COURT OF PUBLIC OPINION

Written By Mark Fierro

According to a lawsuit filed on April 24, 2020, and currently making its way through the courts, the major online travel companies have defrauded the State of Nevada by failing to pay taxes amounting to an estimated $200 million to $300 million with tens of millions of dollars per year continuing to accrue, according to attorneys on the case. hundreds of millions of dollars, with a potential for tens of millions of dollars in payments continuing for the foreseeable future.

Defendants include Orbitz Worldwide, Travelscape, Travelocity, Cheap Tickets Inc., Expedia, Hotels.com, Hotwire, Priceline, Hotel Tonight and other online travel firms.

Before we go any further, as a point of disclosure, the author, Mark Fierro, and Sig Rogich are qui tam “relators” in this case.

They brought the case to authorities in Nevada and have an economic interest in seeing Nevadans prevail.

To be clear, this isn’t a class action suit in which everyone involved would get an instantly forgettable small check for their involvement in the case.

This is a case in which state officials and county officials may receive a lump sum check that runs to hundreds of millions of dollars, with a potential for tens of millions of dollars in payments continuing for the foreseeable future.

This is the basis of the lawsuit: Online travel companies secure large volumes of hotel rooms purchases in big blocks. The taxes on these discounted rooms have legitimately been paid.

The alleged fraud comes in when the online travel company then re-sells the room at a discount to full rack rate to the consumer and then doesn’t pay the additional taxes that are owed.

To be clear, it doesn’t appear this was a bookkeeping error or an oversight.

The online travel companies have been repeatedly sued in other jurisdictions and lost because it was clear they were required to pay taxes on the amount the room was ultimately sold for, yet their practices continued.

Moreover, plaintiffs’ attorneys argue that Nevada law is just about as straightforward as it gets.

“Nevada’s law appears to be among the strongest and clearest in the U.S. in this area,” said lead attorney Dominic Gentile of the Clark Hill law firm.

What makes the alleged fraud so galling is that it appears it has been an ongoing practice as Nevadans suffered through the worst downturns that the country as a whole experienced. Think about it. During the housing crash of 2008, no community in the U.S. was hit harder than the people of Southern Nevada. Think of the foreclosures, the businesses that were forced to shutter, the bankruptcies, the divorces, the unemployment. Think of the government services, education, the firefighters, the police, medical services, which were running on fumes.

It went on and on for years. And every step along the way, the suit alleges, the fraud continued on ta day-to-day basis. The online travel companies stayed the course and allegedly cheated Nevadans.

As all of us know, Las Vegas finally got back on its feet. It had just arrived at some degree of success when Covid hit and the Strip shut down. Every step of the way, as Las Vegas and the rest of Nevada struggled to get back on its feet, the fraud continued.

Once again, all of us and the governmental entities that care for our most critical health and safety needs, suffered losses at every turn.

When the case goes to court, and attorneys Dominic Gentile and Michael Cristalli of Clark Hill have categorically insisted they will go to trial, the law provides for treble damages in cases like this.

The reason for treble damages is clear. Imagine a criminal act, a bank robber. The bank robber comes running out the front door of the bank. The police grab him and a big bag of money. Police look at the bag and say, yep it’s all there. No harm, no foul. You’re free to go.

Well it doesn’t work that way. The problem is that when corporate entities are convicted of wrongdoing, you can’t put them in prison. What you can do is you can provide for treble damages as a solution. They pay three times as much so that the entity and others are dissuaded from repeating the crime.

What you don’t do in a case like this is if it is found that the entities involved cheated taxpayers out of X number of dollars, say give us back those X number of dollars. That would be like letting the bank robber get away free. It would be like telling the corporate entity and its shareholders, and all other similar businesses, that they were essentially loaned free money for years while breaking the law.

Gentile summed up the case, saying: “There is no way the online travel companies did this mistakenly. They intentionally withheld this money that rightfully belongs to taxpayers in Nevada. This is a common scheme in which they attempt to avoid payment of Nevada’s Combined Transient Lodging Tax, which is required by Nevada law. The bad news is this money should have been going to Nevada’s schools, law enforcement organizations, infrastructure and a broad array of other needs of Nevada citizens. The good news is that when we win this case, and we are confident that we will prevail, it will rank among the biggest windfalls that Nevadans have experienced since the landmark 1998 settlement with the tobacco industry.”

Cristalli characterized the firm’s involvement, saying: “There’s no question that this is one of the most significant cases that I’ve handled because of where this money goes. It goes to the public, to education and to other resources that the state really needs.”

Clark County Commissioners unanimously endorsed a parallel lawsuit on May 14, 2021, which is also working its way through the courts.

The online travel companies filed a motion to dismiss in District Court Judge Mark Denton’s courtroom, which was denied on May 17, 2021.

The case is making its way through the courts. As the community and the rest of the state emerge from the grip of the pandemic, there could very well be more good news on the horizon for Nevada taxpayers if this qui tam lawsuit prevails at trial.