It’s because of whistle-blower Brad Birkenfeld, former banker for the American branch of UBS, that tens of thousands of wealthy Americans have disclosed their holdings in offshore accounts and the IRS has recouped billions in unpaid taxes.

Birkenfeld went to the U.S. Department of Justice in 2007 to report that he and his colleagues had encouraged their clients to store more than $20 billion in offshore accounts and avoid paying taxes to the IRS. The former banker claims he learned of UBS’ illegal dealings two years before, and after resigning in October of that year, was shooed away when he complained to the bank’s compliance office about its “unfair and deceptive business practices.”

The investigation by the Department of Justice revealed that UBS had helped 19,000 clients commit felonies by stashing their earnings and skipping out on taxes between 2000 and 2007. The bank paid $780 million to resolve the investigation, and in 2009 provided the names of more than 4,500 American customers who held offshore accounts in order to avoid additional fines. Since then 33,000 frightened Americans have reported their own offshore holdings and paid more than $5 billion in back taxes. The IRS is now investigating at least 11 other banks suspected of similar misdealing.

Birkenfeld profited from his disclosure: A 2006 federal law allows up to 30 percent of any money the government recovers in a fraud case to go to the original whistle-blower. Birkenfeld was recently awarded $104 million for informing the authorities. That reward is the largest in whistle-blower history, says Stephen Kohn, executive director of the National Whistleblowers Center and attorney to Birkenfeld, and will encourage other bankers to step forward and expose the wrongdoing of their colleagues. That principle of incentive was threatened in 2009, however, when Birkenfeld was prosecuted by the Department of Justice for involvement in UBS’ crimes and put in jail for two and a half years. He was released to a halfway house in August and still faces three years of probation.

For helping to expose some of the Swiss banking and illegal offshore depositing system that defrauds the American public, we honor Brad Birkenfeld as our Truthdigger of the Week.

— Posted by Alexander Reed Kelly.

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