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The Whistlerblower Blog

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Presented by Hodgson Russ, the Whistleblower Blog is written by a team of lawyers experienced in successfully guiding both whistleblowers and companies accused by whistleblowers of wrongdoing through the False Claims Act process.

Showing 15 posts in Tax Fraud.

IRS Whistleblowers Collect More Than $230 Million Over Three Years

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The IRS Whistleblower Award Program has paid over $230 million in awards over the last three fiscal years, according to its most recent report to Congress. The awards averaged over $650,000 each, and average about 18% of the amount collected in each case. The program received over 14,000 new claims during FY 2014. According to the report, the award program exists to provide whistleblowers with an incentive to report “significant tax noncompliance” to the IRS.

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Topics: Tax Fraud, Whistleblower Settlements

IRS Paid $53 Million to 122 Whistleblowers in 2013

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According to the IRS Oversight Board’s recent report to Congress, the IRS paid $53 million last year to 122 whistleblowers. This is an average of nearly $435,000 per whistleblower. The whistleblower awards last year average 14.6 percent of the amounts collected by the IRS. As noted in the report, the law requires the IRS to pay awards if the information provided “substantially contributes to the collection of tax, penalties, interest, and other amounts when the amounts in dispute are more than $2,000,000.” The award ranges are based on “percentages of the collected proceeds.” The law is designed to encourage people “with knowledge of significant tax noncompliance to provide that information to the IRS.” According to the report, the IRS “continues to receive submissions from whistleblowers, many of whom claim to have inside knowledge of the transactions they are reporting. They often provide extensive documentation to support their claims.”

John Sinatra is a partner in the Business Litigation Practice at Hodgson Russ LLP. You can reach him at jsinatra@hodgsonruss.com

Topics: Tax Fraud, Whistleblower Settlements

Moving at Warp Speed, New York’s Attorney General Lands a Significant Tax Whistleblower Win

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New York Attorney General Eric Schneiderman announced on March 14, 2014, the successful conclusion of a tax whistleblower case brought under the historic 2010 amendments to the State False Claims Act. Those amendments authorized whistleblowers to earn huge rewards by bringing cases on behalf of the state against those who have engaged in significant violations of the tax law. We have written previously about the 2010 amendments and other New York tax whistleblower developments including the attorney general’s major whistleblower suit against Sprint/Nextel.

In this newly announced case, the attorney general’s press release disclosed that a “tax services provider” became aware of the tax violations and blew the whistle on a medical imaging company, Lantheus Medical Imaging, and its parent company, Bristol-Myers Squibb, for failing to pay more than $2.2 million in New York State franchise taxes, New York City corporation taxes, and MTA surcharges for the period 2002 to 2006.

Because the False Claims Act empowers the state to recover treble damages, the suit was settled with the payment of $6.2 million (which appears to be only a minor compromise by the state), of which $1,137,814 was earmarked for the whistleblower.

The settlement is good news for tax whistleblowers.

Topics: Tax Fraud

The New York State False Claims Act Reaches Tax Violations Prior to 2010

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The New York False Claims Act (NY FCA) was amended in August 2010 to expressly apply to knowing violations of the New York State Tax Law. As reported in a previous blog entry, a whistleblower filed an action against Sprint Nextel Corporation alleging that it failed to collect or pay New York State sales taxes on receipts from the sale of certain wireless telephone services. After an investigation, the attorney general for the State of New York, Eric T. Schneiderman, intervened and filed a superseding complaint adopting the FCA claims and alleging additional claims against the mobile telecommunications service provider. Among those claims were claims premised on conduct predating 2010, when the NY FCA was amended to include tax violations.

Topics: Tax Fraud

Is It Time for New York to Consider Augmenting Its Tax Whistleblower Laws to Include a Program Modeled on the Federal Statute?

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After years of complaints from whistleblowers and other interested parties, the IRS whistleblower program—which was enhanced in 2006—has finally begun to show some signs of success. Consider:

  • As my colleague John Sinatra reported, the IRS recently awarded a whopping $104 million to imprisoned UBS whistleblower Bradley Birkenfeld, the first award under the 2006 program
  • Just last month, the IRS awarded $38 million to another whistleblower

Can it be, as Forbes recently reported, that “the days ahead look bright for whistleblowers and the IRS whistleblower program”? With a backlog of significant whistleblower cases filed after 2006 slowly churning through the IRS process, it is a safe bet that more cases are edging closer to completion and that the slow trickle of announcements from whistleblower attorneys about awards will begin to pick up. As more awards are announced, more whistleblowers will come forward.

