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Enron tax whistleblower nets $1.1 million

A whistleblower who exposed a tax fraud scheme by Enron and Wall Street firms has been awarded a $1.1 million reward by the Internal Revenue Service.

Businessman blowing whistle2_Eric-Hood_iStock The payout came from the new IRS Whistleblower Office, but was made under prior, less generous guidelines. Those older rules, which still apply in some instances, call for a reward of up to 15 percent of the money that the IRS recovers based on the information.

The whistleblower office was revamped in 2006. Now when whistleblower information about alleged tax cheating leads to IRS collection of unpaid taxes and the subsequent recovery amount exceeds $2 million, the whistleblower can pocket up to 30 percent of the recovered money.

The Enron fraud whistleblower wants to remain anonymous, according to a statement from Phillips & Cohen, the law firm that represented him in the case. The law firm did say that the person is a Wall Street banker.

"My client's knowledge of how Wall Street operates and his unflagging persistence in convincing the IRS to investigate Enron were instrumental in the government's recovery," said Erika A. Kelton, an attorney in the Washington, D.C., office of Phillips & Cohen.

According to Phillips & Cohen, Enron evaded taxes on more than $600 million of taxable income, resulting in more than $200 million of federal tax savings. However, the IRS was able to recover only a percentage of taxes and penalties owed due to Enron's bankruptcy.

The IRS declined comment about the case or payout, citing privacy laws.

Swiss bank whistleblower waiting for reward: Another potentially huge whistleblower payment is pending.

Bradley C. Birkenfeld, a former private banker with UBS, is serving a 40-month federal prison sentence for helping his clients hide money in Swiss bank accounts. He's now seeking billions for telling the IRS about all those offshore accounts.

Ratting out tax cheats: Most of us will never be able to report suspected tax cheats on the scale of the alleged Enron or Swiss bank cases. But just in case you know of some not-quite-right tax dealings, you can let the IRS know by filing Form 211.

It might, and I stress might, just pay off.

The IRS has to investigate and that takes a while. The Enron whistleblower first notified the feds in 1999.

Then the agency has to collect unpaid money before it pays tipsters.

Finally, if you do collect for ratting out a tax cheat, remember that whistleblower reward money is taxable.

Photo by Eric Hood / iStock

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Interesting to think that if he'd just played the game, he probably would have gotten paid far more than $1.1 million. Yet an other example that in today's American economy, it just doesn't pay to do the right thing. Sad...

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