Preparing an action plan

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A Short Guide To Whistleblowers And Federal Tax Fraud IRS Awards Tax Whistleblower $250M – Part 2. Colorado Expands Whistleblower Protections for Health and Safety Violations What are the Goals and Rewards of Whistleblower Programs? - Halunen Law

 

 

 

 

 

You’re the newest young partner at Smart & Smarter, LLP, and your life just became much more interesting. That’s because the senior partner, on his way out the door yesterday for a week’s vacation, asked you to take on a brand new client who was coming in later. You happily did so, and . . . wow!

 

The new client’s name is Rona Muck. Here’s her story:

 

Until last month Rona had been employed by Big Corp. She’d been there for 15 years, working her way up from clerk to Assistant Tax Director. Had been there, because she was unceremoniously fired after reporting a questionable situation to Big’s General Counsel. She’d done that only because the Tax Director, her boss, had reacted very badly when Rona challenged his version of reality…

 

Basically, Big’s largest operating segment, its civil engineering group, had “cook-ed the books” – the tax books, not the GAAP books. Last year it had earned a performance bonus of $150,000,000 from Big’s largest customer by completing a huge project in half the scheduled time. But, despite that the $150M was treated as GAAP revenue, Big’s tax return omitted it from gross income. Instead it was treated as borrowed money (a loan). How? By latching onto a fine-print clawback provision the contract saying that the $150M would have to be repaid by Big in the event that something went seriously wrong within seven (7) years from the date of completion, and that something was Big’s.

 

Rona had been excluded from all meetings and discussions about this $150M. But she had gotten her hands on a report written to Big’s directors by one of the engineers, a report stating flatly that the odds of such a fault ever occurring were “less than 1% of 1%.” “Claim of right doctrine!” Rona had said to herself, fully ex-pecting the $150M to be included on Big’s 1120. But it wasn’t, which Rona found out about only after the return had been filed.

 

It turns out that Rona’s boss, the Tax Director, somehow had been persuaded by a “substantial authority” tax opinion prepared by (in)famous outside tax lawyer Joe Garza. The opinion concluded that recognizing the $150M in gross income could wait until the 7-year guarantee period expired. Rona had demanded to see this nonsensical tax opinion. She was refused access to it.

 

Livid over having been fired, Rona wants to file a whistleblower claim with the IRS. “Simple!” she says. “$150M understatement of taxable income! $150M x 21% = $30M+ underpayment of tax! Add on the 20% penalty, add on interest – around $40M total! IRS pays us 30% = $12,000,000! Smart & Smarter takes 1/3, I take 2/3, we all retire!”

 

You tell Rona that you’ll prepare an “action plan,” a retainer agreement, and a POA (Form 2848), and have everything ready for her to come back and sign next week. But first you need to prepare a memo to the senior partner , recapping Rona’s story ( very briefly) and outlining the whole whistleblower process. You need to do this because you’ve been told by the other partners that Rona is Smart & Smarter’s first-ever whistleblower client.

 

Around 1,000 words should be sufficient. (For comparison, this entire do


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