Appeals decision has stymied prolific Illinois whistleblower, Professor Ventry tells Bloomberg Tax

Illinois attorney and inveterate tax whistleblower Stephen Diamond’s income has dropped steeply in part because of an appeals-court decision forbidding him to collect attorney fees as well as whistleblower bounties, Professor Dennis J. Ventry, Jr. told Bloomberg Tax.

Diamond has scored hundreds of awards under the Illinois False Claims Act, which permits whistleblowers, or “relators,” to sue people who knowingly perpetrate frauds against the state, and to share in subsequent monetary awards.

Bloomberg Tax found Diamond had obtained 13 settlements in 2016 but just four in 2017 and two in 2018. His take from settlements dropped substantially as well, and he has been filing fewer lawsuits.

Speaking to Bloomberg Tax, Ventry tied the decline in Diamond’s income to, among other factors, Illinois Attorney General Lisa Madigan’s growing willingness to intervene in Diamond’s cases. But the biggest threat to Diamond’s false-claims cases is a 2017 Illinois appeals-court ruling that stripped him of attorney fees in an otherwise successful unpaid-taxes case against pillow-maker My Pillow.

The court ruled Diamond could not be both relator and attorney for the relator, expressing concern about the potential for “abusive fee generation.”

Since then, there have been “all these cases where he is being stripped of fees,” Ventry said. Though the My Pillow case is on appeal,“it appears courts are willing to use the reasoning of My Pillow to strip fees in other cases.”

Professor Ventry is an expert in tax policy and legal ethics. His research interests include tax expenditure analysis, family taxation, professional responsibility and standards of care, tax filing and administration, tax compliance, public finance, and tax and legal history. In addition, he is Chairman of the IRS Advisory Council, and co-author on the casebook, Federal Income Taxation with Martin McMahon, Jr., Daniel L. Simmons, and Bradley T. Borden.

 

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