Appeals Court Shoots Down $2.4B Whistleblower Suit Against Citi

The legal odyssey of an Indiana University economics professor-turned-whistleblower who tried to take on Citigroup in a $2.4 billion qui tam suit alleging that the bank improperly used a federal tax break to evade New York state taxes appears to be over.In a brief order, the Appellate Division, First Department affirmed a Manhattan judge’s ruling to dismiss Eric Rasmusen’s suit, finding that his allegations that Citigroup underpaid its taxes are in the public domain, and thus a whistleblower suit is not justified. Justices David Friedman, Peter Tom, Angela Mazzarelli and Anil Singh joined in the ruling. Rasmusen claimed that Citigroup used the $45 million taxpayer-funded bailout package it received during the financial crisis to avoid paying $800 million for New York’s franchise tax in 2010 and 2011. After the New York attorney general declined to take up the case, Rasmusen brought a qui tam suit alleging violations of the state’s False Claims Act and seeking treble damages. Citigroup was represented by Davis Polk & Wardwell partner Edmund Polubinski III. The bank did not respond to a request for comment. Eugene Kim of the Law Offices Eugene H. Kim represented Rasmusen. In an email, Rasmusen said he was disappointed with the court’s findings but said he would not pursue the case any further. “I was hoping that the court would address the point of law of whether Citigroup really does owe New York $800 million of state taxes, even if it dismissed my suit, because that would have put pressure on the state authorities to collect the money,” he said.