Whistleblower Blog Archives - Page 5 of 35

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International Tax Evasion Targeted by IRS Move to Revamp Its Large Business Division

August 5, 2010
Michael Sullivan

To battle offshore tax abuses and other international tax fraud and tax evasion, the IRS has announced that it is “realigning” and renaming its Large and Mid-Size Business (LMSB) division. To reflect its new emphasis, it will known as the “Large Business and International” division (LB&I).

As more transactions cross international borders, and more corporations and wealthy individuals use offshore tax havens and foreign low tax jurisdictions to avoid their tax obligations, the IRS is smart to focus more of its enforcement efforts in this way.

Based on our experience with tax whistleblowers, it is clear that the IRS Whistleblower Program is already seeing increasing numbers of tax whistleblower claims dealing with offshore tax abuses and other international tax issues.

The new IRS international unit will include a “transfer pricing” director, as well as a chief economist, who will oversee the IRS’s economic positions pertaining to transfer pricing.

(Transfer pricing, in ordinary language, involves a multinational company’s reallocating income or expenses between related entities in different countries with different tax rates to reduce taxes, by artificially increasing or decreasing the price one business entity charges another for goods, services, or intangibles. Transfer pricing cases can be good IRS Whistleblower claims.)

This action is the latest IRS step to address international tax evasion, including the investigation of the misuse of offshore accounts and foreign entities by U.S. taxpayers. Last fall, the IRS introduced a Global High Wealth Industry unit to improve monitoring of tax compliance by high income individuals, and their related enterprises.

Time will tell if the IRS succeeds in its stated goal “to create a more centralized organization dedicated to improving international tax compliance.”

The IRS announcement is reprinted below:
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Offshore Tax Havens Face Increasing Scrutiny, With IRS Whistleblowers Assisting

August 4, 2010
Michael Sullivan

“Offshore” accounts are an increasing priority of IRS enforcement, aided by the new IRS Whistleblower Program. The Offshore World has changed and will never be the same again. The traditional tax haven assurance of secrecy and anonymity won’t necessarily work any more.

The US has concluded Tax Information Exchange Agreements (TIEA’s) with a number of Offshore jurisdictions. Although the TIEA’s fall short of comprehensive Double Tax Treaties, they allow the IRS to obtain tax information about entities and accounts in Offshore jurisdictions under
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How Whistleblower Lawyers Work Alongside Government Lawyers In Successful Qui Tam Cases Under the False Claims Act

August 2, 2010
Michael Sullivan

When whistleblower attorneys bring a qui tam False Claims Act case, the most successful results usually occur when Government counsel and the whistleblower’s lawyers (Relator’s counsel) work together in what is known as the “public-private” partnership model.

This approach to qui tam cases allows the government to leverage its limited resources by calling on the resources provided by private attorneys. This is essentially a “joint prosecution effort, ” in which the government counsel and investigators can rely on Relator’s counsel at each stage,

–from the beginning of its investigation,

–to obtaining input for preparation of subpoenas for documentary evidence from the defendants,

–to review of evidence compiled by the government in response to subpoenas,

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New Rewards for Whistleblowers Reporting Bribery of Foreign Government Officials, Corporate Fraud In Foreign Government Contracts

July 21, 2010
Michael Sullivan

When the President signed the new financial reform bill into law today, new whistleblower provisions quietly took effect to battle corruption, bribery, and corporate fraud to obtain foreign government contracts.

This new law creates the new SEC whistleblower program that we have followed since its gestation after the Madoff scandal broke. The SEC and the U.S. Department of Justice share jurisdiction over a growing and increasingly important area of enforcement, the Foreign Corrupt Practices Act (FCPA).

Bribery of foreign government officials in international business transactions, and false entries in books and records of those companies within the statute, are the targets of the FCPA. Whistleblowers whose information helps the SEC recover monetary sanctions from those corrupt entities in FCPA cases now have an enforceable right to a monetary award of 10-30%.

