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Posts Tagged ‘tax evasion’
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
IRS Proposes Changes to Whistleblower Reward Program
Wednesday, February 23rd, 2011
Better Incentives for Reporting Corporate Tax Fraud
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:
CC:PA:LPD:PR (REG-131151-10)
Room 5203
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
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Switzerland Acts to Assist Foreign Governments on Tax Cheats
Wednesday, February 16th, 2011
Reacting to criticism that it has not done enough to assist international tax authorities in combating tax fraud, the Swiss Finance Ministry said on Tuesday that it will provide information on bank account holders if foreign tax authorities provide a bank account number, social security number, or other information. Prior to the announcement, Switzerland had required the bank account details, as well as the name and address of the individual, often halting investigations in their initial stages.
Switzerland made the change because it concluded that it would not pass an ongoing review by a tax forum organized under the umbrella of the Organization for Economic Cooperation and Development (OECD). If it didn’t pass the current peer review, it risked sanctions by the Group of 20 countries.
Tax agencies often have bank account information because they see movements of money, but do not have the account holder’s name. In some cases, the Swiss demanded the name of the so-called beneficial owner, or the individual behind a trust or an offshore entity that were the titular account holders. Now, the Swiss will help if a foreign country provides a reasonable amount of information to track down an account.
Switzerland’s actions come as the international community seeks to crack down on tax evaders to fill depleted public coffers. “This sends a strong signal that Switzerland is no longer in the business of facilitating offshore tax evasion,” said Jeffrey Owens, director of the Centre for Tax Policy and Administration at the OECD.
Tags: OECD, offshore, Organization for Economic Cooperation and Development, Swiss Finance Ministry, Switzerland, tax, tax evasion
Posted in Uncategorized | 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
Bradley Birkenfeld – Where Did He Go Wrong?
Friday, September 10th, 2010
UBS Whistleblower Bradley Birkenfeld
UBS whistleblower Bradley Birkenfeld’s testimony led to a $780 million settlement and recovery of thousands of questionable Swiss bank accounts, as well as exposing one of the largest tax evasion schemes in the history of international banking. Despite the great risks that Birkenfeld took in coming forward, the United States Department of Justice indicted him, sentencing the whistleblower to 40 months of prison time. In similar cases, most whistleblowers like Birkenfeld – even those partially complicit in the actions they were decrying – received the metaphorical “slap on the wrist” in the form of a fine or suspension of trading licenses. Why, then, considering Birkenfeld’s voluntary and extensive participation, is he currently sitting in a medium security Pennsylvania prison?
Attorneys can find it difficult to maneuver the client safely through situations like Birkenfeld’s. Experienced qui tam attorneys recognize that whistleblowers come upon fraud sometimes because the whistleblowers are involved, at least marginally, in the questionable activity themselves. Although Birkenfeld admitted his complicity in the fraud, he aroused the DOJ’s ire by failing to fully disclose his wrong-doings. The prosecutors discovered the extent of Birkenfeld’s complicity at different intervals throughout the case instead of receiving a full disclosure from Birkenfeld at the outset. The prosecuting attorneys felt betrayed by Birkenfeld’s failure to be completely candid during the initial debriefings and believed his initial interviews to contain material misrepresentations, whether by commission or omission. The lack of initial disclosure complicated the DOJ’s investigation, diminished Birkenfeld’s credibility as a witness, and placed Birkenfeld in the unenviable position of seeking leniency for substantial criminal conduct while making material misrepresentations to the government.
There are several simple lessons to be learned from the unfortunate Birkenfeld saga. First, as a whistleblower be prepared to be entirely truthful about your role in the conduct that you are exposing. Do not expect to pick and choose what you will reveal to the government. Second, fully disclose everything to your counsel so that he or she can determine what is relevant and needs to be disclosed to the government. Conversations with counsel are protected by the attorney client privilege so those disclosures can be made without fear of them being revealed without your approval. Third, hire counsel experienced in evaluating potential criminal and civil liability in tax matters. There are steps that can be taken to protect your interests even if potential criminal exposure exists for your conduct. Experienced counsel can explain your options and see that your interests are protected while pursuing your whistle blower claim.
When you consult whistleblower counsel, feel comfortable that Kenney & McCafferty can advise you no matter what your situation. Kenney & McCafferty possesses the necessary experience in both civil and criminal tax matters to safely navigate the whistleblower through the difficult process of reporting tax fraud.
Tags: Birkenfeld, tax evasion
Posted in IRS Whistleblower Office, Recent News | Comments Off
