New York Sues Sprint for $300M Tax Fraud
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.
This entry was posted on Tuesday, April 24th, 2012 at 6:31 pm and is filed under Corporate Tax Fraud, False Claims Act, Tax Fraud. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.