Michael Sullivan, Author at Finch McCranie LLP

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Whistleblower Attorneys Discuss False Claims Act Amendments & “The Most Pressing Issues in Representing Whistleblowers”

July 12, 2009
Michael Sullivan

At the 20th Annual Convention of NELA, the National Employment Lawyers Association, I recently had the pleasure of moderating a panel discussion of some of the country’s top “whistleblower” lawyers. The topic was “The Most Pressing Issues in Representing Whistleblowers.”

Joining me in this panel discussion were Richard Renner and David J. Marshall. Richard is an attorney with Kohn & Colapinto in Washington, DC. and also serves as Legal Director of the National Whistleblowers Center. David is a partner with Katz, Marshall & Banks, LLP
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New SEC Whistleblower Program & Hedge Fund Investor Protections On Way, to Supplement IRS Whistleblower Program? Congress & SEC Consider Changes After Madoff, Stanford Schemes

July 3, 2009
Michael Sullivan

Could a meaningful SEC “whistleblower” program prevent the next Madoff or Stanford debacle? The SEC and legislators are now seriously considering that question. That Madoff managed to defraud investors for so long proves that the current system is inadequate.

Past experience proves that incentives to whistleblowers to report illegal acts work. The nation’s primary “anti-fraud” statute that protects federal funds, the False Claims Act, has been extremely successful in encouraging whistleblowers to come forward by allowing them to share in the government’s recovery.

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SEC “Bounties” for Whistleblowers–The Statute

July 3, 2009
Michael Sullivan

The statute authorizing the SEC in insider trading cases to pay whistleblowers “bounties” of up to 10% of civil penalties is below. (See our separate post discussing why the SEC needs a new, meaningful whistleblower program to help stop the next Madoff scheme.)
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False Claims Act Amendments Become Law Today, and Justice Department Expands Health Care Fraud Task Force

May 20, 2009
Michael Sullivan

Today was a monentous day for those who believe in integrity in how taxpayer funds are treated.

President Obama signed into law today the Fraud Enforcement and Recovery Act of 2009, which makes important amendments to the country’s most important tool for fighting fraud, the False Claims Act.

Also important today, the Obama administration announced an expansion of DOJ’s health-care strike forces, which are designed to combat fraud in Medicare and Medicaid programs. Attorney General Eric H. Holder Jr. and Health and Human
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Interview with IRS Whistleblower Office Director Steve Whitlock on “Best Practices in Pursuing IRS Whistleblower Claims” Is Released

May 15, 2009
Michael Sullivan

Last Fall, and again in March 2009, whistleblower lawyer blog co-author Michael A. Sullivan had the pleasure of sitting down with IRS Whistleblower Office Director Steve Whitlock, for an in-depth interview on the “best practices” for lawyers in pursuing IRS Whistleblower claims for their whistleblower clients.

The interview has just been published in the April 2009 False Claims Act & Qui Tam Quarterly Review. It includes some of the important points made by Director Whitlock at the IRS Whistleblower Boot Camp sponsored by Taxpayers Against Fraud in March, 2009, about which we have written previously.

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Major Whistleblower Law Development–False Claims Act Amendments Pass House of Representatives, As Part of the “Fraud Enforcement and Recovery Act of 2009”

May 6, 2009
Michael Sullivan

Today is an historic day–the House of Representatives has passed the Fraud Enforcement and Recovery Act of 2009 by a vote of 367-59. The Act includes long-needed amendments to the nation’s primary anti-fraud law, the False Claims Act, about which we have written often.

The amendments are designed to protect the hundreds of billions in taxpayer funds now being spent from fraud affecting TARP, other “stimulus” measures, Medicare and Medicaid, national defense including the Iraq and Afghanistan wars and reconstruction efforts, and countless other government programs.

The Senate approved the Act by a vote of 92-4 on April 28th. A conference committee now will consider reconciling differences in the versions of the bill.

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Fraud Against TARP Funds A Real Threat, Warns Special Inspector General for TARP

April 23, 2009
Michael Sullivan

We have written previously how the “bailout” measures such as TARP–the Troubled Assets Relief Program–and other “stimulus” measures must have effective oversight,disclosure, and anti-fraud provisions to protect those funds from those who look to commit fraud. The speed at which the government has acted to address the faltering economy will only increase the opportunities for fraud. Already, TARP whistleblowers have begun to come forward with reports of misuse of billions in TARP funds.

