The public welfare demands that constitutional cases must be decided according to the terms of the Constitution itself, and not according to judges' views of fairness, reasonableness, or justice.
-- Justice Hugo L. Black ( U.S. Supreme Court Justice, 1886 - 1971).
Monday, June 29, 2009
Mike Ioane - Justice Hugo Black on the Public Welfare
Monday, June 8, 2009
IRS Raids Home of Michael Ioane Without Valid Warrant
In response to a recent story, on June 6, 2006, about 15 armed agents from the Fresno, California Office of the IRS stormed the home of Michael and Shelly Ioane under the pretense of a lawful search warrant.
Having knowledge of IRS corruption, Mr. Ioane demanded a copy of the alleged search warrant. Immediately after reviewing it, Mr. Ioane determined that it was VOID on its face and demanded that the IRS leave. When they refused, Mr. Ioane asked to call his Attorney, which they allowed; however, Mr. Ioane actually called 911 and requested assistance.
Approximately 5 minutes later several Atwater Police Officers responded. The Officers gave various instructions to the IRS agents and informed Ioane that, although the warrant appeared suspicious, he, Mr. Ioane, would have to deal with the matter by filing a civil suit.
About four hours later the agents left the home; although they left a list of many of the items taken regarding various clients and Mr. Booth, they did not disclose over $30,000.00 in wholesale jewelry, which was taken. Mr. Ioane has reported this theft to Treasury Inspector General for Tax Administration; however, as of today the property has not been recovered or accounted for.
Pending before the United States district court, is case number 07-cv-0620, whereas Mr. Ioane and his entire family have sued the United States and IRS for the illegal raid. On September 23, 2008, district Judge Anthony Ishii, denied in part and granted in part the governments motion to dismiss. The most relevant counts were denied.
Shortly after the court denied the government's motion to dismiss, threats of criminal prosecution began and the government moved to stay the civil action, since they felt that they were being taken advantage of. Assistant US Attorney G. Patrick Jennings, specifically and directly intimated that if Ioane didn't drop his lawsuit he would be prosecuted criminally.
Read more: Complaint for Damages for Constitutional Violations, and Order of Judge Ishi on Motion to Dismiss
Thursday, June 4, 2009
Attorney Speaks Out on Judges, Corruption
Attorney Richard I. Fine Speaks Out on Judges, Corruption, Circumstances
Excerpts from a Full Disclosure Network InterviewLESLIE DUTTON
March 3, 2009
LESLIE: You've been up against some formidable challenges. But none quite like the one that's facing you today. Would you say that tomorrow's (contempt hearing before Judge David Yaffe) is — how would you compare that to all of the challenges you've had before this?
RICHARD FINE: Well, tomorrow's hearing is interesting because the challenges that I've had before are basically challenges that we can say work within a functioning system. And when I was getting all of this money back and so forth, I was dealing with a system that was functional. I mean, you have a case, you go into a court; it either gets settled, you win it or you lose it, and you're dealing with a system that has integrity. Tomorrow's case, or the case that we have now, is dealing with a dysfunctional system because of the fact that this is now pure politics and retaliation. We are dealing now with a judge who took money from the County of Los Angeles, who then made an order that I should pay money to the County of Los Angeles, holds me in contempt for refusing to answer questions about my personal assets to force me to pay that money, and now wants to send me to jail because I'm in contempt for not obeying his illegal order, which was illegal because he took illegal money from the County. We're dealing with a dysfunctional system and a judge that is dealing with political retaliation. So we're not dealing in a justice system anymore. We're dealing with what some people would call a third-world country; we're dealing with all the things that America condemns about other countries. That is what we have in this courtroom tomorrow. So I wouldn't say that it's really a comparison. We aren't dealing in a system that this country was set up to operate.
LESLIE: Tomorrow when you go into court, Judge Yaffe is going to make a — he's going to give you a sentence; is that it? He's already found you in contempt?
RICHARD FINE: Yes. He's — he's found me in contempt for refusing to answer questions from a commissioner about an illegal order that he has made. And he wants to sentence me to jail until I answer those questions. Now, I have gone to the Court of Appeal with what is known as a writ of habeas corpus, which means "bring in the body," and I have asked the Court of Appeal to enter a stay stopping Judge Yaffe from doing anything. I haven't heard yet, as of today, whether they've entered that stay or not. If they enter the stay, Judge Yaffe is dead in his tracks. If they don't enter the stay, then I'll go into the California Supreme Court, and if the California Supreme Court doesn't enter the stay, then I'll go into the United States District Court. Sooner or later, I will win. Whether I win before he sends me to jail, I don't know. But that — that is what we are dealing with.
LESLIE: Tell us how this all started.
RICHARD FINE: Well, this — this all started in a very innocent type of way. It started back in 1999, and in 1999, I brought a lawsuit called John Silva vs. Garcetti — Gil Garcetti, Los Angeles District Attorney. And that lawsuit was based upon the fact that John Silva had paid money as part of his divorce — child support money. And child support money was being paid into the Los Angeles because the County of Los Angeles, as you know, collects child support money. Now, what we found out is that he had paid his child support money in, but the child support money wasn't going to his wife. The County was not distributing it. And the County wasn't distributing about $14 million of child support money. What the County was doing is, the County was taking this money in and it was holding it. Now, there's a law that says that the County must distribute the child support money within six months or give it back to the father. And they will only give it back to the father if they can't find the wife or the children. Now, in John's case, he knew where his wife was, and he knew where the children were, because his wife was friendly. You know, he was giving the money to the County support system; the County wasn't giving it to his wife. His wife knew that the money was going in, so she was cooperating with us, and we found out that all these other women and children were not getting their money.
So I sued the County to have this money distributed. The County answered and told me how much money was there, where the accounts were. All they had to do was distribute it. They were refusing to do it. I went into court, and we got to the end of the trial. The County moved to dismiss, and the judge dismissed the case. And I was astounded. And I went up into the appeal, and after the trial was over and before I filed my first brief, I found out that the judge, Judge James C. Chalfant, had received money from the County Los Angeles. That's how it started. That was one case.
The second case that it started out with was the case that I mentioned earlier about the County of Los Angeles taking money from the environmental fees, and in that case — that was a case called Amjadi and Lacaoehs vs. the Board of Supervisors of County of Los Angeles. And I was brought into that case to get that money out of the general fund of the County of Los Angeles and into a special fund. And I won that. I got the case, you know, got the special fund established. I got $11 million that they still had in the general fund put into the special fund. I got the fees frozen for three years until that $11 million was used up, and then when it came time to get the attorneys fees, Judge Kurt Lewin, who was the judge in the case, refused to award the attorneys fees, saying that I was representing a County union, and unions shouldn't sue the County. And in addition to that, that unions were always in negotiations with the County for wages. And therefore what the union was really doing, had really brought the case, not to help the public, but really for its own benefit. Well, I also found out that Judge Lewin was getting money from the County. And to pay the attorneys fees, the attorneys fees would be coming out of these funds, which was County funds.
LESLIE: When you talk about these judges getting money from the County, how is it that money is coming to them? For what purpose? Under what..?
