On October 4, 2012, the Internal Revenue Service (IRS) paid a $2 million reward to a whistleblower that exposed an alleged tax avoidance scheme by Illinois Tool Works Inc. (ITW) that cost the U.S. Treasury hundreds of millions of dollars. The scheme involved ITW enlisting a Swiss bank to fabricate unauthorized tax deductions by duplicating its own tax deductions in order for ITW, as a client and unrelated taxpayer, to claim the same deductions as an offset to ITW's otherwise taxable income.

As a result of tax audits, ITW wrote down its deferred tax asset by $383 million. Whether motivated by a sense of justice or the pursuit of a seven-figure reward, the Wall Street insider known only as "Mr. ABC" has demonstrated the huge return on investment available to IRS whistleblowers that provide information under a program that pays out between 15 percent to 30 percent of any recovery, without any monetary cap on the amount of the reward. It was the third time that Mr. ABC had received an IRS whistleblowing award, including $1.1 million in 2004, when he provided information about abusive tax shelters that helped Enron avoid taxes on more than $600 million of taxable income, and $1.24 million in another case.

In testimony before the 2004 U.S. Senate Finance Committee, Mr. ABC proceeded to explain his motivation to blow the whistle by criticizing the government's ability to identify and investigate sophisticated tax shelters. "When I looked through all the financial engineering and big words, I believed it was just a fake deduction scheme," he testified. The IRS refused to comment, noting confidentiality issues

Questions
1. Should we regard Mr. ABC as a new "caped crusader" or an opportunist? Explain the reasons for your response.

2. Is it ethical for a Wall Street insider to analyze financial data of an unrelated company in order to identify corporate wrongdoing, report it to the appropriate authorities, and then receive a whistleblowing reward?

3. Consider Mr. ABC's motivation for blowing the whistle in the ITW case and the fact that it was the third time he had engaged in whistleblowing to the IRS. Using Kohlberg's model of moral development, at what stage of ethical reasoning would you say Mr. ABC was at? Why?