Timothy L. JENKINS, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
No. 2012-5019.
United States Court of Appeals, Federal Circuit.
June 8, 2012.
684 F.3d 1251 | 511
Mr. Alonzo also asserts that the VA failed to accommodate him by placing him in available positions from the time he informed them of his medical problems in 1996 until his ultimate separation in 2000. However, as the Board found, any failure by the agency to accommodate him beginning in 1996 is not the subject of his appeal. MSPB Final Decision at 8. In his application for retirement, Mr. Alonzo indicated he became disabled in July 1999, and before the AJ he testified that he felt his retirement became involuntary after the VA failed to respond to his request in March 2000. Mr. Alonzo‘s claims of failure to accommodate him prior to his March 2000 request are therefore not relevant to this appeal.
Mr. Alonzo contends that the agency and courts continue to ignore the evidence and legal precedent supporting his claims. However, the AJ and the Board thoroughly considered the evidence relevant to the issues properly before them and determined that Mr. Alonzo “failed to prove that there was an accommodation available that would have allowed him to continue his employment, or that the agency improperly failed to provide such accommodation.” Alonzo v. Dep‘t of Veterans Affairs, No. SF-0752-10-0202-I-1 at 12 (M.S.P.B. April 19, 2010).
CONCLUSION
For the reasons discussed above, we affirm the final decision of the Board.
AFFIRM
Background
The central issue in this appeal is whether Jenkins was personally liable for withholding taxes of Dialogue Diaspora, Inc. (“DDI“) that DDI failed to pay the Internal Revenue Service (“IRS“). In August, 1992, Jenkins and Gary A. Puckrein entered into a preorganizational memorandum of understanding to govern the creation of DDI to publish a magazine, American Visions. Under the agreement, Jenkins and Puckrein would each hold half of the voting stock of the company and would receive equal compensation. The agreement also indicated that Puckrein would be DDI‘s President and that Jenkins would assume the title of Publisher of American Visions.
Shortly after execution of the preorganizational memorandum, DDI became an incorporated entity with Jenkins serving as its Chief Executive Officer (“CEO“) and Chief Financial Officer (“CFO“). On August 26, 1992, Puckrein and his wife filed articles of incorporation for DDI with the District of Columbia, and the District accepted the filing approximately one month later. The articles of incorporation listed four directors of the company, specifically, Jenkins, Puckrein, and their respective spouses. One day after the District accepted the articles of incorporation for DDI, the company held its first board meeting. At that meeting, DDI‘s board resolved that Jenkins was appointed CEO and CFO with the title of Publisher. The meeting minutes also reflect that the initial distribution of voting stock was 55 percent to Jenkins, 22.5 percent to Puckrein, and 22.5 percent to Puckrein‘s wife. Subsequent transactions resulted in half of the voting stock being owned by Jenkins and
Timothy L. Jenkins, of Washington, DC, pro se.
Marion E.M. Erickson, Attorney, Appellate Section, Tax Division, United States Department of Justice, of Washington, DC, for defendant-appellee. With her on the brief were Tamara W. Ashford, Deputy Assistant Attorney General, and Joan I. Oppenheimer, Attorney.
Before NEWMAN, LOURIE, and PROST, Circuit Judges.
LOURIE, Circuit Judge.
Timothy L. Jenkins appeals from the decision of the United States Court of Federal Claims finding that he was liable for trust fund taxes under
On the same date that DDI held its first Board of Directors meeting, Jenkins and the other three board members of DDI executed an agreement that provided that DDI would own, publish, and produce American Visions. The agreement described Jenkins as “an executive officer and an equity participant” in DDI. Jenkins, 101 Fed.Cl. at 125.
After the company was formed with Jenkins as its CEO and CFO, Jenkins provided financing for DDI‘s operations. First, in addition to leasing their office property to DDI (the “S Street Property“), in early 1993, Jenkins and his wife agreed to encumber the property for the benefit of the company that would print American Visions. In addition, Jenkins further agreed to loan capital to DDI for publication and other budgeting costs. For security on the loan, DDI‘s board of directors created a voting trust that allowed Jenkins to, at his option, exercise control over fifty-five percent of the voting shares of DDI. A second part of the agreement created a factor‘s lien that secured Jenkins’ loan with DDI‘s merchandise, accounts receivable, and all proceeds from the sale or disposition of the merchandise. Over the operating life of DDI, Jenkins also provided a number of advances to the company to cover operating expenses such as employee salaries. In addition to lending capital to DDI, Jenkins also personally guaranteed some of DDI‘s debt owed to third-parties.
