03/12/2012 11:49 am ET

Joseph Insinga, Ex-Bank Executive, Sues IRS After Not Receiving Whistleblower Reward

Getting the IRS to give you money might not be the easiest thing in the world. But that's what Joseph Insinga is trying to do.

Insinga, formerly an executive at the Dutch bank Rabobank, says he has been a lucrative tipster for the Internal Revenue Service, according to a recent report in The Washington Post. Insinga claims he has given the IRS information over the years that would have helped them recover substantial amounts in unpaid taxes -- and that he's entitled to a reward under the IRS's own rules as a whistleblower.

But Insinga hasn't gotten that reward. And so, the Post reports, he's suing the IRS in the hopes of collecting what he says they owe him. The IRS has declined to comment on Insinga's lawsuit, according to the Post.

Insinga is hardly the only person who's been disappointed by the IRS's whistleblower reward program. Under rules passed in 2006, it's supposed to pay out between 15 and 30 percent of what it collects to the party that provided the intel if the agency gets information that allows it to collect hoarded taxes.

But despite receiving a flood of tips since 2006, the IRS went at least three years without giving out a single reward, prompting some lawmakers to worry that tipsters -- in the absence of financial incentive -- would lose interest in helping bring tax dodgers to justice.

The whistleblower reward program appears to face serious internal resistance at the IRS. Donald Korb, who served as chief counsel at the agency from 2004 to 2008, later said in an interview that the reward program was "unseemly" and "forced on [the IRS] by Congress," according to Forbes.

Still, the new program has resulted in the occasional whistleblower payday. Last April, the trade magazine Accounting Today reported that an unnamed CPA had received $4.5 million as a reward for alerting the IRS to a $20 million tax shortfall at a financial services firm.

Whistleblowers looking to get some cash for their troubles might consider going to the Securities and Exchange Commission instead. That agency offers between 10 and 30 cents on the dollar for actionable information.

On the other hand, whistleblowers who go to the Federal Bureau of Investigation could very well walk away with nothing but a word of thanks, according to the lawyer David Colapinto, who told The Washington Post last month that the FBI is "not obligated to do anything" for tipsters.