Edelman v. Comm'r of Internal Revenue

• Decision Date: 05 December 1994
• Docket Number: 887–88.,Nos. 8253–87,s. 8253–87
• Citation: 103 T.C. 705,103 T.C. No. 39
• Parties: Jon J. EDELMAN, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: U.S. Tax Court

103 T.C. 705

103 T.C. No. 39

Jon J. EDELMAN, Petitioner,

v.COMMISSIONER OF INTERNAL REVENUE, Respondent.

Nos. 8253–87

887–88.

United States Tax Court.

Dec. 5, 1994.

Joseph J. Haspel and Dennis L. Stein, for petitioner.

William L. Blagg and Roland Barral, for respondent.

Subsequent to filing petitions in this Court, P was convicted of tax fraud. Prior to a hearing in this Court on the merits of his case, P escaped from prison. P presently remains a fugitive from justice. R filed motions to dismiss based upon P's fugitive status.

Held: Inasmuch as there is a connection between the proceedings in this Court and P's criminal conviction for tax fraud, a rational basis exists for disentitling P from utilizing this Court's resources to redetermine his deficiencies and additions to tax while he remains a fugitive from justice. See Ortega–Rodriguez v. United States, 507 U.S. 234, 113 S.Ct. 1199 (1993). R's motions to dismiss based upon P's fugitive status will be granted.

OPINION

JACOBS, Judge:

This matter is before the Court on respondent's motions to dismiss these cases based upon petitioner's fugitive status.

By separate notices of deficiency, respondent determined the following deficiencies in, and additions to, petitioner's Federal income taxes:

+-----------------------------------------------------------------------+
                ¦            ¦      ¦            ¦Addition to Tax  ¦Increased Interest  ¦
                +------------+------+------------+-----------------+--------------------¦
                ¦Docket No.  ¦Year  ¦Deficiency  ¦Sec. 6653(a) 1  ¦Sec. 6621(c)        ¦
                +------------+------+------------+-----------------+--------------------¦
                ¦8253–87     ¦1979  ¦$2,604,677  ¦$130,234         ¦2                   ¦
                +------------+------+------------+-----------------+--------------------¦
                ¦8253–87     ¦1980  ¦1,887,477   ¦94,374           ¦2                   ¦
                +------------+------+------------+-----------------+--------------------¦
                ¦887–88      ¦1981  ¦4,789,095   ¦239,455          ¦2                   ¦
                +-----------------------------------------------------------------------+
                 

¹ For 1981, the additions to tax for negligence or intentional disregard of rules and regulations are codified under sec. 6653(a)(1) and (2). With respect to 1981, respondent determined an addition to tax equal to 50 percent of the interest due on $1,815,679 pursuant to sec. 6653(a)(2).

¹ 120 percent of the interest due on the deficiency.

Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years in issue.

Background

Petitioner resided in Rye, New York, at the time he filed petitions invoking the jurisdiction of this Court. Subsequent to filing his petitions, petitioner was convicted of 31 counts of Federal income tax fraud in violation of section 7206(1) and (2), and 1 count of conspiracy to defraud the United States in violation of 18 U.S.C. section 371. On July 28, 1993, petitioner began serving a 5–year sentence at the Federal Correctional Institution in Florence, Colorado. On September 23, 1993, he escaped. On September 27, 1993, a warrant was issued for petitioner's arrest. The United States Marshals Service has been unable to locate petitioner.

On January 11, 1993, respondent filed motions to compel production of documents in these cases.¹ On January 19, 1993, petitioner filed motions to dismiss, or in the alternative, to enforce a settlement agreement allegedly entered into with respondent. On March 30, 1993, respondent filed objections to petitioner's motions. The Court held hearings with respect to petitioner's motions on June 10, 1993, in New York City and on November 15–17, 1993, in Washington, D.C. The Court was not informed of petitioner's fugitive status until April 7, 1994, when respondent filed motions to dismiss on the basis that petitioner is a fugitive from justice. On May 16, 1994, petitioner filed memoranda of law in opposition to respondent's motions, and on June 8, 1994, respondent filed responses to petitioner's memoranda of law.

Discussion

It is well established that a court may dismiss the case of a litigant who is a fugitive from justice during the pendency of his case. What has come to be known as the “fugitive dismissal rule” was first applied over a century ago by the U.S. Supreme Court in Smith v. United States, 94 U.S. 97 (1876). In that case, an escaped defendant remained at large when his appeal arose before the Court. The Supreme Court dismissed the case, holding that there could be no assurance that any judgment it issued would prove enforceable. See also Bonahan v. Nebraska, 125 U.S. 692 (1887).

