Lawsuit alleged Mellon employees destroyed more than 77,000 tax returns, vouchers, and checks to disguise its failure to meet an annual filing deadline.
Mellon Bank is the latest corporation to fall to an increasingly more aggressive and vigilant Internal Revenue Service.
Mellon Bank has entered into a civil settlement agreement with the United States and has agreed to pay $16.5 million in civil damages and penalties under the federal False Claims Act.
The United States’ civil False Claims Act claims are based on the April 2001 destruction of more than 77,000 tax returns and tax payments at the Mellon Client Service Center in Pittsburgh. In the civil settlement agreement, Mellon denies that it has any liability under the False Claims Act.
In a prior agreement with the U.S. Attorney’s Office, Mellon accepted responsibility for the conduct of its employees, which constituted violations of federal criminal law. In that prior agreement, Mellon agreed to fully cooperate with the government in connection with the investigation into the 2001 document destruction. Mellon also agreed to amend its policies and procedures to strengthen its compliance and ethics programs and agreed to the appointment of a monitor to oversee Mellon’s corporate compliance program for three years.
Eight former Mellon employees were charged in connection with the document destruction. Four have entered guilty pleas in their cases.
In April 2001, Mellon held a Lockbox Depository Agreement with Financial Management Service, an agency of the U.S. Department of the Treasury for the benefit of the Internal Revenue Service to process tax returns, vouchers, and checks received at its Pittsburgh lockbox facility.
The checks were to be deposited in an IRS account, and the tax returns were to be forwarded to the IRS Service Center in Andover, Mass. Under the lockbox agreement, certain deadlines were required to be met, including the program completion date, which was midnight on April 29, 2001. Failure by Mellon to comply with the tax processing deadline would have constituted a breach of its contract with the IRS.
At 3:11 p.m. on April 29, 2001, a Mellon vice president notified the IRS that Mellon had met the PCD deadline when, in truth, it had not. Mellon employees had concealed from the IRS and ultimately destroyed more than 77,000 tax returns, vouchers, and checks it had received from taxpayers, all in an effort to deceive federal agencies about Mellon’s timely completion of the 2001 tax program.
“This resolution of the United States’ civil claims represents an additional step in the Department of Justice’s campaign to restore corporate accountability,” U.S. Atty. Mary Beth Buchanan said in a statement.
This isn’t the first large corporation to strike a deal with the IRS.
Others include MasterCard, Merck & Co., Jenkens & Gilchrist, and the Hollywood Foreign Press Association, which organizes the Golden Globe Awards.