New York Attorney General Eric Schneiderman announced a whistleblower-initiated $40 million settlement with Alabama-based investment firm Harbert Management Corp. over unpaid state income taxes claimed instead in lower-tax Alabama.
The dispute arose out of 2015 whistleblower allegations that members of Harbert failed to pay millions of dollars in taxes. New York law requires businesses that operate both in and out of New York to apportion taxes on income derived in New York.
The settlement alleges that Harbinger Partners Offshore Managers LLC, a $26 billion New York City hedge fund sponsored by Harbert, failed to pay certain required taxes in New York from 2004 through 2009. Instead, Harbinger paid taxes in Alabama, where rates were much lower.
Harbinger, run by Philip Falcone, operated out of a Manhattan office and allegedly stated on tax forms that it had no nexus in New York state and has no income derived from New York sources. Harbinger did make money, though, notably doubling investors’ money by shorting the subprime mortgage market in 2007.
Harbert management alleges the settlement was purely a business decision and the whistleblower who brought the case in 2015 is a disgruntled employee, but the settlement agreement states that Harbinger’s New York investment team clearly conducted business activities in New York.
As part of the settlement, an unnamed whistleblower received an $8.8 million bounty.
Under the SEC whistleblower program, established by the Dodd-Frank Act in 2011, the SEC is required to ardently protect confidentiality of whistleblowers and cannot disclose information that might indirectly or directly reveal a whistleblower’s identity.
The whistleblower program offers confidentiality, protection from retaliation, and rewards fraud tipsters for reporting wrongdoing that leads to an SEC enforcement action in which over $1 million in sanctions is collected. The award can range anywhere from 10 to 30 percent of the sanctions, according to the website.
Contact Our Firm if You Have Whistleblower Tip
Scott L. Silver, managing partner of the Silver Law Group, was an early proponent of the legislation and authored a primer on the SEC Whistleblower Program. Our legal team includes David R. Chase, a former SEC prosecutor now working to protect whistleblowers.
Silver Law Group and The Law Firm of David R. Chase are committed to the protection of whistleblowers through the whistleblower claim process and can prosecute your whistleblower claims. If you have questions about your legal rights as a whistleblower, please contact Scott Silver of the Silver Law Group for a free consultation at ssilver@silverlaw.com or toll free at (800) 975-4345.