Beeler v. US, 86 Civ. 8810 (JGK).
| Decision Date | 18 August 1995 |
| Docket Number | No. 86 Civ. 8810 (JGK).,86 Civ. 8810 (JGK). |
| Citation | 894 F. Supp. 761 |
| Parties | Joel I. BEELER, Plaintiff, v. UNITED STATES of America, Defendant. UNITED STATES of America, Third-party Plaintiff, v. Stuart ROSS and Robert Liebmann, Third-party Defendants. |
| Court | U.S. District Court — Southern District of New York |
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William E. Murray, New York City, for plaintiff.
Mary Jo White, United States Attorney for the Southern District of New York by Sarah Thomas, Katherine Staton, New York City, for defendant.
Raymond G. Lefler, New York City, for third-party defendant Robert Liebmann.
Stuart Ross, pro se.
Plaintiff Joel I. Beeler commenced this action on November 17, 1986 to obtain a refund of a $124.28 payment he made toward a penalty assessed against him by the Internal Revenue Service ("IRS") under 26 U.S.C. § 6672 for his alleged failure to cause the payment of withheld income and social security taxes allegedly owed to the Government by Equidyne Management, Inc. ("EMI"), a company of which Beeler was an officer. The statute subjects persons who willfully fail to collect and pay over withholding taxes and are responsible for doing so to a penalty equal to the total amount of the uncollected tax. The Government has counterclaimed against Beeler for $56,285.15, allegedly the unpaid portion of the $60,773.19 penalty assessment, and has filed a third-party action against Stuart R. Ross and Robert H. Liebmann, other EMI officers, seeking to hold each of them liable for the full penalty. The taxes underlying the penalties allegedly accrued in the last three quarters of 1981 and the first quarter of 1982. Following reassignment to this Court, the case was tried in an eight day bench trial. The Court makes the following findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure.
A. The Equidyne Ventures:
1. Plaintiff Beeler and third-party defendant Ross are lawyers. J.Ex. 23, p. 17; Beeler Aff. ¶ 1; Tr. 247. Third-party defendant Liebmann is a Certified Public Accountant with extensive experience in real estate. Tr. 559-61.
2. In 1977, Beeler and Ross incorporated Equidyne Corporation ("Equidyne") for the purposes of engaging in syndicated offerings to qualified investors. Initially, Equidyne offered investors interests in limited partnerships owning energy related enterprises. Most of the investment opportunities were marketed as tax shelters. Stip.Facts 1, 21; Tr. 24, 250-52, 257; Beeler Aff. ¶ 5.
3. Beeler and Ross incorporated various corporations to acquire and transfer assets to the limited partnerships and to otherwise assist in the conduct of the Equidyne ventures. Beeler and Ross each had a fifty percent share in the equity of these entities, but profits were split sixty percent to Ross and forty percent to Beeler. Stip.Facts 3, 4, 5; Tr. *24, 257-60, 263, 949-52.
4. In 1978, Equidyne Properties, Inc. ("EPI") was formed to acquire real estate properties for Equidyne Corporation. Beeler was the President of EPI and Ross was Secretary-Treasurer. Stip.Fact 5.
5. EPI purchased, owned, and syndicated nine properties (the "Equidyne properties") through a series of limited partnerships. EPI was the general partner of each of the limited partnerships that owned a property. Stip.Fact 6; Beeler Aff. ¶ 9.
6. Prior to 1981, Equidyne Management, Inc. ("EMI") was incorporated for the purpose of managing the real estate properties syndicated by Equidyne. Stip.Fact 7; Beeler Aff. ¶ 11, Tr. 82, 275, 882, 902. EMI was wholly owned, either directly or indirectly, by Equidyne. Stip.Fact 10, Tr. 275.
7. Beeler and Ross were EMI's directors. Tr. 299-300. At the time of EMI's formation, Beeler was its president, but he ceded that role to Peter Pantelic prior to June 30, 1981. Stip.Fact 8. Ross was EMI's secretary. Tr. 94, 294-97; J.Ex. 18.
8. To assist them with the financial aspects of their ventures, in or about January, 1980, Beeler and Ross hired third-party defendant Robert Liebmann to be Financial Vice-President of EMI and the other entities involved in the Equidyne ventures. Stip. Fact 14; Liebmann Aff. ¶ 1; Beeler Aff. ¶ 12; Tr. 561-62. At the time of his hiring, Liebmann's nominal employer was Eastland Industries, Inc. Tr. 561-62. Initially, Liebmann's duties included supervising the book-keeping staff that kept the records for the ventures, and once Steve Miller was hired as a controller for EMI, he reported to Liebmann. Stip.Fact 26; Tr. 570-74, 900-01. After being hired as president of EMI, Peter Pantelic would sometimes report to Liebmann as well as to Beeler. Id. Liebmann was not a shareholder of EMI. Stip. Fact 27.
9. Beeler was primarily responsible for the day-to-day decisions required to manage the Equidyne properties. After becoming president of EMI, Peter Pantelic reported to Beeler. Stip.Fact 25.
