NEW YORK (Legal Newsline) — New York Attorney General Eric T. Schneiderman announced April 18 that Alabama-based Harbert Management Corporation and top executives at the firm will pay $40 million for allegedly perpetrating a scheme to avoid paying millions in New York state tax on performance income.

“Our investigation uncovered a brazen and deliberate decision to avoid paying millions in taxes owed to New York state,” Schneiderman said. “Harbert Management made a clear choice to skirt the rules and as a result, ordinary New York taxpayers were left footing the bill. This sends a forceful reminder to businesses that if they think they can get away with tax evasion in New York, they should think again.”

Harbert Management sponsors Harbinger Capital Partners, a $26 billion hedge fund based in New York City (Harbinger Fund). Members of Harbinger’s investment manager purportedly conducted the tax avoidance scheme over a number of years.

“Each year at this time, the overwhelming majority of New York taxpayers meet their filing obligations and honestly pay their fair share of income taxes,” said Nonie Manion, acting commissioner of the New York Department of Taxation and Finance. “It’s especially troubling when the wealthiest taxpayers neglect this responsibility, leaving others to shoulder more of the tax burden. This agreement proves that no one is above that requirement, and we applaud the attorney general for his diligent pursuit of this settlement.”

Handling the case for New York was assistant attorney general Justin Wagner of the Taxpayer Protection Bureau, under the supervision of deputy bureau chief Scott J. Spiegelman.

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