Posts Tagged ‘IRS whistleblower’
Friday, April 12th, 2013
On March 13, 2013, the United States Tax Court issued an order calling for an evidentiary hearing to determine whether Joseph Insigna ever received a determination from the IRS. Order, Joseph Insigna v. Commissioner of Internal Revenue Service, No. 4609-12W (March 13, 2013). In his petition to the Court, Insigna argues that, although he has not received a final determination letter from the IRS, his whistleblower claims “have, as a practical matter, been denied, and that he has therefore received a de facto rejection.”
In response, the IRS argues that Tax Court lacks jurisdiction to hear the matter because it has not, in fact, issued a determination on Insigna’s claim.
While both sides seem keen on arguing over whether Tax Court has jurisdiction over a claim in a situation when the IRS unreasonably delays in failing to issue a determination letter, the Order makes clear that the Court does not intend to reach that question unless it must. Instead, the Court will first focus on whether Insigna did, in fact, receive a determination — even a de facto determination .
Pursuant to the whistleblower statute, Tax Court has jurisdiction only if there has been “any determination regarding an award.” Id. To that end, the Court noted that the statute “does not explicitly require a ‘notice’ of a determination, nor a written determination, nor even any communication of a determination.”
The purpose, then, of the evidentiary hearing is to determine whether a de facto determination has, in fact, been made. To reach that conclusion, the Court will seek to determine “whether the IRS has completed its consideration of petitioner’s claim; what, if anything, the IRS is still doing with regard to petitioner’s claim; and whether the IRS expects to do anything in the future with regard to petitioner’s claim.” Id. Notably, the Court states that “[i]f there has been a cessation of administrative action, then a reviewable determination may have been effectively made thereby.” Id.
A former bank executive recently filed suit against the Internal Revenue Service claiming that the IRS owes him a reward for blowing the whistle.
Joseph A. Insinga filed a claim for an award with the IRS Whistleblower Office in 2007, one year after Congress passed a law establishing the Whistleblower Office. Under the Tax Relief and Health Care Act of 2006, tax whistleblowers may receive an award ranging from 15% to 30% of the total taxes, penalties, and interest collected by the IRS, with the actual percentage awarded based on an informant’s contribution to the case.
Insinga claims that the IRS collected proceeds from the allegedly fraudulent taxpayers based on information that he provided, but he has yet to receive a response from the IRS regarding an award. As a result, Insinga filed a claim in the United States Tax Court, claiming the IRS owes him a portion of the proceeds it collected based on his information.
According to his petition, for at least two years, the IRS led him to believe that an award was forthcoming yet, following purported payments by the targeted taxpayers in November 2011, the IRS changed its tune, informing Insigna that his claims “were on life support.” Moreover, the IRS claimed that there were “other sources” of the information Insigna provided nearly four years earlier. The IRS subsequently informed Insigna that a final decision would be issued soon. According to Insigna, that statement was made in November 2011. Following nearly four more months of silence, Insigna filed his petition in or around February 2012.
The news of Insinga’s claim does not come at an opportune time for the IRS, which earlier last week was the subject of a scathing article on Forbes.com, critical of its failure to reward whistleblowers for valuable information. According to the author, Erika Kelton, an attorney at Phillips & Cohen who represents whistleblowers before the IRS, the problem with the IRS whistleblower program is not the “quality of the whistleblower information that the IRS is receiving” but rather “the IRS itself and institutional resistance to whistleblowers within the IRS.”
In FY 2010 alone, the IRS collected $464.6 million from taxpayers under its whistleblower program, so it is clear that the information is out there. The problem is that the IRS hands out too few awards, and takes too long to pay them.
It has recently been suggested that the IRS establish a website to monitor the status of its whistleblower claims. Even if personal data was redacted in accordance with IRS regulations, the website would at least reassure whistleblowers that their claims are being processed.
Whistleblowers should be viewed not as a burden, but rather as a weapon in the fight against fraud. After all, the False Claims Act recovered over $4 billion in federal funds in FY 2011. Given that the annual gap between what is owed in taxes and what is paid is approximately $385 billion (and growing), the IRS would be well served to use the tools Congress provided when it established the whistleblower program and follow in the footsteps of the False Claims Act in an effort to eliminate tax fraud and the $385 billion gap.
If you have knowledge of Tax Fraud and would like to discuss the possibility of a whistleblower award under 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, May 4th, 2011
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
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
Wednesday, February 23rd, 2011
Proponents of the IRS Whistleblower Program can encourage the IRS to adopt a change in an award calculation rule that could increase payments to whistleblowers who report corporate tax underpayments. On January 18, 2011, the Service published a revision to IRC Section 301.7623 that would expand the scope of “collected proceeds” to include “amounts collected prior to receipt of the information if the information provided results in a denial of a claim for refund that otherwise would have been paid; and a reduction of an overpayment credit balance used to satisfy a tax liability incurred because of the information provided.” Those interested in encouraging folks to report corporate tax fraud should write to the Service and ask that the definition be specified to include offsets against NOLs.
So…why the change?
The IRS issued its whistleblower manual in June 2010. The Service adopted a definition of “collected proceeds” that disallowed payments to whistleblowers when the defendant taxpayer satisfied the tax debt by reducing a previous tax credit balance. The new definition expands the term “collected proceeds” to include offsets against credit balances.
Here’s the problem. In the case of large corporations, the reference to “credit balance” is not generally used. Corporations either have a taxable balance, or they are in a Net Operating Loss (NOL) position in which case they don’t pay tax in the current tax period. Instead, the corporations apply a portion or all of the NOL balance to current period taxable income. In addition, corporate credit balances (NOLs) result from many reasons other than tax “overpayment.” For example, a corporation can achieve an NOL balance through the acquisition of another company – and not pay tax for that period.
To boil it down, a whistleblower reports that MegaCorp underpaid $ 100M in taxes for the year 2008. The IRS confirms that MegaCorp underpaid $ 100M in taxes for the year 2008. However, MegaCorp bought MiniCorp and incurred a NOL of $ 100M. MegaCorp says to the IRS, “Okay, just take the $ 100M from the NOL, and we’ll call it even.” The IRS says okay, and the whistleblower gets nothing. That is, nothing under the June 2010 Whistleblower Manual. And, unless NOL offsets are explicitly addressed in the new expanded definition of “collected proceeds,” whistleblowers could be denied rewards for NOL offsets because they are not technically “credit balances.”
Changing the definition of “collected proceeds” to specify inclusion of NOL offsets would incentivize whistleblowers to report tax fraud being committed by large corporations. The IRS is asking for public comment on the rule change. Those who want to comment on the change should send written comments to:
Internal Revenue Service
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044
The IRS will consider timely submissions of written comments that include the original letter and eight copies. Submit your comments by April 1, 2011.
Tags: corporate fraud, fraud reward, internal revenue service, IRS, IRS whistleblower, tax claims, tax evasion, Tax Fraud, tax underpayment, tax whistleblower, whistle blowing, whistleblower award, whistleblowing, whistlebower reward
Posted in Uncategorized | Comments Off