Michael Sullivan, Author at Finch McCranie LLP

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Michael Sullivan

IRS on Tax Preparer Fraud: Report Illegal Tax Schemes to IRS Whistleblower Office

January 7, 2009
Michael Sullivan

With tax season approaching, the IRS has alerted the public to “tax preparer fraud” by issuing issued a “fact sheet” (at https://www.irs.gov/newsroom/article/0,,id=202123,00.html). The IRS also has attached information about reporting abusive tax schemes through the IRS Whistleblower Program, which provides rewards to whistleblowers.

Interestingly, the IRS has included descriptions of some of the tax fraud and tax evasion schemes that have caused courts to issue “more than 290 permanent injunctions against abusive tax scheme promoters and abusive return preparers since 2001.”

The summary by the IRS is reprinted below:
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With Treasury Reporting TARP Funds to More Than 200 Financial Institutions, Who–Besides Whistleblowers–Can Guard Against Fraud and Abuse?

January 6, 2009
Michael Sullivan

The Treasury Department last week issued its December 2008 report to Congress on what it has done with the “bailout” funds through the Troubled Asset Relief Program (TARP) and Capital Purchase Program (CPP). With more than 200 institutions receiving taxpayer money, an overriding question is how to prevent and redress the inevitable fraud and abuse of TARP and other taxpayer funds, through whistleblowers and other means.

Treasury reported that, as of December 31, 2008, it had invested $177.5 billion in more than 200 U.S. financial institutions. As discussed previously on the whistleblower lawyer blog, Treasury recounted its announced assistance to General Motors and GMAC, as part of the Automotive Industry Financing Program (AIFP).

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Treasury Department Announces TARP Investment in GMAC

December 29, 2008
Michael Sullivan

The TARP bailout funding continues, as the Treasury Department announced today that it will buy $5 billion in senior preferred equity with an 8% dividend from GMAC LLC.

Senator Charles Grassley has emphasized that TARP and other “bailout” funds must be protected through whistleblower protections and whistleblower laws such as the False Claims Act. The GMAC announcement today will present ample opportunities to test those premises on which Congress approved the bailout funding.

The Treasury announcement is reprinted below:
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KPMG Tax Shelter Fraud Trial Ends With Three Tax Evasion Convictions for Accountants and Lawyer

December 18, 2008
Michael Sullivan

Fraudulent tax shelters continue to be a target not only of IRS Whistleblower claims, but also of enforcement actions.

We have followed closely the KPMG tax shelter fraud case in this whistleblower lawyer blog. The trial of four defendants ended this week, with two former KPMG partners and one attorney convicted of multiple counts of tax evasion for their roles in the bogus tax shelters. Another lawyer defendant was acquitted.

Prosecutors alleged that KPMG officials offered wealthy clients illegal offshore tax shelters, and paid outside attorneys to give the bogus shelters the appearance of legitimacy. According to the government, the investments had no real risk, and generated “paper losses that allowed the accounting firm’s clients to offset income.

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Qui Tam Whistleblower Recoveries under False Claims Acts (Federal and State) in 2008

December 16, 2008
Michael Sullivan

Some recent significant recoveries under the False Claims Act–the nation’s primary tool for fighting fraud and false claims–are summarized below. This summary is part of a paper I submitted in connection with serving on the faculty (with some excellent attorneys) of the “Southeastern Health Care Fraud Institute” on December 18, 2008.

Health care attorneys will gather at the Institute to discuss developments under the qui tam provisions of the nation’s major whistleblower statute, the False Claims Act, as well as other issues relating to fraud in the health care industry.

Recent Significant False Claims Act Recoveries
(as reported by www.taf.org)

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Pharmaceutical Industry Hit by Layoffs

December 8, 2008
Michael Sullivan

The country’s ongoing economic distress has produced layoffs in many industries, and pharma appears to be feeling the pain as well.

Recent layoffs reported in the drug industry include Sanofi (650 sales reps);Novartis (550 U.S. salespersons);Merck (8,000); Wyeth (2,440); GSK (1,000); Schering-Plough (5,500);and Boehringer Ingelheim (200).

