Whistleblower Dilemma: Would You Do 3 Years in Prison for $20 Million?

by Darwin on January 17, 2010

There are few things people won’t do for money.  Would prison be one of them for you?  What if a multimillion dollar payday awaited your return?  That’s the exact situation faced by a UBS Securities whistleblower who unveiled the Swiss banking secrets that have been guarded for decades.  While he may not have known going in that he was facing jail time by the time all was said and done, this mid-level banker, originally from the US, working for UBS in Switzerland stands to gain tens of millions of dollars given US Whistleblower guidelines allowing for a portion of the amount recovered to go to the whistleblower in return for their assistance in recovering money for the US government.

whistleblower-prison

There’s a detailed account of the story on 60 minutes, but in summary:

  • US has never been able to penetrate Swiss Banking veil of secrecy – thousands of Americans have been avoiding Billions in taxes for decades.
  • ~19,000 clients with $19Billion in holdings.
  • Bradley Birkenfeld, a UBS banker, approached the US as a whistleblower and shared everything from how many Americans were hiding taxes overseas to total amounts and how they did it.
  • In some cases, he would act almost as a high-priced shopper, buying diamonds and other expensive artifacts and smuggling them into the US for his clients when they wanted to cash in on some of their Swiss account holdings.
  • As a result of his information, the US has netted Billions of dollars in tax revenues they wouldn’t have otherwise.
  • As a result of this case, 14,700 Americans came forward to voluntarily declare their tax liabilities in exchange for amnesty from prosecution.
  • Unfortunately, at the same time Birkenfeld was coming forward, the Justice Department was investigating one of his clients for tax fraud.  While his client did no jail time after paying a hefty fine, Birkenfeld was charged.
  • Of the thousands of people that hid taxes and performed similar roles as Birkenfeld, he is the single person being charged with a crime in the whole scenario.
  • Birkenfeld sentenced to 40 months prison time for his role with the particular client – the government claims he wasn’t transparent enough about his role early on.
  • However, he is still likely to receive a massive whistleblower payout.  The check will be sent to the prison housing him at the time the award is determined.  It’s not clear what the exact amount would be, but it’s in the tens of millions of dollars.

Birkenfeld is young enough that he will certainly be able to enjoy the money.  The question is whether it will have been worth it in the end.  For a typical American, even a mid-level Swiss banker, this kind of money would ensure lifetime security and remove the necessity to ever work again.

Pros/Cons:

  • This is the type of generational wealth this banker never would have been able to attain in his current role.
  • Perhaps he could translate this experience into some sort of positive, like other white collar criminals and regain his honor.
  • However, what will he endure in prison?  Prison is no walk in the park.  Even if he survives unscathed, surely he’ll regret the black mark on his name for his remaining years.
  • I’m not sure what kind of family he has, but would this cost him his marriage?  If not, will it be difficult to find a mate later in life with this conviction?

That brings us to the question:

Would you do 40 months jail time for $20 Million?


Share

You're Not Following Darwin's RSS? Check out Why You Have to Subscribe to Darwin's Finance!

If you enjoyed this post, you can get free updates through RSS Feed or via Email whenever a new post is published. Rest assured that you can unsubscribe at any time via the automated system and your information will not be sold, archived or utilized for any other "nefarious" purposes.

{ 3 trackbacks }

Weekend reading: Obama versus the banks
January 23, 2010 at 8:29 am
Best of January 2010 – The Dough Roller
February 4, 2010 at 7:33 am
Best of January 2010 | Credit Guy
February 4, 2010 at 11:44 am

{ 15 comments… read them below or add one }

1 Revanche January 17, 2010 at 2:51 pm

Off the top of my head, depending on the state/circumstance, a convicted felon could lose the right to vote, the right to hold public office (not limited to elected office), and sometimes the right to testify in court. I suppose $20 million could make all of that seem inconsequential for some people, though.

There’s an odd conflict involved here: go to jail for money, while doing the right thing? But at the same time, the question requires that you were involved in committing actions that were jailworthy in the first place which lacks integrity. I think I’d rather not have been involved in the first place, thus sacrificing the opportunity for jail OR big money. Naive, I suppose.

[Reply]

2 Evan January 17, 2010 at 3:01 pm

40 months? $20,000,000? I think for me it would depend on the type of jail I was likely to go to. $20,000,000 in muni bonds at 4% net is $800,000 NET without eating into principal. At that kind of wealth your children never have to worry about money.

