Mellon Bank has agreed to pay $16.5 million to settle claims brought under the False Claims Act that it destroyed thousands of tax returns and tax payment checks to avoid penalties for failing to meet a contract deadline for processing those documents, the Department of Justice announced today.
The government said Mellon violated the False Claims Act when it falsely reported to the Internal Revenue Service (IRS) that it had completed a special program to process the tax returns and checks received during the peak April 2001 tax period.
Instead, Mellon employees destroyed more than 77,000 tax returns, vouchers and checks it had received from individual taxpayers to deceive federal agencies about Mellon’s timely completion of its contract, according to the government.
The settlements brings Mellon’s total payments to the government in this case to $34 million. In 2002, Mellon paid $18 million as part of a separate administrative settlement with the Treasury Department to reimburse the government for the value of the interest lost on the destroyed checks until replacement checks were received from taxpayers as well as the costs incurred by the government in obtaining the replacement checks.
For more information read the Department of Justice’s press release about this False Claims Act case.