US v. Stoecklin

• Decision Date: 15 February 1994
• Docket Number: No. 93-148-Misc-J.,93-148-Misc-J.
• Citation: 848 F. Supp. 1521
• Parties: UNITED STATES of America, Petitioner, v. Kenneth A. STOECKLIN, Respondent.
• Court: U.S. District Court — Middle District of Florida

848 F. Supp. 1521

UNITED STATES of America, Petitioner, v. Kenneth A. STOECKLIN, Respondent.

No. 93-148-Misc-J.

United States District Court, M.D. Florida. Ocala Division.

February 15, 1994.

COPYRIGHT MATERIAL OMITTED

A.B. Phillips, Trial Atty., Tax Div., U.S. Dept. of Justice, Washington, DC, and Ralph J. Lee, Asst. U.S. Atty., Jacksonville, FL, for U.S.

Kenneth A. Stoecklin, appeared pro se.

ORDER

JOHN H. MOORE, II, Chief Judge.

The above-styled cause is before the Court on the Report and Recommendation of the United States Magistrate Judge, filed December 8, 1993 (Doc. # 35). Defendant objected to the Report and Recommendation on December 13, 1993 (Doc. # 39).

After conducting a de novo review of the entire record herein, the Court hereby adopts, confirms, and ratifies the Report and Recommendation. Accordingly, it is now

ORDERED AND ADJUDGED:

1. That the Petition to Enforce Internal Revenue Service Summons filed September 15, 1993 (Doc. # 1) is hereby GRANTED;

2. That the Motion to Dismiss filed October 7, 1993 (Doc. # 15) and Renewed Motion to Dismiss filed November 30, 1993 (Doc. # 30) are hereby DENIED.

DONE AND ORDERED.

REPORT AND RECOMMENDATION¹

STEELE, United States Magistrate Judge.

I. Status

This cause is before the Court on the Petition To Enforce Internal Revenue Service Summons (Doc. # 1) (the Petition), filed September 15, 1993. An Order To Show Cause was issued by the Court on September 16, 1993 (Doc. # 2); a second Order To Show Cause was entered by the Court on October 21, 1993 (Doc. # 14). Respondent's Motion To Dismiss (Doc. # 15) was filed October 27, 1993. Respondent has also filed a Refusal For Cause And Judicial Notice (Doc. # 22), a Reservation Of Rights Under Uniform Commercial Code (Doc. # 27), an Answer To Petition To Enforce I.R.S. Summons (Doc. # 29), and a Renewed Motion To Dismiss (Doc. # 30).

A hearing was held by the Court on December 1, 1993. The Court heard the testimony of Revenue Officer David Quinn and received Respondent's Exhibits A and B. As directed by the Court, petitioner has also submitted excerpts of a deposition given by respondent in a bankruptcy proceeding and citations to published notices (Doc. # 31).

II. Summons Enforcement General Principles

Title 26, United States Code, §§ 7402(b) and 7604(a), grant courts the jurisdiction to issue appropriate process for enforcement of Internal Revenue Service (IRS) summonses. Local Rule 6.01(c)(11), United States District Court For the Middle District of Florida, refers such matters to the magistrate judge, and a report and recommendation to the district court is then prepared. United States v. First National Bank of Atlanta, 628 F.2d 871, 873 (5th Cir.1980).²

To obtain judicial enforcement of a summons, the Internal Revenue Service must establish: (1) the investigation is being conducted for a legitimate purpose; (2) the inquiry may be relevant to that purpose; (3) the information sought is not already in the IRS's possession; and (4) the administrative steps required by the Internal Revenue Code have been followed. United States v. Powell, 379 U.S. 48, 57-58, 85 S.Ct. 248, 254-55, 13 L.Ed.2d 112 (1964); United States v. Medlin, 986 F.2d 463, 466 (11th Cir.), cert. denied, ___ U.S. ___, 114 S.Ct. 347, 126 L.Ed.2d 311 (1993). This imposes a "minimal burden" upon the IRS, which may be satisfied by merely presenting a sworn affidavit of the agent who issued the summons attesting to these facts. United States v. Medlin, 986 F.2d at 466. Once the IRS has made such a showing, the burden shifts to the party contesting the summons to disprove at least one of the four elements of the government's prima facie showing or to convince the court that enforcement would constitute an abuse of the court's process. United States v. Medlin, 986 F.2d at 466; LaMura v. United States, 765 F.2d 974, 979-80 (11th Cir.1985). The burden on the contesting party is a heavy one which requires allegations of specific facts and the introduction of evidence. United States v. Leventhal, 961 F.2d 936, 939 (11th Cir.1992).

