The Continuing Relevance of Whistleblowers

In a recent speech at the annual conference of members of the Taxpayers Against Fraud Education Fund (“TAF”) in Washington DC, IRS Commissioner John A. Koskinen remarked that given his department’s “tight budget picture,” the information provided by whistleblowers [wa]s a godsend.” Fraud_Photo He lauded the vital role whistleblowers play in deterring corporate non-compliance and ensuring a fair tax system:  “The deterrence value of the whistleblower program is key here…With a strong, active whistleblower program out there, the individuals running that corporation will know there are people internally and externally who are aware of the company’s decisions and have a financial incentive to report the scheme to the IRS. That knowledge will certainly make those corporate bigwigs think twice, if they’re smart, and weigh heavily against trying an end run around the tax law.”

Commissioner Koskinen underscored the need for corporations and other companies to maintain a culture of corporate integrity:

“By helping the IRS improve tax compliance, the whistleblower program…helps to ensure the integrity and fairness of our tax system. That system is built on the notion of voluntary compliance. Average taxpayers who play by the rules must be confident that corporations and wealthy individuals cannot avoid paying their fair share of tax through the creation and use of complicated financial structures that exploit the tax law.”

In this same vein, the keynote speaker at the TAF conference, TAF Board Chair, Neil V. Getnick also emphasized the role of corporate integrity in deterring fraud against the government:

“An underlying problem is that companies typically rely on ‘law-driven’ compliance rather than ‘business-driven integrity programs. Law-driven programs seek to avoid punishment by meeting the letter of the law without developing a deeply rooted culture of integrity. In many cases, law-driven programs are only grudgingly tolerated by executives and employees, and they often fail as a result.

By contrast, a business-driven integrity program is much more likely to prove effective because business people from the top down (not just the legal department) embrace and promote it as essential to the long-term success of the enterprise. A business-driven program is viewed throughout the company as a profit center and a competitive advantage, rather than a cost center or an obstacle.”

Whistleblower_Photo Also, last week, the office Virginia Attorney General Mark R. Herring announced a $1.15 BILLION whistleblower lawsuit against several of the largest commercial banks in the world, accusing them of misleading the Virginia Retirement System (VRS) during the sale of residential mortgage-backed securities (RMBS) to the state retirement fund.  Attorney General Herring’s lawsuit alleges that the banks misrepresented the loan-to-value ratio of mortgages; misrepresented the owner occupancy rate of the homes; and misrepresented the percentage of homes with second mortgages. The named defendants include,

Barclays Capital Inc.

Citigroup Global Markets Inc.

Countrywide Securities Corporation

Credit Suisse Securities (USA) LLC

Deutsche Bank Securities Inc.

Goldman, Sachs & Co.

RBS Securities, Inc.

HSBC Securities (USA) Inc.

Morgan Stanley & Co. LLC

UBS Securities LLC

WAMU Capital Corp.

J.P. Morgan Securities LLC (and as current owner of Bear, Stearns & Co.) Merrill Lynch, Pierce, Fenner & Smith Incorporated(and as current owner of Banc of America Securities LLC).

Attorneys at Farmer, Jaffe, Weissing, Edwards, Fistos, & Lehrman, P.L., maintain an active False Claims Act qui tam and whistleblower practice and have extensive experience handling whistleblower cases.

 

Mark S. Fistos, Partner-Member, Farmer, Jaffe, Weissing, Edwards, Fistos, & Lehrman, P.L.

 

 

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