Topics: Tax Fraud

U.S. Pays $104 Million Reward to Tax Whistleblower

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According to numerous media reports citing his attorneys, former UBS Banker Bradley Birkenfeld has received a $104 million tax whistleblower reward for his role in exposing alleged secret Swiss banking schemes designed to enable U.S. taxpayers to evade taxes. The whistleblower’s revelations led to a $780 million settlement from UBS as well as tens of thousands of taxpayer coming forward in exchange for amnesty. The IRS’s tax whistleblower program provides a bounty or reward of up to 30 percent of the government’s recovery. Experts on both sides of these cases believe that the size of the reward will ensure that future tax whistleblowers are encouraged and incentivized to come forward with details of other tax schemes.

Topics: Tax Fraud, Whistleblower Settlements

Whistleblower Teams Up With the State of New York in Groundbreaking Suit Against Sprint-Nextel Corporation

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On April 19, 2012, Attorney General Eric T. Schneiderman filed a groundbreaking lawsuit against Sprint-Nextel Corporation for deliberately under-collecting and underpaying millions of dollars in New York State and local sales taxes. The lawsuit was brought under the New York False Claims Act, which, unlike its federal counterpart, expressly permits cases involving tax fraud.

Topics: Tax Fraud

Misappropriation of Confidential Information or Legitimate Whistleblowing?

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There is an obvious tension between the desire to encourage employees to come forward with information necessary to report and expose fraud and the recognition that certain company information is truly private and confidential and should remain so. A recent decision from the U.S. Department of Labor Administrative Review Board further complicates the issue.

Celanese Corporation, an international publicly traded corporation, hired Matthew Vannoy to catalog and reconcile employee expense reimbursement submissions. In 2007, Vannoy filed an internal compliant about employees misusing company credit cards; around the same time, he began talking to an attorney about Celanese’s business practices with respect to its employee credit card-use program. Vannoy then filed a claim with the IRS Whistleblower Rewards Program, and he provided documents to the IRS that included Celanese proprietary and confidential information. A few months later, Vannoy’s supervisor began conducting an investigation into his email communications with employee cardholders and found that he sent a document containing 1,600 social security numbers of Celanese employees to a personal e-mail account. Vannoy was suspended without pay and ultimately terminated.

Topics: Tax Fraud

News for New York Tax Whistleblowers

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As we move into the final stretch of 2011, interesting developments appear to be on the horizon for tax whistleblowers in New York.

Now in his nine month as attorney general, New York’s Eric Schneiderman is showing no sign of slowing down in his pursuit of whistleblower cases alleging tax fraud. Similarly, on the federal side, all indications are that the IRS will finally begin paying awards to some of the hundreds of whistleblowers who have filed complaints of significant tax noncompliance by thousands of taxpayers since the program was strengthened in 2006 with the enactment of section 7623(b) of the Internal Revenue Code. Given these developments, it looks like we are on the precipice of some exciting times for tax whistleblowers and those who believe in tax compliance and fairness.

Topics: Tax Fraud

Important Tax Whistleblower News for Practitioners, Businesses, and Whistleblowers

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Make no mistake about it: paying big awards to whistleblowers who disclose illegal conduct, including tax offenses, has become a top government enforcement strategy. Why? Because rewarding whistleblowers works. State and federal False Claims Act cases, which permit whistleblowers to sue wrongdoers on behalf of the government as qui tam plaintiffs, have skyrocketed and have helped the government recover tens of billions of taxpayer dollars, a sizeable piece of which often goes to whistleblowers.

Since the IRS beefed up its tax whistleblower program in 2006 by increasing and making mandatory whistleblower awards for claims involving IRS tax obligations of $2 million or more, federal whistleblower claims have increased sharply in both number and quality. And whistleblowers are recovering millions for their efforts. In April 2010, for example, as reported in the Wall Street Journal and Accounting Today, an in-house CPA at a Fortune 500 financial firm earned $4.5 million for exposing a $20 million tax liability owed by his firm.

Topics: Tax Fraud

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