RICHARD FINE: Okay. What — the — to answer your question, the way that the money comes from the County to the judges is that every year, the County, as part of its budget, under what is known as Trial Court Funding — if you look in the budget, you'll actually see this under Trial Court Funding, you will see money going to the judges, and that money in this particular year is approximately $20 million, or $46,370-some-odd per judge. Now, how it started was, back in 1988, the County of Los Angeles, decided, through its Board of Supervisors, that they wanted to pay judges — and these are their — somewhat their exact words — to attract and retain qualified judges and qualified candidates to sit as judges in this — meaning L.A. — County. And that was their reason. Now, they knew — and we actually — I actually have a copy of the document — they knew at that point in time that they couldn't do this. They knew that to do this was illegal because under the California Constitution, under what is known as Article 6, Section 19 of the California Constitution, only the State legislature could prescribe the compensation of the judges.
RICHARD FINE: There's a document in November of 1988 which was written by the — at that point, the County Counsel to Frank Zolin who was the Clerk of the Courts, and it actually went from the County Counsel to the Clerk of the Courts, explaining these things. So the L.A. Superior Court actually got this document. In that document, it said that the Attorney General had given the opinion that this could not be done, and so what the County Counsel tried to rationalize is, he said, "Well, this part of the Constitution really only meant salaries and it didn't mean compensation," so they're gonna try and get around it in that way. They knew they were doing wrong. They also knew that the Attorney General had given opinions that you couldn't pay this money as part of a statute as compensation for judges. So they knew right then and there that what they were doing was wrong. The other thing that they knew is that if you're giving the money to attract people as candidates for judges, judges are elected officials — they're State elected officials under the California Constitution. We vote for a Superior Court judge every six years. So if you're going to be giving money to a judge to attract him to be a candidate, you'd be giving money to his political campaign, and that would be a gift of public money to a private individual, and that would be a violation of Article 16, Section 6 of the California Constitution.
LESLIE: How much was this money that they were giving them?
RICHARD FINE: It turns out that at that point in time they were giving them about 27 percent of their salary, and back in '88 I'm not sure what the salary was, but it was probably, maybe around $20,000-some a year. Now it's doubled to $46,000 a year.
LESLIE: So would they be able to give that kind of money as a campaign contribution?
RICHARD FINE: As a campaign contribution in 1988, they wouldn't have been able to give that amount of money to a judge because the campaign contribution limits the State to $1,000 per candidate.
LESLIE: So would you say, then, that basically the County was buying judges?
RICHARD FINE: The bottom line of it is yes, because the only reason that the County could be giving this money — the only underlying reason — is that the County had — had cases in front of these judges. The County is a major litigant in the California courts, and it's the same thing as if Tony — the fictional Tony Soprano had been giving money to the judges. In fact, the County has an average, as far as normal cases are concerned — when I say "normal," that's excluding child custody cases, that's excluding criminal cases — just taking your regular cases. The County has about 700-800 new cases a year in the Superior Court. So when the County is giving this money, the underlying thought, in my opinion, is that the County wanted to influence the judges to decide the cases in the County's favor. Now, this thought of mine actually came true because we have documents from the County Counsel to the Board of Supervisors that show that in the year 2005 and in the year 2006 and 2007, not one case that was decided by an L.A. Superior Court judge was decided against the County of Los Angeles. So basically nobody won in that period of time. And for the year 2008 — 2007, 2008, in that fiscal year, the documents are a little bit more vague, and possibly two cases were decided by a judge against the County of Los Angeles. But that was about the most. So that gives you the effect of the monies.
LESLIE: Now, you made that statement, "That gives you from the beginning of the payments with respect to the payments," but you've only cited 2005, 2006, 2007. You don't know what the win/loss ratio was from 1988 to 2005?
RICHARD FINE: There — there are no documents that I know of that tells me the win and loss ratio from the years in between, because the only documents that I have been able to pick up are the ones that started in 2005. Now, the County may have internal documents that were not published or that have not been made public that might have — might tell us what's happened in the previous years. And I don't know if the court is keeping internal documents as to what has happened on the various cases. Somebody actually — if somebody wanted to go in and do the survey, you could go into the court system and take every case where the County of Los Angeles is named as a defendant and then go in and look to see what happened in the cases and whether it was a judge decision or a jury decision. That would be a fairly large project, but one could do that. And because you're looking at from 1988 to, say, 2005, you're looking at approximately 17 years of cases, and 700, you know, cases per year. So you're looking at maybe 13,000-some-odd cases. It would take a little bit of time for someone to do the survey and dig up the records. But you could actually find out the exact number.
LESLIE: Now, you have given us the background of why you're coming into this hearing tomorrow. It's basically because of the predicament that the judges are in. What happened, legislatively, at the State level to change the future for the judges?
RICHARD FINE: Well, what happened at the State level is very interesting, and this is somewhat involved with the State Bar proceeding against me also. On February 1st — and it actually was e-mailed in on February 2nd — I filed a Federal complaint against the L.A. Superior Court judges, in particular Judge Yaffe, who is involved in tomorrow's hearing, uh, Judge Bruguera, who is the judge that dismissed the cases regarding Marina del Rey where we, the people in the County of Los Angeles have lost approximately $1 billion of income from the developers in Marina del Rey that should have come to the County, and against Supervisors Antonovich, Knabe and Molina, who voted in favor of the development of the Del Rey Shores project here in Marina del Rey, while receiving contributions from the developer, Jerry Epstein, within a 12-month period of time. And then also against the State Bar judge, Richard A. Hahn, who made the decision recommending that I be disbarred, while in fact he sat on the Board of Governors of the Special Olympics of Southern California that had received $30,000 in contributions from L.A. County. So that was — and I filed this complaint with the Justice Department on February 2nd of 2009. I gave a copy of that complaint, as part of my State Bar case, to the California Supreme Court, on February 2nd.
On February 11th, the Judicial Council — Senator Stein — President Pro Tem of the State Senate, Darryl Steinberg, introduced a bill called Senate Bill SBX2 11 into the State Senate, which stated that all the judges and all the government officials and all the governments that were involved with any activity of judges receiving money from counties received immunity from civil liability, criminal prosecution, and disciplinary action.
LESLIE: Now, why haven't we heard anything about this?
RICHARD FINE: Well, let me just trace it — before we get to that, let me just trace how this came about so you understand the whole story. The next thing that happened is that the — this — my complaint — it is my belief, and I think I'm correct in this — went from the California Supreme Court to the California Judicial Council, because the Chief Justice of the California Supreme Court is the Chairman of the Judicial Council. The bill that I just mentioned, according to its legislative history, came from the California Courts Administrative Office. The Court Administrative Office is located in the Judicial Council. So it was written in the Judicial Council. It went from the Judicial Council to Darryl Steinberg's office. It was voted on by the State Senate three days later — February 14th — and passed. It was passed by the State Assembly one day after that, February 15th, and it was signed by Governor Schwarzenegger as part of the budget package on February 20th. And that answers your question as to why you didn't hear about it, because it came up as part of the budget package, and as part of the budget package, every — all the news media and everything else were basically looking on the fact that there's a budget that was passed, and nobody looked at the fact that they had sneaked through this bill that gives these judges immunity. And also the bill says that even though the previous payments are illegal because there was a case called the case of Sturgeon vs. the County of Los Angeles, that held that the payments to the judges are unconstitutional, and the bill recognizes this, and then the bill says, "Well, future payments can be made from the County." So what happened is that the bill admits that the payments were illegal, gives the judges and these other people immunity for their actions of having received the payments, the supervisors the immunity for having given the payments, and immunity for everything that occurred with respect to these payments.
