Archive for April, 2012
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.
Wednesday, April 11th, 2012
Wednesday, April 11, 2012- An Arkansas judge ordered Johnson & Johnson to pay $1.1 billion after a jury found that the company’s Risperdal marketing campaign violated the state’s consumer-protection laws. Specifically, the jury found that J&J downplayed and hid risks- diabetes and weight gain- associated with taking its antipsychotic drug.
Circuit Judge Tim Fox determined that J&J and its subsidiary, Janssen Pharmaceuticals Inc., committed nearly 240,000 violations of the state’s Medicaid fraud law — or one for each Risperdal prescription issued to state Medicaid patients over a 3 1 / 2-year period. Each violation carried a $5,000 fine, the state’s mandatory minimum amount, bringing the total to more than $1.1 billion.
Judge Fox issued an additional $11 million fine for more than 4,500 violations under the state’s deceptive practices act.
Arkansas Attorney General Dustin McDaniel issued a statement, claiming that today’s verdict “sends a clear signal that big drug companies like Johnson & Johnson and Janssen Pharmaceuticals cannot lie to the [FDA], patients and doctors in order to defraud Arkansas taxpayers of our Medicaid dollars.”
Arkansas is one of several states who have sued J&J over its marketing of Risperdal, yet the Arkansas penalty is the largest to date against J&J. In 2010, jurors in Louisiana ordered the drug manufacturer to pay almost $258 million to state officials for making misleading claims about the drug’s safety. Less than a year later, in June 2011, a South Carolina judge upheld a $327 million civil penalty against the company. Most recently, in January 2012, Texas reached a $158 settlement with the company, which did not admit fault in connection with the settlement.
Shortly after the verdict, Janssen issued a statement indicating its intent to appeal the verdict, which would be heard by the Arkansas Supreme Court.
The United Stated continues to investigate the sales practices of J&J and Janssen related to Risperdal, including allegations that the company marketed the drug for unapproved uses. “Johnson & Johnson needs to wake up and realize they are playing a losing game. They should be running, not walking, to the settlement table,” said Patrick Burns of Taxpayers against Fraud. “[The Department of Justice] offered a global settlement for $1.8 billion last month. I am not sure that deal is going to stay on the table after this.”
If you have knowledge of Healthcare Fraud and would like to discuss the possibility of a whistleblower award under the False Claims Act, 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.
Tuesday, April 3rd, 2012
On Monday, the Commodity Futures Trading Commission (“CFTC”) filed civil charges against Royal Bank of Canada (“RBC”), accusing the bank of engaging in hundreds of millions of dollars in illegal stock future trades to gain Canadian tax credits.
“Today’s action should make clear that the CFTC will not hesitate to bring charges against even the most sophisticated market participants who unlawfully exploit the futures markets for their own gain,” said David Meister, Director of the CFTC’s Division of Enforcement.
The complaint, filed in the Southern District of New York, alleges that from at least June 2007 to May 2010, RBC conducted a massive wash sale scheme in connection with exchange-traded stock futures contracts. According to the CFTC, a small group of senior RBC employees allegedly created and managed a trading strategy whereby they improperly coordinated trades to allow subsidiaries of the bank to buy and sell stock futures without taking a position in the market, thereby eliminating, or washing, the risk of a loss.
Wash trades, the simultaneous and offsetting purchase and sale of futures contracts, are banned under U.S. futures law.
The lawsuit claims that the bank bought and sold stocks in U.S. and Canadian companies, and then took opposing positions on futures written on those same stocks. Specifically, RBC “allegedly non-competitively traded hundreds of millions of dollars’ worth of narrow based stock index future and single stock futures contracts with two of its subsidiaries,” and then executed block trades on OneChicago LLC, an electronic futures exchange.
According to the complaint, those trades were not negotiated at arm’s length, as required by law. Federal regulations allow futures trades between companies and subsidiaries only if they are conducted on an arm’s length basis. In its complaint, the CFTC alleges that the trades were designed and controlled by senior RBC personnel acting on behalf of RBC’s behalf.
The goal of the scheme was to “realize lucrative Canadian tax benefits from holding certain public companies’ securities in its Canadian and offshore trading accounts,” while limiting market exposure.
The complaint also accuses the bank of concealing and making false statements about its scheme from OneChicago and CME Group, Inc., the entity that exercised regulatory compliance for OneChicago. When asked to describe the trades to CME Group, the bank allegedly falsely stated that its trading activity was conducted at arm’s length, and concealed the fact that the strategy was created and managed by a group of RBC personnel.
“A fundamental purpose of the futures markets is to provide an arm’s-length mechanism for market participants to discover prices and shift risks associated with products traded in those markets,” added David Meister. “RBC not only designed and executed a wash sale scheme that undermined that purpose, it went a step further and misled the exchange into believing that its conduct was lawful.”
The CFTC is seeking monetary sanctions and a permanent injunction against further violations of the Commodity Exchange Act and the CFTC’s regulations.
RBC has called the allegations “absurd,” and has promised to defend itself against “such baseless allegations,” said Elisa Barsotti, a spokeswoman for the bank.
To read more about the charges filed by the CFTC, see the Commission’s full press release at http://www.cftc.gov/PressRoom/PressReleases/pr6223-12.
If you have knowledge of Securities Fraud and would like to discuss the possibility of a whistleblower award under the CFTC 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.