Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

United States v. Joel

United States District Court, W.D. Kentucky, Louisville Division

October 18, 2018

UNITED STATES OF AMERICA PLAINTIFF
v.
LARRY H. JOEL, ET AL. DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          JOSEPH H. MCKINLEY, JR., CHIEF JUDGE

         This matter is before the Court on a motion by Defendant, Larry H. Joel, to dismiss all claims [DN 43], on a cross-motion by Plaintiff, the United States of America, for summary judgment [DN 44], and on a motion by Plaintiff, the United States of America, to amend the complaint [DN 75]. Fully briefed, these matters are ripe for decision.

         I. BACKGROUND

         This matter arises out of an action filed by Plaintiff, the United States of America, seeking to reduce to judgment certain unpaid income taxes and related penalties assessed against Defendant, Larry H. Joel (hereinafter “Joel”), for tax years, 1991, 1993, and 1994, and seeking to enforce a nominee/alter ego tax lien for those taxes and penalties against real property owned by an irrevocable trust - the CTJ Trust. Internal Revenue Service Account Transcripts of Joel reflect the following assessments for unpaid federal income taxes, penalties, and interest calculated as of May 6, 2013: (1) Tax Year 1991: $4, 051, 614 (fraud penalty); (2) Tax Year 1993: $105, 905.34; (3) Tax Year 1994: $78, 597.09. (Kevin Kuhner Decl. ¶ 6.) Pursuant to these assessments, Kevin Kuhner, revenue officer with the Internal Revenue Service, avers that Joel is indebted to the United States in the amount of $4, 236, 116 as of May 6, 2013, plus statutory additions that will continue to accrue until the outstanding balances are fully paid. In an effort to recover the unpaid taxes, the United States filed a lien against real property known as the Champion Lakes Court residence in Jefferson County, Kentucky. The deed reflects that the property is held in the name of L. Gregory Yopp, Trustee of the CTJ Trust.

         On August 26, 2015, Joel filed a motion to dismiss all claims. On September 21, 2015, the United States responded to the motion to dismiss and filed a cross-motion for summary judgment. On September 24, 2015, the Magistrate Judge granted the United States' motion to add WWWM, LLC as a defendant in the action. On November 16, 2015, the case was stayed in order for the parties to engage in settlement negotiations. Because the parties have been unable to resolve their dispute, the Magistrate Judge reinstated the parties' dispositive motions in July of 2018, ordered the United States to serve Defendant WWWM, LLC, and ordered the United States to file a reply to its pending motion for summary judgment. On September 14, 2018, the United States filed a reply in support of its cross-motion for summary judgment. On that same date, the United States moved to amend its complaint to add Defendant WWWM, LLC pursuant to the Magistrate Judge's order of September 24, 2015. No. response was filed by the original Defendants.

         II. STANDARD OF REVIEW

         A. Motion to Dismiss

         Upon a motion to dismiss for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6), a court “must construe the complaint in the light most favorable to plaintiff, ” League of United Latin Am. Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007) (citation omitted), “accept all well-pled factual allegations as true[, ]” Id., and determine whether the “complaint states a plausible claim for relief[, ]” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). Under this standard, the plaintiff must provide the grounds for his or her entitlement to relief which “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A plaintiff satisfies this standard only when he or she “pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. A complaint falls short if it pleads facts “merely consistent with a defendant's liability” or if the alleged facts do not “permit the court to infer more than the mere possibility of misconduct.” Id. at 678, 679. Instead, the allegations must “‘show[ ] that the pleader is entitled to relief.'” Id. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).

         B. Motion for Summary Judgment

         Before the Court may grant a motion for summary judgment, it must find that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving party bears the initial burden of specifying the basis for its motion and identifying that portion of the record that demonstrates the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Once the moving party satisfies this burden, the non-moving party thereafter must produce specific facts demonstrating a genuine issue of fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).

         Although the Court must review the evidence in the light most favorable to the non-moving party, the non-moving party must do more than merely show that there is some “metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Instead, the Federal Rules of Civil Procedure require the non-moving party to present specific facts showing that a genuine factual issue exists by “citing to particular parts of materials in the record” or by “showing that the materials cited do not establish the absence . . . of a genuine dispute[.]” Fed.R.Civ.P. 56(c)(1). “The mere existence of a scintilla of evidence in support of the [non-moving party's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [non-moving party].” Anderson, 477 U.S. at 252.

         III. DISCUSSION

         Joel moves to dismiss all claims asserted by the United States under Fed.R.Civ.P. 12(b)(6) on grounds that the statute of limitations established under 26 U.S.C. § 6502 for collection of the taxes and penalties expired before the United States filed its complaint in this action, and the claims are now time-barred. The United States filed a response to the motion to dismiss and a cross-motion for summary judgment arguing that it had demonstrated that (1) Joel is indebted to the United States for a fraud penalty and unpaid federal income taxes, penalties, and interest in the amount of $4, 236, 166, as of May 6, 2013; (2) CTJ Trust is a sham trust and the alter ego or nominee of Joel and, as such, the federal tax liens attach to Joel's interest in real property located at Champion Lakes Court, Louisville, Kentucky; and (3) the United States' claims are not time-barred. A brief review of the various actions related to Joel's tax liability is helpful in understanding the arguments of the parties.

         A. Background of Civil and Criminal Actions

         1. Tax Assessments and Fraud Penalty

         On April 20, 1998, the United States assessed a fraud penalty against Joel for the 1991 tax year in the amount of $1, 675, 322, based on its contention that Joel owed more than $13 million in income tax for tax year 1991, rather than the $7 million he reported, and that he evaded paying that tax obligation. (Compl. at ¶ 13.) On February 15, 1999, the United States then assessed federal income tax and statutory additions against Joel in the amount of $74, 038.87 for tax year 1993 and $43, 745.66 for tax year 1994. (Compl. at ¶ 22.)

