UBS whistleblower case shines light on potential pitfalls

One of the most difficult aspects of blowing the whistle on wrongdoing is finding legal representation suited to one’s needs and finances.  Typically, the whistleblower is in a poor negotiating position, needing immediate help and having little money or legal knowledge.  Sometimes, a whistleblower nevertheless ends up with great representation.  But, many whistleblowers complain about neglect, overcharging, conflicts of interest and other abuses.

Today, the public received a rare peek at behind-the-headlines legal representation in the case of UBS whistleblower Bradley Birkenfeld who was represented, at different times, by two law firms. The first firm, Schertler & Onorato LLP, in Washington, D.C., is trying to claim $13 million of the $104 million awarded to Birkenfeld by the IRS for exposing tax evasion by thousands of people with accounts at the Swiss bank.

Birkenfeld hired Schertler & Onorato LLP in 2006 to help him tell the U.S. how UBS used Swiss bank secrecy to cheat the Internal Revenue Service. Birkenfeld, now 47, told his story the next year to the IRS, the U.S. Justice Department, the U.S. Senate and the Securities and Exchange Commission. He agreed in October 2007 to pay the law firm 12.5 percent of any IRS whistle-blower award, according to court documents.

Birkenfeld served 31 months in prison after pleading guilty to conspiracy and was released on Aug. 1, six weeks before the IRS gave him the largest federal whistle-blower award for an individual. Birkenfeld had fired Schertler & Onorato in 2008, and his new law firm says the 12.5 percent accord is no longer binding. (Bloomberg News, October 16)

While in prison, Birkenfeld filed a lawsuit, pro se, against Schertler & Onorato for allegedly mishandling negotiations with the Justice Department, “which refused in 2007 to grant him either immunity or a subpoena he said he needed to reveal information otherwise protected by Swiss law” (Bloomberg).  Birkenfeld later retained David Colapinto, of Kohn, Kohn & Colapinto, in Washington, D.C., to represent him.

The dispute over Schertler & Onorato’s claim appears destined to be decided by the Attorney-Client Arbitration Board of the District of Columbia Bar.  More information about Bradley Birkenfeld’s case is available here.