New York False Claims Act Settlement

Whistleblower Awarded More than $62 Million in New York False Claims Act Settlement with Sprint

The Attorney General for New York announced recently that Sprint had agreed to pay $330 million. The claim was filed pursuant to New York’s False Claims Act law which is modeled on the Federal False Claims Act. 29 other states and Washington DC have similar false claims statutes. These laws reward whistleblowers who disclose fraud, against the government by individuals and companies, with a percentage of the recovery. The whistleblower in the Sprint case, Empire State Ventures, LLC, will receive $62.7 million.

The false claims act laws also, generally, allow for treble damages and fines.

The complaint against Sprint alleged the telecommunications company failed to “collect and remit more than $100 million in state and local sales taxes,” according to a press release. The settlement is the largest in New York history for a false claims act complaint. It is also the largest state settlement of its kind for any state.

The New York allegations of fraud

The NY Attorney General added that:

“Sprint knew exactly how New York sales tax law applied to its plans—yet for years the company flagrantly broke the law, cheating the state and its localities out of tax dollars that should have been invested in our communities.”  

The claim against Sprint was based on the assertion the company underpaid the state sales tax for up to seven years – in order to keep its prices to customers down.

The settlement came after years of contested actions by Sprint. According to the press release:

  • The whistleblower filed its claim in March 2011.
  • The New York Attorney General’s office (with help from the New York State Department of Taxation & Finance) investigated the claim.
  • The NY Attorney General’s office filed a civil claim against Sprint in 2012 against Sprint and its subsidiaries.
  • The following courts wrote opinions contesting Sprint’s attempts to have the case dismissed:
    • The New York Supreme Court
    • The New York Supreme Court Appellate Division, First Department,
    • The New York Court of Appeals

The key statute at issue in the case was New York Tax Law § 1105(b)(2) which became effective in 2002. This law “imposed a sales tax on all wireless voice services that are sold for a fixed periodic charge, without differentiating between intrastate or interstate and international voice calls.” The courts ruled that this law was not ambiguous over objections by Sprint.

The press release further stated that even though Sprint’s attorneys and lobbyists knew what the 2002 tax provision required, the company failed to pay the state and local taxes on the part of the “flat-rate charge for a wireless calling plan that Sprint arbitrarily deemed to be for interstate calls.” The violations took place between 2005 and the time of the filing of the lawsuit, 2012, – and even after the filing. Only in May 2014 did Sprint agree to follow the 2002 tax provision.

California has its own False Claims Act (FC). The federal FCA covers fraud involving federal agencies. The California FCA covers fraud involving California agencies. There are formal disclosure procedures that must be followed in order to be able to claim a percentage of any recovery. Experienced whistleblower lawyers understand the procedures. They also work to persuade the state or federal justice departments to accept/intervene in the claim.

For help understanding and pursuing an FCA whistleblower claims contact Stephen Danz & Associates at 877-789-9707 to schedule an appointment. We have multiple offices throughout California.