Raba v. U.S., 91-5782
| Decision Date | 23 November 1992 |
| Docket Number | No. 91-5782,91-5782 |
| Citation | 977 F.2d 941 |
| Parties | -6151, 93-1 USTC P 50,039, Unempl.Ins.Rep. (CCH) P 17189A Lawrence RABA, et al., Plaintiffs, v. UNITED STATES of America, Counter-Claimant-Appellee, v. Lawrence RABA, et al., Counter-Defendants, Raymond Mirelez, Counter-Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Edward Daneri, Antonio, Tex., for Mirelez.
Jordan Glickstein, Atty., Gary R. Allen, Chief, David I. Pincus, Appellate Sec., Tax Div., Dept. of Justice, Washington, D.C., for appellee.
Appeal from the United States District Court for the Western District of Texas.
Before GOLDBERG, SMITH, and EMILIO M. GARZA, Circuit Judges.
Raymond Mirelez appeals a judgment finding him liable for $122,281.45, less credits for payments, plus interest, pursuant to 26 U.S.C. § 6621(a)(2). The district court determined Mirelez was a responsible person, required to collect and pay over payroll taxes, who willfully failed to do so under id. § 6672. Finding no error, we affirm.
Mirelez started to work for the predecessor corporation to Cerna, Raba & Partners (CRP) in 1984 as a bookkeeper. CRP was established to design and construct buildings. Lawrence Raba, David Cerna, and Sebastino Ochoa were the principal shareholders and officers of CRP from 1983 to 1991. Mirelez gradually assumed a more prominent role in CRP, becoming a Vice President on the Board of Directors in 1984 and Chief Financial Officer from 1984 until 1987. He grew to be, by his own admission, the single most important individual directing the business affairs of CRP.
Mirelez's duties were myriad. He prepared financial statements, drew up lists of accounts payable and accounts receivable, and oversaw the preparation of CRP's checks. He gave lists of bills to Cerna and Raba and suggested which ought to be paid. Cerna and Raba testified that they signed, without question, checks Mirelez presented them. 1 Mirelez prepared the Internal Revenue Service (IRS) Forms 941 and payroll checks. Although Raba usually signed the tax forms, Mirelez signed them on occasion.
In the mid-1980's, while Cerna and Raba concentrated on CRP's daily architecture practice, Mirelez was left in control of CRP's financial dealings. The district court found that during 1985 and 1986, Mirelez had significant control over the disbursement of CRP funds. It found his control so great that he had the authority to determine on a daily basis which of CRP's creditors were to be paid.
One of Mirelez's favorite creditors was himself. Between 1980 and 1986, Mirelez lent CRP money. On June 5, 1985, he deposited $40,000 into CRP's corporate account; he was repaid $60,000. Between November 5, 1985, and February 3, 1986, Mirelez lent $100,000 to CRP. CRP repaid this loan in installments made to Mirelez between 1985 and September 2, 1987.
Mirelez also had more inventive ways of obtaining money from CRP: The district court found that he embezzled more than $350,000 from the company. In 1991, he pleaded guilty to nine counts of felony theft for misappropriating CRP checks. 2 In 1987, he altered the name of the payee on two checks, substituting his own name for that of CRP. He deposited the funds from these checks into his own account rather than paying them over to the IRS. Raba testified that but for the misappropriation of funds by Mirelez, CRP would have been able to repay all the withholding taxes it owed the IRS.
By 1985, Mirelez became aware that CRP consistently was delinquent in the payment of its payroll taxes. In early 1986, he told Cerna and Raba that IRS records showed that CRP's employment taxes were delinquent. Mirelez represented to Cerna and Raba that CRP did not actually owe any payroll taxes but that the taxes had been applied to the wrong employer identification number.
On October 31, 1988, and November 14, 1988, Cerna, Raba, and Mirelez were assessed a 100% penalty for failure to pay over payroll taxes to the IRS, pursuant to section 6672, in the amount of $122,281.45. The quarters and amounts involved are as follows:
Tax Period Ended Amount
December 31, 1985 $ 38,529.28
April 30, 1986 59,799.35
June 30, 1986 2,002.24
December 31, 1986 21,950.58
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Total $122,281.45
On February 13, 1989, Raba filed a complaint against the government seeking a refund of $797.75. The government filed an answer and counterclaim alleging, among other things, that Mirelez was a person responsible for CRP's unpaid employment taxes for the fourth quarter of 1985 and the first, second, and fourth quarters of 1986. 3
In May 1991, the district court held a bench trial to determine whether Mirelez was a "responsible person" who had willfully failed to pay over withholding taxes under section 6672. The court concluded that Mirelez had violated the statute and on September 24, 1991, entered judgment in the government's favor.
