Monday, June 27, 2005 | 9:32 a.m.
CARSON CITY -- The Nevada Supreme Court will be asked Tuesday whether bounty hunters who track down companies that evade taxes should be allowed to collect a percentage of the recoveries that in some cases amounts to millions of dollars.
International Game Technology is asking the court to toss out a suit filed by employee James McAndrews who maintains the slot machine giant filed false tax returns that could amount to $30 million.
In a second case, the state Attorney General's Office is seeking dismissal of a handful of suits in Las Vegas by a Chicago law firm that says some major companies are evading sales and taxes on Internet sales. The law firm of Beeler, Schad & Diamond has brought the suits that could total millions of dollars in unpaid taxes.
At issue is whether McAndrews and the Beeler firm can continue with their suit or should the state Department of Taxation be the one to pursue the claims of lost tax revenue.
These cases have been consolidated for oral argument before the full court.
McAndrews maintains in his suit in district court in Reno that IGT, its subsidiary Anchor Coin Inc., and an associated company called Spin for Cash Wide Area Progressive failed to pay the sales tax on the multitude of machines sold.
IGT says that the state Taxation Department is the one to determine if there has been fraud and failure to pay taxes, not McAndrews. But McAndrews says the taxation department has been auditing IGT for 20 months and has not reached a conclusion.
Chuck Chinnock, executive director of the state Department of Taxation, said Friday the audit has not been completed and would not comment further.
McAndrews says if his suit is successful he should be entitled to recover anywhere from 15 to 50 percent of what IGT and the sister companies allegedly owe.
District Judge Peter Breen of Reno permitted the McAndrews suit to go forward but IGT appealed to the Supreme Court to stop the legal action.
In his suit McAndrews says he went to work for IGT in June 2001 to review accounting practices of the world's largest slot machine maker. He said he found the company never charged or collected sales and use taxes on many of its sales. When he brought that to the attention of his supervisors, he said he met with "resistance and hostility."
After he filed suit, he said he was placed on administrative leave and the only time he can enter the company's business is to pick up his paycheck. He maintains this amounts to a "constructive and wrongful discharge."
IGT, in its pre-hearing brief to the Supreme Court, said "Tax matters may not be properly litigated under the Nevada False Claims Act but should be handled by the Nevada Taxation Department." It says it never filed false tax returns.
The Beeler law firm has sued such major companies as Toys "R" Us, Wal-Mart Stores, Target, Amazon.com and the Borders Group on grounds they should be paying the sales and use taxes on items ordered over the Internet and that are shipped to Nevada if these companies have stores in the state.
Dan Reaser, a Reno attorney representing Amazon and Borders Group, said his clients maintain there are no taxes due.
Reaser said the Beeler group has filed similar suits in at least two other states. He said the Nevada Attorney General's Office sought to have the suits filed in Las Vegas dismissed because the state's Taxation Department should be handling this, not the courts. District Judge Valorie Vega refused and permitted the legal actions to forward.
The Nevada Taxpayers Association has joined as a friend of the court, saying the issue should be determined state Taxation Department, rather than through the courts. "Private plaintiffs are not impartial arbiters that can determine the taxpayer's liability with uniformity and impartiality," the group's brief says.
The Association said the people who file suit have a "pecuniary interest" in the outcome of the case.
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