The IRS has yet to pay on any claims under the 2006 IRC 7623(b) mandatory reward program enacted in December 2006, according to its annual report to Congress issued earlier this week. Claims paid in 2008 for the discretionary rewards program (IRC 7623(a)) exceeded $22 million.
The Whistleblower Office has seen an increase in amounts collected and awards paid since FY 2004. That year, the Service paid out more than $4.5 million in awards. In FY 2005, the Service paid whistleblowers $7.6 million. Award payouts spiked in 2006 at just over $24 million. In 2007, the amount paid dropped to $13.6 million, with in increase in 2008 to more than $22 million.
The Whistleblower Office reminded Congress that the 7623(b) program represented a significant change for the Service, requiring the Whistleblower Office to "tool up." For example, during 2008, the Office staff grew from 4 to 14. Currently, ten analysts examine and shepherd meritorious whistleblower claims through the Service's criminal and civil investigation divisions.
Interesting was the Service's report on month by month submissions to the program. In October 2007, the Whistleblower Office received 16 submissions. In September 2008, the Office received 136 submissions. Submissions peaked in July of 2008 with a record 204 claims submitted, identifying 243 alleged fraudsters.
The Whistleblower Office laid out FY 2009 priorities in the report. The four areas of emphasis are 1) revise and update published guidance; 2) develop baseline information; 3) enhance communications; and 4) build program stability.
KEMY maintains regular contact with the IRS Whistleblower Office and monitors changes in whistleblower reward program policy. If you believe you have a potential IRS reward claim, contact KEMY for a free consult today.
Monday, September 28, 2009
Waiving the Privilege - Tax Accrual Work Papers
Have you shared tax accrual work papers with an independent outside auditor? If so, you've waived your privilege to keep those papers from the Internal Revenue Service.
Many tax practitioners have been following the tumultuous progression of the Textron case, in which the First Circuit decided, en banc, to side with the IRS. Textron fought an IRS summons on four grounds - 1) the summons lacked a legitimate purpose; 2) the tax accrual work papers were protected by attorney-client privilege; 3) the papers were protected by tax practitioner privilege; and 4) the papers were protected by the work product doctrine.
The district court found that though the papers were prepared by attorneys, Textron waived its attorney-client privilege when it presented those documents to its independent auditor. Waiver of attorney client privilege occurs when the client opts to share the information with a third party. When shared with an independent third party, such as an independent auditor, the court views the information as no longer protected by the narrow confines of the attorney-client privilege doctrine. The waiver of attorney client privilege by Textron suffered no further scrutiny, but other aspects of Textron's argument temporarily gained some ground within the First Circuit.
The lower court agreed with Textron that the tax accrual work papers were protected by the work product doctrine, a privilege intended to prevent premature disclosure of legal strategy. Concluding the papers were protected by the work product doctrine, the lower court ruled that Textron did not have to provide the papers to the IRS. The IRS disagreed.
Appeals ensued. The First Circuit's Appellate Panel agreed with the lower court, and then the First Circuit, en banc, vacated both lower court decisions. The en banc appeal focused on the narrow question of whether the documents were protected by the work product doctrine and concluded they were not. The First Circuit reasoned that the papers were written in accord with ordinary business practices, and though they described the hotly litigated issue of SILOs, they were not written "in anticipation of litigation." As such, Textron's documents were not protected by the work product doctrine, and Textron had to provide them to the IRS.
Only two Circuits, the First and the Fifth, have addressed work product protection for tax audit work papers; Textron is the most recent. It reflects a change in the Service's long standing history of restraint on requesting tax accrual work papers. Large scale fraud activity has captured the attention of the courts and resulted in an erosion of legal privileges generally. The courts are requiring documents to be provided to fraud investigation entities and protecting only very narrow types of information from judicial and opponent review.
KEMY is up to date on the changing law and its impact on tax work papers. If you have access to legal tax papers and do not know whether or not they can be provided to the IRS in pursuit of uncovering fraud, call KEMY for a free consult today.