Based on the increasing number and size of these FCPA cases, the rewards to whistleblowers can be meaningful–as they must be to cause whistleblowers to come forward. Over the past decade, the government has pursued more and more FCPA cases, and some recover hundreds of millions of dollars.

Recall that, in late 2008, Siemens agreed to pay more than $1.6 billion to the United States and Germany, after allegedly paying “$1.4 billion in bribes to government officials in Asia, Africa, Europe, the Middle East and the Americas.” Announcing the guilty plea and settlement, the government described “a corporate culture in which bribery was tolerated and even rewarded at the highest levels of the company.”

The SEC obtained $350 million in disgorgement from that settlement, which was the largest FCPA settlement to date.

In announcing that 2008 recovery, the government explained that “there is no question that the Department has in recent years significantly increased its FCPA enforcement. From 2001 to 2004, the Department resolved or charged 17 FCPA cases. For the period of 2005 to 2008, that number is 42 resolutions, representing an increase of more than 200 percent within these four years as compared to the prior four-year period.”

With money scarce both at home and abroad, it is even more urgent to recoup funds lost to fraud. The new SEC whistleblower awards and Commodity Futures Trading Commission rewards should prompt more efficient law enforcement efforts to stop this fraud, just as the False Claims Act and the new IRS Whistleblower Program have shown is possible.

This corruption harms legitimate businesses, who cannot compete when corruption prevents a level playing field. This crime also causes damage to others, as the government explained in announcing the Siemens settlement. That transcript is reprinted below, and in part states:

For let there be no doubt that corruption is not a victimless offense. Corruption is not a gentlemen’s agreement where no one gets hurt. People do get hurt. And the people who are hurt the worst are often residents of the poorest countries on the face of the earth, especially where it occurs in the context of government infrastructure projects, contracts in which crucial development decisions are made, in which a country will live by those decisions for good or for bad for years down the road, and where those decisions are made using precious and scarce national resources.

To illustrate the types of corruption this new whistleblower law should bring to light more often, the government’s announcement of the 2008 Siemens settlement is reprinted below:
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Whistleblowers Reporting Derivatives Fraud? Whistleblower Incentives Must Be Paid by CFTC Under New Financial Reform Bill

July 18, 2010
Michael Sullivan

The new financial reform bill that awaits the President’s signature this week has something important for potential whistleblowers with knowledge of fraud in options, futures, derivatives and other financial products within the jurisdiction of the Commodity Futures Trading Commission (CFTC). The bill will modify the Commodity Exchange Act to provide whistleblower rewards and protections.

Similar to the new SEC whistleblower awards for persons who reports securities fraud, the rewards to whistleblowers will be available if the CFTC recovers monetary sanctions of more than $1 million because of the whistleblower’s information.

Like SEC whistleblowers, CFTC whistleblowers will have an enforceable right to 10-30% of what the CFTC recovers in substantial cases when the whistleblower has “voluntarily provided original information to the Commission that led to the successful enforcement of the covered judicial or administrative action, or related action.” (Section 748 of Dodd-Frank Wall Street Reform and Consumer Protection Act, reprinted below).

Crucial to the success of these new whistleblower programs, whistleblowers will know that they will receive at least 10% of the recovery in significant cases when the whistleblower meets the law’s criteria.

The history of the nation’s major whistleblower statute, the False Claims Act, shows that guarantees of meaningful rewards are the critical element in causing whistleblowers to report substantial fraud. Fraud recoveries increased dramatically once Congress amended the False Claims Act in 1986 to provide meaningful whistleblower rewards of 15-25% in cases in which the government intervenes.

The new IRS Whistleblower Program is proving the same point, as quality submissions have poured in now that a right to a meaningful whistleblower award exists.