Now, to take this a step further, the effect of this is that every Superior Court Judge in every county in Los Angeles, with the exception of San Francisco County, Yono County, and Mendocino County, has received these payments. So all of these judges are tainted. Every Court of Appeal Justice who had previously been a Superior Court Judge has now been given immunity for all of their actions as being Superior Court Judges, so they are tainted. On the California Supreme Court, you have the Justice Corrigan, who was a former Alameda Superior Court Judge, Justice Chin, who was a former Alameda Superior Court Judge, and one other justice whose name slips my mind, who is a former — Moreno, I believe it is — who is a former Los Angeles Superior Court judge. All of them are tainted because of these payments.
LESLIE: Are we talking about Moreno on the Supreme Court?
RICHARD FINE: Yes. The last three men — people that I mentioned are justices — Associate Justices of the California Supreme Court. So three of the seven Associate Justices of the California Supreme Court are tainted. You then had the tainting going to the Chief Justice of the California Supreme Court, Justice George, who's the Chairman of the Judicial Council, who wrote the bill, and Justice Baxter, who is the — the Chairman of the Committee of the Judicial Council that wrote the bill. So we end up with five of the justices of the California Supreme Court who are tainted. Now, you ask why are these people tainted? Because another thing that happened is that this bill is personal to the judges. This bill is not helping the judicial system of California. This bill says that all of these judges can continue getting the money which is personal to them because the money goes from the County to the judge. It doesn't pass through the State of California. It's personal money going from the County to the judge, and it gives immunity, personal immunity, to all of these people. So what the Judicial Council did is, the Judicial Council took our public money and wrote a bill for the personal benefit of these individuals. Then the Judicial Council spent public money on its lobbyist to go in and lobby for this bill. So you have the tainting of these two supreme court justices. So effective five out of the seven supreme court justices at this point in time are tainted by this action. And the result of this is that by legislation — and I repeat, by legislation, the California Judicial System has been legislated to have been corrupt and to have committed illegal acts and to have been given immunity for the commission of those illegal acts.
LESLIE: Wow! So the legislature itself has basically condemned them as guilty?
RICHARD FINE: Absolutely. They condemned them as being guilty by one, say, that the payments were unconstitutional, and by affirming the decision of — the Sturgeon (vs. L.A. County Board of Supervisors) decision. And then by going through and taking the second step and giving them immunity.
LESLIE: Now, when you say "immunity," are we talking about retroactive?
RICHARD FINE: Retroactive immunity. The immunity is retroactive all the way up to the — as it says in the bill, the effective date of the bill. And the effective date of the passage of the bill was February 20, 2009. However, that brings us to a new problem: And that means that these judges who are sitting in office today are still biased, because the money that they got up to February 20th from these counties is biasing them for any decision that they make on February 21st. So basically every judge that is dealing with a decision of a county, on February 21st, is being influenced by the money that he got or she got on February 19th. So we do not have an unbiased judiciary in the State of California at the present time, with the exception of the judges who did not receive the money, which you —
LESLIE: Are there any?
RICHARD FINE: Yes. Once again, that's Yolo County, Mendocino County, and San Francisco County, and any judge that might be sitting on the California Supreme Court or on the Court of Appeal that did not receive this money. That is what — that is what is left in the California judicial system at the present time.
LESLIE: Let me ask you: Do you believe that the individual judges are aware of what they've been doing is illegal?
RICHARD FINE: Absolutely. There's no question that they knew that it was illegal. These people aren't like you or I, you know, that are unaware of the law. These are judges. These are people that are supposed to uphold the law. They have a code of judicial ethics that makes them liable and makes them aware that they have to uphold the integrity of the court. They have to obey the laws of the California. They have taken an oath to obey the law of the State of California. They have taken an oath to obey the law — the Constitution of the United States of America and the laws of the United States of America. And under Article 6, Clause 2 of the United States Constitution, they are bound to obey the law, the Constitution of the United States and the laws of the United States. There is no question whatsoever that they knew that they were taking illegal money. None whatsoever. They knew the California Constitution; they knew that the Constitution said that only the State could prescribe their compensation; they knew that they're State-elected officials; they knew that they're State employees; they knew that they weren't working for the County; and they knew that this money was illegal. And they took it. No way that they can get around that. And that's why I filed the complaint with the U.S. Department of Justice, because they violated the Federal law of what is called the implied or intangible right to honest services, and that's 18 United States Code, Section 1346, because the case law that holds is that when a judge takes money from an individual — or even a government — and then does not disclose it, he violates that particular code section. And he violates it by the fact that he is not giving honest services to his employer, which is We the People, or the State of California. And he's not giving those honest services because we're paying him a salary to go in and do his job as a judge. And what the judge is doing is, the judge is taking money from another source to do the job, and the judge is not disclosing it, because none of these judges have disclosed this money on what is called their Form 700, Statement of Economic Interest, which requires them to disclose any income from another source. And they — they wouldn't have to disclose the income if it came from the County for expenses to go to a convention or something else. But because this is compensation that they're getting, they had to disclose it. They didn't disclose it. And I had called the Political Reform Commission — the Fair Commission on Political Reform, and I asked them about this and they said, "No, nobody's disclosing it." And then I checked on these judges. I checked on Yaffe. He didn't disclose it. And I checked on — you look on the Form 700 on any Supreme — and of the three Supreme Court judges — justices. They didn't disclose it.
So none of these judges are disclosing this income. So consequently, they're violating the Political Reform Act, they're violating the Federal law of the implied or intangible right to honest services. And by doing that, they are sitting in another position. They're violators. They're violating a criminal law. Now, that is a reason why the legislature gave them immunity. It's the reason why the Judicial Council wrote that immunity in — because the Judicial Council knew that they couldn't save them from the Federal law violations, but at least they could save them from the State law violations.
LESLIE: Well, let me ask you — I mean, this is just astounding. It's — it's just astounding. How can our government possibly deal with this when it's so widespread?
RICHARD FINE: Oh, it's very simple. I mean, it's just like dealing with a single judge that took a bribe. Back in — and I'll give you the precedent for it. Back in the 1970s, you had a number of judges getting involved in doing illegal activities in Illinois, and it was called the Greylord Cases. I think it might have been 30 or 40 judges. I don't remember the exact number. Government came in, they prosecuted the judges, got the judges out. So here we're dealing with maybe 1,600 or 1,700 judges. You know, the number doesn't really make that much difference, you know. It's the same violation. The legislature has already said that the violation occurs, so you go in and just prosecute the people.
LESLIE: Now let me ask you: You mentioned the Greylord Case, I guess. Tell me, what type of bribery were those judges getting? Were they getting being bribed by government officials?
RICHARD FINE: The bribery there, I think, was — I think it was private, you know, private individuals. But here the analogy exists because the County of Los Angeles, as far as being a party to a lawsuit, is the same as you or I. You know, just because they're the County of Los Angeles, it doesn't make them any different from you or I, because the employer of the judges is the State of California. And this is where a lot of people seem to get confused. They seem to think that because it is the County, that the County seems to have some sort of a right to be able to pay the judges. The County doesn't have any more right to pay the judges than you or I, because when you look at the government of California, the government of California is the State. It is not the County. The State of California has three parts to it: It has the executive, which is the governor and the governor's office; it has the legislative, which is the State Senate and the State Assembly; and it has the judicial branch, which are the courts, or is the courts, depending upon how you want to look at it, as one thing or lots of courts. Those are the three branches of the State government.
