Whistleblower Blog

International and Offshore Tax Whistleblower Issues Among Topics for Next IRS Whistleblower Boot Camp

We have written about the first two highly successful “IRS Whistleblower Boot Camps” in 2009 and 2010, at which the IRS Whistleblower Office and whistleblower lawyers gathered to discuss the latest developments in pursuing tax whistleblower cases. It is sponsored by Taxpayers Against Fraud.

The Third Annual IRS Whistleblower Boot Camp will be held on April 12 in Washington, D.C.

Because the IRS has increasingingly focused on international and offshore tax issues, I will be moderating the panel discussion on “International and Offshore Tax Whistleblower Issues.”

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IRS Whistleblower Rules For Disclosure of Tax Return Information to Whistleblowers and Their Attorneys

The IRS announced today final regulations for sharing of tax return information with IRS whistleblowers and their lawyers, as the IRS pursues tax whistleblower claims.

Under these regulations, officers and employees of the Treasury Department may disclose tax return information to whistleblowers and, if applicable, their legal representatives, in connection with written contracts for services. (See our updated comments on why this rule and IRS practice should change dramatically, as the procedure has never been used.)

In theory, that sharing of information should
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Offshore Alert Conference: Protecting Whistleblowers from Criminal and Civil Liability

Of interest to whistleblowers reporting fraud under the False Claims Act, the IRS Whistleblower Program, or the brand new SEC Whistleblower and CFTC Whistleblower Programs is an upcoming presentation, “Avoiding the Mistakes of the UBS/Birkenfeld Case: Protecting Whistleblowers from Criminal and Civil Liability.”

This discussion is part of a fascinating gathering this April in South Beach–the OffshoreAlert Conference. As the brochure promises:

Where else could tax collectors mingle with tax minimizers, asset tracers with asset protectors, regulators with the regulated, whistleblowers with their former employers and crooks with prosecutors?

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SEC Whistleblower Office Has First Director–Sean McKessy

Just as we have followed closely the development of the IRS Whistleblower program since Congress authorized it in December 2006, we are watching the birth of the new SEC Whistleblower program. In 2010’s Dodd-Frank Financial Reform law, Congress mandated the creation of what could be the first meaningful SEC and CFTC Whistleblower programs.

Today, the SEC took a major step in announcing the first head of the nascent SEC Whistleblower Office: Sean McKessy, a former Senior Counsel in the SEC’s Division
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SEC Resolves FCPA Case With Maxwell Technologies, Inc. Alleging Millions in Bribes to Chinese Officials

As we have discussed previously, bribery of foreign government officials is the subject of many cases filed by the SEC under the Foreign Corrupt Practices Act. Those cases, which often bring significant recoveries, will increase in number as a result of rewards to whistleblowers under the new SEC Whistleblower program that we have followed.

The SEC today announced the successful conclusion of an FCPA investigation of Maxwell Technologies, Inc. The SEC announced it had filed a “settled” case through which Maxwell agreed to
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New IRS Offshore Account Disclosure Program Takes Shape

As the IRS continues its increasing focus on international tax issues, a new IRS offshore disclosure program announced in December continues to take shape. While the IRS has not made public a full description of the program, details have emerged in comments of IRS officials over the past weeks.

Using the 2009 IRS voluntary disclosure program as a template, the IRS is apparently tweaking the approach that generated approximately 15,000 disclosures in the 2009 effort.

The IRS Criminal Investigative Division (“CI”)–already quite busy
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Long-Awaited IRS Whistleblower Rule “Fix” Is Released for Comment

We have written previously about Senator Grassley’s pointed criticisms of aspects of the IRS whistleblower rules proposed in June 2010. The IRS’s delay in finalizing those rules is a principal reason why the IRS has not yet paid whistleblowers who have come forward since the December 2006 creation of the new IRS Whistleblower Program.

Today, the IRS took a large step to correct one major flaw that Grassley urged be corrected: re-writing a bizarre rule that would deny rewards to valuable whistleblowers who prevent improper refunds, or reduce a credit balance by a taxpayer. From what we can tell, that nonsensical rule was not the creation of the IRS Whistleblower Office, but of others within the IRS.

The IRS today announced a new IRS whistleblower rule to correct that anomaly, to be published for comment in the Federal Register.

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Activities of IRS Large Business and International Division Earn Its Commissioner Recognition As “Tax Person of the Year”

Citing many developments in the IRS Large Business and International Division in 2010, Tax Analysts this week named IRS LB&I Commissioner Heather Maloy as its “Tax Person of the Year.”

Among those developments that we have followed previously are the international focus of the restructured LB&I division (formerly known as the Large and Mid-Size Business Division (LMSB)), and the creation of the new Global High Wealth Industry Group within LB&I. That group within LB&I is already is working some very significant IRS Whistleblower cases.

Also mentioned by Tax Notes was one of my favorite IRS professionals who assisted the new IRS Whistleblower Program in its infancy, Stuart Mann:
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New SEC Whistleblower Program to Benefit from SEC’s Appointment of New Enforcement Official?

