Whistleblower Lawyer Blog

Our potential tax whistleblower clients--who call our attorneys about participating in the new IRS Whistleblower Rewards Program--regularly ask before they proceed if the IRS will keep their identities confidential.

Across the country, the IRS Special Agents we have been dealing with in representing our tax whistleblower clients (for example, in New York, Las Vegas, Dallas, and Atlanta, to name a few) have consistently answered the question the same way. Confidentiality is addressed by Treasury Regulations applicable to the IRS, which provide in part as follows: "No unauthorized person will be advised of the identity of an informant." 26 C.F.R. § 301.7623-1(e).

We have found the IRS Agents we deal with to be quite professional. They appreciate whistleblowers coming forward. They recognize that, when the IRS receives information from persons in this position, their investigative work is far more focused--and effective.

In fact, the June 2006 Report of the Treasury Inspector General for Tax Administration noted that, based on past experience,"examinations initiated based on informant information were often more efficient and effective." (See June 2006 Report of Treasury Inspector General for Tax Administration--which predated Congress' creation of the new IRS Whistleblower Rewards Program, entitled The Informants Rewards Program Needs More Centralized Management Oversight, No. 2006-30-092. See also www.tigta.gov.)

In our experience, the IRS professionals are very excited to have the new Program under the IRS Whistleblower Statute. They recognize the great service that whistleblowers provide. We look forward to further progress as the new regulations are announced this Fall.

One of the many types of fraud and false claims that whistleblowers can report to whistleblower attorneys is unlawful "kickbacks" paid by companies that do business with the federal government.

The Justice Department has announced a settlement with IBM and PriceWaterhouseCoopers for more than $5.2 million, to resolve allegations that these firms violated the False Claims Act through business arrangements that allegedly constituted unlawful kickbacks. The announcement followed a whistleblower suit under the qui tam provisions of the False Claims Act, which we have explained on this whistleblower lawyer blog previously.

According to the government, it investigated IBM and PWC as part of an ongoing investigation of government technology vendors and consultants. Other complaints have been filed in April 2007 in Arkansas against Accenture, Hewlett-Packard, and Sun Microsystems, according to the Justice Department.

We congratulate the agencies involved in securing this victory for taxpayers: the Justice Department’s Civil Division; the U.S. Attorney’s Office of Little Rock, Ark.; the Department of Energy’s Office of Inspector General (OIG); ; the Defense Criminal Investigative Service; the General Services Administration Office of the Inspector GeneralNASA Office of the Inspector General; the Army Criminal Investigation Command; the Defense Contract Audit Agency; the Environmental Protection Agency (EPA) Office of the Inspector General; the Postal Service Office of the Inspector General; the Navy Criminal Investigative Service; and the Air Force Office of Special Investigations.

The Minerals Management Service of the U. S. Department of Interior is responsible for the collection of royalties on federal and Indian leases. Companies who have such leases are required to report to the Department of Interior the value of natural gas produced (or minerals mined) from federal and Indian leases and to pay a percentage to the government as royalties. When the entity that has the duty to pay the royalties files a false report and misstates what the collected revenues were, this is a “reverse” false claim. It is “reversed” because the entity is not making a claim for payment but is instead paying less money than is owed to the government under false pretenses. This case, like any scheme to defraud the federal government, is actionable under the False Claims Act and fortunately, the Department of Justice is vigorously prosecuting cases where those who owe money to the government are willfully failing to pay it.

Yesterday, on August 15, the Department of Justice announced that Burlington Resources, Inc., a subsidiary of Conoco Phillips, had agreed to settle a False Claims Act case with the United States for $97.5 million. A whistleblower had filed a Complaint against Burlington alleging that it was systematically underpaying royalties due on their federal and Indian gas production. The Department of Justice intervened in the Qui Tam lawsuit, determined that the whistleblower’s allegations were true and correct and forced a settlement with Burlington Resources, Inc.

What this case shows is that the Federal False Claims Act continues to be the government’s best tool for obtaining restitution and penalties in cases where companies are failing to discharge their duties to the federal government. While schemes to defraud take a variety of forms, obviously, a company with a lease agreement with the United States has a fiduciary duty to properly account for royalties. By submitting false reports understating the amount of gas production, Burlington Resources, Inc. exposed itself to the whistleblower suit and presumably paid 2 to 3 times the amount of actual damages in penalties as provided for by the Federal False Claims Act.

