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Archive for the ‘Corporate Tax Fraud’ Category
New York Sues Sprint for $300M Tax Fraud
Tuesday, April 24th, 2012
New York has filed suit against Sprint Nextel for more than $300 million. Attorney General Eric Schneiderman announced the “first-of-its-kind” lawsuit against the company for “deliberately under-collecting and underpaying millions of dollars in New York state and local taxes on flat-rate access charges for wireless calling plans.”
The complaint alleges underpayments of more than $100 million, costing the State nearly $210,000 per week.
The lawsuit is the first ever tax enforcement action filed under the New York False Claims Act. Twenty-nine states and the federal government have passed False Claims Acts, but only New York’s Act expressly covers tax fraud. Under the NYFCA, the Attorney General may seek triple damages, plus penalties and interest.
According to the complaint, beginning in 2005, Sprint, the third-largest U.S. mobile service provider, failed to collect and pay New York sales taxes on an arbitrarily set portion of its revenue from fixed monthly access charges. The scheme was a part of a nationwide effort by the company to obtain an advantage over its wireless competitors, all of which have complied with the “extremely clear and unambiguous” state tax law, according to Schneiderman. “Everyone else had no trouble figuring out what the tax law was – except Sprint.” In executing its fraudulent scheme, Sprint repeatedly and knowingly submitted false records and statements to New York State tax authorities.
“By deliberately evading sales tax, Sprint cost state and local governments over $100 million that could have been used for critical services and much needed resources that our state and its citizens need given the challenging economic times we are in,” said Schneiderman. The message of our office is clear – tax dodging is not acceptable and we will use every tool in our arsenal to make sure that taxpayers’ money is protected, and that honest businesses and consumers are not placed at a disadvantaged for collecting and paying their fair share of taxes.”
The State’s lawsuit was prompted by a whistleblower complaint from Empire State Ventures. As whistleblowers, they may be eligible to receive up to twenty-five percent of any money recovered by New York as a result of information they have provided.
In response to the lawsuit, Sprint issued a statement denying the allegations: “This complaint is without merit and Sprint categorically denies the complaint’s allegations.”
If you have knowledge of Tax Fraud and would like to discuss the possibility of a whistleblower award under the New York False Claims Act or the IRS whistleblower program, please contact our whistleblower attorneys today. Kenney & McCafferty will consult with you about your case, without obligation. All communications with Kenney & McCafferty attorneys regarding your case are confidential and protected by attorney-client privilege.
Tags: False Claims Act, New York False Claims Act, Sales tax, Tax Fraud, tax underpayment, whistleblower award
Posted in Corporate Tax Fraud, False Claims Act, Tax Fraud | Comments Off
SEC Whistleblower Program Rules Available
Thursday, May 26th, 2011
Look for this link on the SEC's home page.
Since the Commission’s 3-2 vote adopting the final rules yesterday, the SEC has made the document available on its website at ttp://www.sec.gov/news/press/2011/2011-116.htm
Kenney & McCafferty is carefully reviewing the document and determing how the new rules can benefit those reporting securities violations. For a free consultation about a potential claim of your own, please call K&M today.
Tags: abuse, corporate fraud, False Claims Act, fraud, government fraud, health care fraud, pharmaceutical fraud, retaliate, retaliation, Tax Fraud, tax whistleblower, waste, whistle blower, whistle blowing, whistleblower, whistleblowing, wrongful termination
Posted in corporate fraud, Corporate Tax Fraud, False Claims Act, government fraud, Money Laundering Tax Fraud, SEC Whistleblower Program, Uncategorized, Whistleblower Protection | Comments Off
K&M Presents Testimony on Whistleblower Program
Wednesday, May 18th, 2011
The IRS Building in Washington, D.C.
Linda Stengle of Kenney & McCafferty, P.C. presented testimony before the IRS on May 11, 2011, on its proposed definition of “collected proceeds.” The definition, if approved, would form the basis of calculating whistleblower awards.
