The Enemy Inside

FIFTY-THREE

This morning Harry and I are closeted in the library at the office, busily working up notes with our accountant. We’re going over the terms of the agreement, how to handle the money, the settlement between Betz and the government.

We have already hammered out the terms of his release. They are trying to sweeten the pot by dangling a full pardon. I doubt that it matters to Betz as long as he can see his daughter. Their first visit was this morning, and from the tone of his voice he was floating on air. She is the only thing that matters to him in life.

Our CPA, Bruce, is spread out at the table, becoming giddy as he crunches the numbers. He huddles over his computer, punching in figures. All that is missing from this picture is a green visor on his head and a handle he can pull periodically like a slot machine.

“We don’t have all the numbers yet,” he says. “We have the eight hundred million in fines from the bank, and some of the fines and penalties along with back taxes collected from the five thousand some odd individuals he turned over.”

These are the US taxpayers with hidden accounts identified by Betz at his company’s bank, his old Swiss employer.

“But we don’t have them all as yet. And you say there could be more?”

He means the PEPs who were moved to Gruber Bank, though he doesn’t know the terms or any of the details because we haven’t given him any of it. None of us know the fate on those as yet.

“If they go public and end up in the tally,” says Harry, “it’s gonna be like finding the Atocha.” Harry is talking about the Spanish treasure galleon that went down in the Caribbean back in the 1600s.

“Who are they?” says Bruce.

“Never mind.” I look at Harry.

“Sorry,” he says.

It is an irony that after all this time Harry and I, as a consequence of taking Alex Ives’s drunk driving case, and in the process netting Betz as a client, stand to receive what may be a very large payday, though neither of us understand the full dimensions of it yet.

Rubin Betz is insisting that we take, at a minimum, ten percent of everything over one hundred and ten million, the original offer made to him by the government. He says that without me he would have never seen a dime over that amount and would probably still be sitting in his cell at Supermax. More important, because he is free, he has regular contact with his daughter.

The question, I wonder, is whether Grimes knew about this, and figured that maybe she was buying me off? During the phone call Proffit told me that I would be well compensated. But I never had a clue as to the amount. My guess is neither did he; otherwise he would have shouldered me aside and tried to grab it for himself. I suspect this is what happens when you rub up against the rich and powerful in D.C.: flecks of gold wrapped in bouquets of garbage rain down.

“I expect what they’re going to want to do is go back to square one and start their calculations all over again,” says Bruce. “They’ll probably argue that the fine paid by the bank subject to the settlement is not ‘revenue’ within the meaning of the law. Therefore you get no part of it under the whistleblower program. The fact is, it’s money paid to the US Treasury, they would have never gotten it without the information given to them by your client, and they clearly used it to calculate their original offer to him. They’ve dug themselves a hole,” he says.

“Beyond that, you’re going to want to leave the agreement open-ended in order to capture any future claims. It’s gonna be a moving target by all appearances, developing as you go. The other three thousand taxpayers they’re still working on.”

“Can we do that?” I ask. “I was assuming they’d want a final figure.”

“You can do whatever you want as long as the government agrees to it. If they refuse, I would file a claim in the tax court. Ordinarily my advice,” he says, “is to take whatever they offer you and go. You can die of old age fighting with the government. But in this case, given the amounts, the fact that you’ve got a minor on the receiving end, you’d be a fool not to press it.” Bruce used to work for the IRS. He knows the game, but he tells us we are plowing new ground here. “This is without question the biggest claim the Whistleblower Fund has ever seen,” he says.

I make a note to keep the agreement open-ended to capture future claims.

“There may be more, but for the moment let’s keep it conservative,” I tell them. “Run the numbers on what we know, the figures we have right now. I’ll draft the agreement to capture whatever might be owing from the rest of the five thousand we already know about. Anything else, we’ll have to see.”

“You and I’ll have to talk about that.” Harry wants a pound of flesh from the politicians.

The accountant starts punching numbers. “OK, so we start with what we know. The government claims revenue of one point one billion dollars, of which eight hundred million comes from fines paid by the bank. The balance comes from about two thousand of the five thousand hiding funds offshore. Working backwards at ten percent, that gets you to the hundred and ten million dollars they originally offered him.

