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New York False Claims Act and tax fraud Qui Tam litigation

As we've previously written on this blog, whistleblower or Qui Tam litigation is a means for those who have inside information regarding fraud to file a claim on behalf of the government. Qui Tam litigation allows whistleblowers to assist in holding the offending business liable for fraud and to obtain a reward for doing so.

Qui Tam litigation can occur at both the state and the federal level. At present, 29 states have established False Claims Act measures. Many of these laws are modeled after the federal measure and most are aimed largely at Medicaid fraud. At present, New York is one of nine states that also allow whistleblowers to pursue tax code fraud claims on behalf of the state.

New York's current False Claims Act goes back to 2010, when the state modified the law to clarify that whistleblowers may bring Qui Tam claims for tax code violations. The amendments allow for greater focus on large-scale tax frauds. As it stands, defendants must net over $1 million per year and knowing defraud the state of over $350,000 in taxes.

Since the law was modified, the state of New York has been able to bring in roughly $60 million in unpaid taxes and penalties in connection with these violations. The largest recovery so far under the law is a $40 million settlement Attorney General Eric Schneiderman reached with an out-of-state hedge fund sponsor. Other states are reportedly looking at the possibility of permitting tax fraud claims as a way to supplement the ordinary means of enforcing tax laws. New York's whistleblower law is, in some cases, being used as a model.

In our next post, we'll continue looking at this topic, and the importance of working with an experienced attorney when pursuing Qui Tam litigation.

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