Congress has set forth general criteria for the CFTC to determine the amount of the award within the 10-30% range. Factors that the CFTC will consider include:

“(I) the significance of the information provided by the whistleblower to the success of the covered judicial or administrative action;

”(II) the degree of assistance provided by the whistleblower and any legal representative of the whistleblower in a covered judicial or administrative action;

”(III) the programmatic interest of the Commission in deterring violations of the Act (including regulations under the Act) by making awards to whistleblowers who provide information that leads to the successful enforcement of such laws; and
”(IV) such additional relevant factors as the Commission may establish by rule or regulation”.
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New SEC Whistleblower Program Approved by Senate in Financial Reform Bill

July 17, 2010
Michael Sullivan

Since the SEC refused for years to heed Madoff whistleblower Harry Markopolis’ warnings that Madoff was running a Ponzi scheme, we have followed with great interest the efforts of those who sought to create the first meaningful SEC whistleblower program.

The Senate this week took an important step by authorizing a new SEC whistleblower program–one more potent than the SEC apparently wanted–as part of the Wall Street Reform and Consumer Protection Act.

When the Madoff fiasco surfaced, Congress asked why the law failed to encourage SEC whistleblowers to come forward, in the same way the qui tam whistleblower provisions of the False Claims Act have been so successful in rewarding whistleblowers for helping stop fraud against the government. Those same principles in the new IRS Whistleblower program have caused an explosion of valuable information presented by whistleblowers in exposing tax liability of many billions of dollars.

SEC leadership helped shape the tepid House version, which would have made rewards to whistleblowers wholly discretionary.

When we criticized the House version of the proposed SEC whistleblower rewards for that reason, staffers of the Senate Banking Committee contacted us to discuss what a meaningful whistleblower program should include, based on our experience with whistleblowers under the False Claims Act and IRS Whistleblower program. Our response was that, at minimum, a whistleblower with information about significant fraud must have a legally enforceable right to a meaningful reward.

Fortunately, the Senate version included such a right to an award of 10-30% in substantial cases, and the Senate view ultimately prevailed (see below text of whistleblower provisions in Section 922).

It remains to be seen how SEC leadership will respond. At this spring’s Offshore Alert Conference in Miami, an SEC official listened to his panelists describe how successful mandatory rewards have been in causing whistleblowers to come forward in False Claims Act cases and IRS Whistleblower claims, yet apparently failed to “get” that SEC whistleblowers need a similar incentive to come forward in the best cases.

In our experience in representing whistleblowers, persons with the most significant information will rarely come forward without an enforceable right to a meaningful reward. The SEC has not exactly fostered public confidence in its judgment in recent years. If it embraces whistleblowers as Congress has directed, the SEC will find that–like the IRS Whistleblower Office–it will receive better, and dramatically more, information about fraud within its jurisdiction.

The full text of section 922 regarding SEC whistleblowers is reprinted below:
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New IRS Procedures for Whistleblowers Should Encourage More Significant IRS Whistleblower Claims

July 1, 2010
Michael Sullivan

This morning’s Washington Post quotes me, among others, in criticizing one aspect of the new procedures for IRS whistleblowers recently published in the Internal Revenue Manual. That one glaring defect aside, the new IRM procedures are welcome news that should encourage more IRS whistleblowers to come forward.

Today’s Post article by David Hilzenrath on the IRS whistleblower procedures makes the following point, among others:

“There’s apparently an institutional resistance to rewarding whistleblowers that will take some time to dissipate,” said Michael A. Sullivan
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TARP Fraud and Other Violations Alleged by SEC Against Chairman of Major Mortgage Lender

June 16, 2010
Michael Sullivan

As we have written previously, the billions of “bailout” dollars to financial institutions through the TARP program inevitably would result in many fraud cases, including some by TARP whistleblowers.

Today, the SEC announced allegations of TARP fraud and securities fraud of more than $1.5 billion other violations against Lee B. Farkas, through his company Taylor, Bean & Whitaker Mortgage Corp. (TBW).

