Jan 7, 2018 | Whistleblower
IRS Whistleblower Program – More than $499 Million in Whistleblower Monetary Awards
According to the recently released “IRS Whistleblower Program Fiscal Year 2017 Annual Report to Congress”:
- Since 2007, information submitted by whistleblowers has assisted the IRS in collecting $3.6 billion in revenue.
- The IRS has approved more than $499 million in monetary awards to whistleblowers.
- In FY 2017, the IRS Whistleblower Office made 242 awards to whistleblowers totaling $33.9 million (before sequestration), which includes 27 awards under IRC § 7623(b), representing a 50% increase in the number of IRC § 7623(b) awards as compared to 18 awards paid in FY 2016.
- Award dollars to whistleblowers as a percentage of amounts collected increased to 17.8% from 16.6%.
IRS Whistleblower Program Overview & Whistleblower Program Award Criteria
The IRS Whistleblower Office operates at the direction of the Commissioner of the IRS and coordinates with other IRS units, analyzes information submitted, and makes award determinations.
If a submission does not meet the criteria for IRC § 7623(b) consideration, the IRS may consider it for an award pursuant to its discretionary authority under IRC § 7623(a).
An IRS whistleblower must meet several conditions to qualify for the IRC § 7623(b) award program. According to the IRS Whistleblower Program Annual Report, the information must be:
- Signed and submitted under penalties of perjury;
- Related to an action in which the tax, penalties, interest, additions to tax, and additional amounts in dispute exceed $2,000,000; and
- Related to a taxpayer, and for individual taxpayers only, one whose gross income exceeds $200,000 for at least one of the tax years in question.
If the information meets the above conditions and substantially contributes to an administrative or judicial action that results in the collection of tax, penalties, interest, additions to tax, or additional amounts, the IRS will pay an award of at least 15 percent but not more than 30 percent of the collected proceeds resulting from the administrative or judicial action (including related actions).
The award percentage decreases for cases based principally on information disclosed in certain public sources or when the whistleblower planned and initiated the actions that led to the underpayment of tax.
Whistleblowers may appeal the IRS Whistleblower Office’s award determinations under IRC § 7623(b) to the United States Tax Court.
The IRS pays awards from collected proceeds, and as such, payments cannot be made until the taxpayer has exhausted all appeal rights and the taxpayer no longer can file a claim for refund. Therefore, typically the IRS does not make award payments for several years after the whistleblower has filed a claim.
IRS Whistleblower Claims Under IRC § 7623
In August 2014, the U.S. Treasury and IRS published final regulations, which, among other things, provide guidance on submitting information regarding tax underpayments or violations, filing claims for award, and the whistleblower administrative proceedings applicable to claims for award under IRC § 7623. The regulations also provide guidance on the determination and payment of awards, and provide definitions of key terms used in IRC § 7623.
The final regulations published in the Federal Register can be viewed by clicking Awards for Information Relating to Detecting Underpayments of Tax or Violations of the Internal Revenue Laws.
The IRS Whistleblower “Informant Award” website page also contains detailed information about the IRS Whistleblower Office and Whistleblower Claims.
The Whistleblower Program Annual Report contained the following data reflecting IRS Whistleblower Program amounts collected and awarded in FY 2015, FY 2016, and FY 2017:
NOTE: The IRS Whistleblower Program Annual Report reflected that whistleblower award and claim data is reported as of September 30, 2017, and “Total Amounts of Award” is before the sequestration reduction.
IRS Whistleblower Program Claims – FY 2017 Closed Whistleblower Claims
According to the IRS Whistleblower Program Annual Report, in FY 2017, the IRS Whistleblower Office closed 14,445 claims, a 31.6 percent decrease from FY 2016 closures.
The most common factors for whistleblower claim closures were:
- Rejected claims with either a non-specific, non-credible, or speculative allegation.
- The issues were below the threshold for IRS action.
- The information was already known to the IRS, lack of resources to pursue a claim, or due to a survey (no tax effects).
- Claims denied due to insufficient time remaining on the statute of limitations or the statute expired before IRS Form 211 (“Application for Award for Original Information”) was submitted.
IRS Whistleblower Actions – Eligibility & Submitting a Whistleblower Claim
The IRS may pay awards to individuals who provide specific and credible information to the IRS if the information results in the collection of taxes, penalties, interest or other amounts from the noncompliant taxpayer. The IRS wants “solid information,” not speculative or unsupported claims, regarding significant federal tax issues. The IRS Whistleblower Program is not designed to resolve personal tax problems or business disputes.
