Sprint must face NY tax-fraud case, says judge
Whistleblower claims that Sprint Nextel allegedly committed tax fraud may wind up in a lawsuit filed by the state of New York.
Sprint may end up in court after a U.S. judge refused to throw out a case accusing the carrier of deliberately not collecting and paying millions in tax.
According to Reuters, the U.S.-based firm could be facing a lawsuit brought forward by the New York state over the allegations. Under the state's False Claims Act (.pdf), the Attorney General -- Eric Schneiderman -- is able to file a suit against Sprint on the basis that the company withheld funds from the state and local government through "false or fraudulent conduct."
If a case is successful, a person or company found liable will usually have to pay treble damages, civil penalties, as well as costs and attorneys fees. In addition, whistleblowers that bring fraudulent activity to a local official's attention can receive up to 25 percent of money recovered by the U.S. government and are protected from legal retribution.
Based on information from a whistleblower, Schneiderman claims that Sprint failed to bill customers properly for its wireless network services over the past seven years. As a result, the U.S. government may be out of pocket by up to $100 million.
Sprint allegedly failed to use the correct tax rates in order to offer lower service charges, designed to entice customers away from rivals including AT&T and Verizon.
On Monday, New York Supreme Court Justice O. Peter Sherwood denied Sprint's request to dismiss the case. However, Sherwood did dismiss allegations of conspiracy against the carrier. In an emailed statement, the company said:
Sprint is disappointed in the Court's decision, and we intend to file an appeal shortly. With this lawsuit, the Attorney General's office is claiming New York consumers, who already pay some of the highest wireless taxes in the country, should pay even more.
A spokesman for the Attorney General told the publication that the decision "sends a message that tax dodgers will be exposed and prosecuted to the fullest extent of the law."
This story originally appeared as "New York judge denies Sprint Nextel tax fraud lawsuit dismissal" on ZDNet.