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Top Ten Tax Recoveries of 2018

Posted  January 18, 2019

Tax fraud and tax evasion can take many forms, but there is one constant: when entities and individuals pay less tax than they owe, they are cheating the system. Bringing cases against companies and individuals that cheat the system is central to the Internal Revenue Service’s mission. Tax fraud may also give rise to a claim under the IRS Whistleblower Reward Program, which pays eligible whistleblowers 15 to 30% of government recoveries that result from the whistleblower’s reporting.  In addition, this year’s Top Ten includes two substantial recoveries in cases brought under the New York False Claims Act, which allows whistleblowers to bring claims based on a failure to pay taxes to the State of New York.

Here are the top ten tax recoveries of 2018 by the numbers:

  1. Sunoco – In November 2018, the Federal Circuit Court of Appeals affirmed the decision of the Court of Federal Claims and the position of the United States that Sunoco, Inc., a petroleum and petrochemical company, improperly claimed approximately $1 billion in alcohol fuel mixture credits on its federal excise tax returns thereby reducing its federal fuel excise tax liability by the same amount.
  2. Sprint – In December 2018, Sprint Communications agreed to pay $330 million to the State of New York to resolve claims that for nearly a decade Sprint knowingly failed to collect and remit more than $100 million in state and local sales taxes owed on flat-rate wireless calling plans sold by Sprint to New York customers. The investigation was initiated by a whistleblower lawsuit filed under the New York False Claims Act, which allows whistleblowers to bring claims based on a failure to pay taxes. The unnamed whistleblower will receive $62.7 million of the settlement.
  3. Basler Kantonalbank – In August 2018, the U.S. entered in to a deferred prosecution agreement with Swiss bank Basler Kantonalbank (BKB) where BKB agreed to pay over $60 million in penalties and cooperate with ongoing investigations regarding U.S.-related accounts. The bank held over 1,000 accounts for U.S. customers, with an aggregate value over $800 million; many of these accounts were not declared to U.S. taxing authorities by the account-holders.
  4. RaPower-3 LLC and International Automated Systems, Inc. – In October 2018, a federal court in Utah ordered RaPower-3 LLC and International Automated Systems, Inc. to stop all promotion and marketing and disgorge $50 million collected in an abusive tax scheme involving false tax deductions and solar energy credits. The companies and their principals marketed what they claimed was technology that could be used in the production of solar energy. However, the technology was phony and defendants knew that its purchasers would not be entitled to the tax deductions and credits.
  5. Harbinger Capital Partners Offshore Manager LLC – In September 2018, a New York-based hedge fund manager, Harbinger Capital Partners Offshore Manager LLC, agreed to pay $30 million to settle charges that it used fraudulent means to avoid paying both New York State and City taxes. A related investment management company based in Alabama, Harbinger Management Corporation, had earlier settled for $40 million, bringing a total of $70 million recovered in a case first brought to light by a whistleblower filing under the New York False Claims Act. For their role in exposing the fraud, the unnamed whistleblower is to receive a relator’s share of $15.4 million.
  6. House of Oxford – In September 2018, House of Oxford and its officer Alex Goldman were sentenced for conspiring with others to evade California’s excise taxes on tobacco products intended for sale in California.  In addition to a three-year prison sentence for Goldman and probation for the entity, the defendants agreed to a civil forfeiture of approximately $14 million in assets, which were returned to the State of California.
  7. Porsal Equities Ltd. – In November 2018, offshore art purchaser, Porsal Equities Ltd., agreed to pay $10.75 million to settle claims for tax fraud and for violation of the New York False Claims Act. Between 2010 and 2015 Porsal Equities Ltd., a company based in the British Virgin Islands, finagled their way out of paying sales tax on over $50 million in artwork and other goods purchased in New York. They fraudulently claimed that they were exempt from paying sales tax because the art was purchased for resale.
  8. Andre Bernard – In February 2018, Andre Bernard was sentenced to 87 months in federal prison for conspiracy to commit wire fraud, making false statements related to the Clean Air Act, and his participation in a multi-state scheme to defraud biodiesel buyers and U.S. taxpayers by fraudulently selling biodiesel credits and fraudulently claiming tax credits. As part of his sentence, the court also entered a money judgment in the amount of $10.5 million, the amount of proceeds of the charged criminal conduct that the defendant personally received.
  9. Mirelis Holding S.A.  In July 2018, Mirelis Holding S.A., a Swiss financial and asset management firm, entered in to a non-prosecution agreement with a penalty of $10.25 million. Mirelis also agreed to cooperate with U.S. investigations in to its U.S. clients who used Mirelis to conceal assets and evade U.S. tax obligations.
  10. Teymour Khoubian – In November 2018, Teymour Khoubian of Beverly Hills, California, pleaded guilty to filing false tax returns which concealed offshore accounts he held and earned income from. Khoubian had declined to disclose the accounts under the IRS’s Offshore Voluntary Disclosure Program. As part of his guilty plea, Khoubian agreed to a penalty of $7.7 million and an additional $612,310 in restitution to the IRS. Khoubian faces a prison sentence of three years.

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Tagged in: Tax Fraud, Top 10,


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