Whistleblower Joe Connolly, former lab technician for New England Compounding Center, speaks out for the first time to 60 Minutes anchor, Scott Pelly
If a pharmaceutical manufacturer recalls a product due its potential dangers, it often takes several months or years for the public to become aware of how much the company knew beforehand and when they became aware of the danger. Too often, manufacturers participate in the act of concealing pertinent information, delaying their findings to the public and hoping the situation goes unnoticed.
Attorney General Eric Schneiderman says “Mohan” Ramchandani will plead guilty to felony tax fraud after failing to pay New York sales and income tax for almost 10 years.
Attorney General Eric Schneiderman announced today that Mohanbhai “Mohan” Ramchandani, known as the “tailor to the stars,” and his business corporation, Mohan’s Custom Tailors, Inc., has chosen to plead guilty to felony charges for evading the payment of New York sales and income tax for nearly a decade. Ramchandani reportedly owes at least $2 million in taxes dating back to 2002.
Ramchandani also agreed to pay $5.5 million in fines to settle civil suits alleging tax fraud filed by a whistleblower under New York State’s False Claims Act. On Tuesday, Ramchandani pleaded guilty to felony tax fraud charges, according to authorities.
Ramchandani owns and operates “Mohan’s Custom Tailors,” which provides men’s custom clothing and tailoring services to high-end clients. Ramchandani claims to outfit multiple celebrities and sports stars. Former celebrity clients include figures such as former Mayor Rudy Giuliani and basketball stars Patrick Ewing and Clyde Frazier. The business is located on East 42nd Street in Manhattan and is still in operation.
“There are no excuses for tax cheats – regardless of how prominent they are. Mr. Ramchandani’s conviction for orchestrating this multi-million dollar scheme to defraud taxpayers sends a clear message that those who rip off the public will be held accountable for their crimes,” said Attorney General Schneiderman.
“Honest citizens are harmed by people who break the law to avoid paying their fair share, making it harder for New York State to provide essential services. This office will continue to bring aggressive action against tax evaders who believe they are above the law.”
Details of the Tax Fraud Case
According to evidence gathered during the Attorney General’s investigation, going back to at least 2002, Ramchandani and his business failed to pay at least $1.7 million in state and local sales taxes that were charged to customers. In addition, during the tax years of 2007, 2008 and 2009, Ramchandani failed to pay at least $256,000 in state and local personal income taxes.
Attorney General Schneiderman’s office began their investigation on a tip that was received from a credible whistleblower with inside information about Ramchandani and his Custom Tailor business’ illegal tax practices. The Attorney General’s office came to a resolution in this case by using the Taxpayer Protection Bureau and the Criminal Prosecutions Bureau, with additional aid from the New York State Department of Taxation and Finance.
As part of the plea agreement, Ramchandani gave a detailed confession, admitting that he willfully and knowingly defrauded the government out of nearly $2 million in sales and income taxes. Ramchandani also admitted that between September 2002 and June 2012, he fraudulently reported only $5,674,738 in retail sales on the tax returns, although the business made at least $28,046,064 million in taxable income.
In exchange for pleading guilty to tax fraud, Ramchandani will receive a prison term of at least one to three years. He and his business must also pay $5.5 million dollars in damages and fines as part of the settlement.
A First for the False Claims Act
This multi-million dollar settlement is unique, in that it is the first time the False Claims Act has been used to resolve a tax fraud case. The law requires that defendants pay treble damages and civil penalties if they are found liable. In an attempt to strengthen the law, Attorney General Schneiderman authored several amendments to New York’s False Claims Act in 2010. One of those amendments makes it possible for whistleblowers to sue substantial tax law violators on behalf of the government, and be protected and rewarded for coming forward with the information. Early in his term, Attorney General Schneiderman created the Taxpayer Protection Bureau as a way to combat fraud against the government and handle cases under the False Claims Act. The False Claims Act entitles those whistleblowers that come forward and report fraud against the government to receive a share of the money recovered.
Sanofi-Aventis is the latest pharmaceutical company to settle with the United States Department of Justice in an Average Sales Price Fraud case, but will almost certainly not be the last.
Par Pharmaceuticals allegedly committed fraud by promoting Megace ES for off-label uses not approved by the Food and Drug Administration.
Par Pharmaceuticals recently pled guilty in federal court to charges of off-label marketing and will be forced to pay $45 million in order to resolve the company’s criminal and civil liability. Par allegedly promoted its prescription drug, Megace ES, for off-label uses that were not approved as safe or effective by the Food and Drug Administration (FDA) and uses not covered by federal health care programs. Continue reading…
Defense Contractors Convicted of Fraud by a Federal Jury
A federal jury recently convicted two Poway-based defense contractors and a Poway corporation of conspiracy and bribery in connection with a defense fraud and corruption scheme at Naval Air Station North Island.
