First False Claims Act Tax Recovery in New York; Whistleblower Awarded $1.1 Million

A well-known New York City tailor pled guilty to tax-evasion charges and separately agreed to pay $5.5 million to settle a related whistleblower case brought under New York State’s False Claims Act (FCA).

The whistleblower, Vijay Tharwani, a former employee of the tailor, will receive $1.1 million of the settlement.

The case marked the first time the state’s recently strengthened FCA has been used successfully in a tax case; in 2010, New York became the first state to authorize citizens to sue tax cheats on its behalf.

Mohanbhai Ramchandani — a tailor to politicians and professional athletes — was tripped up, in part, by his belief in numerology: He made sure that the digits in each fabricated number on his tax forms added to ten.

In his guilty plea, Mr. Ramchandani admitted to reporting less than a quarter of his business’ $28 million revenue on tax returns — and simply keeping taxes that he collected from customers.

His business, Mohan’s Custom Tailors, was know for creating suits for celebrities such as basketball player Patrick Ewing and former New York City mayor Rudolph Giuliani.

Tagged: Fraud Types, New York False Claims Act, Tax Fraud, Whistleblower Laws (Federal)