Posts by William J. ComiskeyPartner
After years of complaints from whistleblowers and other interested parties, the IRS whistleblower program—which was enhanced in 2006—has finally begun to show some signs of success. Consider:
- As my colleague John Sinatra reported, the IRS recently awarded a whopping $104 million to imprisoned UBS whistleblower Bradley Birkenfeld, the first award under the 2006 program
- Just last month, the IRS awarded $38 million to another whistleblower
Can it be, as Forbes recently reported, that “the days ahead look bright for whistleblowers and the IRS whistleblower program”? With a backlog of significant whistleblower cases filed after 2006 slowly churning through the IRS process, it is a safe bet that more cases are edging closer to completion and that the slow trickle of announcements from whistleblower attorneys about awards will begin to pick up. As more awards are announced, more whistleblowers will come forward.
As we move into the final stretch of 2011, interesting developments appear to be on the horizon for tax whistleblowers in New York.
Now in his nine month as attorney general, New York’s Eric Schneiderman is showing no sign of slowing down in his pursuit of whistleblower cases alleging tax fraud. Similarly, on the federal side, all indications are that the IRS will finally begin paying awards to some of the hundreds of whistleblowers who have filed complaints of significant tax noncompliance by thousands of taxpayers since the program was strengthened in 2006 with the enactment of section 7623(b) of the Internal Revenue Code. Given these developments, it looks like we are on the precipice of some exciting times for tax whistleblowers and those who believe in tax compliance and fairness.
Make no mistake about it: paying big awards to whistleblowers who disclose illegal conduct, including tax offenses, has become a top government enforcement strategy. Why? Because rewarding whistleblowers works. State and federal False Claims Act cases, which permit whistleblowers to sue wrongdoers on behalf of the government as qui tam plaintiffs, have skyrocketed and have helped the government recover tens of billions of taxpayer dollars, a sizeable piece of which often goes to whistleblowers.
Since the IRS beefed up its tax whistleblower program in 2006 by increasing and making mandatory whistleblower awards for claims involving IRS tax obligations of $2 million or more, federal whistleblower claims have increased sharply in both number and quality. And whistleblowers are recovering millions for their efforts. In April 2010, for example, as reported in the Wall Street Journal and Accounting Today, an in-house CPA at a Fortune 500 financial firm earned $4.5 million for exposing a $20 million tax liability owed by his firm.
Tax whistleblowers and those considering becoming whistleblowers recently got some good news regarding both the IRS whistleblower program and New York’s tax whistleblower False Claims Act.
On the federal front, news broke late last week that the IRS’s enhanced whistleblower program has finally produced a whistleblower award: $4.5 million paid to an accountant who blew the whistle on a former employer. According to published reports in the Wall Street Journal and elsewhere, the accountant came forward in 2007 after his employer ignored his repeated complaints that the employer was failing to pay federal taxes. Based on the whistleblower’s complaint, the IRS ultimately recovered approximately $20 million in back taxes and interest from the unidentified company, described in some articles as a large financial firm and a Fortune 500 company, and paid the whistleblower 22 percent of the amount recovered.
As reported in my last blog post, tax whistleblowers and those considering becoming whistleblowers recently got some good news regarding both the IRS whistleblower program and New York’s tax whistleblower False Claims Act.
On the state side, potential whistleblowers should be encouraged by the swift-moving developments in the New York attorney general’s office.
And he’s off!
In the short time since he assumed office on January 1, 2011, New York Attorney General Eric Schneiderman has made unmistakably clear his commitment to combating fraud against the state.
▪ In announcing the settlement of an $18 million Medicaid whistleblower case on January 18, 2011, he proclaimed that “cracking down on those who try to defraud the taxpayers” will be one of his “top priorities.”