Updated Nov. 5 at 11:27 a.m.
A former UBS AG banker who blew the whistle on his ex-employer's activities filed a lawsuit yesterday for legal malpractice against his former attorneys at Washington's Schertler & Onorato.
Bradley Birkenfeld worked at UBS from 2001 until he resigned in 2005. Beginning in 2007, Birkenfeld cooperated with federal prosecutors investigating allegations that UBS helped clients evade U.S. taxes. UBS was eventually fined $780 million, and the U.S. Internal Revenue Service approved a $104 million whistleblower award for Birkenfeld in August.
In the complaint (PDF) Birkenfeld filed yesterday in District of Columbia Superior Court, however, he accused his former lawyers at Schertler & Onorato of botching the whistleblower process and costing him a potentially larger award. He also accused the firm of failing to take steps that could have prevented his subsequent arrest and conviction on a charge of defrauding the United States.
Schertler & Onorato name partner David Schertler, in a statement today, accused Birkenfeld of filing the lawsuit in retaliation for the firm's effort to collect 12.5 percent of his whistleblower award, which the firm claims it is owed pursuant to a retainer agreement. Birkenfeld has been ordered to keep the disputed funds in escrow until the fee dispute is resolved.
The case isn't the first Birkenfeld has filed against the firm. In August 2011, he sued Schertler in U.S. District Court for the District of Columbia, claiming his lawyers interfered with his ability to communicate with the U.S. Securities and Exchange Commission as part of its investigation into UBS. Birkenfeld voluntarily dismissed the case in late 2011. The firm's counterclaim for fees is still pending and is currently before the D.C. Attorney-Client Arbitration Board.
Birkenfeld also filed a legal malpractice lawsuit against the firm in Superior Court in August 2011, but he voluntarily dismissed it several months later.
"We note that this is the third law suit that Mr. Birkenfeld has filed against our law firm in the past fourteen months. The two previous suits were dismissed. As with those suits, there is no merit to the most recent allegations that Mr. Birkenfeld has made against Schertler & Onorato and its partners," Schertler said in his statement. "We are confident that this third suit will be dismissed as well."
Birkenfeld's lawyer, Christopher Hoge of Washington's Crowley, Hoge & Fein, declined to comment.
In his complaint, Birkenfeld claimed that Schertler attorneys falsely told him that they had significant experience with federal whistleblowing laws, but in fact did not. He accused his lawyers of failing to help him submit forms required by the IRS Whistleblower Office and of failing to secure an immunity or confidentiality agreement with the government in exchange for his help.
Besides problems with the handling of his whistleblower status, Birkenfeld accused his lawyers of failing to tell him that they feared federal prosecutors were preparing to arrest him in 2008. Had they secured a better deal, Birkenfeld alleged, he might have avoided criminal prosecution. He also accused his lawyers of failing to turn over information to the U.S. Department of Justice detailing the full scope of his cooperation, which he claimed not only could have helped him at sentencing, but also might have meant an additional $7.8 to $15.6 million in his whistleblower award.
Birkenfeld eventually pleaded guilty to a single count of defrauding the United States and was sentenced in 2009 to 40 months in prison, a $30,000 fine and three years of probation.
Birkenfeld is suing Schertler for $20 million for legal malpractice, breach of fiduciary duty and unlawful trade practices. The case is before Judge Judith Macaluso.
A previous version of this article incorrectly stated that a previous lawsuit had settled.