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Once-jailed banker gets $104 million whistleblower payout

The IRS will award Brad Birkenfeld $104 million for his help in uncovering UBS's illegal offshore banking operation. CNBC's Eamon Javers reports the latest details.

Attorneys for jailed former Swiss banker Bradley Birkenfeld announced Tuesday that the IRS will pay him $104 million as a whistleblower reward for information he turned over to the US government.

The information Birkenfeld revealed detailed the inner workings of the secretive private wealth management division of the Swiss bank UBS, where the American-born Birkenfeld helped his US clients evade taxes by hiding wealth overseas.

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At one point during his private banking career, Birkenfeld reportedly brought diamonds across the US border secured inside a toothpaste tube.

Tuesday's announcement represents an astonishing turn of fortune for Birkenfeld, who was released from federal prison in August after serving 31 months on charges relating to his efforts to help a wealthy client avoid taxes.

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He is currently under home confinement in New Hampshire. The terms of his probation prevented Birkenfeld from attending the press conference announcing his windfall.

Birkenfeld attorney Stephen Kohn said the information the former Swiss banker turned over to the IRS led directly to the $780 million fine paid to the US by his former employer, UBS, as well as leading over 35,000 taxpayers to participate in amnesty programs to voluntarily repatriate their illegal offshore accounts. Kohn said that resulted in the collection of over $5 billion dollars in back taxes, fines and penalties that otherwise would have remained outside the reach of the government.

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Birkenfeld's disclosures also led to the first cracks in the legendarily secretive Swiss banking system, and ultimately the Swiss government changed its tax treaty with the United States. UBS turned over the names of more than than 4,900 U.S. taxpayers who held illegal offshore accounts. Investigations into those accounts are ongoing.

In an interview with CNBC conducted in federal prison in 2011, Birkenfeld emphasized the value he had as an insider: "I knew the other bankers. I knew the other banks. And I knew the headhunters," Birkenfeld said at the time. "So, I knew exactly who was doing this business."

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Under the IRS whistleblower program which was revamped in 2006, informants are entitled to a percentage of the dollars recovered by the US government when fraud is exposed.

This decision is expected to send a message to other potential informants that there is money, potentially big money, in turning to the government.

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