“However, as we know, the statute and the regs call for a sliding scale of between fifteen and thirty percent of the amount recovered by the government. Let’s start at the low end,” says Bruce. He’s working the keyboard. “Fifteen percent of one point one billion is one hundred and sixty-five million dollars. That’s your client’s payday, bottom line, minimum amount under the statute and the regs. That’s as low as it’s going to get for them.”

“You mean. .” says Harry.

“I mean unless there’s some extraordinary reason that none of us know about, either they pay that or they’ll be forced to pay by the tax court. They can delay, drag their feet, but ultimately you’ll collect.”

“That’s fifty-five million dollars more than they offered him,” says Harry. “That means. . that means five and a half million dollars.” Harry looks at him.

“Your fee, that’s correct,” says Bruce.

Harry is stunned.

“So that’s where they’ll start negotiating,” says Bruce.

“What do you mean start?” says Harry.

“That will be their opener, lowball offer,” says Bruce. “You on the other hand start at thirty percent. Make your best case. Without the assistance and the information from your client, what was the likely return and revenue to the government? Zero. You haggle. Where are you gonna end up? Somewhere in the middle,” he says. “Let’s just take a ballpark, split the difference, say around twenty-two and a half percent, give or take.” He punches some more numbers, moves the mouse, does it again, then says, “Let’s see, that’s two hundred and forty-seven million, five hundred thousand dollars. Not to put too fine a point on it.”

Harry, sitting across the table from me, has just turned white.

“Your fee,” says Bruce. He does a few more calculations. “If I figure correctly, should be somewhere in the neighborhood of thirteen million, seven hundred and fifty thousand dollars. Now that’s the stuff we know about, current claim,” he says. “That doesn’t include the other three thousand taxpayers they know about but are still working to tally up. If you extrapolate knowing what we know from the first two thousand,” he says. “Figure another four hundred million in revenue to the government, at twenty-two and a half percent that’s another ninety million for your client, nine million to you. So the total ballpark figure is, say. . let’s round it off, say three hundred and thirty-seven million dollars. That’s your client’s take. Your fee, thirty-three million, seven.” He looks up at us. “Now that’s the most you’re going to get. You can make it easy on yourself by getting in their faces and then backing off a little, take a little less. At some point they’ll cave and say ‘good.’ ”

“Did you just say thirty-three million, seven hundred thousand dollars?” says Harry.

“That’s what I said. And the good thing about all of this,” says Bruce, “is that the money to pay the back taxes and penalties is already in the bank. There’s no need for the IRS to discount any of it. So don’t let them tell you they did. Everybody’s getting a windfall here. You, them. This is money the government didn’t know existed. Everybody but the taxpayer.”

We sit there for a moment and catch our breath. “Bruce, I want to thank you for coming by.”

“You guys don’t look happy,” he says.

“We’re OK, I think it comes as a bit of a shock. I’ll have to talk to Betz, make sure he understands what he’s giving up. Check the statutes, make sure were not running afoul of anything. Assuming it’s OK, it’s gonna take a while to get used to the concept.”

“What concept is that?” says Bruce.

“Having money.” When it happens this suddenly it’s hard to get your head around it. Like winning the lottery.

He starts to collect his stuff, puts the computer in his bag, and gathers his papers.

“I’ll call you in a few days, as soon as we pull together a draft of the agreement. There’s a lot to think about.”

Bruce gets up, shakes my hand.

“Good to see you again.” Bruce looks at Harry, who is just sitting at the table, stunned.

“Yeah. Good to see you.” It’s the first time I have ever seen him speechless. He blinks a couple of times before finally collecting himself enough to turn and look at Bruce, who is almost out the door.

“Are you sure about this?” says Harry. “To me, I don’t know, but it sounds like a Ponzi scheme.”

“It depends how hard you want to push them,” says Bruce. “I wouldn’t get too hard-core unless you want to fend off audits for the rest of your life. On the other hand, you will have the money to pay me if that happens.” He smiles at us. “All I can say is, that’s the ballpark you’re playing in.”

“Somebody gimme some Cracker Jacks,” says Harry. Not even the slightest grin on his face. My partner, the ultimate contrarian, pessimist even among the doomsayers, may have just won the lottery. He has yet to see a dime, but the thought alone shatters everything he knows about the world and human nature.

Bruce laughs, heads out the door, and closes it behind him.

“Cheer up,” I tell Harry. “That’s the bad news. The good news is we probably won’t live long enough to see any of it.”