If we are talking about sing sign – then probably not, but if we are talking about a white collar jail where rape is a lower possibility then I would say yes.

[Reply]

3 Mark Wolfinger January 17, 2010 at 3:06 pm

Dunno. Doubt it very much.

Madoff has accepted a life-term in return for not telling where the money is. His family gets to keep whatever is hidden.

[Reply]

4 20smoney January 18, 2010 at 8:47 am

Wow what a question. I wouldn’t because I have a family. If i were single, I dunno maybe. :)

[Reply]

5 LeanLifeCoach January 18, 2010 at 3:12 pm

$20 mill guaranteed? Where’s the line?

I am not ashamed to say I have a price and you have crossed it. Sorry wifey and kids, daddy is going to be gone for a little while!

[Reply]

6 Doctor Stock January 19, 2010 at 1:27 am

Nah… I don’t think so. Not unless I could bribe some guard to give me a view by the lake with a private suite :)

[Reply]

7 FinEngr January 19, 2010 at 1:09 pm

Would I do 40 mo. in jail for $20mil…. Based on,

Number Itself: YES. Like you said, that’s “generational” wealth.

Ethical Responsibility: YES. The term whistle blower doesn’t put the person in a good light, but this was not a gray area of legality – its outright fraud/evasion.

Fear of the Rich: NO. Taking the stat, it looks like each client is worth $1bil. The probability of ONE of them suing him afterward is high, and it would be a battle of attrition (bleed the $20mil dry). There’s also the far-fetched possibility that one could quietly hire an”elimination” of your presence.

Fear of Prison: DEPENDS. Is this white-collar, laid back or Pelican Bay?

[Reply]

8 Jim January 19, 2010 at 5:48 pm

I would avoid committing felonies like tax fraud in the first place.

[Reply]

9 Kate January 20, 2010 at 1:42 pm

I think he could have avoided jail time if he had been honest up front. That said, I really don’t think I would go to jail for 20 mil, maybe 30 mil if it was a white collar jail like Evan suggested. Nah, my own integrity is too important to sell for money. I wouldn’t do it.

[Reply]

10 Big Spender January 20, 2010 at 7:43 pm

If you do the math it’s a simple answer: HECK YEAH. Three years in prison = 26,280 hours. If you get $20 million on the back end that works out to $761 an hour. That’s more than your better doctor, attorney or investment banker. Not to mention that your expenses go way down!

[Reply]

11 Financial Samurai January 21, 2010 at 11:53 pm

I would do 40 months for $100,000,000. $20 million is a raw deal. Although, if I lived in a non violent prison, maybe $50 mil. And probably $20 mil if I could go to the beach and have free wifi and a laptop and have weekends off!

[Reply]

12 Monevator January 23, 2010 at 7:20 am

I agree with Evan – if it was an open prison for white collar workers with very low inmate crime and vegetable gardens to rehabilitate us felons, yes I’d probably do three years for $20 million – especially if the deal was put like that (rather than ‘maybe $20 million’).

Like most people I’ve done shabby jobs for about that long. You can read books in prison, and write. $20 million buys you an incredible life afterwards.

I wouldn’t for a million or anything silly like that though, or if it was a prison where I had to decide whether to do or be done! :(

[Reply]

13 Roger January 31, 2010 at 4:01 pm

For the general question of being willing to trade 40 months in prison for $20 million, I’m with Evan and many of the other commentators: it depends almost entirely on what type of prison. If there’s a very real chance that I won’t live through the prison term (or that I’ll have to join a prison gang just to protect myself), then no thank you. If I’m in a white collar/minimum security prison where the biggest risk is that my roommate spends all his time discussing the details of the convoluted investment scheme that got him put away, then sign me up. It definitely seems like a good trade to me, a half million for each month I’m in jail.

In this particular case, it seems like the only Birkenfield did wrong (besides participating in the fraud in the first place) was not come forward soon enough (or not be ‘transparent’ enough after coming forward). So on top of the money, he also gets to the good guy in the story (from the U.S. government’s point of view, at least); a flawed good guy, but still a good guy. Not a bad deal, from where I stand.

[Reply]

14 Jojo February 5, 2010 at 4:02 pm

Hell yes! Figure with time off for good behavior, the time might get reduced to 2 years. I’d do 2 years for 3 million. Wouldn’t care about voting or anything because I’d be moving outside the country on release anyway.

[Reply]

15 Nasrullah Mardani March 14, 2011 at 3:13 am

thanks for the info………

[Reply]

Leave a Comment

You can use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>