United States v. Shearer
| Decision Date | 06 August 2018 |
| Docket Number | No. 2:12-cv-02334-TLN-DB,2:12-cv-02334-TLN-DB |
| Parties | UNITED STATES OF AMERICA, Plaintiff, v. L. RICHARD SHEARER, et. al.; Defendants. |
| Court | U.S. District Court — Eastern District of California |
This matter is before the Court on Plaintiff the United States of America's ("Plaintiff") Second Motion for Partial Summary Judgment. (ECF No. 65.) Defendant L. Richard Shearer and Defendant Diane Shearer (collectively, "Shearers") oppose the motion. (ECF No. 69.) Defendant Stanley Swenson, as Trustee of the Holcum Trust, Berryvale Trust, and Regency Trust, ("Trustee") also opposes the motion. (ECF No. 70.) Plaintiff has replied. (ECF No. 74.) For the reasons discussed below, the Court GRANTS Plaintiff's Second Motion for Partial Summary Judgment, (ECF No. 65).
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The Shearers, a husband and wife, are residents of Siskiyou, California. (ECF No. 4 ¶ 5.) L. Richard Shearer is a medical doctor who practiced in Siskiyou, California from 1995-2001. (ECF No. 53 at 2.) Beginning no later than 1995, he "deposited substantial net income from his medical practice into a bank account he controlled that was in the name of a trust he controlled." (ECF No. 53 at 3.) Farr West Consulting ("Farr West") and a co-defendant in the criminal case, Lonnie Crockett ("Crockett"), submitted invoices from a bank account in Utah controlled by Crockett to the medical practice for payment of alleged services. (ECF No. 53 at 3-4.) These amounts correlated to transfers routed by Crockett through offshore accounts. (ECF No. 53 at 4.)
The payment of money from the medical practice "into trust accounts for trust entities owned and operated by Farr West and Crockett were a series of sham transactions which had no economic purpose." (ECF No. 53 at 3.) Crockett was paid a fee for these transfers. (ECF No. 53 at 3.) Plaintiff refers to these transactions as a "loop." (ECF No. 53 at 3.) The "funds realized as income from [the] medical practice were not reported on [the Shearer's] joint individual income tax return prepared by the accountants provided by" Farr West and Crockett. (ECF No. 53 at 4.)
In 2001, L. Richard Shearer pleaded guilty, pursuant to a plea agreement, to one count of conspiracy to defraud the United States, in violation of 18 U.S.C. § 371, and one count of making and subscribing to false tax returns, in violation of 26 U.S.C. § 7206(1). (ECF No. 67 at 5.)
The IRS audited the Shearer's account and calculated back tax, including all unreported income but no business deductions. (ECF No. 66-2 at 13.) The Shearer's filed amended returns that disregard the trusts, which the IRS accepted with minor corrections. (ECF No. 53 at 5.) The IRS substantially reduced the tax for 1995-1999 but retained fraud penalties. (ECF No. 53 at 6.)
Plaintiff filed this civil action to reduce the joint federal tax assessments against Defendants, to establish that three trusts are nominees, or alter egos, of Defendants and set aside fraudulent transfers, and to foreclose federal tax liens on real property. (ECF No. 4 ¶¶ 25, 32, 39, 48.) Plaintiff moves for "an adjudication of the tax, interest and fraud penalty liabilities, and that the statute of limitations does not bar this action." (ECF No. 65 at 2.) Plaintiff states it reserves for trial the remaining nominee, fraudulent transfer, and foreclosure issues. (ECF No. 65 at 2.)
Summary judgment is appropriate when the moving party demonstrates no genuine issue as to any material fact exists and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). Under summary judgment practice, the moving party always bears the initial responsibility of informing the district court of the basis of its motion, and identifying those portions of "the pleadings, depositions, answers to interrogatories, and admissions on file together with affidavits, if any," which it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). "[W]here the nonmoving party will bear the burden of proof at trial on a dispositive issue, a summary judgment motion may properly be made in reliance solely on the pleadings, depositions, answers to interrogatories, and admissions on file." Id. at 324 (internal quotation omitted). Indeed, summary judgment should be entered against a party who does not make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.