III. Application of Principles To This Case

The Declaration of Revenue Officer David B. Quinn and the testimony and exhibits from the December 1, 1993 hearing established the following: Revenue Officer Quinn has been employed with IRS for approximately 19 years and is a grade GS-12. He served an IRS Summons upon petitioner on July 8, 1993. (Doc. # 1, Declaration, ¶ 3, 4, Exhibit A-1). The Summons directed respondent to appear on July 20, 1993 to give testimony and produce for examination and copying "all records regarding the existence of, and/or the transactions between and among Kennedy Financial and Investment Company and Kenneth A. Stoecklin, including, but not limited to Trust documents and bank records pertaining to Kennedy Financial and Investment Company, beginning with the inception of Kennedy Financial and Investment Company through the date of appearance required by this Summons." (Doc. # 1, Declaration, ¶ 3; Exhibit A-1). Revenue Officer Quinn testified that Kennedy Financial and Investment Company is an offshore trust which respondent had identified in a deposition in a bankruptcy case in Tampa, Florida. Respondent testified in deposition that he was the trustor and beneficiary of the trust and the trust was in the Caribbean. He also testified the trust had an interest in Commonweal, Inc., a debtor in bankruptcy proceedings in Tampa. (Doc. # 31, Exhibit A). Respondent failed to appear in response to the summons and has continued to fail to produce the requested documents. (Declaration, ¶ 5).

As noted above, the United States must establish a prima facie case before the burden shifts to respondent. The United States has met its burden, and respondent has neither rebutted this showing nor established that enforcement would be an abuse of the Court's process. The Court will discuss each of the required elements and will then discuss the affirmative defenses raised by respondent in his Answer and the issues raised by his Motion To Dismiss.

(1) Legitimate Purpose of Investigation:

The Declaration of D.B. Quinn (Doc. # 1, Exhibit A) states that he is a Revenue Officer of the IRS and is "conducting an investigation for the purpose of collecting the unpaid federal income tax liability of Kenneth A. Stoecklin for the years 1978, 1979, 1980, 1981, 1982, and 1983" (Declaration, ¶ 2); he gave similar testimony at the December 1, 1993 hearing. Collecting unpaid federal income tax liability is a legitimate purpose for which a summons may properly be issued. 26 U.S.C. § 7602(a). Respondent's summary denial in his Answer is insufficient to disprove this element, and no evidence to the contrary was introduced at the hearing. The issues raised in respondent's Affirmative Defenses and Motion To Dismiss purporting to rebut this element are discussed below and are without merit.

(2) Inquiry Relevant to Purpose of Investigation:

Revenue Officer Quinn's Declaration states that the items sought by the Summons "may be relevant and material to the investigation". (Declaration, ¶ 6). He further states that it is necessary to obtain respondent's testimony and documents "in order to collect the unpaid federal income tax liability" of respondent for the years 1978 to 1983. (Declaration, ¶ 8). Respondent admitted in the bankruptcy deposition that financial transactions between himself and Kennedy existed and that he was the trustor and only beneficiary of the trust. This element of the government's prima facie case has been satisfied.

(3) Information Not Already In IRS Possession:

Revenue Officer Quinn has stated that the items sought by the Summons "are not already in the possession of the Internal Revenue Service." (Declaration, ¶ 7). Respondent's Answer asserts a denial based upon a lack of knowledge; this is insufficient to disprove this element, and therefore this element of the government's prima facie case has been established.

(4) Compliance With Administrative Requirements:

Revenue Officer Quinn has stated that all administrative steps required by the Internal Revenue Code have been followed and testified to the same effect. (Declaration, ¶ 9). Respondent's Answer asserts a denial based upon a lack of knowledge; this is insufficient to disprove this element, and therefore this element of the government's prima facie case has been established.

(5) Abuse of Court's Process:

Revenue Officer Quinn has stated that there has been no referral to the Justice Department for criminal prosecution for the years 1978-83. (Declaration, ¶ 10). This satisfies the requirement of 26 U.S.C. § 7602(c).

Respondent has raised a number of affirmative defenses in his Answer; these elaborate and expand upon similar arguments made in his Motion To Dismiss and his Refusal For Cause and Judicial Notice. The Court will discuss each issue raised in any of respondent's filings to determine if enforcement of the summons would be an abuse of the Court's process.

(a) Failure To State Claim:

Respondent asserts in his Motion To Dismiss (Doc. # 15) that the Petition does not state a claim for which relief may be granted. The Court has reviewed the Petition and its exhibits and concludes that it fully complies with the requirements of United States v. Powell, 379 U.S. 48, 57-58, 85 S.Ct. 248, 254-55, 13 L.Ed.2d 112 (1964) and therefore does state a claim for which relief may be granted.

(b) Subject Matter Jurisdiction:

Respondent argued at the hearing that his primary assertion is that this Court lacks subject matter jurisdiction. Respondent asserts that the Secretary of the Treasury is required by 26 U.S.C. § 7805(a) to promulgate implementing regulations, that these regulations have the force of law, that the Secretary has failed to promulgate such regulations regarding income tax, and that without such regulations the IRS statutes are given no force and effect. In the absence of such regulations, respondent asserts that 26 U.S.C. §...