NEW YORK (Legal Newsline) -- New York Attorney General Eric Schneiderman said this week a settlement has been reached in a multimillion-dollar tax fraud case against a celebrity tailor.
Schneiderman said Tuesday that Mohanbhai "Mohan" Ramchandani and his business corporation, Mohan's Custom Tailors Inc., pleaded guilty to felony charges in New York County Supreme Court related to a 10-year scheme to evade payment of state sales and income taxes.
Ramchandani also agreed to pay $5.5 million to settle separately filed civil claims that were first raised by a whistleblower under the state's False Claims Act.
Ramchandani, 66, owns and operates Mohan's Custom Tailors, a men's custom clothing business in Manhattan that markets itself as outfitting celebrities and sports stars. He has claimed Patrick Ewing and Darryl Strawberry among his clients.
Ramchandani faces up to three years in prison.
Schneiderman's investigation revealed that since at least 2002, Ramchandani and his business knowingly failed to pay at least $1.7 million in state and local sales taxes that they nevertheless charged to customers.
In addition, for tax years 2007, 2008 and 2009, Ramchandani knowingly failed to pay at least $256,000 in state and local personal income taxes.
"There are no excuses for tax cheats -- regardless of how prominent they are. Mr. Ramchandani's conviction for orchestrating this multi-million dollar scheme to defraud taxpayers sends a clear message that those who rip off the public will be held accountable for their crimes," the attorney general said in a statement.
"Honest citizens are harmed by people who break the law to avoid paying their fair share, making it harder for New York State to provide essential services. This office will continue to bring aggressive action against tax evaders who believe they are above the law."
Schneiderman's office investigated the claims of a whistleblower with "credible insider information" about Ramchandani and Mohan's Custom Tailors' illegal tax practices and pursued them to resolution through the Taxpayer Protection Bureau and the Criminal Prosecutions Bureau, with the additional aid of the New York State Department of Taxation and Finance.
Stephen A. Weiss, a managing partner of Seeger Weiss LLP, represented the relator in filing the lawsuit and bringing his information to the attention of authorities.
Weiss called the case "groundbreaking" -- it is the first settlement obtained under the 2010 tax whistleblower amendment to the False Claims Act, he said.
"(Ramchandani) perpetrated a sophisticated tax fraud for over 10 years that cost New York's taxpayers and the state treasury millions of dollars," Weiss said in a statement Tuesday.
"Today's settlement demonstrates how necessary and effective whistleblower laws are in uncovering small business fraud that may be known and visible only to company insiders.
"We should all be grateful to whistleblowers like my client, who risk their reputations and wellbeing to do the right thing and bring wrongdoers like Mohan to justice."
Under the relator award provisions of the FCA, the relator will receive a $1.1 million whistleblower reward.
Weiss and associate Asa R. Danes represented the relator, along with Benjamin Brafman of Brafman and Associates PC and Thane Rosenbaum, a professor at the Fordham Law School.
Seeger Weiss LLP is one of the nation's leading trial law firms handling qui tam, or whistleblower, claims.
Neil Getnick, chairman of Taxpayers Against Fraud, a nonprofit advocacy group for whistleblowers, said Tuesday the case was of "national importance."
"In 2010, Eric Schneiderman authored and passed the only False Claims Act in the nation that expressly allows for whistleblowers to sue big ticket tax cheats on behalf of the government, and to be protected and rewarded for coming forward," he said.
"This case has national importance because it conclusively shows that such a law, along with aggressive enforcement methods and an openness to working with whistleblowers, works and benefits taxpayers."
From Legal Newsline: Reach Jessica Karmasek by email at firstname.lastname@example.org.
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