IRS-Tax Evasion Whistle Blowing
In recent years, the number of whistleblower cases brought into United States courts has significantly increased, meaning more and more citizens and employees of companies have been reporting wrongdoing of companies. This increase may be due to the state and federal laws that have been enacted providing not only protection for potential whistleblowers, but also potential and substantial monetary gain. As the laws change and offer more protection for whistleblowers, experts expect that whistleblowing activity will further increase. Whistleblowing can involve a number of different wrongdoings by a particular person or company, namely IRS tax evasion. Tax evasion occurs when a person or company illegally neglects to pay or underpays their taxes. Often times tax evasion occurs when a corporation deliberately misrepresents certain facts in order to receive large tax breaks provided by the government, or to otherwise reduce the amount of money owed in taxes.
Most whistleblower suits are brought under federal law, particularly the False Claims Act. The False Claims Act, or FCA, is a federal law originally enacted during the Civil War to prevent fraud against the army. Now, the act has dramatically changed through a number of updates to the law, and it is now used as a way for whistleblowers to bring cases against corporations for certain wrongdoings. In order to prove a violation of the FCA, four elements must be met. First, the plaintiff must show that the defendant made a statement of material fact with the potential to influence a government agency. Second, the plaintiff must show that the statement the defendant made was false. Third, the plaintiff must show that the statement was made knowingly or willfully. Finally, the plaintiff must prove that the defendant had knowledge that the statement was false.
If an FCA suit is successful, the whistleblower will be afforded job protection, but also might be entitled to significant monetary gain. The FCA provides that for each violation or false statement, there is a civil penalty of $5,000 to $10,000, plus three times the amount of damages sustained by the government as a result of the false claim. In addition, courts may award punitive damages and attorney’s fees. The whistleblower that brings the claim is entitled to 25 to 30% of the damages awarded by the court. In addition, whistleblowers bringing FCA suits are afforded job protection. Whistleblowers that have been fired as a result of bringing an FCA claim are entitled back pay as well as reinstatement.
In addition to federal law, Massachusetts has enacted Whistleblower laws as well. The Massachusetts law was enacted much more recently (1993) and its original purpose it to encourage internal policing of companies throughout the state. Similar to the FCA, the Massachusetts statute provides numerous protections for employees bringing such suits, including compensation for recovery of triple lost wages and attorneys fees.
If you believe you are aware of tax evasion and are interested in bringing a whistleblower action, it is important to contact an experienced attorney. At Altman & Altman LLP, our attorneys have over 40 years of experience with cases in the Boston area. A consultation is free, so there is no risk for making a phone call to our office. We will listen to your case, and help you understand the options that you have going forward. You may contact us 24 hours a day, seven days a week.