Whistleblower Suit Dismissed by Texas Court due to Interpretation of Dodd-Frank Act
The United States District Court of the Southern District of Texas recently decided to dismiss a whistleblower lawsuit filed by a former employee of G.E. Energy (GE). What makes the case unique is that the former Iraqi country manager for GE claims he was fired for telling supervisors and an ombudsman about potential Foreign Corrupt Practices Act (FCPA) violations.
Khaled Asadi, a dual citizen of the United States and Iraq, alleged he was fired in retaliation for complaining to various supervisors that GE was in violation of the Foreign Corrupt Practices Act (FCPA). The Texas court never ruled on the merits of the case, however, as it determined the protection provided to whistleblowers by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) did not apply extraterritorially. As Asadi was working in Jordan during the relevant dates, the court chose to grant GE’s motion for dismissal for failing to state a claim.
Khaled Asadi was an American employed by GE Energy, when he was temporarily assigned to Amman, Jordan. His job required him to coordinate between GE and Iraq’s governing bodies in order to secure and manage energy service contracts. Asadi alleged that while GE was negotiating a Joint Venture Agreement with the Iraqi Minister of Electricity, the company hired Iman Mahmood, a woman “closely associated” with the Senior Deputy Minister of Electricity, “in order to curry favor with the Minister while negotiating a lucrative Joint Venture Agreement.” He further alleged the Senior Deputy Minister himself demanded that GE hire Mahmood for the position
Convinced that Mahmood’s hiring violated the FCPA, Asadi reported the incident to his supervisor and the GE ombudsman. Shortly after speaking with the ombudsman, Asadi received a negative performance review. He also alleged that GE began “constant and aggressive severance negotiations” in an attempt to make him leave the company, until things finally blew up and GE “abruptly ended all discussions and terminated” him on June 24, 2011. Afterward, Asadi filed suit alleging his termination was illegal retaliation for his whistleblowing activity.
Interpretation of the Dodd-Frank Act
Because the Dodd-Frank anti-retaliation provision is silent as to whether it applies to Americans abroad, the court had to consider the provision’s context. The court noted that Section 929P(b) of Dodd-Frank addresses the extraterritorial scope of the statute, granting district courts extraterritorial jurisdiction in certain enforcement actions brought by the Securities and Exchange Commission (“SEC”) or by the United States government. The Court also found that “when a statute provides for some extraterritorial application, the presumption against extraterritoriality operates to limit that provision to its terms.”
Section 929P (b)’s reference to extraterritorial citizens made the “absence of any explicit mention of protections for extraterritorial whistleblowers weigh against implying those protections.” Between the evidence and the presumption against extraterritorial coverage, the court ruled Asadi was not protected by Dodd-Frank’s anti-retaliation provision.
Since the passage of the Dodd-Frank Act, extraterritoriality has been one of the major talking points and controversies. Section 929P states in clear, unambiguous terms that any United States court will, going forward, “have jurisdiction to hear any action brought by the SEC or the Government with respect to violations, even those occurring outside the United States, of the anti-fraud provisions of the 1934 Act.” According to the court, having jurisdiction, or “power to hear a case,” is “an issue quite separate from the question whether the allegations the plaintiff makes entitle him to relief.”
Given the confounding interpretation of this portion of Dodd-Frank, the anti-retaliation provision serves only to protect “required” disclosures. Because it was not required by law that Asadi report this activity, the court determined he was not protected under the FCPA and, finding no grounds on which the anti-retaliation provisions of Dodd-Frank could apply extraterritorially, the court ultimately granted GE’s motion to dismiss the case.
Two and a half years after the Dodd-Frank Act’s whistleblower program passed and more than one year after key rules went into effect, the program has generated more than 3,000 tips, complaints, and referrals. It has also yielded the first Securities and Exchange Commission enforcement action this year.
Recently Released Report from the IRS Reveals Highest-Ever Payments to Whistleblowers in 2012
The Internal Revenue Service released its Whistleblower Report for Fiscal Year 2012, which ended on Sept. 30. The report is required by Congress and shows the annual accounting for the IRS whistleblower program that pays rewards to those people who report or turn in tax frauds.
Qui Tam Suit Against Cooper Health System Finally Resolved
A False Claims Act lawsuit filed against Cooper Health System, a New Jersey hospital, by Delaware Valley cardiologist Nicholas L. DePace, M.D., set off what became a multi-year investigation by the United States Department of Justice and the New Jersey Attorney General’s Office.
The federal government has sued Lance Armstrong, alleging the former cyclist committed fraud through cheating and false statements.