Title 26 U.S.C. §§ 3102 and 3402 require employers to withhold from employees' wages the amount owed by every employee for federal income taxes and social security contributions. The employer holds the funds in trust for the United States. Howard v. United States, 711 F.2d 729, 733 (5th Cir.1983). When a corporate employer does not pay over the withheld taxes, the government may impose a penalty under section 6672(a). 4 In order to be found liable under this section, a person must be a "responsible person" 5 and must act "willfully" in not paying the withheld taxes. Wood v. United States, 808 F.2d 411, 414 (5th Cir.1987).
The district court found that Mirelez was a responsible person who willfully failed to pay over taxes to the United States under section 6672. We review these findings under a clearly erroneous standard. Gustin v. United States, 876 F.2d 485, 491 (5th Cir.1989).
We generally take a "broad view of who qualifies as a responsible person." Wood, 808 F.2d at 415. See also Turnbull v. United States, 929 F.2d 173, 178 (5th Cir.1991); Morgan v. United States, 937 F.2d 281, 284 (5th Cir.1991); Gustin, 876 F.2d at 491. Determining whether an individual is a responsible person is a question of "status, duty and authority." Howard, 711 F.2d at 734. See also Mazo v. United States, 591 F.2d 1151 (5th Cir.), cert. denied, 444 U.S. 842, 100 S.Ct. 82, 62 L.Ed.2d 54 (1979). The crucial examination is whether a person had the "effective power to pay taxes." Gustin, 876 F.2d at 491. In other words, we look behind a person's official title or job description to determine whether he had the actual duty or ability to pay over the taxes owed.
In Turnbull, 929 F.2d at 179, we held that the former president of a corporation, whose employees still perceived of him as the "boss," and who retained authority to sign checks and negotiate with the IRS, was a responsible person under section 6672. We considered the following factors to determine responsible person status:
(1) holding an office or owning stock in the corporation;
(2) managing the day-to-day operations of the business;
(3) making decisions as to disbursement of funds and payment of creditors; and
(4) check-signing authority.
Id. at 178. While Mirelez did not have authority to sign CRP checks, he was a CRP officer who managed the daily financial affairs of the firm, including deciding how funds were spent and which creditors were paid.
In Wood, 808 F.2d at 415, we held that the chairman of the board of a corporation was a responsible person because he had a substantial financial interest in the corporation, took an active role in decisions made by the board of directors, had check-signing authority, and ran the daily operations of the corporation. We rejected the chairman's attempt to disqualify himself from responsible person status simply because he was not responsible for ensuring the payment of payroll taxes. Id. Similarly, we cannot allow Mirelez to disqualify himself from responsible status simply because he does not fit into every category we have ever listed.
In Gustin, 876 F.2d at 492, we held that a corporate officer who had actual authority to pay delinquent taxes, but chose instead to pay other creditors, was a responsible person. In Howard, 711 F.2d at 731, we found that a minority shareholder and executive vice president of a corporation was a responsible person because he had the responsibility for hiring and firing employees and determined which bills were to be paid. Likewise, in Neckles v. United States, 579 F.2d 938, 940 (5th Cir.1978), we decided that a de facto officer of a corporation, even though he received no salary and held no title, was a responsible person because he had the authority to pay creditors and did so, knowing that taxes were due the government. Having "significant control over disbursements" was sufficient for section 6672 liability to attach. Id. at 940. Mirelez also had the authority to pay creditors and chose to pay them instead of the government.
Distilling the key elements of "responsibility" from these cases, and applying them to the case at hand, we cannot say that the district court's decision was erroneous. Mirelez was an officer--Chief Financial Officer--of CRP during the contested quarters. He was responsible for the daily financial operations of the company. He was involved in preparing CRP's bills, deciding which bills to pay, and disbursing funds to pay them. He also took care of payroll taxes and prepared (and occasionally signed) the payroll tax reporting forms. While Mirelez never had the authority to sign checks on his own, he did have a virtually free hand to disburse funds as he pleased because Raba and Cerna--those with the power to sign checks--rubber-stamped whatever Mirelez put in front of them. Mirelez had effective power to pay taxes.
Mirelez tries to relieve himself of liability through two arguments, neither of...
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