Many tax practitioners have been following the tumultuous progression of the Textron case, in which the First Circuit decided, en banc, to side with the IRS. Textron fought an IRS summons on four grounds - 1) the summons lacked a legitimate purpose; 2) the tax accrual work papers were protected by attorney-client privilege; 3) the papers were protected by tax practitioner privilege; and 4) the papers were protected by the work product doctrine.
The district court found that though the papers were prepared by attorneys, Textron waived its attorney-client privilege when it presented those documents to its independent auditor. Waiver of attorney client privilege occurs when the client opts to share the information with a third party. When shared with an independent third party, such as an independent auditor, the court views the information as no longer protected by the narrow confines of the attorney-client privilege doctrine. The waiver of attorney client privilege by Textron suffered no further scrutiny, but other aspects of Textron's argument temporarily gained some ground within the First Circuit.
The lower court agreed with Textron that the tax accrual work papers were protected by the work product doctrine, a privilege intended to prevent premature disclosure of legal strategy. Concluding the papers were protected by the work product doctrine, the lower court ruled that Textron did not have to provide the papers to the IRS. The IRS disagreed.
Appeals ensued. The First Circuit's Appellate Panel agreed with the lower court, and then the First Circuit, en banc, vacated both lower court decisions. The en banc appeal focused on the narrow question of whether the documents were protected by the work product doctrine and concluded they were not. The First Circuit reasoned that the papers were written in accord with ordinary business practices, and though they described the hotly litigated issue of SILOs, they were not written "in anticipation of litigation." As such, Textron's documents were not protected by the work product doctrine, and Textron had to provide them to the IRS.
Only two Circuits, the First and the Fifth, have addressed work product protection for tax audit work papers; Textron is the most recent. It reflects a change in the Service's long standing history of restraint on requesting tax accrual work papers. Large scale fraud activity has captured the attention of the courts and resulted in an erosion of legal privileges generally. The courts are requiring documents to be provided to fraud investigation entities and protecting only very narrow types of information from judicial and opponent review.
KEMY is up to date on the changing law and its impact on tax work papers. If you have access to legal tax papers and do not know whether or not they can be provided to the IRS in pursuit of uncovering fraud, call KEMY for a free consult today.
Friday, September 18, 2009
UBS Tells Clients to Get an Attorney
Swiss bank UBS sent a letter on September 10, 2009, to several of its US clients warning that their undisclosed income in Switzerland may be reported to the United States Internal Revenue Service. UBS told US clients to appoint a Swiss attorney to represent them or the Swiss government would appoint one for them.
As part of the recent settlement between the United States and UBS, UBS will reveal the identities of 4,450 US account holders that UBS believes have failed to pay US taxes by hiding assets in the Swiss banking system. The settlement resulted from a lawsuit filed by the United States seeking disclosure of all 52,000 account holders. The Swiss government became involved to protect its banking industry and assisted in negotiating the compromise. The international lawsuit against UBS is the second case this year involving undisclosed foreign assets. In February, UBS pled guilty to criminal tax evasion and disclosed 250 names. The two cases will only yield 4,700 US account holders out of 52,000, but those revealed are anticipated to be the largest UBS violators of the IRS tax laws.
Under the settlement agreement, the Swiss have 360 days to process the 4,450 accounts before the names will be released to the United States. UBS account holders who have been targeted for disclosure may appeal the disclosure decision to the Swiss Federal Administrative Court before the information is submitted to the United States. The Swiss govenment has appointed 5 temporary judges to handle approximately 500 anticipated appeals of the bank's disclosure decision. The decision of the Swiss Federal Administrative Court will be final.
In the meantime, record numbers of offshore account holders are taking advantage of a time limited IRS voluntary disclosure period, hoping to reduce their exposure to back taxes and a reduced fine with no criminal penalty. The IRS now averages an unprecedented 500 voluntary disclosures per week. The deadline for voluntary disclosure is September 23, 2009.
