Two whistleblowers who provided the Internal Revenue Service (IRS) with original information about tax violations were issued a $8.8 million award from the agency, the whistleblower law firm Zerbe, Miller, Fingeret, Frank, Jadav & Hunziker LLP (ZMF Law) announced on September 8.
The whistleblowers’ information allowed the IRS to collect approximately $35 million. The IRS originally granted the whistleblowers a much smaller award but increased the amount following an appeal.
“My clients and I are extremely heartened that the IRS revisited its decision and more than tripled the award for these two whistleblowers after we made an appeal. It is very gratifying that the IRS looked closely and considered our legal arguments – and ultimately sided with the whistleblowers,” said Dean Zerbe, a partner at ZMF Law who represents the two whistleblowers.
Through the IRS Whistleblower Program, qualified whistleblowers, individuals who voluntarily provide the agency with original information about large scale tax violations, are entitled to monetary awards of 15-30% of the funds recovered by the government.
Steven Miller, former acting Commissioner of the IRS and partner at ZMF Law, states that the award “is particularly interesting given that the whistleblowers provided information to the IRS about significant tax evasion by a specific company – based on the whistleblower’s informed knowledge of the company and industry, as well as analyzing a wide range of public documents. The whistleblowers’ detailed analysis provided the IRS the path forward to take action on this corporation’s tax evasion.”
Zerbe notes that the award determination is promising because the IRS Whistleblower Office has a new Director after years of declining statistics in whistleblower awards. In fiscal year 2021, the IRS only issued $36 million in whistleblower awards, significantly down from the $312 million in awards issued in fiscal year 2018.
“One robin doesn’t make a spring – and one whistleblower award doesn’t make a turnaround of the IRS whistleblower program – but it is still very good news for the program,” Zerbe told WNN. “This award decision got a lot of attention at the IRS – but it took the new Director of the Whistleblower Office, John Hinman — coming in, considering the legal arguments we made and ultimately cutting through it all and making the right call in favor of the whistleblower.”
“The unfortunate trend had been that the IRS seemed to be looking for reasons to say ‘no’ to whistleblower awards,” Zerbe continued. “This decision, revisiting an earlier ‘no’ hopefully signals a cultural shift to saying ‘yes’ to whistleblower awards at the IRS. It comes at a critical time with the IRS getting significant new funding – and the need for the IRS to double down on making the whistleblower program a success.”
“This is a good sign for whistleblowers,” said whistleblower attorney Stephen M. Kohn of Kohn, Kohn & Colapinto. “The IRS program has been hampered by long delays and low payouts,” continued Kohn, who alongside Zerbe represented Bradley Birkenfeld, the recipient of the largest IRS whistleblower award in history. “Whistleblowers have been discouraged from risking their jobs to file claims. As the program improves, large tax evasion schemes will be stopped. Let’s hope this happens quickly.”
As Zerbe notes, the Inflation Reduction Act will significantly increase the funding of the IRS, a move that whistleblower advocates hope will mean more staffing and resources for the whistleblower program. The U.S. Senate Finance Committee recently released a report into the largest alleged tax fraud in U.S. history which calls for a stronger IRS Whistleblower Program.
Whistleblower advocates are also calling for the passage of the bipartisan IRS Whistleblower Program Improvement Act of 2021. The bill, introduced by Senators Ron Wyden (D-OR) and Chuck Grassley (R-IA), offers seven common sense reforms designed to bolster the effectiveness of the program, including instituting de novo review for whistleblower award cases. The National Whistleblower Center has issued an action alert calling on Congress to act immediately to pass the IRS Whistleblower Program Improvement Act and save the program from its current crisis.