The SEC has just announced that current senior advisor to SEC Chairman Mary Schapiro, Stephen L. Cohen, has been named an Associate Director of the Division of Enforcement.

We hope this is good news for the nascent SEC Whistleblower Program. The SEC recently announced that its delaying creation of an SEC Whistleblower Office for budget reasons.

Steve Cohen has advised Chairman Schapiro on a number of issues including the SEC Whistleblower program, which I have discussed with him briefly earlier this year.

Coincidentally, the announcement came on yesterday’s deadline for comments on the SEC’s proposed rules for SEC whistleblowers, which must be substantially revamped so as not to defeat Congress’ purpose by discouraging meaningful whistleblowers from coming forward. We have submitted our own comments to the SEC on its proposed whistleblower rules, and will discuss later others’ comments here. See our comments

The SEC’s press release is reprinted below:
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IRS Whistleblower Claims Reporting Tax Evasion and “Overlooked” Returns

Tax whistleblowers using the new IRS Whistleblower Program have reported many instances of tax evasion involving domestic and foreign corporations, partnerships, and trusts, in addition to abusive offshore transactions about which we have written previously. These tax whistleblowers will allow the IRS to reduce the more than $300 billion “tax gap”–the difference between what tax cheats owe, but refuse to pay.

Tax evasion generally entails taxpayers understating taxes in the returns they file. In many cases evasion also entails taxpayers failing to file returns, especially information returns (as opposed to tax returns).

For example, partnership returns (Form 1065) are information returns and as such do not report tax payable. Cases of partnership tax evasion sometimes arise where filing Form 1065 is “overlooked.” In many of these cases, the partners continue to file their own income tax returns, which typically understate taxable income and tax payable, as there are no K-1’s to report.

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Release of Incarcerated UBS Whistleblower Birkenfeld Shifts IRS Whistleblower Debate to New Round of Issues

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

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

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

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

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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Another Financial Fraud False Claims Act Case Nets Millions from Lender

Financial fraud cases under the False Claims Act continue. A Pennsylvania lender has agreed to pay $3.9 million in a False Claims Act case over alleged false statements in mortgage loan applications for loans insured by the U.S. Department of Housing and Urban Development (HUD). The loans were made to two nursing homes.

The government contended that Capmark Finance LLC misrepresented the borrowers’ creditworthiness in these two applications for mortgage loans. When the loans defaulted, the FHA sustained losses.

The Financial Fraud Enforcement Task
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In Largest False Claims Act Case Over Mortgage Fraud, Bank of America to Pay $1 Billion

Since the 2008 financial collapse, many have called for imposing liability on those whose fraud fueled the crisis.

In this early phase of what we predict will be a wave of financial fraud cases, the Justice Department announced today the largest False Claims Act settlement to date over mortgage fraud. Bank of America has agreed to pay $1 billion to resolve allegations that the Bank, through Countrywide Financial Corporation and some of its subsidiaries and affiliates, engaged in underwriting and origination mortgage fraud.

DOJ
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IRS Whistleblower Claims Explored at Heckerling Institute, the Leading Conference for Estate & Trust Lawyers and Estate Planners

The University of Miami’s Heckerling Institute last week brought together the nation’s leading estate planners, including attorneys, trust officers, accountants, insurance advisors, and wealth management professionals. For the first time, these estate planning professionals delved into how estate and gift tax issues are the subjects of many IRS Whistleblower claims.

This program was organized by Marty Basson, who recently retired from the IRS Whistleblower Office and hung out his shingle (now providing a wealth of knowledge to the private bar), after a distinguished career as the IRS authority on estate and gift tax issues.

Marty has long served on the Heckerling Institute faculty at the University of Miami. Marty is also a charter member of the IRS Estate and Gift Tax National Advisory Panel, a select group of IRS attorneys who assist in forming nationwide policy decisions in the estate and gift tax area.

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How Whistleblowers in Qui Tam, IRS, and SEC Whistleblower Cases Must Protect Email Communications

At the Healthcare Fraud Institute this past week, I was asked to address what steps whistleblowers should take to ensure confidentiality of emails with their lawyers. Although qui tam cases under the False Claims Act were the focus of our discussion, the same principles apply to tax whistleblowers and SEC whistleblowers.

Potential whistleblowers should never use their company’s email system, or any email account shared with or accessible to another person, for communicating with their attorney or for gathering information or evidence to report to the government.

Although the law encourages whistleblowers to report fraud, whistleblowers can create unnecessary problems for themselves by not following this rule.

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Qui Tam Whistleblower Cases Under False Claims Act Explained

I have been asked to publicize a seminar at which I am speaking on handling qui tam whistleblower cases under the False Claims Act, the nation’s primary whistleblower law addressing fraud that steals government funds. Here is the announcement:

AAJ will hold a “Qui Tam” Teleseminar on December 6, 2011 at 2:00 pm EST. With recently amended whistleblower laws and several high profile settlements, lawyers need to understand the procedural complexities and pitfalls in qui tam whistleblower cases. Cosponsored by the Qui Tam Litigation
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