U.S. v. Kattar

• Decision Date: 19 August 1999
• Docket Number: No. 95-221-JD.,95-221-JD.
• Citation: 81 F.Supp.2d 262
• Parties: UNITED STATES of America v. George T. KATTAR, et al.
• Court: U.S. District Court — District of New Hampshire

Page 262

81 F.Supp.2d 262

UNITED STATES of America v. George T. KATTAR, et al.

No. 95-221-JD.

United States District Court, D. New Hampshire.

August 19, 1999.

George P. Eliopoulos, U.S. Department of Justice, Trial Attorney, Tax Division, Washington, DC, Charles J. Cannon, Steven Lyons, U.S. Department of Justice, Trial Attorney Tax Division, Washington, DC, for U.S.

Albert F. Cullen, Jr., Cullen & Cullen, Boston, MA, Steven M. Gordon, Shaheen & Gordon, Concord, NH, Richard C. Mooney, Concord, NH, for Defendants.

Philip T. McLaughlin, N.H. Attorney General's Office, Concord, NH, Janice E. McLaughlin, McLaughlin Law Firm, Laconia, NH, for Town of Meridith.

ORDER

DiCLERICO, District Judge.

The United States of America ("government"), brought this action against George T. Kattar, Phyllis Kattar, Personally and as Trustee, Mary Abdoo, Trustee, George P. Kattar, Trustee, Kevin Kattar, Trustee, the Seven Children Trust, and the Town of Meredith, seeking to reduce to judgment certain assessments of tax liabilities made by the Internal Revenue Service ("IRS"), to have a tax lien declared against certain property, and to render void certain fraudulent transfers of property. Before the court is the motion of the government for summary judgment (document no. 90).

Background¹

I Tax Proceedings

On January 16, 1969, Special Agent McNally and Revenue Agent Chernosky contacted George T. Kattar and informed him he was to be investigated for income tax liability based upon allegations of fraud. The investigation initially focused upon tax years 1962 through 1967 and included review of a number of George T. Kattar's business enterprises, and his income and deductions therefrom. On November 11, 1971, George T. Kattar was informed by IRS agents that it was likely they would recommend prosecution for willful tax evasion. The record indicates that prosecution was indeed recommended in the late winter or early spring of 1972. On April 13, 1972, George T. Kattar was indicted by a federal grand jury for the District of Massachusetts on six counts of tax evasion, charging among other things personal income tax evasion for the years 1965, 1966, 1967, and 1968. On December 10, 1973, George T. Kattar plead guilty to two counts of subscribing to federal income tax returns which he did not believe to be correct.

After completion of the criminal proceedings, George T. and Phyllis Kattar (alternately the "Kattars") litigated their civil tax liabilities for 1963 through 1967, and 1970, in the United States Tax Court.² See George T. Kattar and Phyllis Kattar v. Commissioner, 48 T.C.M. 629, (filed July 26, 1984). After a trial, the tax court determined that there were tax deficiencies of approximately $170,000 for those years. As a result, on April 29, 1985, and September 26, 1985, the IRS made assessments for tax, penalties, and interest totaling $505,626.68 for the years 1963 through 1967, and on April 29, 1985, the IRS made an assessment of $70,645.41 for the tax year 1970.

The IRS asserts that on April 12, 1985, it also issued a notice of deficiency for 1971, identifying a deficiency of $18,586, along with statutory additions for negligence. See 26 U.S.C.A. § 6653(a). The Kattars do not dispute that they never filed a petition in the Tax Court in connection with this notice. Thereafter, on August 23, 1985, the IRS asserts it issued a deficiency assessment for 1971 in the amount of $50,562.04.

II Property Transfers

On March 31, 1969, approximately two months after being contacted by Special Agent McNally regarding the investigation for tax evasion, George T. Kattar created seven trusts titled the "Meredith Clifford Trusts" and numbered them one through seven. Each child of George T. Kattar was designated the sole beneficiary of one of the trusts. George T. Kattar then attempted to transfer over to the Meredith Clifford Trusts the value of certain stock which was owned by him, including stock in the Tri-State Development Corp., the Northeast Investment Co., Inc., the Community Investment Corp., North American Enterprises, Inc., and the Kattar Realty Trust, Inc. On May 6, 1976, the Kattars belatedly filed a 1969 federal gift tax return indicating that the total value of stock transferred to the trusts was $133,392.00, with the value of the Kattar Realty Trust stock transferred being $0.00.