The County of Los Angeles is a subdivision. It is an independent entity, and it is not a governing branch of the State. So consequently, when the County comes into court, it comes in in the same way that you or I come into court. When you sue the State of California, you are suing the State of California with its permission to be sued because it's part of the government that you're suing. When you're suing the County of Los Angeles, you're suing it with its permission as a county, but you're suing it in a court that is run by the State, because the County of Los Angeles doesn't have any courts. We don't have any county courts anymore. There isn't the county judicial system that is existing.
LESLIE: Didn't we have at one time?
RICHARD FINE: At one time we had a municipal court system that was existing, but all that has been unified into a State court system at the present time. So everything now is under the State, and so the County does not have any rights with respect to anything in the State system. And in fact as a litigant, the County never did have any rights greater than you or I.
LESLIE: Let me ask you: You've described the judges and their illegal actions — their knowingly illegal actions. What about the County? Who instructs the County? Are the supervisors liable?
RICHARD FINE: The immunity— the answer to that question is yes. According to — interestingly enough, according to the immunity that was given, the immunity goes to the government entity, which the immunity goes to the County, and the immunity goes to the government employees and government officials. So the immunity actually went to the County and it went to the Supervisors.
LESLIE: Is that possible that they could get away with this?
RICHARD FINE: Well, the — the answer is yes. They — they have gotten away with it. Now, there might be some questions as to whether, under the United States Constitution, you can grant immunity, you know, for past — whether a State can grant immunity for past acts. But the State is only granting immunity under the State's powers. Remember, this immunity is not going to the — any United States law. It is only dealing within the State. So what we still have — and I'm gonna jump a subject here with you — is that you as a litigant still have your rights, your First Amendment rights to petition the government to redress grievances is still existing, and in fact that right has been infringed upon. And your 14th Amendment right to due process has been infringed upon.
So if I can take you one step further in saying what can be done? Every case in which one of these judges has ruled against you, as an individual, or you had a problem with the County, can now actually be overturned, because of the fact that they've legislated this immunity and they've given them the immunity for this bad act or for this illegal act. We have what is known as a writ of quorum nobis. And the writ of quorum nobis says that if there's a new fact that has come in to show that what's happened with the case, you can now come in and say, "Look, I want my case overruled and I want my case redone." So that is a side effect of this legislation. For every person that had a case that went bad under one of these judges, come in on the writ of quorum nobis and ask to have the case re-heard. That's one of the things that can take place.
LESLIE: And that's a case that involved the County?
RICHARD FINE: That is a case that involved the County. Now, to give you an idea of how wide that can be, that can deal with eminent domain, that could deal with any kind of a homeowner case, that could deal with child custody cases. If a county was involved in any type of a custody case or any type of a case with children or children's services, and the County paid the Children's Services Department or if the County gets involved with support payments, or if the County gets involved in a divorce case and suddenly the County's brought in as part of the child custody with respect to an evaluation or something and the judge is following that, you can get that case overturned because the judge could be biased in looking at what the County did in deciding the custody situation. So you have all of these cases that can go in and get overturned at this particular point in time.
LESLIE: Let me ask you: You've been dealing with this for some time now, and I know you're always thinking ahead of what could happen. You're prepared for the hearing tomorrow. You've taken action here to try to head it off — your being incarcerated, if you possibly can. But what if — what if you're successful with your Federal complaint? How does this situation get reconciled? You said 1600 judges could be prosecuted. What would that mean?
RICHARD FINE: It's very simple because when you get down to the bottom line of things, solutions are very, very simple. Let's assume that 1,600 judges are prosecuted. These 1,600 judges either resign or they get impeached. Now, let's assume that they don't resign and they try and stay in office, and let's assume that the state legislature doesn't impeach them. So you now have 1,600 judges who are under indictment who stay in office. Every one of these judges is going to come up for re-election because the judges come up for re-election every six years. So they are rotating into re-election as of now. One thing that the public does: The public looks at the judge who's sitting in office, the public sees the judge is sitting in office — votes him out. So what would happen is that the only thing that would keep an illegal judge in is public apathy. Real simple. If the public is so lazy that they're going to let a judge who they know has taken bribes stay in office, then that judge is gonna stay in office. If the public decides, "Look, we don't want someone that's taken illegal money to be in office," they'll vote 'em out. That would take from now until six years from now dealing with any judge that got elected during the last election. So that would take you six years.
A more pro-active thing that could happen is that the legislature could go in and pass a bill saying that we want to have an emergency election, and every judge that has received money across the entire California system — Superior Court judges, Appellate Court judges who are elected every 12 years, and California Supreme Court judges, who are elected every 12 years — are now up for re-election. We could do that within 30 days. Because you have Superior Court judges. Anyone can run for office. On California's Appellate Court judges, you vote 'em "Yes" or "No." There's only one person on the ballot. So the guy's name is on the ballot. You either vote "Yes" to keep him or you vote "No" to get rid of him. California Supreme Court judge, exactly the same thing. "Yes" to keep 'em, "No" to get rid of 'em.
That would clean up the system. It would actually clean up that system within a 30-day period of time. Then what would take place as far as all the Superior Court judges are concerned, the 1,600, you would have new Superior Court judges that would be elected, and the only thing that you have left is, you would have the Court of Appeal justices and the Supreme Court justices where new appointments would have to be made. And those appointments would be sitting until the next election, normal election for that office. Now, the appointments would be made by the governor. The governor now has a problem because the governor isn't going to be able to appoint anyone who had received this money. They wouldn't be able to pass the scrutiny. So we would end up getting new Supreme Court justices who did not receive the money, and we would be getting Court of Appeal justices who did not receive the money. And we'd have a clean system.
LESLIE: Well, you are definitely doing what it takes to bring this to a head, but even almost — what — two, three weeks after this momentous bill passed giving the judges immunity, admitting that they're criminals and giving them immunity, nobody knows about it. Is the news media complicit in this?
RICHARD FINE: I think it's beginning to get to the news media now. I think what happened is that, number one, the news media first of all probably didn't understand it. That's probably the first thing. And second of all, by not understanding it, they didn't pick up on it. Now that it is beginning to get out, the media will start picking up on it and I have a very firm belief in the American news media. It's like — it's the pack method. Once it begins to get out, then the media will pick up on it because once one person starts publishing it, then the rest will publish it because they don't want to be behind it. Whether they were complicit or not, I don't know. I personally do not believe in conspiracy theories. And I don't believe in conspiracy theories because of the fact, first of all, it is very difficult to maintain a good conspiracy over a long period of time. Self-interest will destroy any conspiracy over any extensive period of time. And second of all, I believe in the "stupid theory," and that is that most people are just too dumb to be able to maintain a conspiracy. I mean, what you really have is, you have mistakes more than you have conspiracies. To put together a good conspiracy really takes a lot of effort, and I'll give you the example of OPEC.
There's no question OPEC is a conspiracy. None whatsoever. But the OPEC members cheat on each other every day of the week, so the only thing that keeps the OPEC crisis going is not the OPEC members. They go out and set their prices in Vienna all the time. They then cheat on their prices, and the only people that are keeping their prices going is the buyers. It's the fact that the buyers are willing to pay their prices that's keeping OPEC going. It's not the fact that the OPEC people are setting the prices and adhering to them. They're cheating on themselves. It's the fact that you've got Mobil and Exxon and these other people that are going in there, that are willing to pay the prices, that will keep the conspiracy going. And so it takes two types of people in order to keep a conspiracy going. It takes one, the people to be able to put the thing together; and second of all, it takes the second group of people to be able to go along with it. And so therefore, I don't think there is a, you know, a, quote "media conspiracy." There might — you know, you might have a certain amount of perceived fear, and I think that this exists in a lot of places. I think people perceive a fear and therefore are unwilling to do things. You'll — you can call it self-restraint, which is a nice way of putting it.
