Experienced Whistleblower Advocates Working to Expand Protections for Tax Fraud Whistleblowers
Kohn, Kohn & Colapinto’s partners seek to protect and enhance legal protections for tax fraud whistleblowers. KKC has filed numerous internal revenue service rulemaking petitions, filed extensive briefs to the IRS and testified at IRS rulemaking hearsing to strengthen the tax whistleblower program.
Kohn, Kohn & Colapinto’s experienced tax fraud whistleblower attorneys filed the following briefs in support of IRS whistleblower rights:
- November 29, 2012: KKC filed an extensive brief on behalf of the National Whistleblower Center before the IRS strongly urging it to reward whistleblowers who exposed criminal tax frauds.
- February 19, 2013: KKC authored an 84-page comment, on behalf of the NWC, on the proposed IRS whistleblower rules, actively opposing the criminal disqualification.
- April 16, 2013: One of our tax whistleblower attorneys testified at the IRS rulemaking hearing opposing the criminal reward disqualification.
- June 5, 2014: We provided the Secretary of Treasury with an exhaustive 55-page scholarly article co-authored by KKC partner Stephen M. Kohn and Dean Zerbe that explained in detail the legal basis as to why the criminal reward disqualification was illegal and the why the IRS should not approve it. A copy of this article, published in Tax Notes, is available here.
- Finally, Dean Zerbe and Steve Kohn agreed to work with the legal team representing anonymous whistleblowers 21276/77-13W, to ensure that the IRS program correctly implemented the whistleblower reward laws and that any reward calculation included criminal fines and penalties.
On July 1, 2019, The Taxpayer First Act became law. The Taxpayer First Act closed loopholes in corporate whistleblower protections. For the first time, employees who expose tax fraud, which often include violations of the Bank Secrecy Act and anti-money laundering law, are protected from retaliation.
Summary of Taxpayer First Act anti-retaliation provisions:
- The right to reinstatement and double back-pay;
- No mandatory arbitration;
- Expeditious administrative remedies with the right to go to federal court for a jury trial;
- Compensatory damages such as special damage, attorneys fees, and costs, awarded only to a whistleblower who prevails in an employment case.
The Taxpayer First Act also enhances the existing IRS whistleblower reward program by permitting full and open communication between the IRS Whistleblower Office and whistleblowers. Due to a broad reading of other provisions in the tax code concerning taxpayer secrecy, before this amendment, this type of communication was regularly stifled. The change will facilitate the cooperation between whistleblowers and the IRS necessary to fully prosecute tax frauds.
Kohn, Kohn & Colapinto partners worked closely with whistleblower attorney Dean Zerbe, Senior Policy Analyst at the National Whistleblower Center, and the National Whistleblower Center for several years promoting these reforms.
The modern IRS whistleblower award law (Section 7623(b) of the Internal Revenue Code) was created in 2006 and championed by Senator Charles E. Grassley (R-IA). The law provides that whistleblowers are mandated to receive 15-30% of proceeds collected by the U.S. government due to the information given by the whistleblower. The IRS has also been extremely successful in protecting the confidentiality and anonymity of tax whistleblowers.
The below is a summary of what the IRS has collected over the last five years:
Total Amounts of Awards | Amounts Collected | Awards as Percentage of Amounts Collected |
|
FY 2018 | $312,207,590 | $1,441,255,859 | 21.7% |
FY 2017 | $33,979,873 | $190,583,750 | 17.8% |
FY 2016 | $61,390,910 | $368,907,298 | 16.6% |
FY 2015 | $103,486,236 | $501,317,481 | 20.6% |
FY 2014 | $52,281,628 | $309,990,568 | 16.9% |
Source, 2018: IRS Whistleblower Program FY 2018 report
Frequently Asked Questions (FAQs): What is covered under the IRS tax whistleblower reward program?
Security Exchange Commission (SEC) Rulemaking
Experienced whistleblower attorneys work to ensure SEC whistleblowers protected and awarded
During the Dodd-Frank rulemaking process, Kohn, Kohn and Colapinto’s partners worked closely with the SEC to create an effective whistleblower program.
