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New York Attorney General Seeks $300 Million Against Sprint in False Claims Act Tax Enforcement Action

Attorney General Eric Schneiderman has alleged that Sprint-Nextel Corp. has deliberately under-collected and underpaid millions of dollars in New York state and local sales taxes on flat-rate access charges for wireless calling plans.

Schneiderman has announced a "first-of-its-kind" tax enforcement lawsuit under the New York False Claims Act, which Schneiderman authored himself in 2010. The False Claims Act ("FCA") permits whistleblowers and prosecutors to take legal action against entities and individuals who submit fraudulent claims to the government. Twenty-nine states and the federal government have passed false claims acts, however, only New York's expressly permits actions for tax fraud.

The Attorney General's complaint alleges that since 2005, Sprint failed to pay New York sales taxes to artificially bring down costs to gain a competitive edge and purposefully submitted false records and statements to New York State tax authorities. Schneiderman further states that Sprint did this in violation of "extremely clear and unambiguous" tax law.

The action against Sprint began as a qui tam or whistleblower lawsuit, filed in March 2011 by Empire State Ventures, LLC in New York Supreme Court in Manhattan. After an investigation by the Taxpayer Protection Bureau, the Attorney General intervened in the action and filed a superseding complaint against Sprint.

The FCA allows for treble damages, penalties, and attorneys' fees to be assessed against the wrongdoer. The qui tam provision of the New York FCA permits the whistleblower to recover up to twenty-five percent of the amount recovered.

Dreyer Boyajian is currently handling several cases involving whistleblower claims. If you have a potential whistleblower claim, contact our office for a free consultation with one of our attorneys.

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