Saracena v. United States, 216-74.

• Decision Date: 22 January 1975
• Docket Number: No. 216-74.,216-74.
• Citation: 508 F.2d 1333
• Parties: John SARACENA, et al. v. The UNITED STATES.
• Court: U.S. Claims Court

508 F.2d 1333

John SARACENA, et al. v. The UNITED STATES.

No. 216-74.

United States Court of Claims.

January 22, 1975.

Joseph M. Jacobs, East Orange, N. J., attorney of record, for plaintiffs.

Theodore D. Peyser, Jr., Donald H. Olson, and Kenneth R. Pike, Washington, D. C., with whom was Asst. Atty. Gen. Scott P. Crampton, for defendant.

Before COWEN, Chief Judge, and DAVIS and BENNETT, Judges.

ON DEFENDANT'S MOTION TO DISMISS

COWEN, Chief Judge:

In 1962, plaintiffs found more than two million dollars in United States currency which they turned over to the Government. After the Internal Revenue Service had applied all the money to the recovery of income taxes, penalties, and fines due by the individual to whom the funds belonged, the District Director of the IRS paid each plaintiff a reward. They brought this action to recover additional amounts as rewards, claiming that the amounts paid were inadequate and that the determination of the amount of the reward was not made in compliance with 26 U.S.C. § 7623 and Treasury Regulation 26 C.F.R. 301.7623-1. The case is before the court on defendant's motion to dismiss for failure to state a cause of action upon which relief can be granted. After considering the briefs of the parties and the facts admitted by defendant's motion, we conclude that the amount of the reward was determined pursuant to a statute and regulation which vest broad discretion in the District Director of the Internal Revenue Service, and that plaintiffs have failed to show that his determination was an abuse of the discretion reposed in him. Therefore, we grant defendant's motion to dismiss.

The plaintiffs are seven workmen who were employed during the summer of 1962 to remove old doors and install new ones in several garage buildings in Jersey City, New Jersey.¹ In the course of their work on July 3, 1962, they found $2,438,110 in United States currency in the trunk of an old car in one of the garages. Upon finding the money, plaintiffs notified the Federal Bureau of Investigation, whereupon FBI agents took possession of the currency and turned it over to the United States Marshal for the District of New Jersey. Shortly after the money was found, it was discovered that it probably belonged to one Joseph V. Moriarty. On July 5, 1962, the Internal Revenue Service effected a jeopardy assessment for delinquent income taxes and interest due from Mr. Moriarty in an amount which exceeded the currency found by plaintiffs. Thereafter, the Internal Revenue Service caused a lien to be filed in Hudson County, New Jersey, and a notice of levy to be served upon the U.S. Marshal who, on July 16, 1962, paid the $2,438,110 into the Treasury of the United States.

On September 19, 1962, when Mr. Moriarty filed a tax return for 1961, he reported the $2,438,110 as "other income" and requested that any moneys refundable to him be used to reduce his back taxes. The entire sum, which the workmen turned over to the FBI, has been applied to income taxes, penalties, fines, and forfeitures owed by Mr. Moriarty.

Beginning in 1962, several law suits were filed by parties claiming an interest in the $2,438,110. The United States District Court for the District of New Jersey held that Hudson County, New Jersey, was entitled to the money. On February 25, 1969, the seven plaintiffs filed an application and a public voucher for a reward based on their having turned over the currency to Federal authorities and the fact that all of it was applied to the recovery of taxes, penalties, fines, and forfeitures owed by Mr. Moriarty. The application was not acted upon by the District Director of Internal Revenue pending a review of the District Court's decision by the Court of Appeals for the Third Circuit. On January 25, 1972, the Court of Appeals reversed the judgment of the District Court, dismissed the complaint of Hudson County, and held that the United States was the owner of the money. See Stapleton v. Two Million Four Hundred Thirty-Eight Thousand, One Hundred and Ten Dollars, 454 F.2d 1210 (3rd Cir.), cert. denied, 409 U.S. 894, 93 S.Ct. 111, 34 L.Ed.2d 151 (1972).

On May 9, 1974, after it was firmly established that the United States would be able to retain the money and apply it to the taxes due by Mr. Moriarty, the District Director of the Internal Revenue Service awarded each of the plaintiffs or their heirs $4,590. The total amount of the reward was $32,131, which was approximately 1.32 percent of the amount recovered by the United States in taxes and other assessments against Mr. Moriarty.

Plaintiffs' claims are based on 26 U.S.C. § 7623 and the implementing regulation, 26 C.F.R. § 301.7623-1, which provide:

§ 7623. Expenses of detection and punishment of frauds

The Secretary or his delegate, under regulations prescribed by the Secretary or his delegate, is authorized to pay such sums, not exceeding in the aggregate the sum appropriated therefor, as he may deem necessary for detecting and bringing to trial and punishment persons guilty of violating the internal revenue laws, or conniving at the same, in cases where such expenses are not otherwise provided for by law.

§ 301.7623-1 Rewards for information relating to violations of internal revenue laws.

(a) In general. A district director may approve such reward as he deems suitable for information that leads to the detection and punishment of any person guilty of violating any internal revenue law, or conniving at the same. The rewards provided for by section 7623 are limited in their aggregate to the sum appropriated therefor and shall be paid only in cases not otherwise provided for by law.

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(c) Amount and payment of reward. All relevant factors, including the value of the information furnished in relation to the facts

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