The University of Texas and University of Houston systems are suing Alliantgroup, a multimillion-dollar tax-credit consulting firm, for racketeering, even as the politically connected company is under IRS investigation and as its founder battles allegations of sexual harassment.
Filed August 23 in a Houston federal court, the lawsuit accuses Alliantgroup of engaging in a "nationwide scheme" to mislead "thousands of government entities" into signing over tax credits to Alliantgroup's clients, in violation of the RICO Act.
Specifically, the suit alleges that Alliantgroup and an architectural firm hired by the universities, WHR, conspired to reap more than $1.6 million in unauthorized tax benefits from the 2007 construction of the $5.5 million University of Houston Center, and the construction of an MD Anderson parking garage and a UT-Health Science Center project.
Under a section of the federal tax code known as 179D, owners of buildings that meet certain energy-efficient standards can apply for tax deductions. In the cases of government-owned buildings, authorized representatives can allocate the tax credit to private engineers or designers of the buildings. But only qualified government representatives can sign the "form of allocation" transferring tax credits, and this is where the plaintiffs claim WHR and Alliantgroup broke the rules: According to the university systems, WHR misled unauthorized representatives of the university systems into signing the allocation forms.
Moreover, the universities contend that the tax benefits were not meant to benefit an "engineer, architect, or other designer."
But Alliantgroup disagrees, denying the allegations in a September 1 statement to the Houston Press, saying the company was disappointed that the university systems "have been led into a frivolous lawsuit," and adding that "members of Congress have publicly stated that the [tax benefit]" was indeed intended for those parties.
"It was not set up to provide paybacks to government entities," according to the company's statement.
A WHR spokesperson said the company had not yet been served with the suit and could not immediately comment.
Alliantgroup's strategic advisory group includes former IRS commissioners, including a one-time head of the division responsible for investigating whistleblowers' tax fraud claims. The board also includes former U.S. Representative of New York Rick Lazio, former Missouri governor and U.S. Representative Kit Bond, and a former U.S. Representative from Minnesota, Jim Ramstad. U.S. Senator John Cornyn of Texas spoke at an Alliantgroup conference in June, and has spoken at past events.
Located in a glass-curtained, 20-story building in the Galleria, Alliantgroup claims to have helped "20,000 businesses claim over $5 billion in tax incentives."
Current and former employees have alleged to the IRS, Bloomberg and the Houston Press that the company often helps itself at the expense of its clients, via inflated or completely falsified billing. The company has also made a habit of suing clients for non-payment, and for suing former employees who have allegedly absconded with "trade secrets."
These current and former employees also told the Press they were interviewed by IRS officials in 2016. (The Press obtained a copy of a letter to an employee seeking information related to a "federal tax investigation," which does not name Alliantgroup itself. Voicemails left at the local IRS office phone number included in the letter have gone unreturned.)
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While the company has received platitudes from the Houston Chronicle, the Houston Business Journal and other publications for its allegedly friendly work environment and generous salaries, a lawsuit filed earlier this year by a former employee describes a high-pressure atmosphere brimming with paranoia, retaliation and racist and sexist emails, all flowing from the company's head, 46-year-old Dhaval Jadav.
According to some current and former employees, Jadav institutes a corporate culture of forced fun, defined by all-night "raves," and a hierarchy of favorites known as "Craigs," named after a character in one of Jadav's favorite movies, Friday.
Jadav did not respond to an emailed request for comment.