Copyright 2009, Full Disclosure Network
Tuesday, June 2, 2009
Another Irate Judge Loses Control in Response to Michael Scott Ioane
Another irate Judge loses control and issues bizarre, unfounded orders in response to Mike Ioane's exposure of the IRS. (Site here)
Learn more at www.truthinlaw.org.
Monday, June 1, 2009
T.C. Memo Regarding Michael Ioane, Petitioners' Brief
UNITED STATES TAX COURT
MICHAEL S. IOANE,
SHELLY J. OLSON-IOANE,
Petitioner, Docket Nos. 9903-06L
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent.
PETITIONERS’ TRIAL BRIEF
TABLE OF CONTENTS
INTRODUCTION...................................................................................................... 1
ISSUES TO BE DECIDED....................................................................................... 1
PROPOSED FINDINGS OF FACT............................................................................ 2
POINTS RELIED ON................................................................................................ 6
AUTHORITIES & ARGUMENT................................................................................... 8
1. Respondent’s ‘Unreported Income’ Claims Regarding The Income of Acacia Corporate Management, Inc, And Its Related Trusts, Are Barred By Res Judicata Or Collateral Estoppel Since A Bankruptcy Court Has Already Ruled That This Corporation (And Its Related Trust Entities) Is The ‘Nominee or Alter Ego of Gerald and Ona Lindsey’.................... 8
2. Respondent’s ‘Unreported Income’ Claims Are Barred By Res Judicata Or Collateral Estoppel Since It Already Assessed The Tax Against Other Various Entities On The Exact Same Income It Is Asserting As ‘Unreported Income’ to Petitioners.......................................... 11
3. Respondent’s Submission of Third-Party Tax Information Violates IRC §6103(a), And The Court Should Not Be A Party To Such Violations Of Law.......................................... 13
4. Respondent Had The Burden Of Proving Unreported Income And Tax Deficiencies, But Failed To Sustain That Burden................................................................................ 14
5. Respondent Did Not Sustain Its Burden of Production Showing Petitioners Are Liable for The Penalty(s) Under IRC §6651(a)(1)................................................................. 15
6. Respondent Did Not Sustain Its Burden of Production Showing Petitioner is Liable for The Penalty Under IRC §6654(a)......................................................................... 15
7. Petitioners Should Be Allowed All Denied Deductions Since Respondent Seized Petitioners Records And Has Refused to Return Them..................................................... 16
CONCLUSION....................................................................................................... 16
TABLE OF AUTHORITIES
CASES:
Bull v U.S., 295 U.S. 247 (1935)............................................................................ 11
Franchise Tax Board of California v. USPS, 467 U.S. 512 (1984)............................ 11
Helvering v Taylor, 293 U.S. 507 (1935)................................................................. 14
In re Los Gatos Lodge, Inc., 278 F.3d 890 (9th Cir. 2002)........................................ 10
In re Mason, 709 F.2d 1313 (9th Cir. 1983)............................................................. 10
In re Pardee, 193 F.3d 1083 (9th Cir. 1999)............................................................ 10
Karme v CIR, 673 F.2d 1062 (9th Cir 1982)............................................................. 14
Portillo v. C.I.R., 932 F.2d 1128 (5th Cir. 1991)....................................................... 14
Siegel v. the Federal Home Loan Mort. Corp., 143 F.3d 525 (9th Cir. 1998).............. 10
United States v. Philatelic Leasing, Ltd., 601 F.Supp. 1554 (S.D.N.Y. 1985)............. 16
Weimerskirch v. C.I.R., 596 F.2d 358 (9th Cir. 1979).............................................. 14
Williams v CIR, 123 TC 144 (2004)........................................................................ 15
STATUTES:
IRC §6103(a)........................................................................................................ 13
IRC §6651(a)(1).................................................................................................... 15
IRC §6654(a)........................................................................................................ 15
IRC §6654(d) ....................................................................................................... 15
IRC §7491(c)........................................................................................................ 15
OTHER AUTHORITIES:
Saltzman, IRS Practice And Procedure................................................................... 11
INTRODUCTION
This case involves asserted deficiencies and penalties for the following amounts and periods:
Year(s) Deficiency: §6651(a)(1) §6654
2002 $2,104,868 314,754.30 420,973.60
2003 $457,468 ------ 91,493.60
The basis for all these claims is Respondent’s assertion of unreported income that belongs to other entities, for which they filed tax returns claiming the income, and for which assessments have already been made against them. Trial of this case began on January 7, 2008 and concluded January 18, 2008 in Reno, Nevada before Judge Robert Wherry. Petitioner appeared in person. Respondent appeared through counsel, Wesley Wong and David Sorenson.
The evidence in this case consists of a stipulation of facts under Rule 91(f), admissions made by Respondent, and various testimony and exhibits admitted at trial.
ISSUES TO BE DECIDED
The following issues remain to be decided:
1 Whether Respondent’s ‘Unreported Income’ Claims Regarding The Income of Acacia Corporate Management, Inc, And Its Related Trust DBA’s, Are Barred By Res Judicata Or Collateral Estoppel Since A Bankruptcy Court Has Already Ruled That This Corporation Is The ‘Nominee or Alter Ego of Gerald and Ona Lindsey’.
2 Whether Respondent’s ‘Unreported Income’ Claims Are Barred By Res Judicata Or Collateral Estoppel Since It Has Already Assessed The Tax Against Other Various Entities On The Exact Same Income It Is Asserting As ‘Unreported Income’ to Petitioners.
3 Whether The Court Should Allow Respondent To Submit Evidence In Violation of IRC §6103(a).
4 Whether Respondent Sustained Its Burden of Proving Unreported Income, And Any Tax ‘Deficiency’.
5 Whether Respondent Sustained Its Burden of Production Showing Petitioners Are Liable For The Penalty(s) Under IRC §6651(a)(1).
6 Whether Respondent Sustained Its Burden of Production Showing Petitioners Are Liable For The Penalty(s) Under IRC §6654(a).
7 Whether Petitioners Should Be Allowed All Denied Deductions Since Respondent Seized Petitioners Records And Has Refused to Return Them.
PROPOSED FINDINGS OF FACT
1 Petitioners timely filed a tax return for the year 2002. (Stipulation, ¶3, Exh 3-J).
2 Petitioners timely filed a tax return for the year 2003. (Id, ¶4, Exh 4-J).
3 The ‘Notice of Deficiency’ in this case was issued from the Oakland, California office of the IRS dated March 1, 2006 for the years 2002-2003, and was addressed to Petitioners at their Nevada address. (Id ¶2, Exhibit 2-J).
4 The deficiency notice alleges that income belonging to the following entities is ‘unreported income’ of Petitioners for the years 2002 and 2003: Acacia Charitable Foundation, Charitable Scholarship Foundation, American Federal Trust, First Amendment Publishers. (Id).
5 The deficiency notice alleges that income belonging to the following entities is ‘unreported income’ of Petitioners for the year 2003: Acacia Corporate Management Inc, Paradise Solutions Trust. (Id).
6 According to the IRS’ own witness testimony, Acacia Corporate Management Inc had bank accounts which indicated it was ‘doing business as’ the following entities: Paradise Solutions Trust (Tr at 138:13-17); First Amendment Publishers Trust (Tr at 142:4-8); American Federal Trust (Tr 158:11-17); Acacia Charitable Foundation (Tr 160:1-4). All the various trust accounts were associated and created by the Acacia corporation. (Tr. 510:23 - 511:6).
