Vanguard Attorney's Whistleblower Suit Dismissed for a Violation of the New York State Ethics Rule Prohibiting Disclosure of Confidential Information

Vanguard Attorney's Whistleblower Suit Dismissed for a Violation of the New York State Ethics Rule Prohibiting Disclosure of Confidential Information

November 19, 2015
On November 13, 2015, the Supreme Court of New York dismissed a former Vanguard Group tax attorney's New York False Claims Act whistleblower complaint against his former employer.  The court held that the attorney violated New York attorney ethics rules by bringing suit while employed at Vanguard in a position to obtain confidential information from his employer.  Specifically, the court ruled that the attorney could "not proceed with, nor profit from, any disclosure of confidential information" related to the case.  Moreover, the court held that the attorney and his lawyers are barred from refiling another New York whistleblower case based on the same facts.  
 
The attorney's complaint alleged that Vanguard "has operated as an illegal tax shelter for nearly 40 years, providing services to [its funds] at prices designed to avoid federal and state income tax, sheltering hundreds of millions of dollars of income annually, [and] avoiding approximately $1 billion of U.S. federal income tax and at least $20 million of New York tax" over a ten year period.  See a copy of the complaint here.  A tax expert retained by the attorney submitted a report estimating the company's unpaid federal income tax liabilities at approximately $35 billion from 2007 to 2014.
 
The court did not rule on the merits of the attorney's complaint, instead observing that a decision on those merits "would require an intense factual inquiry that cannot be determined based on the record before the court." 
 
Notably, the court's dismissal does not preclude state or federal authorities from pursuing claims against Vanguard. See the Court's Opinion and Order here.
 
 
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