Birkenfeld, a former Geneva employee of the Swiss bank, was granted the record sum by the Internal Revenue Service for providing inside information about UBS’s illegal schemes to enable tax evasion by American citizens, according to the Washington-based National Whistleblowers Center.
The 47-year-old former employee is credited with providing information that forced UBS to pay a $780 million penalty and provide the names of 4,900 American clients to US authorities.
This also sparked a tax dispute between the US and Switzerland that continues to dog relations between the two countries.
Birkenfeld’s handsome reward was branded a “massive provocation against Switzerland,” by Pirmin Bischof, a Christian Democratic Party MP and a lawyer who studied in the US.
The country would respond “appropriately by remaining calm”, he said.
Christoph Blocher, controversial Swiss People’s Party MP, said the Americans have spent $104 million on “a traitor who has previously been jailed”.
Another politician, Hans-Peter Portmann of the Liberal party in Zurich, called the reward “decadent”.
A spokesman from the Swiss Bankers Association declined comment.
UBS is also officially remaining mum, although newspaper Tages Anzeiger said “bitter comments” were heard behind closed doors at the bank over the news.
Birkenfeld’s reward marks a victory for employees who snitch on their employers, but for the Swiss financial sector “this victory amounts to a defeat”, said Le Temps newspaper in an editorial published on its website.
The millions of dollars given to the former UBS banker could incite other bankers who have recently lost their jobs to provide more information to US authorities, the newspaper says.
Birkenfeld, who only last month was released from prison after serving a jail sentence for his involvement in aiding tax evasion, is being rewarded for weakening UBS and Swiss banking secrecy, Le Temps said.
But the dollars he received “also represent a victory for whistleblowers, without whom the big scandals cannot emerge”.
Birkenfeld was awarded the money even before his 40-month prison term had been completely served, Tages Anzeiger reported.
The Zurich-based newspaper noted that the former UBS employee was sentenced in August 2009 for helping a billionaire hide $200 million from US tax authorities through accounts in Switzerland and Liechtenstein.