What are the whistleblower rules for getting an IRS Whistleblower Award?
Amount in Dispute Greater than $2 million
If the taxes, penalties, interest and other amounts in dispute exceed $2 million, and a few other qualifications are met, the IRS will pay 15 percent to 30 percent of the amount collected. If the case deals with an individual, his or her annual gross income must be more than $200,000. If the whistleblower disagrees with the outcome of the claim, he or she can appeal to the Tax Court. These rules are found at Internal Revenue Code IRC Section 7623(b) – Whistleblower Rules.
Amount in Dispute Below $2 million or Gross Income Less than $200,000
The IRS also has an award program for other IRS whistleblowers, which, generally, is for those who do not meet the $2 million in dispute threshold or for cases involving individual taxpayers with gross income of less that $200,000. The awards via this program are less, with a maximum award of 15 percent up to $10 million. Further, the awards are discretionary, and the informant (whistleblower) cannot dispute the outcome of the claim in Tax Court. The rules for these cases are found at Internal Revenue Code IRC Section 7623(a) – Informant Claims Program, and some of the rules are different from those that apply to cases involving more than $2 million.
Individuals Who Have Information About Tax Fraud Committed Against the U.S. Government
If you have information or evidence of tax fraud committed against the United States government and would like to speak privately with an attorney about filing an IRS whistleblower claim, please complete the form above on the right, e-mail [email protected] or contact a Kehoe Law Firm attorney.
Jan 6, 2018 | Consumer Protection, Employment & Technology Archive
Superior Court Action Filed By Urban Outfitters Department Manager Alleges Overtime Violations
On December 7, 2017, an overtime pay lawsuit was filed in the Superior Court of California, Los Angeles County, by Plaintiff Adam Friedlander against Pennsylvania-based Urban Outfitters, Inc.
The Plaintiff, an Urban Outfitters Department Manager from approximately July 2011 through approximately January 2014, alleged that Urban Outfitters wrongfully classified him as exempt from overtime protections under federal and California law and did not pay him for regularly worked overtime.
In the Superior Court action, the Plaintiff brought federal wage claims under the Fair Labor Standards Act (“FLSA”) and state claims California Labor Code, Cal. Lab. Code §§ 201-203, 226, 510, 1194, 1198, California Wage Order 7, and Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq.
Unpaid Overtime Sought by Urban Outfitters Department Manager
The Department Manager alleged FLSA and state law violations and, among other things, is attempting to recover unpaid overtime and liquidated damages for hours worked beyond 40 hours per workweek at a pay rate of not less than one and one-half times the regular rate of pay and liquidated damages under the FLSA. Under California law, the Plaintiff is trying to recover unpaid wages for all hours worked in excess of eight in a workday at a rate of one and one-half times the regular rate of pay and unpaid damages for all hours worked in excess of 12 in a workday at a rate of double the regular rate of pay.
Urban Outfitters Department Manager – Misclassified as Exempt & Not Paid Overtime
According to the state complaint, Plaintiff, in his capacity as an Urban Outfitters Department Manager, regularly performed his primary work duties, which included cleaning the store, folding clothes, building displays, and unloading freight. The Urban Outfitters Department Manager, who was supervised by an Urban Outfitters Store Manager while performing his job duties, worked more than 40 hours per week and/or more than eight hours per day without being paid overtime.
According to the complaint:
[Urban Outfitters] acted willfully and/or with reckless disregard of the law in classifying Plaintiff as exempt from overtime requirements. [Emphasis added]
Upon information and belief, [Urban Outfitters] did not analyze Plaintiff’s specific job duties when it determined that he was ineligible for overtime. [Emphasis added]
Upon information and belief, [Urban Outfitters’] unlawful conduct was and is pursuant to its policy of attempting to minimize labor costs by classifying non-exempt workers as exempt while requiring them to perform non-exempt work. [Urban Outfitters] established labor budgets to cover labor costs for the stores in which Plaintiff worked. The wages for [Urban Outfitters’] store-level employees, including Plaintiff, were deducted from the labor budgets. However, [Urban Outfitters] did not provide sufficient money for the labor budgets, causing Plaintiff, who was not paid overtime, to work additional hours without compensation so that [Urban Outfitters] could avoid paying additional wages to its hourly (non-exempt) store-level employees. [Urban Outfitters] did not consider the impact of its insufficient labor budget on Plaintiff’s job duties, including whether staying within the budget required Plaintiff to perform manual labor and non-exempt duties. [Emphasis added]
Throughout Plaintiff’s employment, [Urban Outfitters] failed to maintain accurate and sufficient time records for Plaintiff. [Urban Outfitters] had a policy and/or practice that did not allow Plaintiff to record all hours worked.
