New York Files False Claims Act Lawsuit Against Sprint Nextel Corp.

New York Attorney General Eric Schneiderman has filed suit under the New York False Claims Act against Sprint Nextel Corp. for underpaying sales tax to the State of New York and to local tax authorities. The allegations involve sales due on flat-rate access charges in wireless calling plans.” According to Capitol Confidential, New York alleges that Sprint failed to collect and pay approximately $100 million in sales tax that it owed under the statute. This represents an underpayment of about 25 percent.

By collecting and paying taxes on just a portion of its flat-fee rates, Sprint was able to offer its services to customers at an artificially low price, giving it an unwarranted business advantage over its major competitors, all of whom fully pay taxes on flat-rate access charges. AG Schneiderman noted that Sprint was advised by 2009 that its tax collection practices were potentially illegal, but Sprint has made no changes. Thus in addition to monetary damages, the lawsuit seeks to allow customers who were misled by Sprint’s actions to be released from their contracts without termination fees.

New York passed its false claims act in 2010. Under the statute, authored by then-state Senator Schneiderman, the AG can seek triple damages, as well as interest and penalties. The lawsuit arose from a complaint by a whistleblower from Empire State Ventures. Based on provisions within the false claims act, the whistleblower is entitled to receive 15 to 20 percent of the amount recovered.

Since the lawsuit was filed, a number of shareholder suits have also been filed against Sprint, alleging that the company’s officers and directors have breached their fiduciary duties by exposing shareholders to potential financial liability, bad publicity, and possible decline in stock value.

Waters & Kraus is a national firm with highly skilled lawyers practicing qui tam litigation in four offices, including Dallas, Los Angeles, San Francisco, and Baltimore. Our attorneys have decades of experience successfully representing whistleblowers in a variety of fraud cases. Contact us or call our attorneys at 800.226.9880 to learn more about our practice and how we can assist.

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