New York Secures $105 Million Dollars from Hedge Fund Manager’s Tax Fraud - TZ Legal - Fraud Fighters
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HomeThought LeadershipNew York Secures $105 Million Dollars from Hedge Fund Manager’s Tax Fraud

New York Secures $105 Million Dollars from Hedge Fund Manager’s Tax Fraud

Earlier this week, New York Attorney General Letitia James announced that the State and City of New York recovered $105 million in owed taxes and damages from Thomas Sandell, his hedge fund company Sandell Asset Management Corporation (SAMC), and SAMC Partners LC. The recovery was due to violations of New York’s False Claims Act (FCA) tax fraud statute.

Sandall owed over $50 million in taxes from over $450 million in fees earned in 2017. The taxes were due in December 2017 due to a change in the deferred management and performance fee rule in 2008. Sandall attempted to avoid paying the taxes by enlisting several accounting firms’ help on tax avoidance, one of whom incorrectly advised him that if SAMC removed its presence and operations from New York before 2017, he would not have to pay the taxes owed. Sandell thereafter took more affirmative measures to evade tax liability. Sandell moved from New York to London from August 2016 to mid-2019, opened a shell office in Boca Raton, Florida, and attempted to make it appear as though SAMC was no longer principally operating in New York City when it was.

New York was tipped off to its deception when a whistleblower filed a complaint in October 2018. During their investigation, confirmation that the services at issue were performed exclusively in New York and that the deferred fees were taxable to the state and city of New York.

This settlement demonstrates the importance that whistleblowers and the tax fraud false claims provision play in cutting greed off at the head, shifting the tax burden from ordinary New Yorkers, and recouping resources for state and local government. In her statement, Attorney General James said:

“The greed that allowed one man to try to avoid paying his fair share of taxes is astonishing. Thomas Sandell and his company bilked New York taxpayers out of tens of millions of dollars in a single year — placing a tremendous burden on our system and forcing ordinary New Yorkers to bear that cost. My office remains committed to ensuring that those who knowingly commit tax fraud — and those who facilitate their misconduct — pay a steep price for doing so.”

In a similar vein, New York City Corporation Counsel James E. Johnson emphasized the importance of this recovery, especially in light of the ongoing COVID-19 Pandemic:

“Tax revenues pay for vital city services. When a deadly pandemic has eviscerated the economy and severely strained our city’s budget, every dollar counts. . .Hedge funds are obligated to pay taxes just like everybody else. When they don’t, we’ll use our legal tools and strategies to hold them accountable. Period.”

By one estimation, New York loses approximately $10 billion a year in unpaid taxes. Tax fraud claims and whistleblower actions are essential to ensure that these taxes are recovered and reallocated for the general welfare. Whistleblowers do not go unrecognized for the critical role they play. The whistleblower who filed this complaint will receive a $22.05 million reward, constituting 21% of the recovery.

If you believe that you may have information about a company committing fraud against the government, the Qui Tam Attorneys at Tycko & Zavareei are readily available to assist in bringing forward a case. We have years of experience litigating under the False Claims Act by holding individuals and corporations accountable for fraud against the government. We have the resources to provide you with guidance on whistleblowing cases relating to fraud within government programs, securities and commodities, tax payments, the banking industry, and more. We have won our clients millions of dollars in compensation as a result of their efforts working with our lawyers and the government. If you would like to consult with one of our False Claims Act attorneys, please fill out our Confidential Case Evaluation Form or call (202) 973-0900 to speak with a lawyer.

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