United States v. Mesadieu, 180 F. Supp. 3d 1113

Government filed suit seeking injunctive relief and disgorgement against Mesadieu for alleged IRS code violations related to fraudulent tax preparation.
Prior to trial, a Preliminary Injunction was entered; a two-day bench trial occurred March 8–9, 2016 to resolve remaining issues.
Mesadieu operated multiple tax-preparation stores through eight entities; he is the sole defendant and claims the stores’ profits were legitimate.
Evidence showed schemes to inflate Earned Income Tax Credits (EITC) and misrepresent business activity on Schedule C to increase refunds, with fees deducted from refunds by a third-party processor EPS Financial.
The Government presented a sample of roughly 230 2012 Texas returns from an estimated universe of about 3,600 Texas returns, alleging a high non-compliance rate, while acknowledging many returns were non-fraudulent.
Court found disgorgement is available under § 7402(a) but concluded the Government failed to provide a reasonable approximation of Mesadieu’s unjust enrichment for all years and states.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Is disgorgement available under § 7402(a)?	Disgorgement is authorized to prevent unjust enrichment and enforce tax laws.	Disgorgement is not available under § 7402(a) and would violate due process.	Disgorgement is available.
Is Mesadieu a liable tax return preparer for disgorgement purposes?	Mesadieu, through stores and employees, is a tax return preparer and can be held liable.	Challenges the scope of liability for multiple entities allegedly involved.	Mesadieu is a tax return preparer liable for disgorgement.
Did the Government provide a reasonable approximation of the disgorgement amount?	Total fees and ill-gotten gains across states justify a large disgorgement figure.	Sampling and methodology are insufficient; amounts cannot be reasonably approximated.	No, the Government did not provide a reasonable approximation.
Is the proposed disgorgement amount properly limited to the defendant's ill-gotten gains and properly measured across years/states?	Disgorgement should reflect profits obtained from fraudulent returns across all years/states.	Cannot disgorge funds without joining all entities and without precise calculation across all years.	The Court rejects gross-receipts approach and finds the amount not reasonably approximated.

United States v. Ernst & Whinney, 735 F.2d 1296 (11th Cir. 1984) (broad equitable power to compel compliance with tax laws)
F.T.C. v. Ross, 743 F.3d 886 (4th Cir. 2014) (disgorgement under equitable powers)
SEC v. Monterosso, 756 F.3d 1326 (11th Cir. 2014) (disgorgement as an equitable remedy to prevent unjust enrichment)
United States v. Kahn, 2004 WL 2251798 (M.D. Fla. 2004) (disgorgement of fees and payments under § 7402(a) and inherent powers)
F.T.C. v. Gem Merch. Corp., 87 F.3d 466 (11th Cir. 1996) (disgorgement as equitable remedy in FTC context)
United States v. Elsass, 978 F. Supp. 2d 901 (S.D. Ohio 2013) (broad definition of tax return preparer including those who employ others)
S.E.C. v. Lauer, 478 F. App’x 550 (11th Cir. 2012) (reasonableness standard for disgorgement amount; general approach)
S.E.C. v. Sidoti, 178 F.3d 1132 (11th Cir. 1999) (limitation on disgorgement to profits from wrongdoing; avoid double counting)
Calvo v. SEC, 378 F.3d 1217 (11th Cir. 2004) (unwillingness to disgorge beyond ill-gotten gains; practical limitations)
Scott v. United States, 88 F. Supp. 3d 1278 (M.D. Fla. 2015) (disgorgement authority under § 7402(a) discussed in district court)