Tax whistleblowers and those considering becoming whistleblowers recently got some good news regarding both the IRS whistleblower program and New York’s tax whistleblower False Claims Act.
On the federal front, news broke late last week that the IRS’s enhanced whistleblower program has finally produced a whistleblower award: $4.5 million paid to an accountant who blew the whistle on a former employer. According to published reports in the Wall Street Journal and elsewhere, the accountant came forward in 2007 after his employer ignored his repeated complaints that the employer was failing to pay federal taxes. Based on the whistleblower’s complaint, the IRS ultimately recovered approximately $20 million in back taxes and interest from the unidentified company, described in some articles as a large financial firm and a Fortune 500 company, and paid the whistleblower 22 percent of the amount recovered.
Finally, after all these years, the IRS has issued its first award under the enhanced whistleblower program, which was created in 2006 to encourage tax whistleblowers to come forward by increasing and making mandatory awards paid to whistleblowers in cases involving tax liabilities exceeding $2 million. While there have been many complaints about the enhanced IRS program, including that it is too slow to act on whistleblower leads and too inflexible in its dealings with whistleblowers, last week’s announcement should be viewed as encouraging news for the thousands of whistleblowers with claims pending with the IRS.
The reports of the case reveal two themes that bear repetition. First, IRS whistleblowers should expect that their identities will likely remain protected if they participate in the federal program. Notwithstanding the substantial public interest that has been generated by this first award under the 2006 IRS program, the identity of the whistleblower has not, to our knowledge, been disclosed. The IRS has not commented on the case, which is consistent with their commitment to protect the confidentiality of whistleblowers to the fullest extent of the law. The news of this whistleblower award only became public when the whistleblower’s attorney reported it, and that attorney has, in the reports I have seen, been scrupulous in protecting his client’s identity.
Second, the case is a good example of the value that whistleblower attorneys bring to tax whistleblower cases. Here, the whistleblower filed his claim pro se (without counsel), but his complaint languished with the IRS for nearly two years without any action. It was not until the whistleblower retained an attorney who pushed his case that the case made progress. Given the fact that the IRS receives thousands of whistleblower reports each year, it only makes sense that claims that are researched, organized, and presented by knowledgeable and experienced advocates have the best chance of producing a good and timely result.