The IRS had four people on a panel to hear the comments. They were Tom Kane, Senior Legal Counsel; Stephen Whitlock, Director of the Whistleblower Office; Alexandra Minkovich, Attorney-Advisor; and Kirsten Witter, Chief of the Service’s Ethics and General Government Law Branch. The panel asked questions of a few presenters, including Stengle. Tom Kane stated that NOLs should be considered to be ordinary deductions and were not relevant to an award calculation. Kane also said there should be no 2 year waiting period imposed in cases involving a closing agreement and that further guidance would be issued with regard to whether whistleblowers can obtain a portion of criminal fines.
Stengle pointed out irregularities in the public comment process ordinarily required when the IRS changes a major regulation. Specifically, the IRS issued its Whistleblower Manual in June 2010 without public comment and narrowed the definition of “collected proceeds.” Senator Grassley, the author of the statute mandating IRS whistleblower awards, criticized the Manual and said that several sections worked to deter whistleblowers from reporting large scale tax underpayment. Stengle echoed Grassley’s request that the manual be held in abeyance while substantive sections undergo public comment.
Four other attorneys presented testimony on the topic. Among other comments, Richard Rubin observed that the proposed rule addressed the inclusion of specific categories of recovery into the definition, but no actual definition for “collected proceeds” exists anywhere in the regulations.
All those who presented stated that the proposed definition for collected proceeds needed to be broadened. The panel members gave no indication of when the IRS plans to publish the final version of the definition.
Tags: corporate fraud, government fraud, IRS, IRS reward, IRS whistleblower program, tax evasion, Tax Fraud, tax underpayment, tax whistleblower, whistleblower award, whistleblower reward
Posted in Abusive Tax Shelters, Corporate Tax Fraud, Employment Tax Fraud, Estate Tax Fraud, IRS Whistleblower Office, Money Laundering Tax Fraud, Offshore Accouts Fraud, Tax Fraud, Uncategorized, Whistleblower Protection | Comments Off
Corporate Attorneys and Investigators Represent the Company – Not Whistleblowers
Wednesday, May 4th, 2011
Corporate investigators and attorneys will protect the company. It's their job.
A long time corporate investigator recently shared his concern that whistleblowers look to corporate investigators and attorneys for help and protection when they blow the whistle. Nothing could be further from the truth. “There’s nothing I can do,” said the investigator. “I’ve seen it over and over again. They are going to get their heads cut off.”
The investigator said he knew that whistleblowers, no matter the merit of their report, would be skillfully and systematically terminated with a substantial paper trail to support management’s actions.
“They look to me for help,” he said. “I work for the company. I tell them that, but they don’t seem to understand.”
Neither did CEO Ian Norris of Morgan Crucible Company. Morgan Crucible came under government investigation for an international price fixing conspiracy. CEO Norris began a campaign to obstruct a grand jury investigation, and he shared details of his campaign with Morgan Crucible’s attorney. When the government learned of Norris’s obstruction, it charged Norris with corruptly persuading, and attempting and conspiring to corruptly persuade, others with intent to influence their testimony in grand jury proceedings. Morgan Crucible waived its attorney client privilege and granted permission for corporate counsel to testify. Norris fought the testimony, saying the corporate attorney also represented Norris in his individual capacity and was prohibited from testifying.
The Third Circuit disagreed, but found that communications about scope of representation were ambiguous. Ultimately, the court ruled that Morgan Crucible, alone, held the right to waive attorney client privilege, and the attorney testified.
The attorney testified that Norris, in front of counsel, disseminated a false cover story and scripts about the price fixing and encouraged everyone, including counsel, to relay the false information to investigators. The attorney said he did not know the information was false.
Attorneys and investigators should provide employees with explicit explanations about their role in investigating allegations of fraud within a corporation. They often do not, for a variety of reasons. Bottom line – employees need to take steps to protect themselves when they report corporate misconduct internally.
For a free consult about whether you have a potential government fraud claim, call K&M today.
