New York firm Menz Bonner Komar & Koenigsberg LLP (MBKK) secured a settlement in a first-of-its-kind tax fraud whistleblower case against Sprint Communications, Inc. New York Attorney General BarbaraUnderwood announced the $330 million settlement in late December 2018. According to a news release, the $330 million recovery is the largest by the Attorney General resulting from an action filed under the New York False Claims Act, and is the largest recovery ever by a single state in an action brought under a state false claims act. MBKK’s client, Empire State Ventures, LLC, will receive a $62.7 million relator share from the settlement.
The firm represents the whistleblower who brought forward the allegations against Sprint in 2011. The Attorney General’s office joined the case in 2012 when it filed a superseding complaint alleging Sprint deliberately under-collected and under-paid millions of dollars in New York state and local sales taxes on flat-rate wireless calling plans starting in 2005. The Attorney General’s lawsuit was the Office’s first ever tax enforcement action filed under the New York False Claims Act, which was amended to cover tax claims in 2010.
“This case is a powerful illustration of how the False Claims Act enables individuals to step forward and expose significant fraud and how whistleblower law is particularly effective in helping the state catch tax offenders,” said David Koenigsberg, who leads MBKK’s False Claims Act practice.
The Attorney General’s complaint had alleged that Sprint was trying “to obtain an advantage over its competitor wireless customers, not by cutting its prices or offering better service, but by failing to collect and pay sales taxes, thereby reducing the cost of its products to its customers.” Sprint defended against the state’s action through a series of appeals up to the U.S. Supreme Court. But in 2016, the Supreme Court declined to hear the case.
The case is People v. Sprint Communications, Inc. et al., Index No. 103917/2011 (New York County Supreme Court) and the New York Attorney General’s press release can be found here.