7 Acacia Corporate Management Inc held and managed funds for other persons and entities, including the various trusts already mentioned in this case. (Tr. 510:2-5).
8 Respondent admits there is nothing in writing to indicate that Petitioners are the owners or have sole control over First Amendment Publishers Trust, Paradise Solutions Trust, or Acacia Corporate Management, Inc. It further admitted it had virtually no bank records concerning Paradise Solutions Trust. (Tr at 459-461). It also admitted it has no personal knowledge concerning any checks, bank statements, or signature cards. (Id at 463).
9 Although many of the checks Respondent presented were made payable to credit card companies, Respondent is not contending those cards were for the personal use of Petitioners. (Tr. 465:13-16). It has “no idea” what the payments to the credit card companies were for, and (because it lacks knowledge) is not contending any credit card charges were merely at the discretion of Petitioners. (Tr. 466:1-14).
10 Respondent has no knowledge of whether any of the exhibits concerning deposits were taxable income events, or whether they were loans, transfers, or merely reimbursements. (Tr. 472:12 - 473:12).
11 Respondent does not know what, if any, business was done by American Federal Trust, Paradise Solutions Trust, Acacia Church, or Acacia Charitable Foundation. (Tr at 482:19-21, 483:1-5).
12 Respondent’s stated reason for assigning all trust income to Petitioners, but disallowing any related trust expenses is because the trust income was not conceded by Petitioners as being their personal income. (Tr. 486:15-22; 489:11-15).
13 Petitioners did not prepare or sign any of the returns for any of the entities of which Respondent claims their income belongs to Petitioners. (Tr. 492:15-22).
14 Respondent has no knowledge of who the trust beneficiaries (owners) may be for any of the various trusts involved, or who any shareholder(s) may be for Acacia Corporate Management, Inc. (Tr. 501:2-8; 510:9-17).
15 During the entire course of this multi-day trial, Respondent failed to present any trust creation/indenture documents, or present any evidence that it even attempted to obtain any such documents. (Entire record). In fact, the auditing agent testified that he never even attempted to summon any such documents from any trustee, trust principals, or trust record custodian, and has never seen any trust documents. (Tr, 504:6-24).
16 Respondent never attempted to summon Petitioners for any information. (Tr. 503:23 - 504:1).
17 Respondent issued a deficiency notice to American Federal Trust for the same income that it claims as unreported income in the deficiency notice it issued to Petitioners. (Second Request For Admissions and Response thereto, ¶4).
18 Respondent assessed income tax against American Federal Trust for the same income that it claims as unreported income in the deficiency notice it issued to Petitioners. (Second Request For Admissions and Response thereto, ¶5).
19 Respondent issued a deficiency notice to First Amendment Publishers Trust for the same income that it claims as unreported income in the deficiency notice it issued to Petitioners. (Second Request For Admissions and Response thereto, ¶7).
20 Respondent assessed income tax against First Amendment Publishers Trust for the same income that it claims as unreported income in the deficiency notice it issued to Petitioners. (Second Request For Admissions and Response thereto, ¶8).
21 Respondent issued a deficiency notice to Acacia Corporate Management, Inc for the same income that it claims as unreported income in the deficiency notice it issued to Petitioners. (Second Request For Admissions and Response thereto, ¶10).
22 Respondent assessed income tax against Acacia Corporate Management, Inc for the same income that it claims as unreported income in the deficiency notice it issued to Petitioners. (Second Request For Admissions and Response thereto, ¶11).
23 Respondent issued a deficiency notice to Paradise Solutions Trust for the same income that it claims as unreported income in the deficiency notice it issued to Petitioners. (Second Request For Admissions and Response thereto, ¶13).
24 Respondent assessed income tax against Paradise Solutions Trust for the same income that it claims as unreported income in the deficiency notice it issued to Petitioners. (Second Request For Admissions and Response thereto, ¶14).
25 On July 30, 2004 the Bankruptcy Court for the District of Ohio entered an order which stated Acacia Corporate Management, Inc was the ‘nominee or alter ego of Debtors Gerald and Ona Lindsey’ exclusively. (Stip. ¶5, Exh. 5-J). No evidence was submitted to indicate this order was ever appealed or disturbed in any manner. (Entire record). Respondent was not only fully aware of this bankruptcy, but was directly involved in it. (Tr 512 -515).
26 Petitioners do not have possession of the records concerning claimed expenses/ deductions because the IRS seized them in a search warrant raid on June 8, 2006, and has refused to return them. (Tr at 54:16-24; p. 62-63; p. 70; p. 86-87).
27 Although Petitioners had the various trust documents in their possession which would show they do not own them, the IRS seized these documents as well on June 8, 2006, and has refused to return them. (Tr at 55:2-7).
28 All documents concerning the preparation of any Petitioner tax returns at issue were given to Mary Fuentes, a tax return preparer. (Tr p. 49 and 68).
29 The IRS agent/auditor in this case never made any inquiry regarding anything on the Petitioner’s returns, and only made requests for documents concerning other entities. (Tr at 88).
30 The IRS agent/auditor in this case never attempted to summon any records from Petitioners concerning their returns. (Tr, at 89).
31 All documents requested during the audit of Petitioners were supplied by both Fuentes and Petitioners. (Tr at 57-58; 63
32 For the year 2002, Petitioners made $12,133 in interest payments to the various other entities identified above.
POINTS RELIED ON
This is a case where Respondent recklessly accuses Petitioners of having unreported income from various entities, even though the income in question was (i) claimed by the various entities on their own returns, (ii) Respondent issued deficiency notices to those entities concerning the exact same income in question here, and (iii) Respondent has assessed the tax on the income in question here against all the other various entities.[1] These assessments are equivalent to judgments, and are binding. They are also subject to principles of res judicata and collateral estoppel against Respondent asserting the tax on the income in question could be owed by someone other than the assessed party. Nonetheless, apparently not satisfied with its assessments (for reasons remaining unknown to Petitioners), Respondent has greedily decided to also assert a deficiency claim against Petitioners based on its claim that the exact same income belonging to the entities somehow belongs to Petitioners. Again, this is even though it has already assessed the tax on the exact same income against the entities.
Respondent is also attempting to outright defy prior findings and orders from a bankruptcy court in 2004 concerning Acacia Corporate Management, Inc. That court held that corporation was solely and exclusively the ‘nominee or alter ego of Gerald and Ona Lindsey.’ Respondent also testified that all the various trust bank accounts involved in this case were dba’s of the corporation, and were created and managed by the corporation (which was involved in the bankruptcy proceeding). Despite this specific ruling of the bankruptcy court, as well as other ramifications of the bankruptcy proceeding, Respondent decided to nonetheless defiantly and groundlessly assert the 2002 and 2003 income of this company, and its related trusts, belongs to Petitioners. Since the bankruptcy court made no such finding, Respondent’s scurrilous claims are barred by res judicata and/or collateral estoppel. If Respondent wanted to make any such assertions, it would have been required to do so in the bankruptcy proceedings.
