A Fox Chapel man who received a $34.5 million award from the federal government for acting as a whistleblower in a massive mortgage fraud case can’t avoid paying local taxes on that money, a split state Supreme Court has ruled.
The decision, outlined in an opinion by Justice David Wecht, overturns a Commonwealth Court decision that temporarily voided a $437,195 earned income tax bill Edward O’Donnell received from his borough and school district.
The Supreme Court’s ruling instead backs a 2019 ruling by an Allegheny County judge who ordered Mr. O’Donnell to pay that tax to Fox Chapel and Fox Chapel Area School District.
This is an unusual case.
Mr. O’Donnell, a former executive of Countywide Mortgage, a subsidiary of Bank of America, filed a whistle blower complaint — known as a qui tam action — on behalf of the federal government in 2014 alleging the bank had violated the federal False Claims Act in its lending practices. Mr. O’Donnell claimed Bank of America had sold the federally supported Fannie Mae and Freddie Mac mortgage companies loans that were subpar.
The feds joined Mr. O’Donnell’s lawsuit, which resulted in massive fines and settlements against Bank of America, some of which were later overturned. As an initiator of the case, Mr. O’Donnell received a 16% cut of that money, which is at the core of the tax dispute the Supreme Court agreed to resolve.
The question was whether Mr. O’Donnell’s whistleblower award constitutes income subject to local taxation.
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