Beginning in early 1993, DDI filed federal employment tax returns but failed to pay the IRS all of the withholding taxes due. At this time, Puckrein signed the tax returns filed with the IRS.
Puckrein and Jenkins had a falling out in 1995. In March of that year, Puckrein threatened to sue Jenkins after contending that Jenkins lacked authority to call a DDI board of directors meeting. Puckrein also told Jenkins that “[u]nder the circumstances, our association must come to an end.” Jenkins, 101 Fed.Cl. at 127. DDI was also increasingly past due on its rental payments to Jenkins for use of the S Street Property. By April, Jenkins learned that DDI had an employment tax dispute with the IRS. After being confronted by Jenkins, Puckrein assured him that the problem had been remedied and that DDI had entered into an installment agreement with the IRS.
In June, 1995, Jenkins learned that DDI was still not compliant with its employment tax payments. At that time, he also learned that Puckrein had been secretly operating a parallel business, American Visions Enterprises. Jenkins and his wife thereafter called a special meeting of DDI‘s board of directors and invited a local IRS agent to attend the meeting. Jenkins also changed the locks on the S Street Property and posted a sign on the property that stated that the premises had been sealed to preserve evidence for the IRS.
Over Puckrein‘s protest, DDI‘s board of directors held a meeting on June 12, 1995. In addition to the board members and their various legal counsel, an IRS agent attended the meeting. At the meeting, a two-thirds majority of DDI‘s board members replaced Puckrein as DDI‘s President, removed him from his editor-in-chief position, and appointed an executive committee comprised of Jenkins and his wife.
After the meeting, Jenkins signed an IRS Form 4180. The form reflected that Jenkins, in addition to owning half of DDI‘s stock, determined DDI‘s financial policy, had opened corporate bank accounts, signed corporate checks, and guaranteed corporate loans. The form in-
One month later, on July 5, 1995, Jenkins wrote a check on DDI‘s bank account payable to himself and his wife for $16,668.47, the balance of DDI‘s account. At the time he wrote the check, he was aware of DDI‘s unpaid tax liability to the IRS.
Jenkins thereafter initiated legal action against Puckrein, who filed for bankruptcy in late 1997. In early 1998, over Jenkins’ protest, the IRS assessed against him a penalty of $189,972 pursuant to
Subsequent to holding a trial on Jenkins’ claims, the court found that he was under a duty to pay the employment taxes pursuant to
The court also found that Jenkins’ failure to collect, account for, and remit the taxes was willful. Specifically, the court found that Jenkins knew that the payment of employment taxes was at risk at least by April, 1995, and perhaps earlier. The court found that instead of paying the delinquent taxes, Jenkins was primarily interested in recouping the money he invested in DDI, evidenced by his decision to empty DDI‘s checking account to pay himself $16,668.47 rather than remit that money to the IRS. In addition to that check, the court also found that Jenkins should have known that each check he signed after April 1995, including two additional checks to himself and his wife, was at risk of transferring money that belonged to the United States.
Jenkins timely appealed. We have jurisdiction pursuant to
Discussion
The scope of our review in an appeal from a Court of Federal Claims decision is limited. We review the lower court‘s factual findings for clear error. Columbia Gas Sys., Inc. v. United States, 70 F.3d 1244, 1246 (Fed.Cir.1995). A finding is clearly erroneous when, after reviewing the record, we are left with the “definite and firm conviction that a mistake has been committed.” Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 855 (1982) (quoting United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948)). In contrast to our review of factual findings, we review the Claims Court‘s legal conclusions without deference. Columbia Gas, 70 F.3d at 1246.
Section 6672(a) provides a remedy against employers who fail to remit trust fund taxes to the government. In pertinent part, the section provides that “[a]ny person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails” to do so shall be liable for “a penalty equal to the total amount of the tax” that the person failed to pay. For the purposes of the section, a “person” is defined as including “an officer or employee of a corporation” that is “under a duty to perform the act in respect of which the violation occurs.”