Whistleblowers, TARP, and Other Wall Street “Bailout” Measures–Why the False Claims Act and IRS Whistleblower Program Are More Essential Than Ever

December 8, 2008
Michael Sullivan

On the same grey November day when President Bush visited Wall Street’s Federal Hall to address the ever-morphing “bailout,” I was in lower Manhattan meeting with IRS officials about an IRS Whistleblower matter. The tax evasion scheme we discussed was yet another that has cost taxpayers dearly.

As NYPD officers scurried about to help protect the President that day, I wondered who and what would protect our taxpayer funds–the hundreds of billions the government was now about to dole out–from fraud and abuse.

Fraud is rampant, as proven by the evidence brought to light by so many of our whistleblower clients under the qui tam statute, the False Claims Act, and now under the new IRS Whistleblower Program.

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Offshore Tax Evasion Investigations by IRS and Justice Department Expand, As IRS Whistleblowers Continue to Come Forward

December 3, 2008
Michael Sullivan

The Justice Department has announced that its investigation of offshore tax evasion will expand to include Europe’s largest bank, HSBC in London, and Credit Suisse in Zurich. The increasing scrutiny of illegal offshore tax schemes comes as the Wall Street bailout and turmoil in the banking and financial services industries generate more interest in IRS Whistleblower Program claims.

DOJ and IRS continue to investigate UBS, Switzerland’s largest bank. Last month saw the unsealing of the an indictment of Raoul Weil, a UBS senior
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Justice Department Announces 2008 Fraud & “Qui Tam” False Claims Act Recoveries, with Medicare, Medicaid, and Other Health Care Fraud Alone Topping $1 Billion in Recoveries of Taxpayer Funds

November 11, 2008
Michael Sullivan

Will Wall Street Bailout Produce the Next Round of Whistleblowers Reporting Fraud?

The U.S. Department of Justice this week announced its FY 2008 recoveries in fraud and False Claims Act cases, with more than $1 billion in health care fraud recoveries alone, and a total of more than $1.3 billion. (As explained below, we believe the $1.3 billion figure is low and understates the actual fraud recoveries this year.)

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Tax Court Prepares for IRS Whistleblower Cases by Adopting New Proposed Amendments to Rules of Practice and Procedure

October 24, 2008
Michael Sullivan

One of the hallmarks of the new IRS Whistleblower Rewards Program is that whistleblowers have an enforceable right to rewards, and can appeal the IRS Whistleblower Office’s rewards decisions to the U.S. Tax Court.

The Tax Court has taken a step forward in issuing new proposed amendments to its Rules of Practice and Procedure to prepare for IRS whistleblower cases. The amendments are reprinted below.

A critical improvement is that the Tax Court has listened to concerns expressed by whistleblower attorneys about the need to allow whistleblowers to proceed “anonymously” and not reveal their identity publicly. The explanation of New Rule 340 would allow anonymous filings to endeavor to preserve confidentiality:

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As IRS Commissioner Steps Down Today, How the Next IRS Commissioner Can Immediately Help Address the “Fiscal Cliff” by Expanding the IRS Whistleblower Program

November 9, 2012
Michael Sullivan

Today marks the end of IRS Commissioner Doug Shulman’s tenure, just as President Obama and Congressional leaders shift to addressing the looming “fiscal cliff.” Rather than disrupt the process of narrowing the deficit, Shulman’s departure could actually assist it–in an important way that does not depend on raising tax rates.

The timing is perfect for a new IRS leader to back fully a bipartisan effort long advocated by Republican Sen. Chuck Grassley (R-Iowa) to tackle the “tax gap”–the more than $300 billion owed but not paid by tax cheats each year. Grassley seeks to expand the IRS Whistleblower Program to fulfill the promise of changes to the tax whistleblower law that Grassley sponsored almost six years ago.

Grassley should enlist as a ready ally President Obama, whose Justice Department is about to announce a record year of fraud recoveries in False Claims Act cases brought by whistleblowers. Grassley also has been the driving force behind that highly successful law since at least 1986.

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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.

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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.

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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.

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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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