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The U.S. government was able to crack down on tax evasion by Americans with offshore bank accounts – primarily with Swiss banking giant UBS – with the help of a whistleblower. Bradley Birkenfeld was a UBS banker who exposed widespread tax evasion by wealthy Americans.

Now Birkenfeld is in prison himself, and says that the Justice Department handled the UBS case so badly, their conduct was criminal.

The 45-year-old Birkenfeld began serving a 40-month sentence in January.

Birkenfeld accuses prosecutor Kevin Downing of missteps in the case. As a result, says Birkenfeld, many key tax evaders, including a famous Hollywood actor and some public officials, will not be prosecuted as tax cheats.  

Birkenfeld was also talking to investigators from the SEC and the U.S. Senate, but Downing threatened Birkenfeld and told him not to talk to other investigators.

Birkenfeld says, “Downing stood up and he pointed his finger at me and shouted: ‘You will not call or meet anyone at the SEC or the Senate.'”

“He was furious, He was red-faced and yelled at me. He didn’t give a reason. He just stood up, pointed at me and yelled at me,” he added.

The Justice Department has declined to comment.

The federal government has now prosecuted several former UBS clients. At least ten have been sentenced to terms ranging from probation to one year in prison. But Birkenfeld, who pleaded guilty in June 2008 to conspiring to help a billionaire real estate developer hide $200 million from U.S. tax authorities, is serving the stiffest prison time by far, 40 months.

After UBS revealed the names of American account holders, the Justice Department dropped its legal action against UBS. “UBS AG has fully complied with all of its obligations,” Downing wrote in the Justice Department’s court filing. “The United States believes that dismissal is appropriate.”

Source: Westlaw News & Insight “UBS whistleblower claims that prosecutor obstructed probe” 11/1/2010