Tax Whistleblower Blog

Whistleblower Program Meets “Girls Gone Wild”

The Tax Whistleblower Reward Program will see its first primetime exposure in the criminal tax case of CEO Joseph Francis, whose company makes the “Girls Gone Wild” videos.  Francis claims that his fomer top finance executive, Michael Barrett, turned him in to the IRS. Details of the Whistleblower case were revealed last month, in a petition that Francis filed in state court against Barrett claiming that Barrett is responsible for fraudulent deductions of $20,000,000.  The state court suit comes in the middle of Francis’s fight against federal charges that he is responsible for the fraudulent deductions.  If convicted, Francis faces up to 10 years in prison.  Francis is scheduled to go to trial this fall.  According to Francis, Barrett reported the alleged fraudulent deductions to the IRS “in order to split the profit with the IRS from taxes, penalties, and interest now due from [Barrett's] accounting mistakes.”  

There are two important lessons to be learned from the recent developments regarding the Whistleblower Program and “Girls Gone Wild.”  First, this is an example of the potential profit that former CFOs stand to gain for turning in their former employers who have underreported tax.  Hopefully, the recent national coverage of the criminal trial of Francis will cause more former CFOs to come forward to claim their potential reward.  Second, this example a blaring example of the importance of confidentiality.  Barrett’s status as a whistleblower was not kept secret.  Now, Barrett has to defend himself in a state court proceeding because of the “loose lips” of someone.  Francis should not have known about Barrett’s status as a Whistleblower.  Francis was not entitled to learn about Barrett’s status until the eve of the criminal trial under Jencks.  The confidentiality of Barrett was not breached by the IRS or the Department of Justice, but instead could only have been breached by Barrett or his attorneys.  Loose lips, sink ships.