GETTING PERSONAL:Birkenfeld Gets First Jail Term In UBS Case

Former UBS AG (UBS) banker Bradley Birkenfeld appears to be headed to jail. For a long time.

A Florida judge has sentenced Birkenfeld to 40 months incarceration, the Department of Justice said Friday, in the first sentencing of the UBS tax case.

While the terms struck some as harsh, given that Birkenfeld helped the government peer into the hidden world of offshore accounts, others say it is fitting justice.

Forty months "doesn't seem that bad to me," says George Clarke, a member of the white-collar and internal investigations and tax practice at law firm Miller & Chevalier. After all, Clarke adds, Birkenfeld "helped taxpayers evade a substantial amount of tax."

It wasn't immediately clear whether the former banker will be able to appeal in the case.

Because Birkenfeld was a key collaborator with the government, there were expectations in some quarters that he would get off more lightly.

Considering that the former banker "blew open the entire UBS operation for the IRS, his sentence seems harsh," says Kenneth Rubinstein, a senior partner at law firm Rubinstein & Rubinstein in New York.

Cases like UBS' can generally be made only through the help of informants or whistleblowers, "and one can only wonder if future potential cooperators will think twice," because of the Birkenfeld sentence, says Scott D. Michel, an attorney at Caplin & Drysdale in Washington, D.C.

The sentence, adds Michel, "is extraordinary" in its harshness.

Birkenfeld worked as a private banker in Geneva for UBS. While there, he helped a U.S. billionaire real estate developer evade $7.2 million in taxes by helping conceal $200 million of assets in Switzerland and Liechtenstein.

Birkenfeld routinely traveled to the U.S. to help other wealthy Americans conceal assets offshore, enabling them to evade taxes on income generated by money in their accounts. He admitted that he and others advised U.S. clients to put cash and valuables in Swiss safety deposit boxes, and buy jewels, artwork and other luxury items while overseas with Swiss account money.

Others are likely to go to jail in the UBS case.

An IRS voluntary disclosure program offering leniency has drawn hordes of people with accounts who know that, if they don't report them and the IRS targets them, they could go to jail.

The guidelines on prison time for tax evasion are harsh: Six months to a year for those who cheat the government out of just $5,000, for example. It is usually worse when an offshore account is involved: Punishment in such cases is often bumped up two notches on federal sentencing guidelines.

The government will more likely go after the big game, those who cheated it out of the large sums that suggest a concerted effort at evasion.

According to baseline sentencing guidelines, someone who evaded between $200,000 and $400,000 could get a prison term of between 27 and 33 months as a first-time offender, and use of an offshore account could lengthen that time.

Though federal sentencing guidelines aren't mandatory in these cases, most judges will follow them. Exceptions can be made if the government urges leniency for someone who has cooperated in investigating others, or the case presents other special circumstances. link.....