On appeal, Jenkins raises a number of arguments regarding both requirements. First, Jenkins argues that despite his CEO and CFO titles, he was not a responsible person at DDI because his employment duties were to develop, promote and supervise a campaign of volunteers for American Voices, not tax collection or payroll. Jenkins argues that because of Puckrein‘s conduct, he never truly owned stock in DDI, his position on DDI‘s board of directors was contested and without effect, and he was unable to manage daily operations. Jenkins asserts that he was unable to make decisions regarding the priority payment of taxes and debts and ultimately was only a DDI creditor. Thus, he argues, it was clearly erroneous to find that he was a responsible person under
We disagree. While Jenkins argues that DDI was effectively Puckrein‘s sole proprietorship, the undisputed corporate records show that Jenkins was DDI‘s CEO and CFO, controlled at least half of the company‘s stock, and was one of four board members. In addition, he was the Publisher of American Voices, the primary business of DDI. It was not clearly erroneous to find that those positions were not illusory and that Jenkins had the authority to demand that DDI pay its trust fund taxes. Indeed, the record below contains evidence that Jenkins determined the company‘s financial policy, convened board meetings, issued checks in DDI‘s name, and directed DDI‘s bank not to honor certain checks. Moreover, he was also DDI‘s landlord, guarantor of its debt, and financier. Thus, the court did not clearly err when it found that Jenkins was a responsible person under a duty to collect, account for, and pay the trust fund taxes.
Regarding the court‘s finding that Jenkins acted willfully, Jenkins raises three main arguments. First, Jenkins argues that because the $16,668.47 of DDI funds that he paid himself was subject to a lien in his favor, he did not willfully pay other creditors instead of paying the government. Second, Jenkins argues that the record below demonstrates that, at most, he acted negligently regarding the trust fund taxes, not willfully. According to Jenkins, the vast majority of the checks he signed on DDI‘s behalf were dated well before he learned that DDI had tax liabilities. Finally, Jenkins argues that, even if his appropriating the $16,668.47 to himself
We disagree. In addition to encompassing a deliberate choice to pay other creditors instead of paying the trust fund taxes to the government, “[w]illful conduct may also include a reckless disregard of an ‘obvious and known risk’ that taxes might not be remitted.” Godfrey, 748 F.2d at 1577 (quoting Feist v. United States, 607 F.2d 954, 961 (Ct.Cl.1979)). Jenkins testified at trial that he became aware in April, 1995 that DDI was delinquent on its trust fund tax payments, although the record contains documentary evidence that Jenkins may have been aware of the issue in 1994. While Puckrein assured Jenkins that he had remedied the tax issue, Jenkins’ own recollection of events shows that such a reliance on Puckrein was unwise at best and it was not clear error to find that Jenkins recklessly disregarded a known risk that the taxes might not be remitted. Indeed, “[o]nce a ‘responsible person’ has had clear notice that the person to whom he has delegated responsibility for paying the taxes has wrongfully failed to pay them in the past, he continues to delegate that responsibility only at his peril.” Thomsen v. United States, 887 F.2d 12, 19 (1st Cir.1989). In addition, the record also contains evidence that after learning that DDI may have been deficient in paying the trust fund taxes, Jenkins signed 13 checks on DDI accounts that were payable to creditors other than the United States. While Jenkins focuses on the $16,668.47 check he issued to himself, arguing that those funds were subject to a lien, Jenkins fails to explain the distribution of the other funds. And, in any event, the tax code establishes that the withheld taxes are held by the employer in “trust for the United States.”
Ultimately, while we commend Jenkins for attempting to involve the IRS upon learning that DDI was not paying the withheld taxes, we cannot hold on this record that the Court of Federal Claims clearly erred in finding Jenkins liable for the trust fund taxes. We have considered Jenkins’ remaining arguments and conclude that they are without merit. For the foregoing reasons, the judgment of the Court of Federal Claims is
AFFIRMED.
Charles W. JOHNSON, Claimant-Appellant, v. Eric K. SHINSEKI, Secretary of Veterans Affairs, Respondent-Appellee.
No. 2011-7180
United States Court of Appeals, Federal Circuit.
June 11, 2012.
Rehearing Denied Aug. 17, 2012.