Tags: abuse, attorney general, corporate fraud, corruption, False claims, False Claims Act, FCA, FERA, fraud, fraud reward, government fraud, health care fraud, IRS whistleblower, IRS whistleblower program, medicare fraud, pharmaceutical fraud, Qui Tam, retaliate, retaliation, SEC whistleblower, Tax cheat, tax evasion, Tax Fraud, tax whistleblower, whistle blowing, whistleblower award, whistleblowing, wrongful termination
Posted in Corporate Tax Fraud, Employment Tax Fraud, False Claims Act, Money Laundering Tax Fraud, Offshore Accouts Fraud, retaliation, SEC Whistleblower Program, Tax Fraud, Uncategorized, Whistleblower Protection | Comments Off
Tax Whistleblowers Must File within 30 Days of No Answer Letter
Tuesday, April 26th, 2011
In Friedland v Commissioner (T.C. Memo 2011-90), the United States Tax Court dismissed the IRS whistleblower’s appeal because it was not filed within thirty days of the date of the “no answer letter” sent to Friedland by the IRS Whistleblower Office. The Tax Court reiterated its ruling in Cooper – the “no answer letter” constitutes a final determination of a whistleblower claim.
Murray Friedland, a CPA, reported two corporations for tax violations in September 2009. On November 13, 2009, the IRS Whistleblower Office sent Friedland a letter explaining that it had reviewed and evaluated the claim and then said that prevailing law prevented it from explaining why a claim would be denied. Friedland found the letter confusing. He sent additional information about his claim to the Whistleblower Office, and he called for an explanation. The WO responded with three letters, one memorializing a conversation in which Friedland was told that he could write to the US Court of Federal Claims. The letters also confirmed that the WO would not change its determination about Friedland’s claim.
Friedland followed the suggestion of the WO and appealed to the Court of Federal Claims. The Court of Federal Claims dismissed the appeal on May 26, 2010, because the CFC does not have jurisdiction to hear IRS whistleblower appeals. On June 18, 2010, Friedland filed an appeal with the Tax Court.
Friedland filed his appeal 217 days after the date of the first letter, the “no answer letter.” As decided in previous Tax Court rulings, the “no answer letter” is notice of a final determination that the IRS is denying the claim. Whistleblowers have thirty days from the date of the no answer letter to file their appeals. Because Friedland filed 217 days after the date of the no answer letter, the Tax Court ruled that it had no jurisdiction over the claim because it was filed too late.
With regard to Friedland’s obvious confusion about the appeal process, the Tax Court said, “We recognize that petitioner may have relied on the erroneous advice of the Whistleblower Office in filing his initial appeal with the Claims Court. . . We sympathize with the petitioner. We cannot expand our jurisdiction, however, even where the Commissioner provided bad advice.”
Kenney & McCafferty, P.C., has successfully represented IRS whistleblowers, even before the passage of the 2006 whistleblower statute. For knowledgeable and trustworthy representation, contact K&M for a free assessment today.
Tags: Abusive Tax Shelters, Corporate Tax Fraud, Employment Tax Fraud, Estate Tax Fraud, fraud reward, IRS whistle blower, IRS whistleblower, offshore tax fraud, Tax cheat, tax claims, tax court, tax evasion, Tax Fraud, tax petition, tax underpayment, tax whistle blower, tax whistleblower, tax whistleblower petition, whistleblower appeals, whistleblower award, whistleblower reward
Posted in Abusive Tax Shelters, Corporate Tax Fraud, Employment Tax Fraud, Estate Tax Fraud, IRS Whistleblower Office, Money Laundering Tax Fraud, Offshore Accouts Fraud, retaliation, Tax Fraud, Uncategorized, Whistleblower Protection | Comments Off
IRS Goes Viral?
Thursday, April 14th, 2011
One of many IRS YouTube offerings.
Not exactly, but the IRS has introduced its own YouTube channel, along with an array of audio products to help taxpayers take advantage of tax benefits available in the American Recovery and Reinvestment Act. People can visit the site at www.youtube.com/irsvideos. The IRS YouTube channel caters to people of different backgrounds by offering videos in English, Spanish, and American Sign Language.
One video teaches viewers how to use the IRS Withholding Calculator. The IRS suggests that people who have more than one job or working spouses should especially check their withholding to ensure neither too much nor too little is being withheld. People can use the calculator to help determine if they should make adjustments. Another video of interest discusses the role of an interim appeals office and what taxpayers can expect from that office.