As whistleblower attorneys, we are pleased that the Department of Justice secured this settlement on behalf of all taxpayers. Any company that underreports the payment of revenue owed to the government should be sanctioned as was Burlington Resources, Inc. The best way to sanction other companies who would defraud the federal government is for whistleblowers with inside information to come forward and to make sure that these dishonest companies are forced to do the right thing. It is regrettable that such whistleblower suits are necessary to force companies to do what is right but time and again we see evidence that informants with insider information are vital in insuring that federal contractors deal honestly with their government.

Medicaid Fraud Recovery Announced by Missouri Attorney General

False and fraudulent billings were uncovered in a Missouri Medicaid fraud investigation that has produced a recovery by the Missouri Attorney General's Office's Medicaid Fraud Control Unit. Billings like this typically violate the False Claims Act or the various state False Claims Acts.

Prescriptions that had not been authorized by physicians were submitted and paid for by the Medicaid program. Once the suspicious activity was reported, the Attorney General's Office's investigation followed and produced a recovery of $462,926 from apparently a single pharmacy in DeKalb County, Missouri, the Randolph Drug Store in Maysville.

The Attorney General's press release does not make clear whether a whistleblower other than the owner of the pharmacy was involved in reporting this health care fraud. We commend the Missouri Attorney General and the Medicaid Fraud Control Unit on their successful effort to stop fraud against taxpayers.

From potential clients seeking information about the new IRS Whistleblower Rewards Program that our attorneys have written about extensively, questions have been asked about the statute of limitations for tax whistleblower cases.

If a whistleblower informant possesses information concerning false of fraudulent tax returns filed with the intent to evade taxes, 26 U.S.C. § 6501(c)(1) provides for no statute of limitations. In the case of a willful attempt in any manner to defeat or evade income tax obligations, once again, the IRS may assess such taxes at any time without regard to a specific statute of limitations.

Thus, in cases involving fraud, these provisions provide no statute of limitations. The same is true in the case of a failure to file a return. If the taxpayer fails to file a return and has earned income on which taxes are owed, once again, these provisions provide for no specific statute of limitations.

Practically, of course, the information possessed by the whistleblower informant must be recent enough to allow the IRS to effectively investigate the information that the whistleblower brings forward. Even if a whistleblower has information that is more than 6 years old, the simple fact remains that, while legally the IRS may be able assess taxes for such conduct, it may be difficult to prove the violation if the information is "stale."

As a general proposition, without evidence of willful or fraudulent intent, other provisions provide for a statute of limitations of 3 years. 26 U.S.C. § 6501(a).

Notwithstanding the legal and practical issues involved in these cases, when a whistleblower possesses reliable and corroborated information, the IRS can assess taxes, penalties and interest on the back taxes owed. The new whistleblower provisions specifically provide that the whistleblower is entitled to receive not only up to 30% of the amount of back taxes owed, but also the same range of percentages of penalties and interest. Thus, in a case where taxes have been evaded for many years, the interest and penalties can be quite significant.

As long as the information provided to the IRS is reliable and credible, and the "taxpayer" has means to pay, a valid claim may be pursued under the IRS Whistleblower Program.

Of course, this blog is not legal advice--please contact an attorney to discuss any questions you have about the IRS Whistleblower Program.

This past week produced examples of why whistleblowers and their attorneys must continue to insist that false claims and health care fraud not be tolerated. The indictments of Texas medical equipment suppliers--who are alleged to have overbilled Medicare and Medicaid for expensive scooters and chairs while providing cheaper ones --show how prevalent false claims are.

The indictment of a physician in West Virginia for allegedly falsifying the time spent in patient visits shows another common type of health care fraud and false claims.

A Virginia home health care provider's indictment for allegedly using unqualified nurses and nurses aides is yet another example of health care fraud that whistleblowers can help stop.

You can read the new articles at the links above--we attorneys who write this whistleblowerlawyerlog want to keep public awareness of health care fraud and other fraud against taxpayers front and center.