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

March 12th, 2013 by Qui Tam

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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