Aug. 15, 2016 Following the recent unsealing of their lawsuit, whistleblower attorneys Stephen B. Diamond of Chicago’s Stephen B. Diamond, P.C. and Timothy J. McInnis of NYC’s McInnis Law announce a $1.109 million settlement of a qui tam lawsuit against My Pillow, Inc. in State of New York ex rel. Stephen B. Diamond, P.C. v. My Pillow, Inc., 100337/14 (Sup Ct, NY County). The settlement resolves allegations that My Pillow, a Minnesota company, knowingly failed to collect and remit New York use taxes on Internet and telephone sales to New York customers, thereby violating the New York False Claims Act, N.Y. Fin. Law § 187. This is the first New York False Claims Act settlement for unpaid taxes on Internet and telephone sales since the Act was amended in 2010 to explicitly include tax claims.
This action followed on the heels of Relator Stephen B. Diamond, P.C.’s 2012 investigation of My Pillow in Illinois, which revealed My Pillow sold merchandise at craft shows and through the Internet and telephone to New York customers. My Pillow also broadcast infomercials to New York residents. In July, 2016, the New York State Attorney General and Relator, Stephen B. Diamond, P.C. entered into a settlement agreement with My Pillow requiring My Pillow to pay $1.109 million in lost taxes and penalties for 2011-2015 and also collect and remit use taxes on all future Internet and telephone sales to New York customers.
In bringing this case as the whistleblower, Stephen B. Diamond, P.C. pointed out “Actions for unpaid taxes pursuant to the False Claims Act give the State a means to recover substantial amounts of lost revenue, including treble damages and penalties.” Attorney McInnis noted that, “New York is one of only a few states that have false claims acts ‘with qui tam provisions’ permitting private individuals to sue state sales and income tax fraud evaders on behalf of the government. Illinois is another such state. Typically a whistleblower can receive between 15% and 30% of recovered funds if the suit is successful.” In this case, under the settlement agreement Stephen Diamond, P.C. received $221,000 (20%), plus the right to seek reasonable statutory fees, which have not yet been determined.
SOURCE McInnis Law
