Judge Dismisses $2.4 Billion False Claims Act Suit Brought Against Citigroup -

A New York State Supreme Court Judge has dismissed a qui tam False Claims Act (“FCA”) suit brought by Eric Rasmusen, an economics professor at Indiana University (the “Relator”), against Citigroup Inc. (“Citigroup”). State of New York ex rel Eric Rasmusen v. Citigroup Inc., No.100175/2013 (Sup. Ct. N.Y. Cnty., May 17, 2017). The suit alleged that Citigroup intentionally failed to pay approximately $800 million in New York State taxes as a result of what the Relator characterized as the improper use of net operating loss (“NOL”) deductions. New York State Supreme Court Judge Charles E. Ramos granted Citigroup’s motion to dismiss the case in a ruling from the bench.

Facts. During the 2008 financial crisis, Congress established the Troubled Asset Relief Program (“TARP”), authorizing the Department of the Treasury (“Treasury”) to purchase equity interests in publicly traded companies in order to stabilize the troubled banking and financial industry. Pursuant to its authority under TARP, the Treasury purchased approximately $45 billion of stock in Citigroup. The Relator claimed that the purchase of Citigroup’s stock constituted an “ownership change” within the meaning of Internal Revenue Code (“IRC”) § 382. If a corporation experiences an “ownership change” under IRC § 382, the corporation’s ability to carry forward NOLs is restricted if the ownership change occurs between the time the company’s NOLs arise and the time that it uses the NOLs to reduce its tax liability.