Sprint has paid New York State a record-breaking $330 million to settle a False Claims Act suit that was filed by the team of New York State Attorney General Barbara D. Underwood and Acting Tax Commissioner Nonie Manion.
The New York False Claims Act was signed into law in 2005. This measure allows for any individual to bring lawsuits on behalf of the state or the entirety of the United States whenever fraud is involved. In New York, the False Claims Act allows for citizens who bring these lawsuits to court to retain as much as 30 percent of whatever is recovered. The Office of the New York Attorney General, then, has said that the person who helped to bring this investigation to fruition will likely collect $62.7 million when all is said and done.
This suit alleges that the fourth largest US cellular carrier did not collect appropriate local and state taxes on mobile plans between from 2005 to 2014. In addition, the allegations say that Sprint was fully aware of the law and, as a matter of fact, misinterpreted the 2002 law in order to skip out on collecting important sales tax, based on the nature of their mobile plans. According to to the suit, Sprint “knowingly failed to collect and remit” state and local taxes which, as the suit claims, shorted the state of New York by about $100 million.
Taking a closer look at the law, it actually requires that mobile telecom carriers collect tax on the full portion of a flat-rate for wireless service regardless of whether the calls were local, national, or international. The problem, then, is that Sprint apparently only collected the portion of taxes involved with interstate calls. Most important, the suit alleges that Sprint’s lawyers knew what the law required and ignored the responsibility. Furthermore, the Empire State’s court of appeals asserts that the terms are “unambiguous,” which means they are easy to understand.
While a spokeswoman for Sprint has said that the company does not agree with the State’s characterizations, resolving this matter is “in the best interest of the company.”