The Ferraro Law Firm in a June 13 press release announced it was submitting a $4.4 billion tax whistle-blower claim against a Fortune 500 company. (For the release, see Doc 2008-13182.)
The claim, reported to be the largest ever reported, alleges that a corporation underpaid its tax liability by billions of dollars by engaging in abusive transactions over a short period of time. Partner Scott Knott said in Ferraro’s statement that the claim represents “just the tip of the iceberg” of corporate failure to pay taxes owed. He said the company that is the subject of the claim “became emboldened after it continually got away with” smaller levels of tax evasion.
“For many companies, the tax department is one of the most profitable business units,” said Greg Lynam, also a partner at the law firm.
While there is no released data on the number of claims submitted since Congress passed a revised whistle-blower statute in 2006, firms representing tax whistle-blowers say they have seen a marked increase in employee interest in reporting corporate tax abuse as a result of enhanced reward opportunities for tax whistleblowers. Lynam told Tax Analysts that “the new statute ensures that tax whistle-blowers will be treated fairly by the IRS, and that appears to be the spark needed to bring out those with high-quality information on tax fraud, tax evasion and underpayments to the IRS.”
Brian Skarlatos of Kostelanetz & Fink, another firm representing several billion dollars in whistle-blower claims, also said there has been a noticeable effect in the number of company employees coming forward concerned about tax fraud or improper tax positions, and said more corporations are worried they are the target of whistle-blower claims. “Either way you look at it, there is ample evidence that the new statute is having the intended effect,” he said.
Tax Analysts Information
Code Section: Section 7623 — Expenses of Detecting Frauds
Jurisdiction: United States
Subject Area: Compliance
Practice and procedure
Tax system administration issues
Author: Coder, Jeremiah
Institutional Author: Tax Analyst
Tax Analysts Document Number: Doc 2008-13179
Tax Analysts Electronic Citation: 2008 TNT 116-1