If the moving party meets its initial responsibility, the burden then shifts to the opposing party to establish that a genuine issue as to any material fact actually does exist. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87 (1986); First Nat'l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 288-89 (1968). In attempting to establish the existence of this factual dispute, the opposing party may not rely upon the denials of its pleadings, but is required to tender evidence of specific facts in the form of affidavits, and/or admissible discovery material, in support of its contention that the dispute exists. Fed. R. Civ. P. 56(c). The opposing party must demonstrate that the fact in contention is material, i.e., a fact that might affect the outcome of the suit under the governing law, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986), and that the dispute is genuine, i.e., the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Id. at 251-52.
In the endeavor to establish the existence of a factual dispute, the opposing party need not establish a material issue of fact conclusively in its favor. It is sufficient that "the claimed factual dispute be shown to require a jury or judge to resolve the parties' differing versions of the truth at trial." First Nat'l Bank, 391 U.S. at 288-89. Thus, the "purpose of summary judgment is to 'pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial.'" Matsushita, 475 U.S. at 587 ().
In resolving the summary judgment motion, the court examines the pleadings, depositions, answers to interrogatories, and admissions on file, together with any applicable affidavits. Fed. R. Civ. P. 56(c); SEC v. Seaboard Corp., 677 F.2d 1301, 1305-06 (9th Cir. 1982). The evidence of the opposing party is to be believed, and all reasonable inferences that may be drawn from the facts pleaded before the court must be drawn in favor of the opposing party. Anderson, 477 U.S. at 255. Nevertheless, inferences are not drawn out of the air, and it is the opposing party's obligation to produce a factual predicate from which the inference may be drawn. Richards v. Nielsen Freight Lines, 602 F. Supp. 1224, 1244-45 (E.D. Cal. 1985), aff'd, 810 F.2d 898 (9th Cir. 1987). Finally, to demonstrate a genuine issue that necessitates a jury trial, the opposing party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586. "Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no 'genuine issue for trial.'" Id. at 587.
Plaintiff moves for judgment on tax, interest and fraud penalty liabilities against the Shearers, and that two statutes of limitation do not bar this action. (ECF No. 65 at 2.) The parties agree the Shearers owe the income tax liabilities they reported on their amended tax returns but did not pay. (ECF No. 69 at 9; ECF No. 65-1 at 12-13.) Accordingly, Plaintiff is entitled to judgment in its favor that the Shearers owe the unpaid tax reported on their amended returns.
The parties disagree about whether L. Richard Shearer ("Dr. Shearer") had specific fraudulent intent to evade taxes as a matter of law. Both remaining issues, whether Plaintiff is entitled to judgment that the fraud penalties apply and whether Plaintiff's claims are barred by a statute of limitations, depend on the answer.
Plaintiff argues the factual basis in Dr. Shearer's criminal plea agreement shows he had fraudulent intent. (ECF No. 65-1 at 16.) The Shearers argue Plaintiff is prohibited from relying on the plea agreement in this civil action. (ECF No. 69 at 9.) The Shearers argue that without the plea agreement Plaintiff cannot establish fraudulent intent as a matter of law by clear and convincing evidence. (ECF No. 69 at 6.) The Shearers argue a genuine issue of material fact exists as to whether Plaintiff properly asserted fraud penalties against Dr. Shearer, imputed fraud intent to Ms. Shearer, and applied the correct statute of limitations. (ECF No. 69 at 5-6.)
The sentence at issue in the plea agreement reads: "The defendant understands that nothing in this agreement affects the defendant's personal federal tax liability, or restricts the United States or the Internal Revenue Service from initiating any collection or civil enforcement action relating thereto." (ECF No. 41-2 at 3.) The Shearers argue the first clause, "nothing in this agreement affects the defendant's personal federal tax liability," establishes that the plea agreement cannot be used in a civil enforcement action. (ECF No. 69 at 10-11.)
Plea agreements are contractual in nature and measured by contract law standards. United States v. De La Fuente, 8 F.3d 1333, 1337 (9th Cir. 1993); United States v. Clark, 218 F.3d 1092, 1095 (9th Cir. 2000), cert. denied, 531 U.S. 1057 (2000). Courts generally construe terms in a plea agreement according to their common legal usage. United States v. Striech, 560 F.3d 926, 930 (9th Cir. 2009). The court should only turn to extrinsic evidence when the word used does not have a clear and unambiguous meaning. United States v. Ajugwo, 82 F.3d 925, 928 (...
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