Other States Expanding False Claims Statutes
Recoveries For State Tax Fraud Can Be Large
Assisting Enforcement Of Tax Laws
Earlier this year, the District of Columbia became the latest State to expand its False Claims Act to include tax-related claims. Such tax-related claims include false tax returns that understate tax liability or seek a tax refund. Where State false claims acts cover tax claims, the benefits for the State can be large, as discussed in a case below. California’s False Claims Act currently does not cover tax fraud, and is losing out on an important enforcement tool by not expanding its act to include tax fraud. This past summer, the California State Assembly approved Assembly Bill AB 2570, expanding the California False Claims Act (CFCA) to include cases of tax fraud brought by private whistleblowers. AB 2570 was sponsored by Assemblymember Mark Stone (D. District 29, Santa Cruz/Monterey Counties) who explained the importance of expanding the CFCA to include tax fraud this way:
No one questions the ability of the Franchise Tax Board and the California Department of Tax and Fee Administration (CDTFA) to skillfully administer the tax law within their respective jurisdictions. This bill, rather, rests on the premise that there are individuals—often current or former employees of a company—who have access to information establishing that tax authorities have been misled as to the amounts owed by the company. These cases are difficult to uncover without the cooperation of an insider because there is no other way to bring the relevant documents and information to light if a company is determined to commit fraud.
June 5, 2020 – Comments by Assemblymember Mark Stone, THIRD READING, Assembly Floor Analysis
Unfortunately, AB2570 died in the State Senate following passage by the Assembly. The opposition succeeded in putting the bill on indefinite “hold” along with many other bills lawmakers sidelined because COVID-19 shortened the 2020 legislative session. Evans Law Firm, Inc. represents individuals who bring whistleblower cases under the CFCA for false claims against the State of California and our litigators hope California will take up this legislation again and enlarge the scope of the CFCA to include tax cases. If you have credible information of fraud against the State, call our attorneys today at (415)441-8669.
Example of Large State Tax Qui Tam Action
State and city officials in New York recently obtained the largest-ever recovery from an individual under the New York False Claims Act, reaching a $105 million settlement with a billionaire hedge fund manager, in a qui tam whistleblower action. The State qui tam action alleged that the hedge fund manager had bilked the state and New York City out of taxes on $450 million in fees. According to the whistleblower complaint, the hedge fund manager was required to pay taxes on about $450 million in deferred fee income in New York City and state in 2017. In order to avoid paying these taxes, the complaint alleged that the fund manager left New York and lived in London from August 2016 to mid-2019, and made it appear as though his firm was no longer operating in New York City, according to the allegations. The New York attorney general said that the manager opened a shell office in Boca Raton, Fla., which he told New York tax authorities was the firm’s sole U.S. operation, even though he had told the U.S. Securities and Exchange Commission that the business was in New York City according to the complaint. The whistleblower will take home $22.05 million, or 21%, of the government’s recovery.
How Evans Law Firm Can Help
The CFCA whistleblower attorneys at Evans Law Firm have experience with State false claims cases and tax fraud cases brought under the IRS Whistleblower Program for evasion of federal income tax laws, often through offshore tax avoidance schemes, use of foreign bank accounts or shell corporations, and similar fraudulent schemes. Our attorneys know how to investigate false claims and tax avoidance cases and are prepared to represent whistleblowers in bringing tax fraud cases under the CFCA if the State Senate ratifies AB 2570. Any whistleblower bringing any action would be protected from employer retaliation for bringing a suit (just as under the existing CFCA) and our litigators represent whistleblowers in anti-retaliation cases and the underlying whistleblower (or qui tam) action.
If you or a loved one has information regarding false claims against the State of California, contact Ingrid M. Evans and the other California whistleblower and false claims attorneys at Evans Law Firm at (415) 441-8669, or by email at <a href=”mailto:email@example.com”>firstname.lastname@example.org</a>. Ingrid and our other California whistleblower attorneys also handle cases before the Internal Revenue Service (IRS) regarding tax avoidance schemes and before the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) in securities and investment fraud cases and in cases brought under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”) for bank fraud.
 Evans Law Firm, Inc. was not involved in the reported case.