In re Noffke, 14-106T

• Decision Date: 13 December 2016
• Docket Number: No. 14-106T,14-106T
• Parties: MARK V. NOFFKE, Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Claims Court

MARK V. NOFFKE, Plaintiff,
v.
UNITED STATES, Defendant.

No. 14-106T

United States Court of Federal Claims

December 13, 2016

Trial; Tax; 26 U.S.C. § 6672; Responsible Person; Willfulness.

Michael E. Shaff, Irvine Venture Law Firm, LLP, Irvine, CA.

S. Starling Marshall, Trial Attorney, Court of Federal Claims Section, Tax Division, United States Department of Justice, Washington, D.C. for the defendant. With her were Brian J. Sullivan, Trial Attorney; Court of Federal Claims Section; G. Robson Stewart, Assistant Chief, Court of Federal Claims Section, David I. Pincus, Chief, Court of Federal Claims Section and Caroline Ciraolo, Deputy Principal Deputy Assistant Attorney General, Tax Division, United States Department of Justice.

OPINION

HORN, J.

The plaintiff, Mark V. Noffke, brought suit in the United States Court of Federal Claims to recover funds for all four quarters of 2009, after the Internal Revenue Service (IRS) determined that plaintiff was a responsible person to pay employment taxes for BOOMj.com, Inc. (BOOMj),¹ and "plaintiff paid the trust fund portion of the employment tax for one employee for the first, second, third and fourth quarters of 2009 for BOOMj." Mr. Noffke seeks the refund of the employment taxes paid, and the government has counterclaimed for the unpaid portions of the assessments. A trial was held and post-trial briefings on the legal and factual issues raised in the case were filed by both parties. After a review of the trial testimony, the exhibits entered into the record, and the submissions filed by the parties, the court makes the following findings of fact.

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FINDINGS OF FACT

The plaintiff, Mark J. Noffke, has been a certified public accountant since 1980.² At trial, plaintiff explained that:

I'm an accountant, CPA. I've been in the accounting industry since 1977. I've run public companies. I've been involved with many types of transactions, start-ups, but the majority of the start-ups I've been involved with are companies that deal in the public arena. I've gone through a lot of various transactions in the various businesses that we've dealt with.

In addition to being a certified public accountant, plaintiff testified that he also has been the chief financial officer of a number of corporations.³ Specifically, plaintiff testified: "I was the chief financial officer for the forest division of Stone Container. That company then was spun off in 1996 . . . and I was the CFO of the U.S Forest Industries. Their revenue was around $300 million, about 600 employees throughout that region." The parties have stipulated that "[a]s CFO of U.S. Forest Industries from 1996 to 2002, plaintiff's group was responsible for ensuring that employment taxes were deposited." In addition, plaintiff served as Chief Financial Officer of National Storm Management, and the parties also have stipulated that "[a]s CFO of National Storm Management from 2004 and 2005, plaintiff had responsibility for ensuring that payroll taxes were paid."

After serving as Chief Financial Officer of BOOMj,⁴ plaintiff testified, "I've been the chief financial officer of a company just recently that I resigned from, a company called EFactor. And presently I'm the -- the chief financial officer of a company called Flying Food Fare, Inc., which is an airline catering business based in Chicago." In sum, plaintiff testified that he has served as chief financial officer of seven different companies. Regarding BOOMj, the parties have stipulated that Mr. Noffke "became CFO and

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executive vice-president of BOOMj.com, Inc., an online services company aimed at baby-boomers in 2007." (internal reference omitted). Regarding the beginning of his employment, Mr. Noffke testified at trial on cross-examination:

Q. Now, you -- when BoomJ began, came into existence, you were one of the original members of the executive team; is that right?

A. That's correct.

Q. And Mr. McNulty was as well.

A. That's correct.

Q. But was Mr. -- you were -- you were issued stock; is that right?

A. At a point in time, correct.

Q. Okay. At the beginning of the company's existence.

A. That's correct.

In response to the question on cross-examination, "when you took on this -- this role as CFO of -- of BoomJ, did you understand that that was a potential -- that -- that a role such as that could carry a potential personal liability should there be nonemployment -- nonpayment of employment taxes?" Mr. Noffke answered: "Yes, I did."