According to the SEC, Farkas “sold more than $1.5 billion worth of fabricated or impaired mortgage loans and securities to Colonial Bank. Those loans and securities were falsely reported to the investing public as high-quality, liquid assets. Farkas also was responsible for a bogus equity investment that caused Colonial Bank to misrepresent that it had satisfied a prerequisite necessary to qualify for TARP funds. When Colonial Bank’s parent company – Colonial BancGroup, Inc. – issued a press release announcing it had obtained preliminary approval to receive $550 million in TARP funds, its stock price jumped 54 percent in the remaining two hours of trading, representing its largest one-day price increase since 1983.”

Perhaps the SEC is showing a new attitude after the Madoff debacle. Whistleblowers should soon be able to participate in the new SEC whistleblower program, which is part of the financial reform legislation now being hashed out in conference committee.

The SEC’s full release is reprinted below:
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New IRS Whistleblower Claim Procedures for Determining Awards to Whistleblowers Announced

June 16, 2010
Michael Sullivan

Today the long-awaited IRS Whistleblower Office procedures for determining awards to tax whistleblowers were announced in an update to the Internal Revenue Manual.

The new provisions for IRS Whistleblower claims address many details of how tax whistleblower claims will be handled. The full provisions are reprinted below:

Part 25. Special Topics
Chapter 2. Information and Whistleblower Awards
Section 2. Whistleblower Awards

25.2.2 Whistleblower Awards
25.2.2.1 Overview: Authority and Policy
25.2.2.2 General
25.2.2.3 Submission of Information for Award under Sections 7623(a) or (b)
25.2.2.4 Initial Review of the Form 211 by the Whistleblower Office
25.2.2.5 Grounds for Not Processing Claims for Award
25.2.2.6 Processing of the Form 211 7623(a) Claim for Award
25.2.2.7 Processing of the Form 211 7623(b) Claim for Award
25.2.2.8 Whistleblower Award Administrative Proceeding
25.2.2.9 Award Computation
25.2.2.10 Appeal Rights under section 7623(b)
25.2.2.11 Confidentiality of the Whistleblower
25.2.2.12 Funding Awards
25.2.2.13 Award Payment Procedures
25.2.2.14 Annual Report to Congress
Exhibit 25.2.2-1 1891 Letter
Exhibit 25.2.2-2 Rejection Letter – 1010 Letter
Exhibit 25.2.2-3 Acknowledgement Letter – Whistleblower Office
Exhibit 25.2.2-4 Debriefing Checksheet
Exhibit 25.2.2-5 Rejection Letter from the Whistleblower Office
Exhibit 25.2.2-6 Memorandum from Steven T. Miller, February 17, 2010
Exhibit 25.2.2-7 Sample Notice of Opportunity to Comment Letter
Exhibit 25.2.2-8 Sample Summary Award Report
Exhibit 25.2.2-9 Award Recommendation-Opportunity to Comment
Exhibit 25.2.2-10 Confidentiality Agreement
Exhibit 25.2.2-11 Sample Preliminary Award Report
Exhibit 25.2.2-12 Sample Determination Letter
Exhibit 25.2.2-13 Award Calculation Computation Guidelines (more…)

Offshore Tax Violations: Sen. Grassley Calls For Accounting of Use of UBS Information Provided by Tax Whistleblower

June 8, 2010
Michael Sullivan

Offshore tax evasion is a great priority for the IRS, and thus also the IRS Whistleblower Program.

Today, the leading advocate for robust whistleblower laws has called for the Treasury Department and the IRS to account for their use of information provided by the “UBS whistleblower,” Bradley Birkenfeld.

Sen. Chuck Grassley issued a press release today summarizing his letter to Treasury Secretary Tim Geithner and IRS Commissioner Douglas Shulman. Grassley commented on Swiss legislators’ move today to “unravel a U.S.-Swiss treaty that would allow for the disclosure of more client information to allow U.S. officials to review cases for potential enforcement of U.S. tax laws.”