Sadly, there are still thousands and thousands of offshore account holders who will not be reported to the Internal Revenue Service, either voluntarily or through the UBS settlement. Those with information about tax evasion and/or tax underpayment can contact KEMY to learn if that information could qualify for a reward from the IRS.
As part of the recent settlement between the United States and UBS, UBS will reveal the identities of 4,450 US account holders that UBS believes have failed to pay US taxes by hiding assets in the Swiss banking system. The settlement resulted from a lawsuit filed by the United States seeking disclosure of all 52,000 account holders. The Swiss government became involved to protect its banking industry and assisted in negotiating the compromise. The international lawsuit against UBS is the second case this year involving undisclosed foreign assets. In February, UBS pled guilty to criminal tax evasion and disclosed 250 names. The two cases will only yield 4,700 US account holders out of 52,000, but those revealed are anticipated to be the largest UBS violators of the IRS tax laws.
Under the settlement agreement, the Swiss have 360 days to process the 4,450 accounts before the names will be released to the United States. UBS account holders who have been targeted for disclosure may appeal the disclosure decision to the Swiss Federal Administrative Court before the information is submitted to the United States. The Swiss govenment has appointed 5 temporary judges to handle approximately 500 anticipated appeals of the bank's disclosure decision. The decision of the Swiss Federal Administrative Court will be final.
In the meantime, record numbers of offshore account holders are taking advantage of a time limited IRS voluntary disclosure period, hoping to reduce their exposure to back taxes and a reduced fine with no criminal penalty. The IRS now averages an unprecedented 500 voluntary disclosures per week. The deadline for voluntary disclosure is September 23, 2009.
Sadly, there are still thousands and thousands of offshore account holders who will not be reported to the Internal Revenue Service, either voluntarily or through the UBS settlement. Those with information about tax evasion and/or tax underpayment can contact KEMY to learn if that information could qualify for a reward from the IRS.
Thursday, September 10, 2009
UBS Tax Evasion Cases To Get Special Scrutiny by Elite IRS Auditors
The IRS posted internal job listings recently for a newly created office within its Large and Mid-Size Business division. The Service is looking for auditors experienced in working with international tax treaties and complex cross-border corporate structures. The focus? Wealthy Americans who hid their assets in UBS accounts.
The Service is gearing up for an anticipated 10,000 new tax evasion cases that should result from the UBS settlement and the current off shore income tax amnesty program, set to end on September 23. Wealthy Americans with off shore holdings are scrambling for last minute tax advice, and hundreds are taking part in the IRS's amnesty program.
As part of a settlement, UBS, the United Bank of Switzerland, agreed on August 19, to turn over 4,450 names of its wealthiest US account holders who are the most likely to be engaging in tax evasion. UBS has 52,000 American account holders, and the agreement arose from litigation filed by the United States government to get access to the secret Swiss bank account information. UBS will give information about the 4,450 accounts to the Swiss government, which will screen the information and decide what should be forwarded to the United States.
The new IRS global high-wealth industry group will be one of six industry-specific sectors within the IRS's Large and Mid-Size Business division. IRS spokesman Frank Keith remarked that the establishment of the global high-wealth industry group was the first step in the IRS's long term enforcement strategy. Those selected will be the most experienced IRS auditors in dealing with global entities.
The Service is gearing up for an anticipated 10,000 new tax evasion cases that should result from the UBS settlement and the current off shore income tax amnesty program, set to end on September 23. Wealthy Americans with off shore holdings are scrambling for last minute tax advice, and hundreds are taking part in the IRS's amnesty program.
As part of a settlement, UBS, the United Bank of Switzerland, agreed on August 19, to turn over 4,450 names of its wealthiest US account holders who are the most likely to be engaging in tax evasion. UBS has 52,000 American account holders, and the agreement arose from litigation filed by the United States government to get access to the secret Swiss bank account information. UBS will give information about the 4,450 accounts to the Swiss government, which will screen the information and decide what should be forwarded to the United States.
