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Case 6-2 Heinrich Müller: Big Four Whistleblower? (a
GVV case)
The facts of this case and names of main characters have been changed to focus on specific
ethical and professional obligations.
Heinrich Müller had always been a team player. His many years at one of the Big Four firms
taught him to be loyal, even to a fault. The German culture expected nothing less. However,
stumbling across details of thousands of firm-arranged tax avoidance deals has changed his
mind. He is sitting in his office wondering whether to blow the whistle on his firm. This is how
the situation developed.
The case takes place in Liechtenstein where tax avoidance deals are not unheard of. In fact, the
country is known to be a tax haven. Müller’s information encompasses the political class in the
tiny European country and elsewhere in the European Union (EU). He has 28,000 pages of
documents from his firm that reveal how companies in the EU funneled money through
Liechtenstein to lower their tax bills to as little as 1 percent.
At the time for the meeting, he knocked on Von Hildenberg’s door. Much to his surprise,
Gunther Kross was in her office. Kross was the head of the tax practice. He welcomed Müller
and asked him to sit down. The ensuing conversation went this way.
“Heinrich, Greta tells me you have something to discuss with her.”
Müller wasn’t sure how to respond. He was still recovering from the shock of seeing Kross at the
meeting. Finally he offered, “Yes.”
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“We’re talking about $20 million euros ($22 million) of tax avoidance transactions.”
“I see you have some files with you.”
Müller’s skin became flushed. He simply nodded his head.
“That’s stealing confidential client information, do you know that, Heinrich?”
Questions
1. Evaluate Heinrich’s actions from an ethical perspective.
Heinrich seems to have a conscience. He knows the tax avoidance transactions are illegal
and shift tax funds from the government and public to private managers of the firm.
Rights Theory asks (of Heinrich): Would I want other tax accountants to act on the
confidential tax information they found that they believe to be illegal by talking to a
2. Assume you are in Heinrich’s position and trying to decide among the following
alternatives: (1) meet the reporter without discussing it with the firm; (2) meet with
the reporter after first discussing it with the firm; (3) skipping the meeting
altogether. What would you do and why?
Heinrich should carefully consider the consequences of his action in making these
determinations. Of particular importance is the idea that the ends do not justify the
means. Heinrich wants the company to cut down on and/or stop participating in these tax
(1) Meeting the reporter without discussing it with the firm seems like the most
extreme action. It smacks of blatant disloyalty to Von Hildenberg, Kross and the
(2) By first discussing it with the firm, Heinrich provides the opportunity to
reconsider the kinds of tax deals offensive to Heinrich and do the right (legal)
thing. It is quite possible that Kross will threaten to take action against Heinrich if
(3) Skipping the meeting is a disrespectful act. Heinrich is still an employee of the
firm and should act accordingly. His bosses have a right to expect him to continue
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3. Assume you have decided to meet with the firm first. Consider the following in
developing a game plan on what you are going to say, who you are going to say it to,
and why.
• What are the key values that inform your intended actions?
If it was a U.S. accounting firm doing the tax work, Heinrich would emphasis the public
interest obligation. The firm is involved in marketing illegal tax avoidance transactions.
This is against the public good. Heinrich could argue the public has a right to know about
the tax avoidance arrangements. Heinrich may use transparency to support disclosure.
• What are the main arguments you are trying to counter? That is, what are the
reasons and rationalizations you need to address?
Heinrich is expected to be a team player and go along with what the firm is doing. He
also knows it is part of the German culture to follow the orders of a superior. Most likely
loyalty would be a reason given to him for staying silent. It is unlikely Kross will say it is
• What is at stake for the key parties, including those who disagree with you?
Both Von Hildenberg and Kross are invested in the tax avoidance transactions and they
are likely to be a major part of tax services provided to wealthy clients using
Liechtenstein as a cover. Their reputation is at stake as well as relationships with wealthy
• What levers can you use to influence those who disagree with you?
There may be an advisory partner to go to and try and convince that individual of the
need for the firm to divorce itself from involvement in illegal tax transactions. The firm is
legally culpable if authorities find out about it. Heinrich might threaten to take the matter
to the managing partner of the firm. Perhaps the greatest lever is simply to discuss the
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• What is your most powerful and persuasive response to the reasons and
rationalizations you need to address? To whom should the argument be made?
When and in what context?
The most powerful response for Heinrich is to emphasize the illegality of the
transactions. Tax accountants have an ethical responsibility (at least in the U.S.) to the tax
4. In an ideal world, what do you hope the outcome of this situation will be after you
meet with the firm? Explain.
In an ideal world the firm would no longer engage in tax shelter transactions that are
illegal. It might be argued that any participation in such transactions is not in the best
Extended Discussion
Rule 3522, Tax Transactions, of PCAOB provides that:
A registered public accounting firm is not independent of its audit client if the
firm, or any affiliate of the firm, during the audit and professional engagement period,
provides any non-audit service to the audit client related to marketing, planning, or
opining in favor of the tax treatment of, a transaction –
(a) Confidential Transactions – that is a confidential transaction; or
(b) Aggressive Tax Position Transactions –that was initially recommended,
directly or indirectly, by the registered public accounting firm and a significant purpose
of which is tax avoidance, unless the proposed tax treatment is at least more likely than
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