“The action by Swiss legislators today to try to unravel an international treaty emphasizes the need for U.S. authorities to exhaust the information they have on U.S. taxpayers who use offshore accounts to evade taxes,” Grassley said. “Honest taxpayers deserve to know what’s happened with what could be very valuable leads, and if it’s nothing, they deserve to know why. It’s a matter of tax fairness and law enforcement. And the IRS shouldn’t wait for international agreements to fall into place when tax evaders can be identified through other appropriate tools.”

Grassley did not advocate for the UBS whistleblower’s release from federal prison, however, but focused on the government’s use of the information he provided. (See prior discussions of the UBS whistleblower’s case here).

Grassley, more than anyone, is responsible for passage of the December 2006 legislation that created the first meaningful IRS Whistleblower Program. The promising new IRS Whistleblower Program was inspired by the great successes of the nation’s primary whistleblower statute for exposing fraud, the False Claims Act.

Sen. Grassley’s announcement and letter today are reprinted below:
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What the $104 Million IRS Whistleblower Award to Former UBS Banker Means for Tax Whistleblowers

October 26, 2012
Michael Sullivan

With the current debate over raising tax rates becoming increasingly heated, a bipartisan, common-sense effort to recover more of the several hundred billion dollars that tax cheats already owe deserves far greater emphasis.

The IRS in September sent a smart and principled message that it is willing to encourage those with the best information about massive tax evasion to come forward. The IRS agreed that the billions in taxpayer funds it has begun to recover based on information from UBS whistleblower Bradley Biirkenfeld should warrant the first $100 million tax whistleblower award ever announced.
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Another Record Year–False Claims Act Recoveries Triple in FY 2012

October 25, 2012
Michael Sullivan

Each Fall, the Justice Department tallies its recoveries of taxpayer dollars that have been pilfered through fraud directed at federal programs. A year ago, DOJ proudly announced $3 billion in recoveries in False Claims Act cases, and a record $8.7 billion recovered in the three years starting in 2009.

Late this year, DOJ will announce that its fraud recoveries tripled from $3 million in FY 2011 to more than $9 million in FY 2012. This trend of increasingly large recoveries of stolen taxpayer funds proves once again the effectiveness of laws like the False Claims Act, which incentivize whistleblowers to expose fraud through its qui tam provisions.

Although health care cases account for the vast majority of FCA recoveries, growing areas include banking, mortgage, and pension fraud cases involving fraudulently obtained taxpayer dollars, as my colleagues at Taxpayers Against Fraud point out. States are also using their own false claims laws to recover stolen taxpayer funds.

In qui tam cases, private citizen whistleblowers (known as “relators”) file suit on the government’s behalf to expose fraud against taxpayer funds. The whistleblowers can receive 15-25% of the government’s recovery of stolen funds if the government prosecutes the case, and 25-30% if the government leaves it to the whistleblower to pursue the recovery.

Consider the history of False Claims Act recoveries that have totalled more than $39 billion since 1986, when Congress authorized meaningful rewards to whistleblowers:
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Executive Summary of “Georgia Taxpayer Protection False Claims Act”

October 23, 2012
Michael Sullivan

Recently, I was asked to explain the newly enacted “Georgia Taxpayer Protection False Claims Act” to some 200 city and county attorneys in Georgia. Although our firm has qui tam False Claims Act cases pending around the country, I take particular interest in making successful this law that I helped draft.

Since then, I have had many calls from attorneys about the new state False Claims Act, which includes qui tam provisions allowing whistleblowers to file suit and share in the recovery. Thus, I am summarizing here some major points about the law:

The Georgia Taxpayer Protection False Claims Act is a state version of the extremely successful federal False Claims Act (FCA). The FCA is the federal government’s primary civil tool for combating fraud directed at taxpayer funds. The majority of states already have such a law designed to stop and deter fraud against state government.

