One of the things that make this nation special is our belief in the American dream. That dream is part of our national ethos. Anyone can work hard and achieve greatness. In the Declaration of Independence we find the words, “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.” Today we define the American dream as the idea that every American has an equal opportunity to achieve success through his or her hard work and determination.
Because of that dream, hard-working Americans particularly loathe cheaters. We especially don’t like people who cheat on their taxes. As a former tax prosecutor, I quickly learned that although no one likes the IRS, they dislike tax cheats even more. The attitude goes something like this, “If I work my butt off and still pay my taxes why shouldn’t you?”
The IRS and a handful of states have tax whistleblower programs to provide incentives for people with inside information about tax cheats to step forward and blow the whistle. These tax whistleblower programs pay cash awards and do a great job of keeping the whistleblower anonymous. Some of our best whistleblower clients have been employees or former employees of companies that continue to underpay workers while the executives steal money from the government. You know the story… “the rich get richer while everyone else is forced to work twice as hard.”
The IRS, New York State, California and Illinois have broad tax whistleblower award programs and we have helped people seek awards from all of those programs.
Estate Tax Evasion and Whistleblower Awards
The average IRS Whistleblower Program case we see involves companies misclassifying workers as independent contractors or businesses that cook up complex schemes to hide profits or falsify expenses. “Creative accounting” as some would call it.
On the state side, we often see sales tax schemes or phone companies trying to pocket the many different fees and taxes found today on phone bills.
So, what is the newest opportunity for whistleblowers to cash in and level the playing field? Estate tax evasion. An estate tax is a tax levied on the estate of a deceased person prior to the assets being distributed to heirs. Sixteen states have them. And in two of those states – New York and Illinois – there is also a state tax whistleblower award program.
NY Estate Tax Evasion Case Study – Estate of Dr. Myron Melamed
Dr. Melamed was a pathologist in New York. During his career he saved lots of money. Like many physicians, he did well for himself. There is nothing wrong with working hard and making money. Where Dr. Melamed is accused of crossing the line was in claiming that he was a Florida resident. New York is considered a high tax state while Florida has no income tax. Evidently, he thought he shouldn’t have to pay like everyone else.
In an unusual whistleblower lawsuit, the former administrator of Dr. Melamed’s pathology company, University Pathology P.C., claimed that the doctor falsely claimed residency in Florida from 2008 through 2013 to avoid New York state income taxes. The administrator, Doreen Light, made a second claim as well. She says that the doctor conspired with his two sons to illegally evade estate taxes that became due upon his death.
For its part, the estate’s lawyer has denied both the income and estate tax evasion claims. They say Ms. Light is nothing more than a disgruntled employee. The lawyer is quoted in a Bloomberg report saying, “This malicious attempt to smear the integrity and reputation of renowned physician, decedent, Dr. Myron Melamed will be vigorously defended.”
Excerpts of the whistleblower complaint are found below. It is a fascinating read. Unfortunately, as the former revenue commissioner of the State of Maine, I personally know that this type of behavior occurs frequently. We saw Maine residents trying to claim New Hampshire residency. New York sees folks claiming Florida residency.
It is somewhat easy to do if you have a vacation home in a no tax state but tax authorities look to see where you derive your income and where you spend the most nights. Spending a few weeks a year in Florida doesn’t cut it if your medical practice and big house is on Long Island, New York.
If Ms. Light is correct she could receive an award of well over $1 million! New York’s tax whistleblower program pays awards of up to 30% of whatever the state ultimately recovers. In this case, it appears that Ms. Light will be entitled to an award of between 25% and 30%.
So how do we get an award of $1 million + if the taxes owed are believed to be $1.7 million? Triple damages! New York law punishes wrongdoers with a penalty of up to 3 times the amount owed. In other words, if you cheat and get caught, you pay a penalty. Assuming Ms. Light prevails and that the taxes are $1.7 million, triple damages brings that number to $5.1 million. 25% of that figure results in an award of $1,275,000.00.
Not a bad payday for reporting fraud.
Call for New York State Estate Tax Whistleblowers
New York has high taxes. No one likes paying them. Most of us swallow hard at tax time and pay what we owe. Unfortunately, there are a few people who don’t pay their fair share. When that happens, we – you the readers and I – become the victims. Let me explain.
When somebody breaks into your home and steals your TV, we all agree that you are the victim of a crime. It’s really the same concept with tax evasion including estate tax evasion. When somebody cheats the state on estate taxes, the rest of us have to make up the missing money. We pay more in taxes when others don’t pay their fair share.
We understand the person who loses a job and must decide between paying taxes or feeding their family. That is not tax evasion. Estate tax evasion is simply about greed. Not paying your fair share after death. And all of us suffer when that happens.
