In the largest state tax settlement in New York history, an unnamed whistleblower earned $8.8 million by reporting unpaid taxes of the Harbert Management Corporation.
The whistleblower filed a lawsuit which triggered an investigation by the state in which they found that Harbert Management hadn’t paid any state taxes from 2004 to 2009. According to the attorneys for the whistleblower, the company earned “hundreds of millions of dollars in performance fees” through their hedge fund office based in Manhattan. The firm did pay state income tax in Alabama, which is where the firm is but Alabama’s state income tax has a much lower tax rate than New York. The State of New York reached a settlement agreement for Harbert to pay $40 million.
Harbert Management was run by Philip Falcone, who was barred from working in the securities industry for five years due to violations at his former hedge fund, is not liable to repay any of the money owed in the settlement as he was only considered an employee.