Five Years Later, IRS Whistleblower Still Waiting For Reward

A whistleblower who reported massive tax fraud on the part of multiple U.S. companies in 2007 is still waiting on a reward, reports the Washington Post.  Joseph A. Insinga, formerly an executive at Rabobank Group, alleges that his company helped seven companies avoid hundreds of millions of dollars in taxes.  He filed a whistleblower claim with the Internal Revenue Service (“IRS”) in 2007, one year after the Internal Revenue Code was changed to reward individuals for coming forward to the IRS with information that would help the IRS to collect taxes, penalties and interest.  The new law allows whistleblowers to collect from 15 percent to 30 percent of the total amount the IRS collects as a result of their information.

Insinga, however, is still waiting to receive anything from the IRS as a reward for his decision to blow the whistle five years ago.  His is not a unique case; government auditors and whistleblower advocates have long charged that the IRS hands out too few awards and takes too long to process claims.  The Post reports that in fiscal 2010, the last year for which the tax agency made data public, it collected $464.6 million from taxpayers under the whistleblower program but paid a relatively meager $18.7 million in total to 97 informants who helped break cases, according to an IRS report to Congress. An IRS spokesman said the awards for fiscal 2011 are too small to be reportable.

Stephen Whitlock, the director of the IRS’s whistleblower office, reminded the Post that the time frame for payouts in these cases is typically five to seven years, since the IRS waits for all outstanding taxes to be collected and appeals to be resolved before making an award determination.  But while IRS officials have said that they are still open to an award determination, an award was unlikely based on other sources of information the IRS received regarding Robobank’s dealings.  Insinga’s lawyers filed a lawsuit on February 21 with the United States Tax Court seeking compensation for the assistance their client provided to the IRS.

“We’ve created and amended multiple statutes over the past decade to provide compensation for those individuals brave enough to blow the whistle on fraudulent practices, and that’s good.  History has shown that financial incentives do work,” said whistleblower lawyer David J. Marshall, of the Washington, D.C. law firm of Katz, Marshall & Banks.  “But if the government fails to honor these new laws and instead looks to find a way out of rewarding whistleblowers, their effectiveness will diminish over time and the public will suffer the consequences.”