by Brian Mahany
Wireless giant Sprint – Nextel has been accused of defrauding New York tax authorities out of $100,000,000. Under New York’s false claim law, the phone company could also be liable for treble (triple) damages and legal fees. The case is the first whistleblower case filed in the state over aleged unpaid taxes.
Under N.Y,’s law, a whistleblower with inside information can file a suit in state court on behalf of the government. If the state likes the case, it can adopt the case and take over. The whistleblower is entitled to up to 25% of whatever the government collects. For the whistleblower in that size case, any award is certainly a life changing event.
New York’s attorney general says that Sprint failed to collect$100 million in sales tax on flat rate calling plans. Under the state’s tax code, that portion of the bill related to interstate calls is not subject to state tax. They say that the company arbitrarily determined what percentage of charges were not subject to tax.
The lesson here is that these laws have empowered employees and competitors to report fraud. The motivation between those two groups may differ but the result is often the same – a long drawn out audit for the business and a large cash award for the whistleblower.
29 states have joined the federal government and passed false claims act statutes that pay awards to whistleblowers. There is a great financial incentive for people to report fraud. Although most false claims laws do not include unpaid taxes like the New York law, the IRS has its own whistleblower law. That means unreported taxes, phony medicaid billing, padded defense contractor invoices and questionable federally insured mortgages are all subject to whistleblower claims.
If you know of illegal conduct that costs the government or taxpayers money, you may have a claim. The IRS whistleblower law requires filing a form with the IRS and assisting them in understanding how the fraud is taking place. In false claims act cases, the whistleblower generally files a law suit in the name of the government. That suit is filed under seal meaning it is secret. The government is then given time to investigate and decide whether or not it wishes to intervene and participate. Only after the government decides can the case become public.
The fraud lawyers at Mahany & Ertl have brought the largest whistleblower case in the U.S. against a mortgage lender. In November of 2011, HUD and the U.S. government intervened in our suit against Allied Home Mortgage and brought a $2.4 billion claim against the lending giant. While not every case can be the large, whistleblower cases are vital for the economy and leveling the playing field for honest businesses.
If you have information about a fraud, give us a call. For more information, contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at All inquiries are kept in strict confidence.
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine and Minneapolis, Minnesota. Services available in many jurisdictions.