The whistleblower recently awarded $1.1 million by the Internal Revenue Service had initially exposed Enron’s fraudulent practice of generating fictitious income by using abusive tax shelters to the IRS back in 1999. Erika A. Kelton of the Washington law firm Phillips & Cohen, was quoted saying, “If the IRS had pursued this information in 1999 when my client first informed them of these abusive tax shelters, the government might have realized the depth of Enron’s problems and perhaps taken steps that might have helped avoid a total meltdown.” Though the firm refused to reveal the identity of their client, they did state that the informant had testified anonymously before the Senate Finance Committee in 2004. During his testimony, the informant stated that he worked for a Wall Street investment bank and was “intimately aware of competitors’ fraudulent tax shelters.” He further stated that over the course of several years of trying to persuade the IRS to take action, he spent thousands of hours educating them on countless fraudulent schemes, which he believes involved over $10 billion of taxable income. Needless to say, the informant described his experience with the IRS as “extremely frustrating and discouraging.”
Unfortunately, the Enron whistleblower was only entitled to receive a maximum of 15 percent of the total amount of unpaid taxes the IRS was able to recover as a result of the information he had provided. The Federal False Claims Act was later changed in 2006 to allow a whistleblower to receive a reward of 15 to 30 percent of the governments’ recovery. The $1.1 million awarded to the Enron informant was the maximum 15 percent allowed under the law at the time he had initially contacted the agency in 1999.