Ex-IRS examiner charged with naming whistleblower - prosecutor

WASHINGTON (Reuters) - A former U.S. Internal Revenue Service examiner was arrested on Thursday and charged with exposing an IRS whistleblower and interfering with the audit of an international bank, said the U.S. Attorney for the Southern District of New York.

Dennis Lerner, 59, was arrested at his home in Edgewater, New Jersey and appeared before a judge in Manhattan, according to a statement from U.S. Attorney Preet Bharara.

Lerner was charged with violating federal conflict of interest laws and improperly disclosing confidential IRS information. He could face up to 20 years in prison.

"Lerner's violations of basic conflict of interest laws were brazen and continued in the face of warnings," Bharara said.

Prosecutors said in the statement that Lerner worked as an IRS international examiner from June 2010 to August 2011.

While at the IRS, Lerner audited an unnamed international bank for alleged underreporting of $1 billion in taxes with the help of a confidential whistleblower, said the statement and legal documents based on an investigation by the U.S. Treasury Inspector General for Tax Administration, an IRS watchdog unit.

Lerner was leading negotiations between the agency and the unnamed bank on a $210 million proposed settlement when he abruptly resigned from the IRS, the statement said.

Unknown to the agency, during the settlement talks Lerner had been seeking a job as tax director at the bank. He got the job in September 2011, the statement said.

A source close to the investigation said the bank involved in the case was German-based Commerzbank AG (CBKG.DE). Officials for Commerzbank could not be immediately reached late Thursday.

Despite warnings from the IRS about further contact with the agency being improper, Lerner subsequently sought information from former colleagues about the audit and encouraged them to approve the settlement, the statement said.

He also divulged to people not employed by the IRS the identity of the whistleblower and "details regarding pending IRS audits of other companies," it said.

A spokesperson for Bharara said Lerner was represented by attorney Jonathan Marvinny, who could not immediately be reached.

(Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh and Phil Berlowitz)