- Harbert Management to Pay New York $40 Million in Tax Settlement, The New York Times, April 18, 2017 (“‘This is a new tax evasion method where tax obligations are being shifted to another state,’ Mr. Getnick said. ‘There is a lot of potential liability here for the industry with multistate operations.’”)
- Harbert Management Reaches New York Settlement, The Wall Street Journal, April 18, 2017 (“The whistleblower will receive $8.8 million in reward, according to the [New York State Attorney General’s] office, the largest tax whistleblower recovery ever awarded by the New York attorney general.”)
- AG Nets Record $40 Million Tax Settlement Against Hedge Fund, New York Law Journal, April 18, 2017 (“‘This settlement is an important step forward for the use of whistleblower laws to battle tax evasion in New York, and it should serve as a wake-up call for hedge funds with multistate operations,’ Getnick said in a statement.”)
- Harbert Management to Pay $40 Million to Settle New York Tax Whistleblower Tax Case, Corporate Crime Reporter, April 18, 2017 (“Getnick told the Corporate Crime Reporter that the case ‘underscores the efficacy of the New York State’s False Claims Act qui tam approach for pursuing tax fraud by taking full advantage of whistleblowers and their counsel teaming up with the government to achieve successful recoveries.’ ‘The IRS whistleblower program would benefit from similar partnerships,’ Getnick said.”)
- Getnick & Getnick/Labaton Sucharow Recover $40m, The Hedge Fund Journal, April 18, 2017 (Neil Getnick quote: “The Attorney General’s Office did an extraordinary job working with us and our client in developing this case, illustrating the value of the public-private partnership established by state and federal whistleblower laws.”)
- Whistleblower Gets $8.8M Thanks to Falcone Tax-Scheme Settlement, New York Post, April 18, 2017 (“‘You can’t set up operations in Midtown Manhattan . . . and turn around and pay zero dollars in taxes,’ Neil Getnick, attorney for the whistle-blower, told The Post.”)
- NY Settles With Ala. Firm for $40M In Biggest Tax Recovery, Law360, April 18, 2017
- Law360’s Weekly Verdict: Legal Lions & Lambs, Law360, April 20, 2017 (Neil V. Getnick named a “legal lion” in connection with Getnick & Getnick’s record-breaking hedge fund tax case.)
- New York State Record Tax Whistleblower Settlement With Harbinger Capital Partners Illustrates Pitfalls of Domestic Tax-Shifting Schemes, Hedge Fund Law Report, April 27, 2017 (“The most significant ‘wakeup call’ for hedge fund managers, [Neil Getnick] noted, ‘has to do with this case revealing a new tax evasion method involving the shifting of tax obligations to another state instead of offshore.’ . . . ‘From the perspective of a governmental agency, the impact of both the domestic and the offshore efforts is the same – zero dollars get paid.’”)
- Viewpoint: Extending False Claims Act to Tax Is A Good Idea, Neil V. Getnick & Gregory M. Krakower, Bloomberg BNA Daily Tax Report: State, May 2, 2017.
- Hedge Funds Become Latest Target for Whistleblowers: $40 Million Settlement in Tax Case Demonstrates Broad Reach of New York’s False Claims Act, Fried Frank FraudMail Alert, May 2, 2017 (“This latest action, which relied on state tax laws as the basis for the fraud claim, may usher in a whole new wave of potential liability against hedge funds and similar businesses.”)
Harbinger: Hedge Fund Tax Whistleblower Case Study
A groundbreaking qui tam lawsuit brought under the New York State False Claims Act recovered $70 million from Hedge Fund and related entities resulting from a tax allocation fraud scheme.
Getnick Law Client Blows Whistle on Hedge Fund Tax Fraud Scheme
Getnick Law, along with co-counsel, represented the whistleblower in this tax evasion case brought against Harbinger Capital Partners Offshore Manager LLC, the investment manager for New York-based hedge funds run by Philip Falcone, and related entities and individuals, including Harbert Management Corporation, an Alabama-based investment company. The lawsuit alleged that the defendants evaded New York State and City taxes by shifting New York-derived income to Alabama to avoid New York’s higher tax rates.
In the case’s first settlement, achieved in April 2017, Harbert and related entities and individuals paid $40 million. Getnick Law’s client received 22% of the settlement ($8.8 million), the then-largest amount and percentage award for a whistleblower in a New York False Claims Act case not involving Medicaid. In the case’s second settlement, achieved in September 2018, Harbinger Capital Partners Offshore Manager LLC paid $30 million. Getnick Law’s client received 22% ($6.6 million) of that settlement as well.
The cases received wide-scale press coverage, including in the New York Times, Wall Street Journal, and New York Law Journal. Read more about the first and second settlement.
Related Materials and Press Coverage (First Settlement: $40 Million)
Related Materials and Press Coverage (Second Settlement: $30 Million)
- Press Release from the New York Attorney General, September 27, 2018. (“The Attorney General expresses her appreciation to the whistleblower, without whose information the misconduct might have remained concealed from the authorities, and to the whistleblower’s attorneys.”)
- Superseding Complaint, September 26, 2018.
- Harbinger Hedge Fund Manager to Pay $30 Mln in New York Tax Accord, Reuters, September 27, 2018 (“‘The $70 million that has been recovered is real money by any measure,’ [Neil Getnick] said. ‘Applying the lessons of today’s case more generally could lead to more liability for the hedge fund and financial services industries.’”)
- NY, Hedge Fund Settle for $30M in Whistleblower Tax Law Suit, Law360, September 27, 2018 (“‘Today’s settlement adds substantially to the recovery for the state and reveals the extent of the potential liability for hedge funds with multi-state operations and the vigor of the state’s tax enforcement efforts,’ [Neil] Getnick said.”)
- Getnick & Getnick and Labaton Sucharow Secure USD30m Settlement in Philip Falcone Hedge Fund Tax Case, Hedgeweek, September 28, 2018 (“The case alleges that the defendants evaded New York State and City taxes by shifting income derived from Harbinger from New York to Alabama to avoid New York’s higher tax rates.”)
- Phil Falcone Is Really Bad At Paying Taxes, Dealbreaker, October 1, 2018 (“Tax bills have always presented a bit of an issue for Falcone . . . Turns out this is something of a trend.”)
- Neil Getnick on Using False Claims Law to Combat Tax and Consumer Fraud, Corporate Crime Reporter, October 8, 2018 (“State and federal false claims laws have been used predominantly in recent years to combat health care fraud. But now the laws are starting to catch tax frauds — and soon — consumer frauds.”)
- Harbinger Capital Partners Offshore Manager Settles New York Tax Evasion Case for $30 Million, The Hedge Fund Law Report, November 8, 2018 (“‘This settlement is a warning to anyone in the hedge fund industry that is diverting state taxes from New York — a high tax rate jurisdiction — to a lower tax rate jurisdiction that there is now significant exposure to liability under New York’s False Claims Act,’ said Neil V. Getnick, managing partner of Getnick & Getnick who represented the whistleblower in this settlement.”)