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Archive for March, 2013

Costly Weight Loss Claims: Par Pharmaceutical Pays $45 Million To Settle Whistleblower Off-Label Claims

Tuesday, March 12th, 2013

Par Pharmaceutical Company has agreed to pay $45 million to settle civil and criminal allegations that the company launched a long term care sales force to promote Megace ES for off-label uses including weight loss in elderly patients.  The FDA approved Megace ES in July 2005 for treatment of anorexia, cachexia, or an unexplained, significant weight loss in patients diagnosed with AIDs.

The whistleblower, Christine Thompson, was one of just ten Regional Business Managers, and supported her claim with executive level emails.  The federal investigation into Par’s marketing practices was conducted through a collaborative effort of the U.S. Department of Justice, and the U.S. Attorney’s Offices for the District of New Jersey.  The New York State Assistant Attorney General’s Office led the investigation on behalf of the states and the National Association of Medicaid Fraud Control Units. 

For more information, please see:
http://www.reuters.com/article/2013/03/06/par-pharma-settlement-idUSnPnPH72242+160+PRN20130306

What Incentive? IRS Wants To Shrink Payments To Tax Fraud Whistleblowers. Politicians Not Amused.

Tuesday, March 12th, 2013

Under currently existing rules, a whistleblower tipster can collect a reward of 15%-30% of proceeds brought in as a direct result of a tip.  The case must involve tax evasion of at least $2 million or tax fraud by an individual making at least $200,000 a year.

While over 1,960 claims have been presented since 2006, the IRS made its first payment only in 2011.  In total, it has paid only three claims; the biggest being a $104 million payment to convicted felon Bradley Birkenfeld, the former UBS AG private banker who kick-started the investigation of Swiss banks.

Now the IRS is proposing restrictions that will likely shrink payouts, including restrictions making it nearly impossible for whistleblowers to share in rewards stemming from a company’s inflation of losses, and excluding from rewards any money brought in from so-called Fbar fines.  These fines, levied on offshore tax evaders, are often dozens and even hundreds of times the amount of actual back-tax an evader must pay.

These restrictions come at a time when, by the IRS’s own estimate, the difference between what U.S. taxpayers should have paid and what they actually paid stands at $345 billion each year.

In January, Sen. Charles Grassley, the 79-year-old Iowa Republican, chastised acting IRS commissioner Steven Miller over this recent proposal, writing that it established that the IRS and its boss, the Treasury Department, “view whistleblowers with hostility.”

For more information, please see:
http://finance.fortune.cnn.com/2013/03/04/tax-fraud-whistleblowers/

Tailor Taxed: Manhattan Tailor Convicted; Agrees to Pay $5.5 Million In Whistleblower Tax Fraud Case

Tuesday, March 12th, 2013

Manhattan tailor Mohanbhai “Mohan” Ramchandani and his business corporation, Mohan’s Custom Tailors, Inc., pleaded guilty to felony charges related to a ten-year scheme to evade payment of New York sales and income taxes, and agreed to pay $5.5 million to settle separately filed civil claims that were first raised by a whistleblower under New York’s False Claims Act, according to a press release from New York Attorney General Eric T. Schneiderman.

This multi-million dollar civil settlement marks the first time that the False Claims Act has been used in resolving a tax case.  2010 Amendments to the NY False Claims Act allow whistleblowers to come forward with claims about substantial violations of the tax laws.  The Act requires defendants to pay treble damages and civil penalties if found liable.

Mohan admitted that between September 2002 and June 2012, he fraudulently reported only $5.6 million in retail sales on tax returns when the real number exceeded $28 million.  The Attorney General’s civil complaint alleged consistent use of numbers on tax forms where the individual numbers added up to a multiple of ten.  In one quarter, Mohan manipulated the figure for sales tax due, consistent with his belief in numerology, so it appeared to be $13,484, and 1+3+4+8+4 equals 20, which is a multiple of 10.  This type of manipulation was repeated for nearly all quarterly sales tax filings. 

Mohan will be sentenced to a prison term of one to three years.

For more information, please see:
http://www.ag.ny.gov/press-release/ag-schneiderman-announces-arrest-conviction-and-55-million-settlement-tax-fraud-case

 

 
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