Kohn, Kohn & Colapinto’s partners met personally with each of the five SEC Commissioners. They presented them with detailed reports and proposals setting forth rules that were essential to make the law work for Dodd-Frank whistleblowers as intended by Congress.
The SEC adopted the key recommendations for enhancing its Whistleblower Reward Program advocated by KKC partners.
The SEC approved these proposals:
- Establishing the right of corporate compliance officials and directors to obtain rewards; and
- Ensuring that employees who “participated” in fraud but did not “plan and initiate” the fraud, could receive rewards.
KKC attorneys chaired formal meetings with the Division of Enforcement, and individual meetings with each SEC Commissioner to present detailed reports and proposals setting forth rules that were essential to make the Dodd-Frank Act work as intended by Congress.
During this period, KKC attorneys were the principal authors of eight key comments to the SEC:
- November 1, 2010 letter to SEC opposing corporate lobby position.
- November 22, 2010 letter to SEC Chairman Schapiro explaining that proposed rules violate congressional intent.
- December 17, 2010 formal rulemaking letter with report to the SEC on the Impact of Qui Tam Laws on Internal Compliance.
- January 25, 2011 letter to Chairman Schapiro applying Chevron to proposed rules, and a marked-up version of proposed rules.
- February 10, 2011 letter to Commissioners explaining the proposed rules’ impact on the ability of US to enforce the Foreign Corrupt Practices Act.
- March 7, 2011 letter to Chairman Schapiro responding to Chamber of Commerce’s attacks on the NWC’s December 17, 2010 report.
- March 17, 2011 letter to SEC with provision-by-provision analysis of proposed rules with suggested revisions and justifications for revisions
- May 16, 2011 letter to SEC Chairman Schapiro and CFTC Chairman Gensler regarding the impact of the first reported decision under the Dodd-Frank Act on the rulemaking process
The final rules were approved and enacted on May 25, 2011 in a 3:2 vote.
Recently the SEC has proposed new rules that would gut its whistleblower program.
The proposed rules would:
- Creating an unrealistic reporting procedure that would disqualify a vast number of whistleblowers simply because they reported their concerns to the wrong office at the SEC, rather than filling out a specific form and filing it according to specific reporting procedures. Whistleblowers who directly contact the SEC Commissioners would be disqualified from obtaining a reward!
- Placing an arbitrary cap on whistleblower rewards, which could be imposed in large fraud cases, regardless of contribution of the whistleblower or the amount of retaliation the whistleblower suffers. This cap would disincentivize whistleblowers from coming forward.
Once again KKC’s whistleblower attorneys are leading the campaign to protect the SEC Whistleblower Program.
KKC partners filed the following comments to the Amendments to the Commission’s Whistleblower Program Rules:
- September 21, 2020 — Summary of Supplemental Comments Filed to SEC
- September 10, 2020 – Eleventh Supplemental Comment: Proposed Rules
- January 16, 2020 – Tenth Supplemental Comment: Proposed Rules
- January 8, 2020 – Ninth Supplemental Comment: Proposed Rules
- December 23, 2019 – Eighth Supplemental Comment: Proposed Rules
- December 10, 2019 – Seventh Supplemental Comment: Proposed Rules Overview
- November 22, 2019 – Sixth Supplemental Comment Proposed Rule 21F-9(e)
- October 21, 2019 – Fifth Supplemental Comment: Proposed Rules 21F-6(d) and 21F-9(e)
- October 16, 2019 – Fourth Supplemental Comment: Proposed Rule 21F-9(e)
- October 8, 2019 – Third Supplemental Comment: Proposed Rule 21F-9(e)
- Dodd-Frank Act Whistleblower Letter filed on May 6, 2019
- Dodd-Frank Act Whistleblower Letter filed on September 12, 2019
- The letter filed by Stephen Kohn on behalf of National Whistleblower Center on September 18, 2018
- Dodd-Frank Act Whistleblower Letter filed on July 24, 2018
- The letter filed by Senator Grassley’s SEC referencing KKC’s concerns over Long Delays in reward decisions