By Douglas Baruch, John Boese, Jennifer Wollenberg and Kayla Stachniak Kaplan, Fried Frank Harris Shriver & Jacobson LLP ( May 8, 2017, 1:34 PM EDT) -- Fittingly, on "Tax Day" 2017, the New York attorney general announced a $40 million settlement based on taxes allegedly avoided by members of Harbinger Capital Partners Offshore Manager LLC, a hedge fund investment manager operating in New York City. While the settlement amount itself was record-breaking, the underlying source of liability — New York's state false claims act, N.Y. State Finance Law §§ 187 et seq. (NYFCA) — was highly unusual as well. Until now, most civil enforcement actions extracting massive settlements from financial industry companies for fraud allegations unrelated to the securities laws have been the exclusive province of the U.S. Department of Justice and whistleblowers — referred to as "qui tam relators" — using the federal False Claims Act (FCA), 31 U.S.C. §§ 3729–3733, and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), 12 U.S.C. § 1833a. This latest action, which relied on state tax laws as the basis for the fraud claim, may usher in a whole new wave of potential liability against hedge funds and similar businesses....