Moody’s “acted properly” with regards to the tax treatment of its captive insurance company, Moody’s Assurance Company, and will demonstrate this at a “later stage”, despite accusations from a former employee that it pursued “aggressive, risky, and/or abusive” behaviour.
The former employee had sued Moody’s under the New York State False Claims Act, asserting that the company and its advisors defrauded New York State and New York City of millions of dollars of tax revenues.
Kirby McInerney, the law firm representing the employee, said that its “whistleblower client brought to light pervasive tax fraud by Moody’s and its consultants”.
The lawsuit was brought as a ‘qui tam’ suit, on behalf of the government to help the government recover money lost by fraud. The whistleblower receives a percentage of the share of the government’s recovery as an award.
Moody’s attempted to dismiss the complaint, but a trial court found that Moody’s relationship did not conform to traditional notions of insurance.
The company then appealed to the New York Appellate Division, which held that the lower court “correctly found that the complaint sufficiently alleges that Moody’s ‘tax treatment of MAC was aggressive, risky, and/or abusive due to its sham nature,’ and that Moody’s knowingly submitted false claims”.
However, a Moody’s spokesperson said that the company “acted properly in this matter”.
The company said it intends to “demonstrate when the facts in this case are fully presented at a later stage”.
“We note that Moody’s Assurance Company is licensed by New York State’s insurance regulator, which has never cited it for any deficiency.”