This week, Neal Barofsky, the Special Inspector General for the Troubled Assets Relief Program reiterated those points in his Quarterly Report to Congress. The IG described TARP as “inherently vulnerable to fraud, waste and abuse, including significant issues relating to conflicts of interest facing fund managers, collusion between participants and vulnerabilities to money laundering.”

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False Claims Act Amendments Gain Momentum In Bill to Combat Financial Fraud

April 21, 2009
Michael Sullivan

New legislation to combat financial institution fraud, securities fraud, mortgage fraud, and other fraud and abuse is gaining momentum, and brings closer long-needed amendments to restore to its intended strength the nation’s major “whistleblower” law, the False Claims Act.

The Fraud Enforcement and Recovery Act of 2009 (S. 386) received support yesterday in a statement from the Administration:

The Administration strongly supports enactment of S. 386. Its provisions would provide Federal investigators and prosecutors with significant new criminal and civil tools and resources
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Tax Evasion Using Offshore Accounts Establishes Fraud, As IRS Prevails Against Statute of Limitations Argument

April 17, 2009
Michael Sullivan

A frequent question in our IRS Whistleblower cases is how IRS Whistleblower claims are affected by the statute of limitations. In long-running violations of the tax laws, that question can determine how much of past tax liability the IRS may be able to recover.

Yesterday, the Tax Court issued a decision that illustrates what happens when the taxpayer has engaged in fraud. (Joseph B. Williams III v. Commissioner, 2009 TNT 72-11). Because the court found that fraud was established by the taxpayer’s plea to
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IRS Announces New List of “Dirty Dozen” Tax Scams

April 13, 2009
Michael Sullivan

In our March 7, 2009 “IRS Whistleblower Boot Camp,” IRS Whistleblower Office Director Steve Whitlock mentioned that the IRS’s priorities include the “Dirty Dozen”–a list of tax scams that is updated yearly.

The IRS has just issued its 2009 “Dirty Dozen” list, which should be of interest to potential IRS whistleblowers. It is reprinted below:

Beware of IRS’ 2009 “Dirty Dozen” Tax Scams

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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.”

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Health Care Industry and 2009-2010 Changes to False Claims Act

June 6, 2010
Michael Sullivan

The health care industry is adjusting to major changes to the nation’s major “whistleblower” law, the False Claims Act.

Both in 2009 and 2010, Congress has removed obstacles to whistleblowers’ use of this anti-fraud statute to address Medicare and Medicaid fraud, as well as fraud affecting every other federal program. As we have written about previously, the Fraud Enforcement and Recovery Act of 2009 (“FERA”) overruled key judicial decisions that had undermined the the False Claims Act’s effectiveness.

This year, the landmark health
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Offshore Tax Evasion Scheme to Defraud IRS Alleged in Indictment of Miami Beach Developers

May 27, 2010
Michael Sullivan

A high priority for IRS Whistleblower cases is the abuse of offshore “tax havens” or offshore financial centers to conceal income from the IRS that is subject to U.S. taxation. Over drinks in Miami Beach recently with IRS agents who worked the massive UBS matter, I discussed some of the recent announced cases the IRS has made involving offshore abuses.

Using shell corporations and “nominee” entities established in the Cayman Islands, Switzerland, or a host of other countries that market “secrecy,” those looking to conceal income from the IRS, or assets from potential creditors, have made offshore tax havens a booming business.

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More Details of UBS Whistleblower Birkenfeld’s Prosecution Explained in Washington Post

May 15, 2010
Michael Sullivan

The Sunday, May 15, 2010 Washington Post will include more details on a perplexing question we have written about: how did UBS whistleblower Bradley Birkenfeld get himself prosecuted for a felony, and earn a prison sentence, while he sought to become an IRS whistleblower?

The story by David S. Hilzenrath explains more of the “dance” between Birkenfeld and prosecutors as he apparently partially told the government what he knew about wrongdoing at UBS.

Birkenfeld blew an opportunity to avoid prosecution for his
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Should SEC Whistleblowers Have Right to Share in Recoveries That They Cause?

May 4, 2010
Michael Sullivan

Congress is at a crossroads in deciding whether there will be a meaningful SEC Whistleblower Program–for the first time.

At this morning’s Offshore Alert conference in Miami, we heard from the SEC Chair’s Senior Advisor Stephen Cohen on this subject, as well as insight from IRS Whistleblower Office Director Steve Whitlock on how the IRS Whistleblower Program is now designed to encourage whistleblower claims.

