Swiss fume at U.S. "hypocrisy" over whistleblower's payout
* Birkenfeld's bumper payout follows jail time
* U.S. guilty of double standards -Swiss MP
By Martin de Sa'Pinto and Andrew Thompson
ZURICH, Sept 12 (Reuters) - Many Swiss are fuming after a whistleblower, who helped prosecute Swiss bank UBS for helping rich Americans avoid taxes, was paid a record $104 million by U.S. authorities after being jailed for his own part in the affair.
Ex-UBS banker Bradley Birkenfeld, who confessed to smuggling diamonds hidden in a tube of toothpaste for a client, was a key witness in U.S. prosecutors' case against UBS, Switzerland's largest bank by assets.
UBS agreed to pay a fine and hand over the names of some 4,500 U.S. clients, a landmark step in eroding the Alpine state's much-vaunted bank secrecy.
"It's the height of hypocrisy if the U.S. is one day sentencing the guy to 40 months in prison and the next give him the highest reward," Pirmin Bischof of the centre-right Christian Democrats and a member of parliament's upper house told Reuters.
Eleven other Swiss banks including Credit Suisse and Julius Baer are also under U.S. scrutiny for aiding U.S. citizens suspected of dodging taxes.
With negotiations to end the long-running tax dispute still ongoing, the Swiss Bankers Association and a government spokesman both declined to comment. Privately, some expressed surprise at the size of the payout, while others were scathing at what they saw as double standards.
Powerful right-wing MP Christoph Blocher, who is under investigation for his role in the leaking of former central bank chief Philip Hildebrand's bank account data, also stressed the double standard: "The Americans give a traitor $104 million, after putting him in jail. Let's see what we give those, who uncovered the Hildebrand affair," media reported.
Hildebrand quit following an uproar over a currency trade made by his wife.
The mass-market Blick and 20 Minuten both published news of the payout prominently. The Tages-Anzeiger ran a commentary saying U.S. officials were pursuing an "equally opportunistic and controversial policy". An editorial in Le Temps termed the move "a defeat for Switzerland".
"It is even more hypocritical if they do it targeting a small country like Switzerland when at the same time they tolerate tax havens and money laundering within their own borders," Bischof said.
The Wachovia Bank unit of Wells Fargo & Co agreed to pay $160 million to settle charges it laundered Mexican drug money via Miami.
Switzerland is trying to get the ongoing investigations into the 11 banks dropped in return for the payment of fines and the transfer of U.S. client names and is also seeking a deal to shield the remainder of its 300-odd banks from U.S. prosecution.
Germany, Austria and Britain have also struck deals with Switzerland to claw back money from tax cheats.
Rudolf Elmer, a former Julius Baer banker who helped put WikiLeaks on the map when he used it to publish bank documents to expose tax evasion, said the level of Birkenfeld's payout sent the wrong message.
"Compensation should be based on what people and their families went through," said Elmer, who was jailed twice in Switzerland and remains under investigation for leaking account data.
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