Urban Outfitters Files Notice of Removal to Federal Court
On January 3, 2018, Defendant Urban Outfitters, Inc. filed a Notice of Removal in United States District Court, Central District of California, to remove the aforementioned Superior Court action to federal court based on federal question jurisdiction and other legal reasons.
Image: “Urban Outfitters in Pasadena, CA,” Minnaert (Own Work), CC BY 3.0
Urban Outfitters Department Managers
If you served as a Department Manager for Urban Outfitters and have questions or concerns about your potential legal rights or claims, please contact Michael K. Yarnoff, Esq., (215) 792-6676, Ext. 804, [email protected], complete the form above on the right or e-mail [email protected].
Jan 4, 2018 | Securities Class Action Archive
Intel Class Action Lawsuits Filed Just Days After First Reporting of Intel Processor Security Vulnerability
Gizmodo reported (“Intel Hit With Three Class Action Lawsuits Related to Security Vulnerability”) that only two days after “The Register first reported that all Intel x86-64x processors were subject to a severe security vulnerability, and already Intel has been hit with at least three separate class action lawsuits related to the vulnerability.”
According to Gizmodo:
All three complaints cite the security vulnerability as well as Intel’s failure to disclose it in a timely fashion. They also cite the supposed slowdown of purchased processors. However that is still up for debate. In a press release today, Intel claimed it has “issued updates for the majority of processor products introduced within the past five years.” Moreover, it says the performance penalty is not as significant as The Register initially claimed.
Intel Class Action Lawsuit – Class Action Complaint Filed for Damages & Equitable Relief
One Intel class action lawsuit, filed on January 3, 2018 in United States District Court, Northern District of California, San Jose Division, “on behalf of all individuals who purchased a defective Intel core processor,” stated that “[f]or at least 10 years, [Intel] has marketed, distributed, and warranted . . . defective Intel CPUs in California and throughout the United States.” [Emphasis added]
Intel Class Action Lawsuit – Intel Processor Design Defect’s Broad Scope
The Intel processor security defect, according to the class action lawsuit complaint, is in Intel’s x86-64x chip processor, the “most widely-used chips in virtually all desktop and laptop computers,” as well as “in most of the large, cloud based servers such as those from Google, Microsoft and Amazon.”
The Intel class action lawsuit complaint further states:
Defendant Intel’s x86-64x CPUs suffer from a security defect, which causes the CPUs to be exposed to troubling security vulnerabilities by allowing potential access to extremely secure kernel data (the “Defect”). The only way to “patch” this vulnerability requires extensive changes to the root levels of the Operating System which will dramatically reduce performance of the CPU. The Defect renders the Intel x86-64x CPUs unfit for their intended use and purpose. The Defect exists in all Intel x86-64x CPUs manufactured since at least 2008. The x86-64x CPU is, and was, utilized in the majority of all desktop, laptop computers, and servers in the United States[.] [Emphasis added]
To date, [Intel Corporation] has been unable or unwilling to repair the Defect or offer Plaintiffs and class members a non-defective Intel CPU or reimbursement for the cost of such CPU and the consequential damages arising from the purchase and use of such CPUs. Indeed, there does not appear to be a true “fix” for the Defect. The security “patch,” while expected to cure the security vulnerabilities, will dramatically degrade the CPU’s performance. Therefore, the only “fix” would be to exchange the defective x86-64x processor with a device containing a processor not subject to this security vulnerability. In essence, Intel x86-64x CPU owners are left with the unappealing choice of either purchasing a new processor or computer containing a CPU that does not contain the Defect, or continuing to use a computer with massive security vulnerabilities or one with significant performance degradation. [Emphasis added]
Intel Class Action Lawsuit – Defective CPUs Not Merchantable & Performance Degradation
The complaint also stated that Intel’s CPUs that were “. . . manufactured and sold to Plaintiffs and Class members were not merchantable and were not fit for the ordinary and particular purposes for which such goods are used in that the [Intel] CPUs suffer from a critical security defect, requiring an OS-level software patch that will degrade the performance of the CPU.”
Intel Chip Flaw Vulnerabilities – Meltdown & Spectre Security Vulnerabilities
Purchasers and consumers can find out more information about the two security vulnerabilities pertaining to Intel’s chip design flaw by reviewing PCMag’s “Chip Design Flaw Not Limited to Intel, Researchers Say,” and the Meltdown and Spectre-related website referenced in the article.