Background: The FCA originally was enacted during the Civil War. In 1986, President Ronald Reagan signed into law an amended version of the FCA, which has since generated more than $30 billion in recoveries from those who have defrauded the government. The FCA also helps deter fraud by those who do business with the government.

State False Claims Acts: As noted, based on the federal FCA’s great successes since 1986, Sen. Charles Grassley has helped lead efforts to encourage states to pass their own versions of the FCA. Congress established financial incentives for states that enact their own versions of the FCA that closely follow the FCA’s terms, through the Deficit Reduction Act of 2005. (Those states receive an extra 10% of Medicaid fraud recoveries.) Congress amended the federal FCA in 2009-2010 to increase the FCA’s effectiveness.

At least twenty-eight other states now have enacted their own False Claims Acts, which are also based on the federal FCA. The majority of these states’ laws protect all state spending of any nature.

On May 24, 2007, Georgia’s “State False Medicaid Claims Act” became law. It is based on the 2007 federal FCA, but protects only Medicaid spending. The new 2012 Georgia Taxpayer Protection False Claims Act now protects all state and local government spending.

In sum, the new Georgia Taxpayer Protection False Claims Act (1) protects all state and local government spending from fraud, and not simply Medicaid spending; and (2) amends the State False Medicaid Claims Act to conform to the 2009-2010 federal FCA amendments. All states are required to conform to those amendments by 2013, or lose the federal incentive of an additional 10% of Medicaid fraud recoveries.
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First SEC Whistleblower Award Made Today–Reading the Tea Leaves

August 21, 2012
Michael Sullivan

This morning’s announcement that the SEC has made its first award to a whistleblower under its new SEC Whistleblower Program established by Dodd-Frank leaves some clues about the message the SEC intends to send.

Speed: The SEC wasted no time–the award came barely two years after Dodd-Frank’s passage, and a little more than a year after the SEC finalized its SEC whistleblower rules. SEC Office of the Whistleblower Sean McKessy had seemed eager to have the SEC move quickly to utilize whistleblower information,
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Release of Incarcerated UBS Whistleblower Birkenfeld Shifts IRS Whistleblower Debate to New Round of Issues

August 1, 2012
Michael Sullivan

In presenting programs on how to protect whistleblowers from criminal and civil liability, we have watched in amazement as UBS whistleblower Bradley Birkenfeld got himself incarcerated for a felony conviction–despite apparently being one of the most valuable IRS whistleblowers ever.

Today’s announcement of Birkenfeld’s release after serving almost 30 months of a 40 month prison sentence–reportedly based on “good time” credits accrued, not some change of heart by the Justice Department lawyers who prosecuted him–comes amidst blistering criticism by Sen. Chuck Grassley of impediments that some IRS officials have created to the functioning of the IRS Whistleblower program. Grassley was so frustrated that he refused to allow nominations of two persons for Assistant Secretary of the Treasury positions to proceed until July 30, after his arm-twisting for information about the tax whistleblower program had made some headway.

Now that Birkenfeld has been released, attention will shift to his claim to receive what he contends is his lawful percentage of the huge sums that the IRS is reaping based on his disclosures about UBS and US taxpayers. Based on my discussions with IRS criminal agents, they will howl if Birkenfeld receives any reward of significance.

Some believe that Birkenfeld’s “holding back” cost the IRS dearly in its investigation of a former Birkenfeld/UBS client. They will argue, “Why reward a convicted felon?”

On the opposite extreme, some persons who advocate for whistleblowers have loudly condemned the entire prosecution of Birkenfeld. Those arguments have struck me as short-sighted. They ignore the principle that there is a rule of law that must apply to all of us, including whistleblowers.

Based on our review of available Birkenfeld court filings and transcripts, he apparently violated the cardinal rule that a whistleblower cannot “hold back” information about his own alleged misdeeds in his “cooperation” with the government. This is not a novel theory, but a long-settled principle.