In another attempt to make the tax code more transparent to today’s filers, the IRS has also launched an ITunes podcast site featuring information about ARRA tax credits.
Unfortunately, the IRS tax whistleblower program has not been the subject of a YouTube video, at least not one produced by the IRS. However, interested tax fraud followers can go to YouTube and type in “irs whistleblower.” One of the results listed will be a video of an IRS Whistleblower Conference panel discussion starring K&M’s lead partner Brian Kenney.
Of course, if you would like to learn more about the IRS whistleblower program, there’s no need to look at YouTube at all. Call Kenney & McCafferty at 215-367-4333 for a free consult today.
Tags: corporate fraud, government fraud, IRS, IRS reward, IRS whistleblower program, tax evasion, Tax Fraud, tax underpayment, tax whistleblower, whistleblower award, whistleblower reward
Posted in Abusive Tax Shelters, Corporate Tax Fraud, Employment Tax Fraud, Estate Tax Fraud, IRS Whistleblower Office, Money Laundering Tax Fraud, Offshore Accouts Fraud, Tax Fraud, Uncategorized | Comments Off
IRS To Hold Hearing on Definition of Collected Proceeds
Monday, April 4th, 2011
The IRS Should Target Large Corporations for Tax Fraud
The IRS has set May 11, 2011, as the hearing date for public comment on proposed regulations REG-131151-10 on the payment of rewards for whistleblowers. Chief among the areas of interest is the new definition of “collected proceeds.”
The proposed regulations do not make it clear whether corporations alleging a Net Operating Loss that is reduced by whistleblower information would result in an award for the whistleblower. Large corporations routinely rely on highly sophisticated tax experts to help them reduce their cash tax liability. The IRS’s proposed change in definition of “collected proceeds” appears to target individual taxpayers but fails to clearly identify large corporations who evade taxes. Tax underpayment by corporations, not individuals, should be the focus of the IRS. Corporations represent the greatest opportunity to capture much needed tax dollars for the US Treasury. Those blowing the whistle on large corporations should be incentivized to the same extent as those blowing the whistle on an individual taxpayer.
People who want to present oral comments at the hearing must submit a written outline of their comments to the IRS by April 19th. Each speaker will be allotted 10 minutes. The hearing will be held at the Internal Revenue Building at 1111 Constitution Avenue, NW, in Washington, D.C.
Tags: corporate fraud, government fraud, IRS, IRS reward, IRS whistleblower program, tax evasion, Tax Fraud, tax underpayment, tax whistleblower, whistleblower award, whistleblower reward
Posted in Abusive Tax Shelters, Corporate Tax Fraud, IRS Whistleblower Office, Money Laundering Tax Fraud, Offshore Accouts Fraud, Tax Fraud, Uncategorized | Comments Off
ACLU Loses Attack on Seal Provisions of FCA
Monday, March 28th, 2011
ACLU Loses Attack on FCA Seal
The ACLU lost its most recent attempt to strike down the seal provisions of the False Claims Act. The ACLU had lost its case in the Eastern District of Virginia and then appealed to the Fourth Circuit. The Appellate Court affirmed the district court’s decision to dismiss the ACLU’s case.
The American Civil Liberties Union filed the lawsuit in 2009, making a facial constitutional challenge to the long standing seal provisions of the FCA. The False Claims Act allows the qui tam plaintiff/relator to file the civil complaint under seal, which means the complaint is not served on the defendant until the seal is lifted by judicial order. The seal allows the government time to investigate the complaint without alerting defendants to the specific allegations. Depending on where the case is filed, the government frequently asks the judge for extensions of a sealed complaint to allow it more time to conduct its investigation. At some point, the complaint becomes unsealed.
The seal makes filing False Claims actions more attractive to whistleblowers because the whistleblowers enjoy anonymity while the government is conducting its investigation of the defendants. If the complaint is under seal, the defendant does not know that a whistleblower is involved and many times, does not know that it is being investigated. Whistleblowers who are current employees of a defendant that is committing government fraud are able to assist the government in its recovery of fraudulently obtained government funds without worrying unduly about retaliation for reporting the illegal conduct.