Image: Pixabay, Gerd Altmann (geralt), CC0 1.0 Universal
Intel Chip Processor (“CPU”) Purchasers
Purchasers of vulnerable Intel chip processors (“CPUs”), or computers which contained affected Intel chip processors, who have questions about the Intel CPU defect, the class action lawsuits or their potential legal rights or claims can speak privately with an attorney by completing the form above on the right or by e-mailing [email protected].
Jan 4, 2018 | Consumer Protection, Employment & Technology Archive
Intel Chip Processors – Design Flaw Could Cause Intel Processor Chips to Be Vulnerable to Hackers
Kehoe Law Firm’s securities investigation concerns whether Intel Corporation and certain Intel Corporation officers violated federal securities laws.
On January 2, 2018, news media reported that a significant design flaw in Intel’s processor chips could allow malicious software to read protected areas of a device’s kernel memory, causing Intel’s processor chips to be “vulnerable to hackers” and “raises concerns about the company’s main products and brand.”
On the news of the Intel processor chip design flaw, shares of INTC fell $1.85, or 3.94%, to close at $45.00 on January 3, 2018, thereby injuring INTC investors.
Fundamental Intel Processor Chip Design Flaw Reported
On January 2, 2018, The Register reported (“Kernel-memory-leaking Intel processor design flaw forces Linux, Windows redesign”) that [a] fundamental design flaw in Intel’s processor chips has forced a significant redesign of the Linux and Windows kernels to defang the chip-level security bug. [Emphasis added]
The Register also reported that “[c]rucially, these updates to both Linux and Windows will incur a performance hit on Intel products. The effects are still being benchmarked, however we’re looking at a ballpark figure of five to 30 per cent slow down, depending on the task and the processor model.” [Emphasis added]
Impact of The Processor Chip Design Vulnerability
The Register described the impact of Intel processor bug as follows:
It is understood the bug is present in modern Intel processors produced in the past decade. It allows normal user programs – from database applications to JavaScript in web browsers – to discern to some extent the layout or contents of protected kernel memory areas.
. . .
Whenever a running program needs to do anything useful – such as write to a file or open a network connection – it has to temporarily hand control of the processor to the kernel to carry out the job. To make the transition from user mode to kernel mode and back to user mode as fast and efficient as possible, the kernel is present in all processes’ virtual memory address spaces, although it is invisible to these programs. When the kernel is needed, the program makes a system call, the processor switches to kernel mode and enters the kernel. When it is done, the CPU is told to switch back to user mode, and reenter the process. While in user mode, the kernel’s code and data remains out of sight but present in the process’s page tables.
. . .
The downside to this separation is that it is relatively expensive, time wise, to keep switching between two separate address spaces for every system call and for every interrupt from the hardware. These context switches do not happen instantly, and they force the processor to dump cached data and reload information from memory. This increases the kernel’s overhead, and slows down the computer.
Your Intel-powered machine will run slower as a result.
Intel Chip Processors – The Security Vulnerability & Hackers
According to The Register, the Intel chip processor “vulnerability could be leveraged by malware and hackers to more easily exploit other security bugs.” The Register described the security hole as follows:
At worst, the hole could be abused by programs and logged-in users to read the contents of the kernel’s memory. Suffice to say, this is not great. The kernel’s memory space is hidden from user processes and programs because it may contain all sorts of secrets, such as passwords, login keys, files cached from disk, and so on. Imagine a piece of JavaScript running in a browser, or malicious software running on a shared public cloud server, able to sniff sensitive kernel-protected data.
On January 3, 2018, Reuters reported (“Security flaws put virtually all phones, computers at risk”) that
[s]ecurity researchers . . . disclosed a set of security flaws that they said could let hackers steal sensitive information from nearly every modern computing device containing chips from Intel Corp, Advanced Micro Devices Inc and ARM Holdings. [Emphasis added]
One of the bugs is specific to Intel but another affects laptops, desktop computers, smartphones, tablets and internet servers alike. Intel and ARM insisted that the issue was not a design flaw, but it will require users to download a patch and update their operating system to fix.
“Phones, PCs, everything are going to have some impact, but it’ll vary from product to product,” Intel CEO Brian Krzanich said in an interview with CNBC Wednesday afternoon.
Researchers with Alphabet Inc’s Google Project Zero, in conjunction with academic and industry researchers from several countries, discovered two flaws.
The first, called Meltdown, affects Intel chips and lets hackers bypass the hardware barrier between applications run by users and the computer’s memory, potentially letting hackers read a computer’s memory and steal passwords. The second, called Spectre, affects chips from Intel, AMD and ARM and lets hackers potentially trick otherwise error-free applications into giving up secret information.
