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New York False Claims Act Recovers $36 Million For Unused Gift Card Balances

May 24, 2022

New York State recently used its state false claims act to recover $36 million from H&M for failing to turn over unused gift card balances.  In addition to the federal False Claims Act, individual states’ false claims acts are valuable tools for fighting fraud. Thirty states, Puerto Rico and DC, have enacted state false claims acts modeled after the federal False Claims Act. These laws permit whistleblowers to file state false claims act cases for fraud committed in violation of state laws. You can read more about the individual state’s false claims acts on our website.

N.Y. Abandoned Property Law Requires Return of Unused Gift Card Balances

After five years of inactivity, gift card issuers, such as H&M must turn over the value of unused balances on the gift cards to the state’s Abandoned Property Fund.  In 2008, H&M became aware of its obligation to transfer unredeemed balances to the Abandoned Property Fund.  H&M then hired a third-party company, purportedly to take over H&M’s gift card business. H&M, however, continued to run its own gift card business and did not transfer the unused balances as required.  Further, in 2011, H&M again lied to the state about its unused gift-card balances.

Whistleblower Files Complaint Under New York False Claims Act

In 2016, a whistleblower filed a complaint under the New York False Claim Act detailing H&M’s fraud. During the state’s investigation, it discovered that H&M knowingly failed to return millions of dollars’ worth of unused gift-card balances to the Abandoned Property Fund and then lied to the state about it.  The New York False Claims Act prohibits companies from lying to avoid paying money, including gift card balances, to the state.

H&M Pays $36 Million to Settle State False Claims Act Case

H&M agreed to pay $36 million to settle the whistleblower’s complaint.  According to the press release by New York Attorney General Letitia James,  “[m]y office has zero tolerance for companies that disregard the law and line their pockets with money that belongs to hardworking people.”  The whistleblower will receive $7.74 million as a reward. The remaining $28 plus million will go to the state of New York.

How to Report the Violation of a State’s False Claims Act

We have assisted many whistleblowers in bringing cases under various state false claims acts. One such example is the recovery of $4.5 million from CleanSlate to settle federal and state false claims act violations.  If you know of the violation of any state or federal false claims act, contact us for a free and confidential consultation.

Client's False Claims Act case settles for $12.9 Million
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