The new IRS global high-wealth industry group will be one of six industry-specific sectors within the IRS's Large and Mid-Size Business division. IRS spokesman Frank Keith remarked that the establishment of the global high-wealth industry group was the first step in the IRS's long term enforcement strategy. Those selected will be the most experienced IRS auditors in dealing with global entities.
Friday, September 4, 2009
Record Pfizer Settlement for $2.3 Billion - Tip of the Iceberg?
The morning of the announcement of the $2.3 billion Pfizer settlement, a few hours before the seal was lifted, we received an emailed NY Times article about a pharmaceutical company's plans for off label marketing of a major anti depressant.
The seal was lifted, and the Department of Justice issued its press release at 10:30 AM. Congratulations poored in; reporters called; interviews were given. At about 4:00 PM, commentators began to point out that pharmaceutical manufacturers view settlements like Pfizer's as merely a "cost of doing business," and the financial penalty akin to "hitting a mule with a 2x4." KEMY agrees that the recoveries to date for off label marketing are probably the tip of the iceberg. Off label marketing of drugs is big business, and big pharma reaps immense profits from off label prescriptions.
KEMY is well aware that pharmaceutical manufacturers continue to engage in off label marketing of drugs, with serious ramifications. In addition to the misspent public dollars for Medicaid and Medicare reimbursements, off label prescriptions raise grave safety concerns. For example, sales reps targeted kids for prescriptions of Geodon, and many parents blindly followed their doctors' recommendations to put their children on the drug. Sadly, the situation is not unusual. We know of people who have died and kids who are suffering because they were the unfortunate victims of an off label marketing campaign.
The Pfizer settlement is particularly gratifying because it raises awareness about the often overlooked mental health population. The public continues to stigmatize those with mental health issues, and one of the by products of this stigmatization is poor health care. Pills are pushed on very vulnerable people who are often desperate to feel better. Many of these same folks receive Medicare or Medicaid, so public dollars and personal safety are at considerable risk. KEMY is very proud to have worked with the government to address this important aspect of health care.
The seal was lifted, and the Department of Justice issued its press release at 10:30 AM. Congratulations poored in; reporters called; interviews were given. At about 4:00 PM, commentators began to point out that pharmaceutical manufacturers view settlements like Pfizer's as merely a "cost of doing business," and the financial penalty akin to "hitting a mule with a 2x4." KEMY agrees that the recoveries to date for off label marketing are probably the tip of the iceberg. Off label marketing of drugs is big business, and big pharma reaps immense profits from off label prescriptions.
KEMY is well aware that pharmaceutical manufacturers continue to engage in off label marketing of drugs, with serious ramifications. In addition to the misspent public dollars for Medicaid and Medicare reimbursements, off label prescriptions raise grave safety concerns. For example, sales reps targeted kids for prescriptions of Geodon, and many parents blindly followed their doctors' recommendations to put their children on the drug. Sadly, the situation is not unusual. We know of people who have died and kids who are suffering because they were the unfortunate victims of an off label marketing campaign.
The Pfizer settlement is particularly gratifying because it raises awareness about the often overlooked mental health population. The public continues to stigmatize those with mental health issues, and one of the by products of this stigmatization is poor health care. Pills are pushed on very vulnerable people who are often desperate to feel better. Many of these same folks receive Medicare or Medicaid, so public dollars and personal safety are at considerable risk. KEMY is very proud to have worked with the government to address this important aspect of health care.
Wednesday, September 2, 2009
KEMY Represents Whistleblower in $2.3 Billion Settlement
Dr. Stefan Kruszewski, M.D., came to KEMY with grave concerns about off label marketing of Geodon, an anti-psychotic, targeting children. Geodon is approved to treat only patients ages 18-65 diagnosed with schizophrenia or acute manic or mixed episodes associated with bipolar disorder. The Harrisburg psychiatrist had noticed that Geodon was being systematically marketed for unapproved uses and to children. KEMY attorneys Brian Kenney and Tavy Deming agreed to work to correct the problem.