New York’s tax whistleblower program is not limited to estate tax. Sales and income taxes, cigarette taxes and corporate taxes are also included. If you have inside information about evasion of these taxes, give us a call. Reporting tax cheats helps taxpayers, keeps the system fair and is the right thing to do. It can also earn you a large cash award.
We prosecute whistleblower cases across the United States. Our whistleblower clients have received over $100 million in awards. That’s real money. The next award could be yours.
If you have information about federal taxes, we can also help. The IRS Whistleblower Program has a benefit not enjoyed by the New York state program. Anonymity. We can in most cases keep your name secret. (For more information about the IRS program, visit our IRS whistleblower information page. Want information about New York’s whistleblower program? Visit our New York whistleblower page.)
Have information about an estate tax evasion scheme? Some other tax scam? Interested in learning whether you have a case? Give us a call. All inquiries are completely confidential and protected by the attorney – client privilege. For more information, contact us online, by email at or by phone at (414) 704-6731.
Excerpts from the Dr. Melamed Estate Tax Evasion Complaint
- This action arises out of a scheme by a prominent doctor and his family to avoid New York State income taxes and estate taxes. Beginning in 2008, Dr. Myron R. Melamed misrepresented to the State of New York that he was a resident of Florida when, in fact, he was working and living full-time in Westchester County. He never changed his domicile or residence to Florida before his death in September 2013.
- Plaintiff-Relator Doreen Light was employed for many years as administrator of Dr. Melamed’s wholly-owned company, University Pathology, P.C. She brings this qui tam action under the New York False Claims Act, State Fin. Law §§ 187 et seq., to recover money damages and civil penalties arising from false statements and false claims knowingly submitted or knowingly caused to be submitted to the State by Defendants.
- Dr. Melamed and University Pathology, P.C., failed to report income that Dr. Melamed earned in New York from 2008 to 2013. They submitted false documents to the State of New York to hide his income tax obligations. For example, in an effort to conceal the fact that he was living and working full-time in New York, Dr. Melamed altered bank account statements to hide the addresses of ATM machines in New York before he submitted the statements to State agents during a tax audit in 2011.
- Although he owned an apartment in Florida, Dr. Melamed never stayed there for more than a few days at a time. As explained below, he lived full-time at his home in Westchester County for nearly 30 years, from January 1984 until April 2013. In the last few months of his life, he stayed in Columbia County, New York, and briefly in Connecticut and North Carolina, but not in Florida. In his Last Will and Testament, re-executed on the eve of his death in 2013, however, Dr. Melamed falsely described himself as domiciled in Florida.
- In the years before his death, Dr. Melamed entered into an agreement with his sons, Daniel Melamed and Joseph Melamed, to take actions so as to not pay the estate taxes that would ultimately be due by hiding the fact that Dr. Melamed was a resident of New York.
- The beneficiaries of this tax avoidance scheme are defendants Daniel Melamed and Joseph Melamed. To maximize their own inheritance, they encouraged their father not to make tax payments due and owing to New York State. Upon his death in September 2013, Daniel Melamed and Joseph Melamed agreed with Dr. Melamed’s estate that they would not file a New York State estate tax return, or even a report of his death (Form ET-141) within nine months of his death, as required by New York tax law.
- Daniel Melamed and Joseph Melamed conspired with Dr. Melamed to transfer his Westchester home into their names. They made this agreement primarily to evade the estate tax. Daniel Melamed and Joseph Melamed never lived in the Westchester house. Even after the purported transfer, Dr. Melamed continued to live in his own home until his sons sold the house shortly before his death.
- Daniel and Joseph Melamed knew that their father Dr. Melamed lived in Westchester County – in the house that they had agreed to move into their own names – so they knew that he was not a Florida resident. They also knew that Dr. Melamed never established his domicile in Florida before his death. Nevertheless, they entered into an agreement with the Estate (acting through its personal representative and counsel) to file papers in Florida describing their father as a resident of Boca Raton so that they would enjoy the increased inheritance gained by avoiding the New York estate tax.
- In June 2008, Dr. Melamed’s accountants had estimated his taxable estate at $12.5 million. They told him that moving his domicile to Florida could save $1.5 million in New York estate taxes. By the time of his death in 2013, the value of his estate had increased, primarily through appreciation of his stock holdings, to approximately $15 million, and his New York estate tax liability was approximately $1.77 million.
- By making false statements to the State of New York about Dr. Melamed’s residency and domicile in an effort to avoid paying income and estate taxes, the Defendants violated the New York False Claims Act.
[Like those reality TV shows, we remind readers that all defendants are presumed innocent until proven guilty. Dr. Melamed’s estate and his sons have denied the claims.]
MahanyLaw – Proudly representing whistleblowers nationwide and prosecuting estate tax evasion claims. Think you have a case? We would love to hear from you. All inquiries are completely confidential. For more information, contact us online, by email at or by phone at (414) 704-6731 (direct).