Oddly, the ACLU sought to strike down the seal provisions on the grounds that they acted against the whistleblower’s right to free speech, that the seal violated the public’s right of access to judicial proceedings, and that the seal impermissibly violated the doctrine of separation of powers. The ACLU was not able to point to a single whistleblower that agreed with the ACLU’s position, however, and admitted that it did not have much familiarity with the workings of a qui tam action.
The Fourth Circuit pointed out that seals are often ultimately lifted in qui tam cases and that the United States has a compelling interest in protecting the integrity of ongoing fraud investigations. Kenney & McCafferty applauds the Courts’ rulings in this matter and looks forward to continuing working with qui tam relators in sealed government fraud investigations.
Tags: abuse, corruption, False claims, False Claims Act, FCA, fca seal, FERA, fraud reward, government fraud, government fraud recovery, Qui Tam, relator reward, whistle blowing, whistleblower, whistleblower reward
Posted in Corporate Tax Fraud, False Claims Act, Recent News, retaliation, Uncategorized, Whistleblower Protection | Comments Off
Galileo – History's Greatest Whistleblower?
Tuesday, February 15th, 2011
Galileo faces the Inquisition
February 15, Galileo’s birthday, is a fitting time to reflect upon Galileo’s experience with blowing the whistle on the Ptolemaic theory, the long held belief that the Earth was the center of the universe and that the sun and the planets orbited the Earth. Galileo today is called “the father of modern observational astronomy” and “the father of modern physics.” Stephen Hawking stated, “Galileo, perhaps more than any other single person, was responsible for the birth of modern science.” Most people don’t realize that Galileo was tried by the Inquisition for his advocacy of Copernicanism, found guilty of heresy, and spent the rest of his life under house arrest.
As brilliant he was, Galileo did not understand the environment in which he was operating, and he failed to adhere to rules and constraints placed on those attempting to advance scientific theories in the 1600s. His support of heliocentrism offended the Catholic church. The church admonished Galileo, who thought he would be clever and work around the constraints that had been placed on him. After being chastised, Galileo waited years to publish Dialogue Concerning Two Chief World Systems, but he didn’t follow the rules. To publish, he needed papal permission and formal authorization from the Inquisition. He didn’t get them. Had he followed the rules, Galileo probably could have avoided trial and arrest. Instead, Galileo was:
* Found “vehemently suspect” of heresy.
* Sentenced to formal imprisonment, which was later commuted to house arrest.
* Had his publication, Dialogue, banned.
* Forbidden to ever publish again.
After his death, the world eventually lauded his contributions, but Galileo died without acclaim and in isolation.
Whistleblowers should learn from Galileo’s mistakes. No matter how brilliant a whistleblower may be, it is impossible for everyone to know everything. There is no substitute for experienced legal advice when one decides to blow the whistle. Galileo originally had many supporters who could have guided him the intricacies of the papacy’s rules for publication. He didn’t ask, and he thought he had the situation well in hand. He was wrong.
If Galileo could not figure out how to maneuver through the intricacies of successfully blowing the whistle, who can? Fortunately, whistleblowers today have Kenney & McCafferty to call for expert advice. Whistleblowers should educate themselves on the pros and cons before blowing the whistle. If you want to report fraud against the government, save yourself some headaches. Get a free consultation by calling Kenney & McCafferty today.
Tags: abuse, corporate fraud, corruption, ecurities violations, False Claims Act, FCA, fraud, fraud reward, government fraud, health care fraud, pharmaceutical fraud, Qui Tam, retaliate, retaliation, SEC whistleblower, tax claims, tax evasion, Tax Fraud, tax whistleblower, waste, whistle blower, whistle blowing, whistleblower, whistleblowing, wrongful termination
Posted in Abusive Tax Shelters, Corporate Tax Fraud, Employment Tax Fraud, False Claims Act, IRS Whistleblower Office, Money Laundering Tax Fraud, Offshore Accouts Fraud, retaliation, SEC Whistleblower Program, Tax Fraud, Uncategorized | Comments Off
Get Smart about Whistleblowing – Retaliation is Human Nature
Monday, February 7th, 2011
In 2008 Judith Moldover, Senior Staff Attorney of the Lawyer’s Alliance of New York, stated, “[R]etaliation is human nature.” Moldover made the statement to a group of human resources professionals at a conference sponsored by the Society for Human Resource Management. As one who spent most of her career defending employers, Moldover warned the HR crowd that retaliation claims would increase because there is an almost “irresistible urge to strike back” against employees who complain about problems or who file lawsuits against their employers. Kenney & McCafferty speaks every day to victims of retaliation. Perhaps because retaliation is so ingrained, employees who speak out against fraud, waste, or wrongdoing should expect their bosses to retaliate against them. The only thing employees can do is smarten up. Figure out if you are a likely target of retaliation as early as you can. Assess whether you have a viable whistleblower claim. And, think twice about making any further reports to your boss.
