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Tax Enforcement Actions

The Internal Revenue Service (IRS) is the United States agency with primary responsibility for enforcing federal tax laws, working with the Department of Justice. Whistleblowers with knowledge of violations of the federal tax laws can submit a claim to the IRS under the IRS Whistleblower Reward Program, and may be eligible to receive a monetary reward.

Below are summaries of recently-announced settlements or successful prosecutions by the IRS or DOJ. If you believe you have information about fraud or wrongful conduct which could give  rise to a claim under the IRS Whistleblower Reward Program, please contact us to speak with one of our experienced whistleblower attorneys.

May 8, 2019

Tea Kaganovich and Ramazi Mitaishvili, co-owners of New York Diagnostic Testing Centers, each pleaded guilty to health care fraud and conspiracy to defraud the lawful functions of the Internal Revenue Service (IRS). The couple submitted false health care claims for diagnostic testing services and paid over $18 million in kickbacks for the referral of beneficiaries who signed up for diagnostic testing and other alleged medical services. They fraudulently reported to the IRS that the illegal kickback payments were valid business expenses, thus causing relevant tax forms to under-report business income and claim deductions. DOJ

May 8, 2019

Cosmetics retailer Sephora USA Inc. paid $159,349 to the State of Indiana to resolve claims brought by a whistleblower under the Indiana False Claims Act alleging that Sephora made false statements in connection with failing to collect sales tax on internet sales shipped to Indiana consumers.  IN AG

May 7, 2019

The owners of a Colorado biomass power plant agreed to pay $2.6 million to settle allegations concerning fraud impacting the U.S. Treasury’s “1603 Program,” which reimburses companies up to 30%, in lieu of tax credits, for placing renewable energy properties into service. The company at the center of the fraud, Eagle Valley Clean Energy, allegedly applied for and received a 30% advance on a fee it was to pay co-defendant Evergreen Clean Energy, LLC for unspecified development services. Eagle Valley wrote off the fee but failed to return the advance to the U.S. Treasury. As part of the settlement, Eagle Valley paid $2.4 million, and the two owners of Eagle Valley, Evergreen, and parent company Evergreen Clean Energy CorporationDean Rostrom and Kendric Wait—paid $125,000 each. USAO CO

April 26, 2019

A permanent injunction has been issued barring Michael L. Meyer from in any way marketing the "Ultimate Tax Plan," also referred to as Charitable LLC or Charitable Limited Partnership, or otherwise preparing federal tax returns or advising taxpayers on charitable contributions.  Meyer had sold his bogus tax scheme with claims that taxpayers could reduce taxes by purportedly transferring property to an entity and purportedly donating their interest in the entity to a charity, while retaining complete control over the assets.  Meyer appraised the “donations,” prepared tax forms for participants to claim unwarranted deductions, and controlled the charities used to perpetuate the scheme.  The government alleged that the scheme deprived the U.S. of at least $35 million in tax revenue.  DOJ

April 25, 2019

Zurich Life Insurance Company Ltd and Zurich International Life Limited have entered into a non-prosecution agreement and agreed to a penalty of $5.115 million to resolve allegations that it knew some of its U.S. taxpayer customers were using certain Zurich policies in order to evade U.S. taxes and reporting requirements.  Under applicable law, the increase of the principal in the policies was subject to U.S. taxation, and the policies were required to be disclosed to the IRS, but Zurich knew or should have known that the policies were undeclared.   Zurich reported its finding of these accounts to the government as part of the DOJ Swiss Bank Program.  DOJ

April 4, 2019

Kenneth C. Coleman of Houston, Texas, who owned Acacia Pharma Distributors, Inc. and Four Corners Suppliers, Inc., has been sentenced to 30 years in prison following his conviction at trial for money laundering, tax evasion, and related charges.  Coleman and his companies purchased second-hand prescription medications from various illegitimate sources and sold them to a third party, Green Valley Medical Distributors, LLC, which then sold the medications to pharmacies as if they were brand new.  In arranging the sales, Coleman created fraudulent documents that misrepresented the sources of the medications and their prior sales.  After being paid by Green Valley, Coleman and others would pay the suppliers of the drugs, often in cash, and failed to report income or file corporate income taxes.  Coleman was also ordered to forfeit $20.3 million and pay $717,000 in restitution to the IRS.  DOJ

March 12, 2019

Israeli-based Mizrahi-Tefahot Bank Ltd., together with its subsidiaries, United Mizrahi Bank (Switzerland) Ltd. and Mizrahi Tefahot Trust Company Ltd., entered into a deferred prosecution agreement resolving claims that the bank engaged in conduct to conceal client funds for the purpose of evading U.S. income taxes.  Among other actions, the bank enabled U.S. customer-taxpayers to maintain accounts using pseudonyms, code names, and foreign nominee entities, accepted non-U.S. forms of identification from known U.S. customers, and held mail for U.S. customers offshore.  In addition, the bank violated its Qualified Intermediary Agreement with the IRS.  The agreement requires the bank to pay $195 million, cooperate in ongoing investigations, and implement specific compliance and monitoring procedures.  DOJ

March 1, 2019

The owner of a mental health clinic in North Carolina was sentenced to 5 years in prison for submitting about $4 million in false claims and evading almost $400,000 in unpaid taxes over the course of four years. Using patient information provided to her by co-defendant Haydn Thomas, who was employed as an office manager for an oral surgeon, Catinia Denise Farrington of Durham County Mental Health and Behavioral Health Services, LLC allegedly submitted thousands of false claims to Medicaid for services that were not performed. In addition to her prison sentence, Farrington has been ordered to pay restitution of about $4 million to NC Fund for Medical Assistance and almost $400,000 to the IRS for paying personal expenses out of business accounts into which she has transferred her fraudulently obtained gains. Her co-defendant faces sentencing later this month. DOJ; USAO MDNC

February 14, 2019

Adam Van Pelt of Houston, Texas, who owned Stat Source, Inc., has been sentenced to nearly three years in prison and ordered to pay restitution of $20 million for failing to pay over more than $20 million in employment taxes to the IRS over the course of 18 quarters between 2011 and 2015.  USAO SD TX

February 1, 2019

Brian Gimelson of New Jersey was sentenced to 18 months in prison for tax evasion, after pleading guilty for concealing $1.2 million in income he received as fees for the sale of a painting purportedly by the Italian Renaissance painter Caravaggio.  Gimelson directed the fee income to a company he created in his wife's name, and further directed his wife to make cash withdrawals from the account.  DOJ
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