Hedge-Fund Manager Thomas Sandell Pays $105 Million New York Tax Settlement
By Corinne Ramey
New York authorities reached a $105 million settlement with
Swedish hedge-fund manager Thomas Sandell over his alleged efforts
to evade state and city taxes.
The New York attorney general's office said the agreement
amounts to the state's largest-ever recovery under the False Claims
Act, which makes it illegal to provide false information related to
payments to government entities.
The office said that Mr. Sandell, through his now-defunct
hedge-fund firm, Sandell Asset Management Corp., had dodged paying
state and city taxes on more than $450 million in fees for
investment-management services in New York.
"Thomas Sandell and his company bilked New York taxpayers out of
tens of millions of dollars in a single year -- placing a
tremendous burden on our system and forcing ordinary New Yorkers to
bear that cost," New York Attorney General Letitia James said in a
A lawyer for Mr. Sandell declined to comment. As part of the
settlement, Mr. Sandell and his firm didn't admit to or deny the
allegations, the attorney general's office said.
Forbes estimates Mr. Sandell's net worth at $1.3 billion. The
New York hedge fund that he founded had been an activist investor
in companies including bookseller Barnes & Noble, furniture
company Ethan Allen Interiors Inc. and restaurant-and-packaged-food
company Bob Evans Farms Inc. Like many other hedge funds, it had
seen a decline in its assets under management in recent years, from
$4.5 billion in 2006 to about $1 billion in 2014. Sandell returned
outside investors' money and turned into a family office in 2019,
according to Forbes.
In 2007, the SEC settled with Mr. Sandell's firm for $8 million
over allegedly improper short sales made after Hurricane
In the New York case, Ms. James's office said Mr. Sandell was
required to pay taxes on about $450 million in deferred fee income
in New York City and state in 2017. In order to avoid paying these
taxes, Mr. Sandell left New York and lived in London from August
2016 to mid-2019, and made it appear as though his firm was no
longer operating in New York City, the office said.
The New York attorney general said Mr. Sandell opened a shell
office in Boca Raton, Fla., which he told New York tax authorities
was the firm's sole U.S. operation, even though he had told the
U.S. Securities and Exchange Commission that the business was in
New York City.
The attorney general's office said the investigation began with
a 2018 whistleblower lawsuit filed under New York's False Claims
Act, under which people who report potential violations of the law
are entitled to receive a percentage of settlement proceeds. The
whistleblower in this case will receive an award of $22.05 million,
which is 21% of the government's recovery, according to Kirby
McInerney LLP, the firm that represented the whistleblower.
Sandell has already paid the $105 million in back taxes and
damages, the attorney general's office said.
--Juliet Chung contributed to this article.
Write to Corinne Ramey at Corinne.Ramey@wsj.com
(END) Dow Jones Newswires
March 02, 2021 18:17 ET (23:17 GMT)
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