In addition to “enforceability” concerns, the Supreme Court has authorized dismissal based upon a “disentitlement” theory. In Molinaro v. New Jersey, 396 U.S. 365, 366 (1970), the Supreme Court stated:

No persuasive reason exists why this Court should proceed to adjudicate the merits of a criminal case after the convicted defendant who has sought review escapes from the restraints placed upon him pursuant to the conviction. While such an escape does not strip the case of its character as an adjudicable case or controversy, we believe it disentitles the defendant to call upon the resources of the Court for determination of his claims. * * * [Emphasis added.]

And in Estelle v. Dorrough, 420 U.S. 534 (1975), the Supreme Court upheld the constitutionality of a Texas statute providing for automatic appellate dismissal when a defendant escapes during the pendency of his appeal, unless the defendant voluntarily returns within 10 days. Estelle reasoned that dismissal of an appeal of a defendant who flees the jurisdiction serves an important deterrent function and advances an interest in efficient, dignified appellate practice. Id. at 537.

Courts have rejected the argument that Molinaro applies only to appeals from criminal convictions. E.g., United States v. Eng, 951 F.2d 461 (2d Cir.1991); Ali v. Sims, 788 F.2d 954, 958–959 (3d Cir.1986); Conforte v. Commissioner, 692 F.2d 587, 589–590 (9th Cir.1982), affg. in part and revg. in part on another issue 74 T.C. 1160 (1980); Doyle v. United States Department of Justice, 494 F.Supp. 842, 845 (D.D.C.1980), affd. per curiam 668 F.2d 1365 (D.C.Cir.1981). In fact, given the plethora of constitutional and statutory procedural protections afforded to criminal defendants but not to civil litigants, it has been stated that Molinaro should “apply with greater force in civil cases where an individual's liberty is not at stake.” Conforte v. Commissioner, 692 F.2d at 589. Indeed, this Court has previously refused to hear a fugitive's case unless or until the fugitive voluntarily returned to the jurisdiction of the Court. Berkery v. Commissioner, 90 T.C. 259 (1988), supplemented by 91 T.C. 179 (1988), affd. without published opinion 872 F.2d 411 (3d Cir.1989); Smith v. Commissioner, T.C.Memo.1989–325.

Courts have identified four reasons for the fugitive dismissal rule:

First, a decision respecting a fugitive is effectively unenforceable because the fugitive is beyond the control of the court. * * * Second, loss of appellate review is appropriate because the fugitive flouts the judicial process by escaping. * * * Third, a rule of dismissal has the salutary effects of discouraging escape and promoting the efficient operation of appellate courts. * * * Fourth, the delay occasioned by the period of a defendant's flight can prejudice the prosecution should a new trial be ordered after a successful appeal. [Citation omitted.]

United States v. Persico, 853 F.2d 134, 137 (2d Cir.1988), and cases cited therein. It is not necessary to meet all four reasons in order to dismiss a fugitive's case. In the present cases, at least two justifications exist for our invoking the fugitive dismissal rule.

One of the principal reasons for the fugitive dismissal rule is a practical one—where a fugitive is beyond the control of the court, a decision involving him may effectively be unenforceable. In the present cases, as long as petitioner remains a fugitive, and the whereabouts of any assets he may own remain undisclosed, it will be difficult for respondent to collect petitioner's deficiencies and additions to tax.

Another reason for the rule is to protect the court's process from abuse. Here, petitioner's criminal conviction for tax fraud and the adjustments in the notices of deficiency being contested in the proceedings in this Court both arise from petitioner's role in the activities of a tax shelter (known as Arbitrage Management) involving bogus securities trading transactions. In essence, the civil tax deficiencies and additions to tax asserted against petitioner are but a continuum of his criminal tax activities. Petitioner escaped from prison while serving a sentence for his criminal tax violations. His refusal to submit himself to justice for the commission of these tax crimes while at the same time seeking relief from this Court with respect to the related civil tax deficiencies flouts the judicial process. Hence, in our opinion, petitioner should not be entitled to utilize the limited resources of this Court in order to dispute respondent's determination while he remains a fugitive.²

Recently the Supreme Court revisited the fugitive dismissal rule under narrower circumstances in Ortega–Rodriguez v. United States, 507 U.S. ––––, 113 S.Ct. 1199 (1993). In that case, the defendant fled the jurisdiction after his conviction for various drug-related charges but before his initial sentencing in the District Court. The defendant was sentenced in absentia to an imprisonment of 19 years and 7 months, and a warrant for his arrest was issued. He was apprehended and sentenced to an additional 21 months. His sentencing was later reduced to 15 years and 8 months. The defendant then appealed his sentence. The U.S. Court of Appeals for the Eleventh Circuit granted the Government's motion to dismiss the appeal based on the fact that the...