Whistleblower says tax prep firm submitted false information to get tax break from New Jersey

A whistleblower testified at a public hearing Thursday that her New Jersey employer submitted false information to a state tax credit program for businesses – and then fired her after she raised concerns.

Gulsen Kama, who lost her job as a vice president at a tax preparation firm, was called to speak by a task force appointed by Gov. Phil Murphy to investigate New Jersey’s troubled Economic Development Authority tax incentive programs.

In January, an audit ordered by Murphy found “numerous significant deficiencies” in EDA’s oversight of nearly $11 billion worth of incentives – including a failure to tell whether 3,000 jobs promised in return for the tax credits had actually been created or retained.

The program steered more than $1.5 billion in tax breaks to companies that agreed to stay in or relocate to the long-struggling city of Camden. Three companies alone received $245 million in tax credits in 2017.

The tax credits are “very much like money,” said Ronald Chen, the task force chair and New Jersey’s former public advocate, as the first of multiple hearings opened at the Trenton War Memorial. Companies can use the credits to reduce their tax bills, or even sell them. If state officials don’t verify what companies tell them, “then you have a situation that is ripe for abuse,” he said.

The investigation is at an early stage, and has subpoena power, Chen said.

Kama’s testimony centered on two tax grants that her former employer received. One of the awards – worth $2.6 million – required the company to keep a minimum number of employees in the state. But her employer failed to meet that minimum for at least 18 months, Kama said, and she learned it had reached a settlement with the EDA for about 10 percent of the award’s value.

The firm, she said, applied for another incentive program in March 2015 – and lied on its application. The company told the state it would move jobs to Sarasota, Fla., or to New York if it didn’t get the state tax credit. But the firm was actually planning to stay in the state, and relocate to Jersey City, she said.

Her employer was acting with the advice of a consulting firm, she testified: The consultancy advised the tax prep company to include a “credible out-of-state alternative” on its application.

The company won the tax grant – but then moved some of its office functions and employees to Florida, and dropped below the grant’s minimum threshold for in-state employees. She said she alerted the company that it was out of compliance in December 2015, and was fired in February 2016.

Kama said that she filed a whistleblower suit against the company, and that the case was settled. She didn’t identify her former employer during her testimony, but according to her LinkedIn profile, Kama was working at the time for Jackson Hewitt Tax Service, one of the largest tax preparations firms in the United States.

In a statement Thursday night, a spokesperson for Jackson Hewitt said the company intends to cooperate with the task force, and “believes it provided an accurate and comprehensive application to the EDA and is in compliance with all applicable provisions” of the tax credit programs.

A second whistleblower was scheduled to testify voluntarily Thursday, a lawyer with the task force said, but she changed her mind in the morning, partly out of concern that her former employer might attend.

“It’s extremely important" that whistleblowers come forward, said Jim Walden, another lawyer involved in the task force.

A whistleblower case that included a deposition by a former EDA official was reported last week by WNYC. That testimony described pressure to give out incentives from Gov. Chris Christie’s administration, which the former official said was “back in the day... probably less concerned with the rules and regulations.”

In a statement issued after the hearing, New Jersey state Senate President Steve Sweeney said anyone who committed fraud should be held accountable.

“The hearing included assertions of misconduct that are completely unacceptable and should not have been allowed to go undetected,” Sweeney said. "If any companies violated their agreements or defaulted on their promises to the EDA, they should be identified.”