To obtain a “pass” for one’s own felonious conduct, one must tell it all. (Read Birkenfeld’s sentencing transcript to see how he failed to dispute then the essential facts relied on by the government). Rather than frighten potential whistleblowers, whistleblower attorneys should encourage them to learn the facts by pointing out Birkenfeld’s apparent errors–and show how easily those errors can usually be avoided.

Except for those who have a financial interest in representing Birkenfeld, I do not see how whistleblower advocates would fail to appreciate how failing to prosecute Birkenfeld under these circumstances would have been even more damaging to the cause of whistleblowers generally.

Given that he apparently flouted this cardinal rule and thus allegedly misled prosecutors, his serious misconduct cannot be ignored. Opponents of compensating whistleblowers for revealing fraud would use an unchastened and unprosecuted Birkenfeld as “red meat” to try to undermine–if not repeal–the IRS whistleblower law.
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SEC Whistleblower Rules Have It Right: Report Shows Most Whistleblowers Report Internally First

May 30, 2012
Michael Sullivan

When the SEC debated in 2011 requiring “internal” reporting within companies as a prerequisite to filing an SEC Whistleblower claim under Dodd-Frank, business interests howled that any other rule would “destroy” compliance programs.

Never mind that the vast majority of whistleblowers have always raised concerns about illegal conduct internally before reporting to the government. Whistleblower lawyers already knew that fact from twenty-five years of experience with the False Claims Act–the nation’s major qui tam whistleblower law that inspired the new SEC Whistleblower Program.
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“Taxpayer Protection False Claims Act” Is Signed Into Law in Georgia

April 16, 2012
Michael Sullivan

The nation’s newest state False Claims Act was signed into law today by Georgia Governor Nathan Deal, after passing unanimously in both houses of the legislature.

The “Georgia Taxpayer Protection False Claims Act” protects all taxpayer dollars spent not only by the State, but also by counties, municipalities, school districts, hospital authorities, and other local public bodies or entities.

Like the federal False Claims Act, this Act combats fraud and false claims against taxpayer funds by imposing “treble” damages and civil penalties of
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Damages and Penalties in Qui Tam Cases Under the False Claims Act to Be Addressed at ABA Conference

March 30, 2012
Michael Sullivan

A critical issue in qui tam cases under the False Claims Act is how government lawyers and whistleblower attorneys prove damages caused by the fraud and false claims involved.

This whistleblowerlawyerblog‘s co-author MIchael A. Sullivan has been asked to moderate a panel discussion on “Recent Developments on Damages and Penalties” at a leading American Bar Association conference on the False Claims Act, the 2012 ABA National Institute on the Civil False Claims Act and Qui Tam Enforcement, on June 6-8, 2012
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IRS Misses Golden Opportunity in Refusing to Modify Tax Whistleblower Rule

February 21, 2012
Michael Sullivan

In a controversial decision today, the IRS squandered an opportunity to help close the tax gap by attracting more whistleblowers with significant information about large tax schemes. The public will suffer as a result.

Stubbornly, the IRS rejected calls for a common sense approach to rewarding tax whistleblowers, as it refused to modify a proposed rule that narrowly defines the categories of cases that should justify awards to whistleblowers.

At issue is what Congress meant by the term “collected proceeds”–an undefined phrase
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Another Financial Fraud False Claims Act Case Nets Millions from Lender

February 13, 2012
Michael Sullivan

Financial fraud cases under the False Claims Act continue. A Pennsylvania lender has agreed to pay $3.9 million in a False Claims Act case over alleged false statements in mortgage loan applications for loans insured by the U.S. Department of Housing and Urban Development (HUD). The loans were made to two nursing homes.

The government contended that Capmark Finance LLC misrepresented the borrowers’ creditworthiness in these two applications for mortgage loans. When the loans defaulted, the FHA sustained losses.

The Financial Fraud Enforcement Task
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