Today, as part of a record settlement involving Geodon and other drugs, Pfizer agreed to plead guilty to criminal conduct and to pay more than $2 billion in criminal and civil fines, penalties, and damages. To read KEMY's press release, click here.
Geodon is FDA-approved to treat only patients ages 18-65 diagnosed with schizophrenia or acute manic or mixed episodes associated with bipolar disorder. According to KEMY’s lead partner, Brian Kenney, “Pfizer targeted pediatrics and adolescents to expand off-label use and maintained on its payroll an army of more than 250 child psychiatrists nationwide.” Kenney continued, "The purpose and intent of paying so many child psychiatrists is clear – to gain a foothold within the fastest growing market for antipsychotics – children. The practice of expansive off-label use is dangerous, particularly in children because the drug has not been evaluated for its safety for the unique physiological make up of children."
KEMY’s whistleblower complaint led to a national investigation into Geodon. The federal investigation into Pfizer’s Geodon marketing practices was conducted by the U.S. Attorney’s Office for the Eastern District of Pennsylvania under the direction of U.S. Attorney Michael Levy, Assistant U.S. Attorney Marilyn May and Assistant U.S. Attorney Charlene Keller Fullmer. Massachusetts Assistant Attorney General Bob Patten led the investigation on behalf of the states and the National Association of Medicaid Fraud Control Units (“NAMFCU”).
According to Kenney, Pfizer’s switching campaign “endangered patients by ignoring or materially understating Geodon’s serious, and even life threatening, side effects.”
Sadly, industry watchers say that large settlements are seen by the drug companies as merely a cost of doing business. Off label marketing of anti-psychotics, anti depressants, anti convulsants, and stimulants to children continues to reap big financial rewards for pharmaceutical companies, despite the safety risks. Children today are being highly medicated with drugs that have only been tested on adults. These drugs have serious side effects and can harm children. If you know of off label marketing targeting children, call KEMY today.
Today, as part of a record settlement involving Geodon and other drugs, Pfizer agreed to plead guilty to criminal conduct and to pay more than $2 billion in criminal and civil fines, penalties, and damages. To read KEMY's press release, click here.
Geodon is FDA-approved to treat only patients ages 18-65 diagnosed with schizophrenia or acute manic or mixed episodes associated with bipolar disorder. According to KEMY’s lead partner, Brian Kenney, “Pfizer targeted pediatrics and adolescents to expand off-label use and maintained on its payroll an army of more than 250 child psychiatrists nationwide.” Kenney continued, "The purpose and intent of paying so many child psychiatrists is clear – to gain a foothold within the fastest growing market for antipsychotics – children. The practice of expansive off-label use is dangerous, particularly in children because the drug has not been evaluated for its safety for the unique physiological make up of children."
KEMY’s whistleblower complaint led to a national investigation into Geodon. The federal investigation into Pfizer’s Geodon marketing practices was conducted by the U.S. Attorney’s Office for the Eastern District of Pennsylvania under the direction of U.S. Attorney Michael Levy, Assistant U.S. Attorney Marilyn May and Assistant U.S. Attorney Charlene Keller Fullmer. Massachusetts Assistant Attorney General Bob Patten led the investigation on behalf of the states and the National Association of Medicaid Fraud Control Units (“NAMFCU”).
According to Kenney, Pfizer’s switching campaign “endangered patients by ignoring or materially understating Geodon’s serious, and even life threatening, side effects.”
Sadly, industry watchers say that large settlements are seen by the drug companies as merely a cost of doing business. Off label marketing of anti-psychotics, anti depressants, anti convulsants, and stimulants to children continues to reap big financial rewards for pharmaceutical companies, despite the safety risks. Children today are being highly medicated with drugs that have only been tested on adults. These drugs have serious side effects and can harm children. If you know of off label marketing targeting children, call KEMY today.
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