10. Peter Pantelic was hired in 1981 as President of EMI. Stip.Fact 15. However, Beeler and Ross continued to make the company decisions and Liebmann continued to act as the equivalent of a senior executive officer. Tr. 798. Pantelic was never authorized to sign EMI checks. Stip.Fact 21. Generally, he reported to Beeler. Tr. 652, 910-11. He would also report to Liebmann. Stip.Fact 26, Tr. 279, 652, 753, 827, 910-11. His decisions regarding which bills to pay had to be approved by Beeler, Liebmann, or Ross. Tr. 760-61, 803-04, 1053.
11. Steve Miller was hired in 1981 as Controller of EMI and other Equidyne entities. Stip.Fact 16; Tr. 761-62, 1034. Miller reported to Liebmann, among others. Stip. Fact 26; Tr. 1035-36. Miller was fired by Liebmann at Ross' insistence in April, 1982. Tr. 162-63, 610, 1046; Beeler Aff. ¶ 27.
12. EMI's executive, management, and accounting staff was located at 950 Third Ave. in New York City. Stip.Fact 13. They handled the accounting for all of the entities related to the Equidyne properties. Beeler Aff. ¶ 13, Tr. 623-24.
13. All EMI corporate and banking records were located at the New York office. Tr. 623, 805. Beeler, Ross, and Liebmann had access to all such records from at least early 1981 to early 1982. Tr. 303, 623, 806.
14. With the exception of limited checking account records, tax returns, and some memoranda, all of EMI's corporate records have disappeared. Stip.Fact 9.
15. EMI received a management fee of 3 to 6 percent of an Equidyne property's monthly rental income. Stip.Fact 19; J.Ex. 23, p. 35; Tr. 81, 637-38. EMI also received a substantial initial management fee when a limited partnership deal closed. Tr. 639. In the fourth quarter of 1981 alone, EMI received $100,000 in initial management fees. Tr. 641. Prior to the formation of EMI, the Equidyne properties were managed by independent, real estate management companies. Beeler Aff. ¶ 11. EMI was formed to generate additional income by bringing the property management operations "in-house." Beeler Aff. ¶ 11, Tr. 81-84, 276-77, 882. EMI received reimbursement from each of the Equidyne partnerships for actual expenses incurred by EMI on behalf of a partnership, such as payroll and utilities. Stip.Fact 18; J.Ex. 23, Ex. H; Beeler Aff. ¶ 14; Tr. 318-19, 637-38.
16. The standard management agreement between the Equidyne limited partnerships and EMI provided that EMI would employ the individuals who worked on-site at the partnership properties. Beeler Aff. ¶ 13; Tr. 625, 762-63, 804, 881-85; J.Ex. 23, p. 3 & Ex. H, p. 3.
17. On April 1, 1981, the beginning of the second quarter of 1981, EMI began issuing the payroll of all of the Equidyne properties. Stip.Fact 17; Beeler Aff. ¶ 13. EMI assumed responsibility for withholding payroll taxes as well as paying employees. Tr. 318-19. Pursuant to the management agreements between the partnerships and EMI (see, e.g., J.Ex. 23, Ex. H), EMI filed quarterly and yearly withholding tax returns (Forms 941 and 940, respectively) listing employees working at the Equidyne properties, as well as EMI employees in the New York office. J.Exs. 22, 49, 51, 63. EMI was reimbursed for its payment of the payrolls of the individual properties. Stip.Fact 18.
18. There were not rigid separations among the corporations involved in the Equidyne ventures and among other corporations that Beeler and Ross controlled. The corporations shared office space, supplies, and employees. Tr. 314-15, 755-57, 762, 796-800, 1039. Beeler, Ross, and Liebmann often met to discuss the operations of all the corporations simultaneously. Tr. 911. Beeler and Ross ordered frequent money transfers among them. Tr. 94, 140-143; 800, 1038-39. Employees were often directed to take actions as if there were only one corporate entity rather than several. Tr. 304-05; J.Exs. 2, 3, 26, 41, 50.
19. Ross, Beeler, and Liebmann received substantial compensation from the Equidyne related entities in 1981 and 1982. Liebmann received $1,000 per week. Tr. 612. Beeler received $2,000 per week in 1981 and $1,000 per week in 1982, and Ross received more. Tr. 907-910. In addition, all three were provided with corporate cars. Tr. 349-52, 612, 910.
B. Corporate Authority:
20. EMI maintained three corporate checking accounts during 1981 and 1982. The accounts required at least two signatures on all checks. Stip.Fact 20.
21. Beeler and Liebmann were authorized signatories on two of the checking accounts and Ross and Liebmann were authorized signatories on the third. J.Exs. 4, 5, 18; Beeler Aff. ¶ 15; Liebmann Aff. ¶ 3; Tr. 98-100, 626. Beeler, Ross, and Liebmann each personally signed numerous checks on EMI checking accounts during the relevant tax periods. J.Exs. 70, 71. Ross personally signed several checks on the EMI account at Republic National Bank for which he may not have been an authorized signatory, but the bank did not reject these checks. Tr. 89-90, J.Exs. 12, 70; Beeler Aff. ¶ 15; Beeler Rebuttal Aff. ¶ 4; Tr. 94-95, 429-30, 548-49, 626, 707. Beeler, Ross, and Liebmann were the only authorized...
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