The trustees of the trusts were the Kattars' attorneys, Jerome Rosen and Henry Hyder, Jr., and George T. Kattar's sister, Mary Abdoo. Phyllis Kattar was designated the successor trustee. Although Mary Abdoo signed trust documents, she testified at her deposition that she had not heard of the Meredith Clifford Trusts or that she could not recall the trusts. Similarly, Henry Hyder testified during his deposition that although he was a trustee, he had little recollection of the trusts or of taking any actions as a trustee. He stated that he was not involved with and had no records concerning the trusts' books, records, distributions, trustee meetings, or the management of trust assets. Jerome Rosen testified similarly as to his limited involvement with the trusts, although he also testified that trust records and books were maintained by a secretary of George T. Kattar's corporations.

Kevin Kattar, one beneficiary of the Meredith Clifford Trusts, never received any benefit from the trusts. Another beneficiary, Kimberly Kattar, had never heard of the trusts, while a third beneficiary, Meredith Kattar, was similarly unaware of their existence.

Also in 1969, Phyllis Kattar signed an affidavit stating that she had signed a purchase and sale agreement to sell the Kattars' residence in Methuen Massachusetts to a neighbor by July 30, 1969. However, she testified in this case that she did not recall selling or offering to sell the Methuen residence to her neighbor.

On December 31, 1970, Phyllis Kattar transferred the title to the Kattars' Methuen residence to George T. Kattar's attorney Henry Hyder. The consideration given was less than $100. However, she testified that she was unaware of ever holding title to the Methuen property or of transferring any real property to Hyder, that a signature on what apparently was the deed was not hers, and that she was unaware until the date of the deposition that title to the property rested in Hyder. Hyder testified that he was holding the property as a nominee for the Kattar family and never used the property. Despite both of the purported transfers, the Kattar family continued to live in and reside at the Methuen property.

On June 20, 1972, two months after George T. Kattar was indicted for tax evasion on joint tax returns for George T. and Phyllis Kattar, they formed the Seven Children Trust ("Trust"). The initial trustees were George T. and Phyllis Kattar, and Mary Abdoo. The current trustees are Phyllis Kattar, Mary Abdoo, and George P. and Kevin Kattar, two of the Kattars' children. The Seven Children Trust was created pursuant to the advice of one of George T. Kattar's attorneys, apparently Henry Hyder, although Hyder could not testify about the reason for the creation of the Trust because of attorney-client privilege. George T. Kattar testified that the Trust was created as an inheritance device. The Trust was structured to issue certificates of interest to beneficiaries of the Trust, denominated shareholders. Pursuant to the terms of the Trust, all property conveyed to the Trust was to vest in the trustees, as joint tenants with right of survivorship as trustees of the Trust, to manage and administer the assets for the benefit of the shareholders. The record indicates that no shares were issued or distributed by the Trust before November 15, 1983, and beneficiaries were not identified until a November 15, 1983, amendment.³

Approximately one week after the Seven Children Trust was created, Phyllis Kattar transferred real estate known as "Clovelly," along with the contents of the residence, to George T. Kattar, Phyllis Kattar, and Mary Abdoo as trustees of the Seven Children Trust. The Clovelly residence is a 12 room year-round residence with a recreation building, a boat house, boat slips, and garage. The record indicates that the consideration given for the transfer was less than $100, and was made upon the advice of attorneys as relayed to Phyllis through George T. Kattar.

On June 27, 1972, Hyder transferred his interest in the Methuen property, supposedly conveyed to him earlier by Phyllis Kattar, to the Seven Children Trust for less than $100 consideration. Also on the same day, June 27, 1972, Phyllis Kattar conveyed real property located in Andover, Massachusetts, to the Seven Children Trust, for less than $100 consideration. Phyllis testified that she did not know why she transferred the property to the Seven Children Trust, and George T. Kattar testified that it was his brother's property and that he did not know why the property would have been transferred to the Seven Children Trust. Indeed, on November 30, 1973, the Seven Children Trust transferred the Andover property to Suzanne M. Kattar, the wife of Peter Kattar, the brother of George T. Kattar. Peter Kattar never knew that the property had been held by the Seven Children Trust, and Suzanne Kattar testified that she was unaware that she acquired her title to the property from the Seven Children Trust, although they both have generally resided there at least since the late 1960's, Peter Kattar having initially acquired it in 1957. The record is unclear what consideration was given, although Hyder testified that he was unaware of any consideration being given.

Finally, in 1980 or 1981, after the death of her daughter, Phyllis Kattar transferred her jewelry and furs to the Seven Children Trust.

Standard

The role of summary judgment is "to pierce the boilerplate of the pleadings and assay the parties' proof in order to determine whether trial is actually required." Snow v. Harnischfeger Corp., 12 F.3d 1154, 1157 (1st Cir.1993) (quoting ...