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State of New York v. Egon Zehnder Int'l Inc.

Settlement's Approval as Fair in State False Claims Suit Over Unreported Taxes Explained

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OPINION AND ORDER Intervenor, the State of New York (“State”), moves for an order, pursuant to New York State Finance Law §190(5)(b)(ii), determining that the State’s proposed settlement of the New York False Claims Act causes of action asserted on the State’s behalf in relator American Advisory Services, LLC’s (“Relator”) amended complaint (the “Amended Complaint”) are fair, adequate, and reasonable with respect to all parties under all the circumstances. Dkt. No. 63. For the following reasons, the motion is granted. BACKGROUND A. Egon Zehnder’s Internal Accounting and Federal and State Tax Reporting This case arises from the internal accounting systems of a multinational executive search firm, Egon Zehnder International AG (“EZI AG”), and the federal and state tax reporting of its United States affiliate Egon Zehnder International, Inc. (“EZI USA” and together with EZI AG, “EZ” or “Defendants”). The following facts are taken from the Amended Complaint filed by Relator and are alleged to be as follows. Dkt. No. 1-5. EZ styles itself an “elite global executive search firm” with offices and thousands of employees all over the world. Dkt. No. 1-5

27, 49. EZI USA, in turn, markets itself as part of a global executive search firm with a “one firm” philosophy that is expert at working across borders to find suitable executive and board members for its clients. Id. 48. EZ kept two sets of books. Id. 3. One set of books was based on what was called the “fax charge” system¹ and was used internally in the conduct of EZ’s business and to monitor its actual performance. Id.

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