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Posts Tagged ‘Tax Fraud’
IRS Whistleblower Program: Under Attack. Again.
Friday, April 12th, 2013
**UPDATE**
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.
Tags: False Claims Act, IRS, IRS reward, IRS whistleblower, IRS whistleblower program, Tax Fraud, whistleblower award
Posted in IRS Whistleblower Office, Tax Fraud | Comments Off
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
SEC Adopts Final Whistleblower Program Rules
Wednesday, May 25th, 2011
Mary Schapiro presided over the vote approving the SEC whistleblower rules.
In a split vote, the SEC adopted final rules to implement the whistleblower program provisions enacted under Dodd Frank in July 2010. Chairman Mary Schapiro presided over the discussion, with Sean McKessy and Stephen Cohen of the SEC’s staff answering questions by the commissioners on the proposal.
Cohen said that the SEC had strengthened its Office of Market Intelligence to handle the incoming tips and would be adding a special Whistleblower page to a new Tips, Complaints, and Referrals section of the SEC’s webpage. McKessy said that they have not seen a significant increase in the number of tips to the SEC since the passage of Dodd Frank, but staff has seen an improvement in the number of high quality tips received.
Commissioners Walter and Aguilar praised the SEC staff for implementing a “robust public process” leading to the development of today’s rules. Commissioner Paredes dissented and said that he thought the rules did not adequately preserve the role of internal corporate compliance programs and the process for reporting of tips would be a deterrent to whistleblowers. Paredes also said he voted against the proposal because the rules as proposed would create an “undue risk of encouraging low quality submissions.” Paredes said the issue was not the merit of whistleblower programs, but anticipated problems created by this particular set of rules.
Schapiro called for the vote, and the final rules were passed 3 to 2.
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 Uncategorized | 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
NY Attorney General Goes after Tax Cheats
Wednesday, February 23rd, 2011
New York Attorney General Eric Schneiderman recently announced the creation of a taxpayer-protection unit to target tax cheats, pension plan frauds, and corrupt government contractors. Schneiderman is hopeful the unit, with the help of whistleblowers, will recover hundreds of millions of dollars to help close the state’s budget gap.
In 2007, New York passed its False Claims Act [FCA]. The Act allows the state’s Attorney General, local governments and whistleblowers to bring actions against anyone that defrauds the government. If found liable, defendants must pay the government triple damages and civil penalties.
Recently, New York lawmakers enhanced the State’s FCA by adding the power to crack down on large-scale, multi-state corporate tax fraud schemes, expanding whistleblower protections and making it easier to prosecute corrupt subcontractors. The enhancement, titled Fraud Enforcement and Recovery Act (FERA), was authored by Schneiderman himself. The revised FCA allows the State to bring false claims actions against those who commit tax fraud, including offshore cases.
Working with whistleblowers, the newly-formed Taxpayer Protection Unit will target multi-state corporate tax fraud schemes, corrupt contractors who over-bill taxpayers, and firms that rip off pension funds. The unit will be comprised of lawyers and investigators who will conduct civil investigations and criminal prosecutions against those who defraud the government.
“We cannot afford to lose any more money to companies and individuals who seek to defraud the State,” Schneiderman said. “Today’s announcement is a signal to anyone thinking of ripping off New York taxpayers: We will go after you with every tool we have, and you will pay the price for these crimes.”
Tags: False claims, False Claims Act, FERA, fraud, Fraud Enforcement and Recovery Act, Tax cheat, Tax Fraud, Taxpayer Protection Unit, whistleblower
Posted in Uncategorized | Comments Off