         2. Bankruptcy and Criminal Action

         On November 8, 2001, Joel filed a chapter 7 bankruptcy petition in the United States Bankruptcy Court for the Western District of Kentucky. See In re Joel, No. 01-36710 (Bankr. W.D. Ky. filed Nov. 8, 2001). On February 7, 2002, Joel received his chapter 7 bankruptcy discharge. (Compl. at ¶¶15-16.) The trustee commenced an adversary proceeding on January 29, 2003, in Joel's bankruptcy case seeking to revoke Joel's discharge alleging that Joel failed to list assets on his bankruptcy schedules and that he failed to surrender assets to the chapter 7 trustee. See In re Joel, No. 3:07CV-00446-CRS, DN 11 (W.D. Ky. filed 2007).

         On January 4, 2005, Joel was indicted in the United States District Court for the Western District of Kentucky under 26 U.S.C. § 7201 for evading his obligations to pay federal income tax for tax years 1991 through 1994. See United States v. Joel, No. 3:05-CR-00010-CRS (W.D. Ky. filed Jan. 4, 2005). (Compl. at ¶ 17.) On February 2, 2007, Joel pleaded guilty to Counts 1 and 6 of the Superseding Indictment for evasion of payment of taxes and conspiracy to defraud the United States. Specifically Count 1, Attempt to Evade and Defeat the Payment of Tax, charged that “[Joel] did willfully attempt to evade and defeat the payment of a large part of the income tax due and owing by him to the United States of America, for the calendar years 1991 through 1994; in the approximate amount of $2, 412, 682, by committing the following acts of evasion” including using two purported trusts, “A.J. Trust” and “C.J. Trust, ” to conceal “his ownership and control of numerous assets, including, but not limited to, . . . real estate . . . .” United States v. Joel, No. 3:05-CR-00010-CRS, DN 42 at 6-7 (W.D. Ky. filed Jan. 4, 2005). In the factual basis for the plea, the parties agreed that the majority of the taxes arose from Joel's failure to report approximately $7, 750, 000 that he received as a “consulting agreement” from Pearl Vision when it purchased a business partially owned by him in 1991. United States v. Joel, No. 3:05-CR-00010-CRS, DN 97 at 2 (W.D. Ky. Feb. 2, 2007). The parties further agreed that “[t]he remainder of the tax due and owing is from I.R.S. adjustments related to tax years 1992 through 1994. For those years, the I.R.S. disallowed losses claimed by Joel in those years.” Id.

         On June 20, 2007, after Joel pleaded guilty in the criminal action, the Bankruptcy Court found that Joel had committed perjury in the bankruptcy proceeding, revoked the discharge order it had issued, and dismissed the taxpayer's bankruptcy proceeding with prejudice. In re Joel, Case No. 01-36710 at ¶ 84. On appeal, the District Court upheld the Bankruptcy Court's decision finding:

In connection with his bankruptcy case, Joel stated that he settled two trusts for the benefit of his children and denied ownership of the assets in the trust. However, in the guilty plea entered in the criminal action against him, Joel admitted that he actually owned and controlled a No. of assets in the trusts and that he “hid his ownership and control over [the] assets through the use of [the] sham trusts.” Joel failed to list these assets on his bankruptcy schedules. . . . The Bankruptcy Court did not err in inferring that Joel acted fraudulently based on his denial of ownership of the assets in the “sham trusts” and failure to disclose those assets on his bankruptcy schedules. Such fraudulent conduct justifies a denial of his discharge under 11 U.S.C. § 727.

In re Joel, No. 3:07CV-00446-CRS, DN 11 at 2-3.

         3. Civil Forfeiture Action

         In 2006, the United States filed a forfeiture action that named the property located at Champion Lakes Court as a defendant, as well as other personal property. See United States of America v. One Tract of Land, 3:06CV-00079-JGH (W.D. Ky. filed 2006). The United States later moved to dismiss the real property from the forfeiture action noting that the property was subject to an IRS civil collection activity as well. On November 16, 2009, the Court dismissed the real property located at Champion Lakes Court from the action noting that “the dismissal of the real property from this action does not affect the collection of taxes or enforcement of tax liens, including but not limited to whatever IRS collection procedures may be instituted.” United States of America v. One Tract of Land, 3:06CV-00079-JGH at ¶ 82.

         4. Second Bankruptcy Proceeding

         Joel filed a second chapter 7 bankruptcy petition in 2011. See In re: Larry H. Joel, No. 11-32009 (Bankr. W.D. Ky. filed 2011). The Bankruptcy Court entered a discharge order on March 13, 2012. The United States initiated an adversary proceeding challenging the discharge. The Bankruptcy Court entered a default judgment excepting the taxpayer's liabilities for federal income tax, penalties, and interest for the tax years 1991, 1993, 1994, and 1999 through 2008 from discharge. United States of America v. Larry H. Joel, No. 12-ap-3025, DN 12 (Bankr. W.D. Ky. filed 2012).

         5. Civil Action for Unpaid Taxes

         On November 7, 2013, the United States filed this action seeking (a) to reduce to judgment the tax penalties and assessments it asserts against Joel for tax years 1991, 1993, and 1994 and (b) to foreclose corresponding federal tax liens against the real property located at Champion Lakes Court. As of the date of the complaint, the United States alleges that Joel owes $4, 051, 614 for the ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.