If you believe your boss is genuinely trying to improve the workplace and wants your input, make good faith reports of problems, at least once or twice. Some employers will do the right thing, and some will even be grateful. Many will not. As Moldover points out, no one likes to hear about problems, and most employers would rather hear that their departments or companies are running well than hear a report of non-compliance or a misuse of company funds. Sometimes a whistleblower can assess the workplace environment and get clues about how a particular supervisor will react to reports of fraud, waste, or abuse.
Suppose you make a report. How does your boss react? Does your boss correct the wrongdoer, or give him more support? Does your boss try to blame the problem on you? Does your boss try to diminish your value to the company somehow? Does your boss suddenly give greater weight to petty workplace problems of yours when those were previously tolerated? Does your boss suddenly give you demeaning work assignments? Does your boss allow others to be rude to you? Are your resources taken away, while wrongdoers get more resources? Does your access to the boss decrease? Does the wrongdoer get more access? Is the wrongdoer emboldened somehow? Does your boss suddenly chastise you in ways that never happened before? Are you passed over when it comes time to hand out plum assignments? Signs of retaliation can be subtle or obvious, but when whistleblowers look back, they often realize that they had observed specific small behaviors that indicated they would be punished for their efforts to address fraud. If your boss shows signs of retaliation against you, even in small ways, step back, and assess the situation.
Unfortunately, most whistleblowers are people of high integrity and perhaps undue optimism. They see little, subtle signs of retaliation like those described above, but they don’t want to be involved in covering up fraud, or they just can’t bring themselves to gloss over a co-worker’s misconduct. Sometimes, they just have too much faith that their companies will appreciate their efforts. By the time the hapless whistleblower contacts an attorney, it’s too late. The well meaning, smart, trustworthy supporter of the company has experienced high level retaliation – attacks on reputation, bad performance appraisals, demotion, and perhaps, loss of job. Despite well publicized reporting protections, retaliation can take many forms, and even in serious, obvious cases, it takes a long time to be made whole when an employer retaliates against you. Think twice before making that report to a boss who doesn’t want to hear it.
Of course, many employees don’t have much choice about whether or not to report fraud, waste, and abuse. Compliance officers, auditors, attorneys – these and many other occupations require one to take action of some sort when encountering fraud. All employees can and should take steps to protect themselves when reporting misconduct and illegal behavior. In cases where government money is involved, even indirectly, the whistleblower should get legal advice early. A workplace insider who reports government fraud can be an important asset to government prosecutors in a False Claims action, for example. A terminated employee is often less valuable.
K&M would like to help you assess whether you have a viable whistleblower claim and what steps you can take to protect yourself in the process of addressing government fraud. If you know of government fraud in your workplace, and you suspect even a hint of possible retaliation, call K&M for a free, expert consultation today.
Tags: abuse, corporate fraud, False Claims Act, fraud, government fraud, health care fraud, pharmaceutical fraud, retaliate, retaliation, Tax Fraud, tax whistleblower, waste, whistle blower, whistle blowing, whistleblower, whistleblowing, wrongful termination
Posted in Abusive Tax Shelters, Corporate Tax Fraud, Employment Tax Fraud, False Claims Act, IRS Whistleblower Office, Money Laundering Tax Fraud, Offshore Accouts Fraud, Press Release, retaliation, SEC Whistleblower Program, Tax Fraud | Comments Off