As we have observed previously about the bills that would create an SEC Whistleblower program, past experience shows that an enforceable right to a meaningful reward is essential to cause whistleblowers to come forward.

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State False Claims Acts Must Be Updated to Include New False Claims Act Changes, Grassley Warns

April 30, 2010
Michael Sullivan

Senator Chuck Grassley is making sure that the States take advantage of important, recent improvements to the federal False Claims Act–with the help of financial incentives. In doing so, Grassley highlighted a defect in Oklahoma’s False Claims Act that should disqualify any state with a similar defect from these financial incentives.

As we have discussed at length, in the Deficit Reduction Act of 2005, Congress recognized how effective the False Claims has been in recovering money for fraud against the government, by creating financial incentives for states that enact equally effective versions of the federal False Claims Act.

“Weaker” state versions of the False Claims Act do not qualify for the incentives, however. The Inspector General for the Department of Health and Human Services must approve a state’s False Claims Act before the incentives are available. So far, the IG has approved fourteen state FCAs, while disapproving six other state acts.

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IRS Whistleblower Office Announces Important Changes, New Procedures for IRS Whistleblower Program

April 28, 2010
Michael Sullivan

IRS Whistleblower Office Director Steve Whitlock announced important, long-awaited developments in the new IRS Whistleblower Program yesterday at the Second Annual “IRS Whistleblower Boot Camp” in Washington.

First, Director Whitlock finally announced how the IRS will share information that will allow whistleblowers to understand the Whistleblower Office’s decisions about what awards are made to whistleblowers.

A year ago in my interview with the IRS Whistleblower Office Director, Mr. Whitlock discussed the need to solve the vexing question of how the IRS can share this information with whistleblowers and their attorneys, while also complying with legal requirements for confidentiality of taxpayer information under section 6103 of the Internal Revenue Code.

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New IRS Whistleblower Program Developments Discussed This Week at “IRS Whistleblower Boot Camp”

April 25, 2010
Michael Sullivan

On Tuesday, April 27, 2010, the Second Annual “IRS Whistleblower Boot Camp” will convene in Washington, D.C., sponsored by Taxpayers Against Fraud.

Representatives of the IRS Whistleblower Office will discuss the latest developments in the IRS Whistleblower Program, though which tax whistleblowers can receive up to 30% of recoveries by the IRS. Other IRS and DOJ representatives will take part as well, as they analyze what lawyers representing IRS whistleblowers should know in pursuing these claims.

Like last year’s program, this one is a sell-out. I am looking forwarding once again to moderating a panel discussion, this time on “Protecting IRS Whistleblowers from Criminal and Civil Liability.”

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SEC Charges Goldman Sachs With Fraud in Synthetic CDO Tied to Subprime Mortgages

April 16, 2010
Michael Sullivan

As Congress finally works to establish a more meaningful SEC whistleblower program, the SEC has just announced that it has charged Goldman Sachs and one of its vice presidents with fraud, in connection with a “financial product tied to subprime mortgages, as the U.S. housing market was beginning to falter.”

Often maligned for failing to protect investors before the recent financial crisis, the SEC now charges that Goldman structured and marketed a “synthetic collateralized debt obligation” (CDO) like those that “contributed to the recent financial crisis by magnifying losses associated with the downturn in the United States housing market,” and then violated the federal securities laws in connection with that product.

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SEC Whistleblower Program–The SEC Inspector General’s Report

April 5, 2010
Michael Sullivan

Post-Madoff, we have followed the legislative efforts to help establish an effective SEC whistleblower program. We know that the Senate Banking Committee in particular has worked hard in attempting to devise the best overall arrangement to encourage and reward whistleblowers who report fraud within the SEC’s jurisdiction.

Shortly before Congress authorized the first meaningful IRS Whistleblower Program in December 2006, the Treasury Inspector General for Tax Administration issued its report on many of the changes needed for the IRS to use whistleblowers effectively.

Now, the SEC’s Inspector General David Kotz has issued his report, “Assessment of the SEC Bounty Program.” No one is surprised that it concludes that the SEC has not effectively encouraged, used, or rewarded whistleblowers over the past decades. Perhaps this report will pave the way for something meaningful–like the TIGTA report that preceded the now-promising IRS Whistleblower Program, which rewards whistleblowers with 15-30% of the government’s tax recoveries.

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