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Published: Friday, 9/14/2012

Cashing in

When good things happen to bad people, that doesn't necessarily mean they don't deserve it.

Former banker Bradley Birkenfeld is a case in point. He made a living helping rich clients evade taxes by hiding their profits in secret Swiss bank accounts.

Mr. Birkenfeld was convicted of helping a California developer cheat on his income taxes. For his trouble, the schemer was sentenced to 30 months in prison.

But instead of spending his time watching TV or lifting weights, Mr. Birkenfeld cooperated with the U.S. Treasury and Internal Revenue Service to help them recover billions of dollars in unpaid taxes from American citizens.

The New York Times reports that the whistle-blower provided a tutorial on the inner workings of banks, and how sophisticated tax cheats get away with their scams. Armed with inside information about how banks systematically conspired with tax dodgers to deprive the U.S. Treasury of billions of dollars, the government leaned on the Swiss banking system.

Mr. Birkenfeld's bank, UBS, paid $780 million to the Treasury to avoid prosecution, and surrendered account information on 4,700 U.S. clients. This release prompted 14,000 Americans to participate in an amnesty program that yielded $5 billion in unpaid taxes.

That's an impressive haul. Still, Mr. Birkenfeld wasn't being patriotic by spilling the beans on his former employer. In exchange for his expertise and information, he was awarded a shocking $104 million by the IRS' whistle-blower program — the most it has ever given out.

The size of his IRS reward will likely prompt other whistle-blowers to come forward. This could help the United States recover an estimated $100 billion annually in unpaid taxes.

Mr. Birkenfeld isn't really an admirable guy, but the country needs more people like him if it is to recover money stolen from taxpayers. Even if the IRS has to pay whistle-blowers to come forward, that's still a good investment in creating a more honest and equitable tax system.

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