A New York appellate court has affirmed a lower court’s decision that a whistleblower properly alleged, in a New York False Claims Act case, that Moody’s captive insurance company was knowingly operated as an improper tax shelter for purposes of calculating New York’s taxes.

In a decision by the Appellate Division’s First Department, the Court ruled that the whistleblower’s case can go forward even though New York State’s Department of Financial Services (DFS) had approved Moody’s license for the insurance company after examining it. The court held that the DFS had only examined Moody’s insurance company for compliance with insurance law –  and not New York’s tax laws.

This is the first New York False Claims Act tax case that a New York appellate court has allowed to go forward even though the Attorney General’s office declined to intervene in the case.

The New York False Claims Act is the only state whistleblower law in the country that expressly allows whistleblowers to sue a corporation for knowingly underpaying taxes on behalf the government.

Click here to read an article on the case from Forbes magazine.