$179 Million Tax Whistleblower Case
We have pointed out the potential rewards which the Internal Revenue Service offers whistleblowers who sound the alarm on tax fraud. A major recent tax whistleblower case is the multimillion dollar dispute between the IRS and Cardinal Health, Inc., a distributor of pharmaceuticals and medical supplies based in Dublin, Ohio.
As reported by the Wall Street Journal, the IRS filed securities filings last month challenging deductions totaling $178.9 million claimed by Cardinal Health from the sale of trade receivables to a special-purpose, accounts receivable and financing entity for the years 2001 to 200. The transactions were facilitated by Rabobank Group, based in the Netherlands.
The IRS has also given Cardinal Health notice of proposed adjustments for tax years 2003 through 2005 relating to the transfer of intellectual property between its domestic and foreign subsidiaries, specifically transfers by Alaris Medical Systems, Inc., a manufacturer of infusion pumps, which Cardinal purchased in 2004. The additional tax proposed by the IRS in these notices totals $598.1 million.
Rabobank has been involved in numerous controversial tax shelters such as the transaction involving Cardinal Health, in which domestic corporations sell accounts receivables to overseas companies at a discount for which they take a tax deduction.
A former Rabobank executive filed a whistleblower claim with the IRS in 2007, claiming that the transactions were designed for tax avoidance and not legitimate business purposes.
Cardinal Health has stated that it disputes the IRS’ adjustments and will vigorously contest them. It has claimed that the accounts-receivable arrangement expired last October.
