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You Can Run, But....

September 14th, 2020

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The world of law enforcement lost a pioneer last week with the death of Gerald Shur. As a young prosecutor targeting what one member described as "a certain Italian-American subculture," he realized his informants would be more likely to testify on Monday morning if they weren't afraid of winding up dead on Monday afternoon. Shur's insight led to the birth of the U.S. Marshals Witness Security Program, better known as Witness Protection. He wrote the manual on the program, decided who to accept, and took credit for helping jail over 10,000 card-carrying bad guys.

Today, the program counts more than 8,600 witnesses — mostly criminals — as "alumni." According to their website, "No Witness Security Program participant, following program guidelines, has been harmed or killed while under the active protection of the U.S. Marshals Service." Of course, some witnesses literally can't get with the program. Mobster Henry Hill, for example, immortalized in Martin Scorsese's Goodfellas, indiscreetly posed for newspaper photos while operating a horse-drawn carriage business on Cincinnati's Fountain Square. (So much for living like a schnook.)

Tax cheats typically wear suits instead of stripes. They commit their crimes with the stroke of a pen or the click of a mouse instead of knives or guns. But confidentiality can be just as valuable to help the IRS catch white-collar offenders, too — even though it's not quite so cloak-and-dagger.

The IRS naturally encourages whistleblowers to rat out their partners in crime. There's even a form for reporting tax cheats: Form 3949-A. The IRS gets tens of thousands of reports every year, and investigates about 5% of them. Section C of that form lets you choose whether or not to identify yourself.

The Tax Court sometimes lets whistleblowers proceed anonymously if they can show that the danger in cooperating (like when the target is mobbed up) outweighs the public's right to know their identity. There's a whole series of cases with names like Whistleblower 15628-16W v. Commissioner splitting those hairs. (In that case, the Court let a whistleblower alleging $3 billion in fraud provide information anonymously, but ruled that if he wound up collecting a potential billion-dollar bounty, that might change.)

Code Section 7623 requires the IRS to reward informants with 15-30% of whatever they collect in certain cases. (File Form 211 to apply.) Typically they pay out $50-100 million in rewards per year. Bradley Birkenfeld was a Swiss banker helping clients avoid tax on hidden accounts when he blew the whistle on his employer. He wound up serving 40 months in a federal penitentiary for his part in the scheme, but went on to claim a $104 million bounty. (That's a tradeoff a lot of people would be happy to make.)

Sadly, disappearing into witness protection won't help you outrun your tax bill. U.S. Marshals give you a new social security number, which you'll use to keep filing returns. The program used to be legendarily generous — Jimmy "the Weasel" Fratianno's wife got breast implants, a facelift, and dental work. But today's fugitives can expect about $60,000 in "getting started" money and six months' of allowance until it's back to work. (Maybe that's why about 20% of witnesses keep committing crimes after going underground.)

There's no "lesson" in this week's story — no grand strategy to help you if you choose a life of crime, then decide the only way to "retire" is to rat out a bigger crook. Just take comfort in knowing that whatever fresh horrors the rest of 2020 may bring, you'll finish the year with the same name as you started


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