Tax whistleblower gets $2 million IRS award: lawyer

WASHINGTON Thu Oct 4, 2012 7:01pm EDT

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WASHINGTON (Reuters) - A tax whistleblower received a $2 million reward from the Internal Revenue Service for his role uncovering an alleged multimillion-dollar tax-avoidance scheme attempted by Illinois Tool Works Inc in the late 1990s, the whistleblower's lawyer said on Thursday.

The informant, a Wall Street banker who remained anonymous to protect his career, previously received two other million-dollar payouts from the IRS, said his attorney, Erika Kelton, with Phillips & Cohen in Washington.

His reward last week could have been larger if his claims were brought forward under newer IRS whistleblower rules revamped in 2006, she said.

Informants to the IRS only receive rewards after taxes are collected, based on the information they provide. This whistleblower filed his claim with the IRS in 2001.

It was unclear how much Illinois Tool Works paid the IRS in taxes based on the whistleblower's tips. In a news release, Kelton estimated the company could have paid $383 million to the IRS, based on tax liabilities in U.S. Securities and Exchange Commission filings.

Alison Donnelly, an Illinois Tool Works spokeswoman, said in response to the news release that it appeared to refer to a 1995 transaction that a former ITW business segment engaged in with an investment bank.

"As part of the IRS' normal audits of ITW's tax returns, the tax treatment of this transaction was fully resolved without penalty with the IRS in 2009, and resulted in no significant financial impact to ITW," she said in an emailed statement.

Illinois Tool Works, based in the Chicago suburb of Glenview, makes a variety of items, including restaurant supplies, construction products, electronic components, auto parts and industrial packaging.

An IRS spokesman said the agency could not comment due to taxpayer privacy laws.

The agency paid $8 million in whistleblower awards in fiscal 2011 and collected $48 million in taxes from their tips, according to IRS figures.

Whistleblower Bradley Birkenfeld, who received a record-setting IRS award of $104 million that was paid in September, has prompted a rush of would-be imitators hoping to reap big payouts for exposing tax cheats, whistleblower lawyers have said.

Birkenfeld's tips led Swiss bank UBS AG to settle with U.S. regulators in 2009 for $780 million in fines, penalties, interest and restitution.

Following Birkenfeld's award announcement, "there's a renewed confidence among whistleblowers" in the IRS, Kelton said. "The inquiries to our firm from potential tax whistleblowers has again picked up," she said.

(Reporting by Patrick Temple-West; Additional reporting by Nanette Byrnes in Chapel Hill, N.C.; Editing by Jan Paschal)

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