. . .
Daniel Gruss, one of the researchers at Graz University of Technology who discovered Meltdown, called it “probably one of the worst CPU bugs ever found” in an interview with Reuters. [Emphasis added]
Gruss said Meltdown was the more serious problem in the short term but could be decisively stopped with software patches. Spectre, the broader bug that applies to nearly all computing devices, is harder for hackers to take advantage of but less easily patched and will be a bigger problem in the long term, he said.
Intel Chip Vulnerabilities & Intel’s Acknowledgement of the Problem
On January 4, 2018, NPR reported (“Intel Acknowledges Chip-Level Security Vulnerability in Processors”) that
[s]ecurity researchers have found serious vulnerabilities in chips made by Intel and other companies that if exploited could leave passwords and other sensitive data exposed.
“Several researchers, including a member of Google’s Project Zero team, found that a design technique used in chips from Intel, Arm and others could allow hackers to access data from the memory on your device. The problem impacts processors going back more than two decades and could let hackers access passwords, encryption keys or sensitive information open in applications,” according to CNET.
The discovery comes shortly after the chipmaker said it was working on a patch.
In a statement released Wednesday, Intel acknowledged the problem, saying that it is “working closely with many other technology companies, including AMD, ARM Holdings and several operating system vendors, to develop an industry-wide approach to resolve this issue promptly and constructively. Intel has begun providing software and firmware updates to mitigate these exploits.”
Wired explains that the bug “… allows low-privilege processes to access memory in the computer’s kernel, the machine’s most privileged inner sanctum. Theoretical attacks that exploit that bug, based on quirks in shortcuts Intel has implemented for faster processing, could allow malicious software to spy deeply into other processes and data on the target computer or smartphone.”
Other Comments About the Intel CPU Bug Issue
Additional information about the CPU issue can be found in The Register’s “translation of Intel’s attempt to spin its way out of the CPU security bug” article here and Gamer Meld’s YouTube video, “Intel Responds To “Bug” In Their CPU Architecture!.”
Image: Pixabay, OpenClipart-Vectors, CC0 1.0 Universal
Intel Corporation Investors
If you purchased Intel securities or would like to learn more about the securities investigation or potential legal claims, please contact John Kehoe, Esq., (215) 792-6676, Ext. 801, [email protected], complete the form above on the right or e-mail [email protected].
Jan 4, 2018 | Securities Class Action Archive
BANC Investigation – Banc of California Securities Investigation
Banc of California (NYSE:BANC)
The Kehoe Law Firm’s class action BANC investigation concerns whether Banc of California and certain of its officers and/or directors violated federal securities laws.
On December 8, 2017, Bloomberg reported that a former Banc of California employee had filed a whistleblower lawsuit against the bank alleging, in part, that: revenue generated by BANC in 2016 was improperly carried over to the following year in order to inflate 2017 profits; and BANC had ignored its former Chief Financial Officer’s use of Company funds to patronize strip clubs.
On this news, Banc of California stock dropped $0.60 per share, or 2.76%, to close at $21.15 on December 8, 2017.
According to the December 9, 2017 Los Angeles Times story:
Troubled Banc of California was a den of iniquity featuring on-premises sex, drugs and strippers, according to a lawsuit filed . . . by a former employee.
Heather Endresen, who was managing director of the bank’s small-business loan department, has charged that the company terminated her without cause, days after she took her concerns about activity at the Irvine home office to a corporate whistleblower hotline.
Her complaints included “male employees having sex with woman in their work offices,” “visiting strip clubs with employees” and “using company funds to pay for strippers.”
Endresen’s lawsuit, filed . . . in Los Angeles Superior Court, further alleged “illegal drug use” by former Executive Vice President and interim CFO Francisco Turner, and accused him of “having sex with certain employees.” Banc of California announced Turner’s resignation in June.
. . .
The suit filed by Endresen, who worked at the bank from 2014 through May 2017, alleges serious breaches of financial propriety as well as rampant sex and drug use. Endresen has charged that company officers engaged in a “sham” effort to shift millions of dollars in corporate revenues from late 2016 into early 2017 — partly to avoid paying bonuses earned by Endresen and others.
BANC Investigation – Banc of California Investors
If you are a Banc of California investor and have questions or concerns about the Banc of California class action investigation, please contact John Kehoe, Esq., (215) 792-6676, Ext. 801, [email protected], complete the form on the right or e-mail [email protected].