At trial, Respondent produced 35+ pounds of bank records that belong to the entities, not Petitioners. A few of the checks were signed by Petitioners in their official capacity for some of the entities. Although Respondent certainly had the power to do so, it never even attempted to obtain any trust indentures/documents which would show what sort of trusts were involved or who any grantor(s) might be. Nor did it attempt to obtain any corporate records which would show the owner(s) of Acacia Corporate Management, Inc. But for the icing on the cake, even though it knew of the bankruptcy court order concerning Acacia in 2004, it still decided to recklessly assert the corporate income somehow belongs to Petitioners (forcing both the Petitioners and this Court to waste their resources addressing this groundless claim). Respondent’s claims should be soundly rejected by this Court.
AUTHORITIES & ARGUMENT
1. Respondent’s ‘Unreported Income’ Claims Regarding The Income of Acacia Corporate Management, Inc, And Its Related Trusts, Are Barred By Res Judicata Or Collateral Estoppel Since A Bankruptcy Court Has Already Ruled That This Corporation (And Its Related Trust Entities) Is The ‘Nominee or Alter Ego of Gerald and Ona Lindsey’.
On July 30, 2004 the Bankruptcy Court for the District of Ohio entered an order which stated Acacia Corporate Management, Inc was the ‘nominee or alter ego of Debtors Gerald and Ona Lindsey’ exclusively. (Stip. ¶5, Exh. 5-J). It was also disclosed at trial that Acacia Corporate Management Inc held, created accounts for, and managed funds for other persons and entities, including the various trusts at issue in this case. Despite the fact that Respondent submitted no evidence to indicate this order was ever appealed or disturbed in any manner, it still recklessly asserts the 2002 and 2003 income of this corporation, and its related trust entities, somehow belongs to Petitioners. This is nothing short of absolute defiance of a court’s order, and the res judicata and estoppel effects therefrom. This is especially true for bankruptcy court proceedings.
As this Court will probably recognize, one of the purposes of a bankruptcy is to make a universal resolution of all issues concerning a bankruptcy petitioner/debtor and all its creditors. Because the government will always have tax claims to be handled, they will always be involved in anyone’s bankruptcy proceeding. Respondent admitted it not only had knowledge of the bankruptcy proceeding here, but was directly involved in it.
The bankruptcy proceeding involved Gerald and Ona Lindsey, Acacia Corporate Management, Inc, and Michael Ioane in July 2004 (a time-frame immediately following the 2002 and 2003 tax years at issue in this case). The bankruptcy court ruled that the corporation was the ‘nominee or alter ego of Gerald and Ona Lindsey’ exclusively. Since the corporation held, created accounts for, and managed funds for the various trusts at issue in this case, the bankruptcy court would have had to resolve any and all issues concerning the funds of any of the trusts, including who they may belong to. Respondent has failed to provide any explanation as to how this order would not have preclusive effects against its assertion that either the corporate income, or its related trust entity income, for the years at issue could belong to anyone else other than Gerald and Ona Lindsey.
The doctrine of res judicata applies to bankruptcy court rulings and orders. Siegel v. the Federal Home Loan Mort. Corp., 143 F.3d 525, 528 (9th Cir. 1998) (discussing application of res judicata to bankruptcy proceedings); In re Pardee, 193 F.3d 1083, 1086-87 (9th Cir. 1999) (discussing res judicata effect of plan confirmation in bankruptcy); In re Mason, 709 F.2d 1313, 1315-16 (9th Cir. 1983) (a bankruptcy adjudication is a judgment in rem, a conclusive determination of the debtor's status in bankruptcy, and res judicata.) It even applies to certain orders which would not even result in a final judgment. In re Los Gatos Lodge, Inc., 278 F.3d 890, 894 (9th Cir. 2002) (discussing bankruptcy court’s order disallowing a claim was res judicata as to whether the claim was ‘allowed’ or ‘disallowed’). There should be no doubt as to the res judicata effect of bankruptcy proceedings in general, or in this case.
Despite what should be the obvious res judicata effect of the bankruptcy court order on this case, Respondent nonetheless asserts that the income of Acacia Corporate Management, Inc (and its related trust dba’s) for 2002 and 2003 somehow belongs to Petitioners. This sort of claim would be barred by res judicata from the bankruptcy court order. It should be obvious that if anyone else had any interest in the corporation or its related trust dba’s, the bankruptcy court would have declared so. Since it did not, Respondent cannot now attempt to make arguments contrary to the bankruptcy court’s order. Moreover, because that order came from a bankruptcy court, and bankruptcy proceedings concern a universal resolution of all matters concerning creditors, property of the bankruptcy estate, and all those who may have any interest in it, the order is binding and conclusive on the parties to this case. Respondent’s claim that any of Acacia Corporate Management, Inc’s income could belong to Petitioners is simply barred by res judicata and/or collateral estoppel.
Petitioner also contend this same preclusion would apply to Respondent’s contention that the income of Paradise Solutions Trust, First Amendment Publishers Trust, American Federal Trust, and Acacia Charitable Foundation would be barred. According to Respondent’s own testimony, these entities were merely dba’s of Acacia Corporate Management, Inc. Since these entities were merely dba’s of a company who has already been adjudged in bankruptcy proceedings to be the nominee or alter ego of someone else, Respondent’s contention that the income of any of these entities could actually belong to Petitioners must be rejected out of hand.
2. Respondent’s ‘Unreported Income’ Claims Are Barred By Res Judicata Or Collateral Estoppel Since It Already Assessed The Tax Against Other Various Entities On The Exact Same Income It Is Asserting As ‘Unreported Income’ to Petitioners.
In addition to the above, Respondent’s own assessments against both the corporation and its related trust dba’s, would preclude it from making its claims against Petitioners. In Bull v U.S., 295 U.S. 247, 259 (1935) the Supreme Court held that once an assessment is made, it is “given the force of a judgment”. It conclusion has not changed since then. It stated the same thing in Franchise Tax Board of California v. USPS, 467 U.S. 512, 523-24 (1984) (the assessment is given the force of a judgment, citing Bull v U.S.). Also see Saltzman, IRS Practice And Procedure, ¶10.01 (assessment is formal recording of taxpayer liability; it divides examination and deficiency procedures from collection procedures). Once a judgment is made, it is conclusive as to the parties and issues adjudicated, and also creates res judicata and/or collateral estoppel effects as to the parties and issues. Given that tax assessments are equated with court judgments, they would have to include res judicata and/or collateral estoppel effects. This would mean that once an assessment is made, whoever it is made against is the one who actually owes the tax; no one else would owe it. Petitioners do not see how these properties of a judgment can be escaped for tax assessments when such assessments are equated with court judgments.[2]
In the instant case, Respondent has admitted that the tax on the exact same ‘unreported income’ that Respondent is asserting against Petitioners has already been assessed against the following entities: American Federal Trust, First Amendment Publishers Trust, Acacia Corporate Management, Inc., and Paradise Solutions Trust. Given this fact, Petitioners contend that Respondent cannot avoid the res judicata and/or estoppel effects of those assessments. The tax on the income in question has been adjudged (by Respondent itself) to be owed by and collectible from, someone else, not Petitioners.
Here, Respondent is apparently not just trying to double, triple, or even quadruple ‘dip’, but is apparently seeking a quintuple dip of tax against multiple parties based on the exact same income. Petitioners submit this is simply unprecedented. No such tax claims against multiple parties on the exact same income are authorized anywhere in the tax code. Petitioners have found no case where a tax deficiency claim against one party was ever sustained on the exact same income when the tax had already been assessed against another party. If this Court were to allow this, it would not only be unprecedented,[3] but highly questionable at best.