Regarding the formation of BOOMj, plaintiff testified:

BoomJ was formed in 2006 as an offshoot of a company called Financial Media Group. The company was a private company until 2007 when it did what was called a reverse merger[⁵] with -- with what's called a shell company. A shell company is a company that is set up for public reporting. It's gone through the SEC. It has received the various blessings that it can be a publicly reporting company which requires three years of audited financial statements and various disclosure documents on a business plan. Well, this company had basically come into what was called a shell status, did not have any liabilities on it. And what we did is we exchanged stock within BoomJ for the stock of this public entity. This entity, then we changed its name then to BoomJ, and then further changed it to a company called Beyond Commerce.

Mr. Noffke testified that "[i]nitially I owned a million shares of BoomJ as the private company. That was then converted into -- it was a reverse merger of 2.02, so converted into 2,200,000 shares. . . ."

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Explaining the relationship between the various entities, Mr. Noffke testified that:

Beyond Commerce is the public vehicle that was the trading vehicle where the stock was. BoomJ.com is a subsidiary 100 percent owned by Beyond Commerce. Beyond Commerce actually owned 100 percent of Local Ad Link, the I Supply company,[⁶] and two other facilities or entities. But the ultimate parent was Beyond Commerce that owned all these other various companies.

Mr. Noffke served as Chief Financial Officer of BOOMj, Beyond Commerce, and Local Ad Link. Mr. Noffke testified that he was "secretary-treasurer at a point in time" of BOOMj and the various entities. In response to the question: "Were you executive vice president and chief financial officer of each of those entities?" Mr. Noffke replied:

I was most likely the treasurer-secretary of each one of those entities not necessarily the CFO, but that legal capacity.

Q. Were you -- were you CFO of any of these entities? I thought --

A. I don't believe there was a CFO for those positions, and we were just -- again, these were legal entities, and so whatever legal entity it required, that's what position I was for that. Again, being Beyond Commerce and CFO of the holding company and owning 100 percent of the stock of each one of these.

Q. So you were CFO of Beyond Commerce, and were you CFO of BoomJ as well?

A. That's correct.

Q. Okay. And then for Local Ad Link and I Supply, you're just saying you don't know what was legally required for them --

A. Whatever was legally required, whether it was a treasurer or just -- I was either treasurer or secretary of that -- of those entities.

Q. What about executive vice president? Were you executive vice president of any of those entities?

A. Not to my knowledge.

Robert McNulty started BOOMj, and testified that, initially, he served as "the chairman of the company, nonexecutive chairman." Mr. McNulty explained that in his role as nonexecutive chairman, "[p]rincipally I worked on the side of the business which was the business strategy, business model, and, you know, the direction of the company from

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that standpoint, and then raising capital for the company." Mr. McNulty testified that "George Pursglove was the CEO, and Mark Noffke was the CFO" of BOOMj. Mr. Pursglove testified that he was the Chief Executive Officer and President of BOOMj. Mr. Pursglove also testified that he formed BOOMj with Mr. McNulty and "the first file I set up on BoomJ was October 1st, 2006." Ultimately, Mr. McNulty became Chief Executive Officer of BOOMj after Mr. Pursglove left BOOMj in October 2007.⁷ Mr. McNulty described his management style by stating:

I'm very direct, you know. Some people think I'm a tough guy to work for. Some people think I'm not so tough to work for. If you do your job, guess what, I'm the easiest guy in the world to work for. If you don't do your job, you probably won't be here very long.

The parties have stipulated that "Mr. McNulty had been subject to a sanction by the Securities and Exchange Commission (SEC) as a result of not disclosing an inter-company transfer to the SEC and that, as a result, Mr. McNulty could not serve as the chairman of the board of a public reporting company."⁸

The parties also have stipulated that Mr. Noffke had check signing authority on all of BOOMj's bank accounts, as well as on all BOOMj's subsidiaries' bank accounts, and Mr. Noffke testified to the same at the trial.⁹ Mr. Noffke also testified that, in addition to hand signing checks, BOOMj had a check signing machine with Mr. Noffke's signature, and that was with "what the majority of the checks were written." The parties have stipulated

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that Mr. McNulty did not have check signing authority on BOOMj's bank accounts.¹⁰ On cross-examination, defendant's counsel asked Mr. Noffke why he did not simply write a check to the IRS to the cover the requisite taxes, to which he responded:

First of all, I didn't have the authority to do that. I mean--and, frankly, why am I doing that? It's a personal obligation I'm taking care of. That's almost--you know, that's determinative embezzlement almost, because it was outside of my authority. And most likely would have only taken care of--it would have bounced. It was--the funds were very, very tight. There was not a million dollars sitting in the account at any point in time. There was only amounts--the amounts that were in the checking account, there were checks that were already

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