LETTERS TO THE EDITOR
tax notes
Fair Treatment of Whistleblowers
Key to Effective Tax Prosecution
To the Editor:
During the nearly 10 years I spent as a federal
prosecutor, I learned a critical lesson: that so-
called insiders are invaluable to investigations
into corporate wrongdoing.
In all phases of a criminal investigation, the
presence of an insider witness, who typically
possesses secret, firsthand information of
corporate misconduct, is exceedingly important.
Insiders are often the ones who alert law
enforcement to potential criminal activity of
which it was completely unaware. Insiders
provide unique, oftentimes unassailable
information that forms the basis of a criminal
investigation. Once an investigation is initiated,
an insiders perspective allows a well-informed
prosecutor to make the appropriate charging
decisions. It is an insiders anticipated testimony
at trial that oftentimes leads to an expeditious
guilty plea without trial. And at trial, it is the
insiders testimony that usually serves as the
foundation for the governments case.
In complex criminal investigations, the role of
an insider is especially valuable. Without insider
witnesses, investigations into complex corporate
malfeasance are typically long, protracted affairs
without any certainty of a viable prosecution. This
is an important concern for a resource-deprived
Department of Justice, which, without access to
key insiders, would bring fewer prosecutions and
have a much lower conviction rate.
Whistleblowers are an especially important
type of insider. Whistleblowers risk their
livelihood and sometimes their safety to bring
criminal wrongdoing to the attention of law
enforcement. Unlike insiders who often come
forward with information to seek leniency at
sentencing, whistleblowers come forward for one
primary reason the financial incentive. For this
reason, whether under the False Claims Act or the
whistleblower programs at the IRS and the SEC,
public policy and the law dictate that
whistleblowers are entitled to an appropriate
TAX NOTES, JUNE 5, 2017
portion of the funds recovered by the United
States due to the information they provide. After
all, but for the actions of the whistleblower, the
United States never would have recovered any
money at all.
Because of whistleblowers, the United States
has recovered billions of dollars. In tax cases
alone, the IRS has recovered nearly $4 billion
because of whistleblower information. Indeed,
without the information provided by
whistleblowers, some of the governments most
successful tax prosecutions never would have
happened.
Because of all this, the IRSs treatment of
whistleblowers in certain cases appears to
contravene public policy and, frankly, defies
common sense. One example of this is the IRSs
position in Whistleblower 21276-13W v.
Commissioner and Whistleblower 21277-13W v.
Commissioner, 147 T.C. No. 4 (2016), which I urge it
to reconsider. In this case, in Tax Court, the IRS
sought to narrow the definition of collected
proceeds under the whistleblower statute to
exclude criminal fines and civil forfeitures. After a
full briefing and hearing, the Tax Court rejected
the IRSs position. In a lengthy, well-reasoned
opinion, the Tax Court looked at the statutory
history and determined rightfully so that
collected proceeds was broadly defined to
include virtually all monies collected as a result of
information provided by the whistleblower. The
IRS filed a notice of reconsideration.
Again, the Tax Court rejected the IRSs
position and found that collected proceeds
includes fines and forfeitures. Despite the Tax
Courts in-depth review of the issue, the Justice
Department recently filed a notice of appeal of the
Tax Courts ruling.
Putting aside the legal merits, I submit that the
position of the IRS before the Tax Court is
shortsighted as a matter of public policy.
Specifically, it fails to consider and undermines
the importance of whistleblowers to law
enforcement. Without a robust whistleblower
program, insiders will not have the appropriate
incentives to come forward with actionable
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 LETTERS TO THE EDITOR

information. Whistleblowers usually make great

sacrifices when they submit information to the
government, and they deserve to be compensated.
To reduce a whistleblowers potential incentives is
to reduce law enforcements ability to enforce our
federal laws and prosecute otherwise unknown
tax violations.
At least eight members of Congress share this
view and submitted a letter regarding this matter
to Treasury Secretary Steven Mnuchin on April
26, 2017. In the letter, these congressmen asked
the secretary to reconsider the IRSs position and
broadly define collected proceeds for the
purposes of whistleblower recoveries. The letter
stated that to do so would bolster the IRS efforts
to go after the worst tax cheats.
The Justice Department has the unique
opportunity to send a strong message to those
with information of criminal wrongdoing: Come
forward, and you will be treated fairly.
Sincerely,
Jeffrey Neiman
Marcus Neiman & Rashbaum LLP
May 26, 2017

1374 TAX NOTES, JUNE 5, 2017