3. Respondent’s Submission of Third-Party Tax Information Violates IRC §6103(a), And The Court Should Not Be A Party To Such Violations Of Law.
Prior to the start of trial, Petitioner made a motion in limine to exclude any third-party tax information because to allow such would violate the tax information confidentiality provisions of 26 U.S.C. §6103(a), and the Court could be an unwitting accomplice in violating the law. (Tr at 30-32). The Court denied the motion, but appears to have skirted the issue by saying this was not an action under §6103, and that this statute is only aimed at individuals, not courts. During trial, Respondent submitted approximately 35 pounds of third-party tax information into evidence. Petitioner believes the Court should reconsider its ruling on the matter.
While it may be true that §6103 does not directly preclude the introduction of illegal disclosures by Respondent, it is also true that the Fourth Amendment does not directly preclude the introduction of illegally seized evidence. However, such evidence is excluded everyday of the week under the Fourth Amendment. To allow such evidence would foster and encourage government agents to disregard the law. Petitioners submit the prohibition of §6103 is no different. If courts decide to simply allow disclosures of information made in violation of §6103, the law will become virtually meaningless and encourage government agents to simply ignore it. The Court should not be an unwitting accomplice in illegal conduct by the government’s agents. For this reason, the Court should reconsider its ruling, exclude all third-party tax information from evidence, and order it to be sealed to prevent further disclosures due to the fact that those records are now ‘public records’ due to the Court’s own proceedings.
4. Respondent Had The Burden Of Proving Unreported Income And Tax Deficiencies, But Failed To Sustain That Burden
Respondent’s entire deficiency assertion is based on alleged unreported income. Respondent has the burden of proof, at least initially, with respect to claims of “unreported income”. Karme v CIR, 673 F.2d 1062, 1065 (9th Cir 1982), (“[w]hen the Commissioner attempts to include unreported income, the Commissioner should have the burden of proving his case ‘because the taxpayer may face practical difficulties in attempting to refute the Commissioner's assertion that the taxpayer received unreported income.’); Weimerskirch v. C.I.R., 596 F.2d 358 (9th Cir. 1979) (no presumption of correctness for "unreported income"); also see Portillo v. C.I.R., 932 F.2d 1128, 1134 (5th Cir. 1991) (presumption of correctness does not attach to notice of deficiency pertaining to "unreported income"). With this burden assignment, the burden is not on a taxpayer to show a correct amount of tax (if any). Helvering v Taylor, 293 U.S. 507, 515-516 (1935).
Petitioners submit Respondent failed to carry their burden of proof. As discussed already, their claims were barred by (i) a prior bankruptcy proceeding between the parties, and (ii) Respondent’s own assessments against other parties for the exact same income it claims belongs to Petitioners.
5. Respondent Did Not Sustain Its Burden of Production Showing Petitioners Are Liable for The Penalty(s) Under IRC §6651(a)(1).
Respondent’s deficiency notice also asserted a failure to file penalty under IRC §6651(a)(1). Pursuant to IRC §7491(c), the burden of production is on Respondent when any penalty is asserted. Williams v CIR, 123 TC 144, 152 (2004). Under §6651(a)(1), Respondent was required to produce evidence that (1) Petitioner failed to file a required return, (2) on the date prescribed, and (3) the failure was due to willful neglect and not reasonable cause. Respondent failed to produce any such evidence, and in fact, did not even attempt to address any of these elements. Respondent failed to produce any evidence on even the most fundamental element: failure to file any return. Without this, the penalty of course must fall on its face, and should be rejected for this reason alone. With this failure of evidence, of course, Respondent also failed to satisfy the other two required elements.
6. Respondent Did Not Sustain Its Burden of Production Showing Petitioner is Liable for The Penalty Under IRC §6654(a).
Similar to the above penalty, Respondent also failed to produce evidence in support of its IRC §6654(a) penalty for alleged failure to make estimated tax payments. Respondent failed to present any evidence whatever of any failure to pay any estimated tax at any time or for any period. Moreover, Respondent did not even present any evidence to show what any installment amount may have been. IRC §6654(d) states the installment amount must be computed based on either 90 percent of the tax shown on the return (or 90% of the tax if no return was filed), or 100 percent of the tax shown on the prior year return. As discussed above, however, Respondent presented no evidence of failure to file any returns, and its claims of the alleged unreported income are barred by res judicata.
7. Petitioners Should Be Allowed All Denied Deductions Since Respondent Seized Petitioners Records And Has Refused to Return Them.
At trial, Petitioner Michael Ioane testified without contradiction that the IRS had seized his records in a search/seizure raid which occurred on June 8, 2006, and has refused to return them.[4] Petitioners submit they simply cannot be compelled to satisfy an evidence burden when the opposing party takes sole possession of the records which might satisfy that burden and refuses to return/disclose them. Moreover, a well established principle of evidence should govern this situation: “a litigating party must‑‑of all persons‑‑be knowledgeable of the facts supporting its position, and if it falsifies ‑‑ or seeks to suppress relevant evidence, such conduct may be taken as an admission that the true facts would defeat the position the party is seeking to maintain.” United States v. Philatelic Leasing, Ltd., 601 F.Supp. 1554, at 1565‑66 (S.D.N.Y. 1985).
Here, Respondent seized the relevant records pertaining to Petitioners’ deduction claims, and in effect is suppressing them by refusing to return them to Petitioners (or disclose them to anyone). Respondent’s actions should be taken as an indication that the relevant records would not be favorable to Respondent if they were disclosed.[5]
CONCLUSION
For the foregoing reasons, Respondent’s determinations should be rejected in full, and a decision entered that no deficiency exists and no penalties are owed. The Court should also consider imposing a sanction against Respondent for its reckless claims which have caused everyone involved to waste their time and resources addressing its claims that were made in contradiction to the ruling of a bankruptcy court, and in contradiction to the assessments that Respondent already made against others for the same tax.
Date: April 7, 2008 Submitted by,
___________________________
Michael Ioane, Petitioner
CERTIFICATE OF SERVICE
It is hereby certified that a copy of the foregoing document was served on respondent by mailing the same on the below date in a postage paid envelope addressed as follows:
INTERNAL REVENUE SERVICE
Attn: Wesley Wong
110 City Parkway, Suite 301
Las Vegas, NV 89106
Date: April 7, 2008 By:______________________________
[1] Even assuming Respondent’s assertion of Petitioner’s ‘ownership’ of these entities to be true, since the entities have been assessed, then, as alleged owners of these entities, how could Petitioners have not also been already assessed the taxes in question via assessments against the entities??
[2] As discussed by Saltzman, the making of an assessment is a very distinct and separate process from making deficiency determinations. Although deficiency determinations may be subject to claims against multiple parties, this would be impossible for income tax assessments because of their ‘judgment’ nature, and because the tax is only imposed on an income transaction once, not multiple times.
[3] Although Petitioners attempted to bring this issue to the Court’s attention before trial, the Court said the IRS ‘does this all the time’. However, Petitioners have been unable to find any case where an income tax that has already been assessed against one party was allowed to be asserted as a deficiency (and later assessed) against yet another party.
[4] The Court is requested to take judicial notice of the search raid warrant and inventory, attached as exhibits to this brief.
[5] At trial Petitioner testified about a ‘casualty loss’ of $49,586,059. (Tr. 50-51). Respondent incorrectly later referred to this as a ‘net operating loss’ (NOL). It was not any NOL. In any event, it may be irrelevant to any deficiency determination since it had no effect in determining any deficiency claim made by Respondent.
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