Originally Published on forbes.com on July 10th, 2011
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Rodrigo Gaona and Albert Kennedy along with George Forero founded a company called MS Patrol. Begining in 2000 the company stopped paying over tax withholdings. Mr. Ganoa was aware of the situation, but Mr. Kennedy was not until sometime in 2003 or 2004. At that point, they hired American Tax Relief. That didn’t work out so well. Apparently Mr. Forero’s failure to filed an individual return was a factor in not being able to resolve the situation. They then called inRoni Deutch, the famous Tax Lady. Alas she was no help either. They finally closed the business in 2006 without ever paying the taxes.
Recently they found themselves in Federal Court. The Government asserts that Kennedy owes a total of $326,101.01 plus interest and statutory additions, and that Gaona owes a total of $381,230.72 plus interest and statutory additions. The Government also seeks a ten percent surcharge for the cost of litigation …..
The theory is that even though the tax payments are an obligation of the company, Mr. Gaona and Mr. Kennedy are “responsible persons”:
Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over…
Mr. Gaona did not put up much of defense, but Mr. Kennedy argued strenuously against being considered a responsible person:
To dispute his responsible person status, Kennedy relies on the fact that he owned only 5% of the company’s stock, as compared to Gaona and Forero who each owned 47.5%. However, the government has presented evidence to suggest that Kennedy may have owned 33% of the stock, rather than only the 5% that he claimed. Kennedy also argues that he was Vice President of Marketing for M.S. Patrol, responsible for managing business and getting clients, whereas Gaona was President and Treasurer and had responsibility for financial matters. In his sur-reply, Kennedy also argues that Gaona “kept the financial documents of M.S. Patrol under lock and key during the periods at issue in this case,” and thus Kennedy had no physical access to M.S. Patrol’s financial documents, no ability to determine who its creditors were, and nodirect access to company checks without Gaona’s permission.
Gaona testified that the company’s financial records were kept “under lock and key,” but Gaona did not know whether Kennedy had the key to access them, or whether Kennedy had access to the key which was kept in a desk in the corporate office space. He further testified, however, that Kennedy had a key to Gaona’s desk where the company’s checks were kept, and on occasion Gaona would unlock the desk to get a check for Kennedy. On other occasions Kennedy would tell Gaona that he needed a check, Gaona would say okay, and Kennedy would get it.
It turned out that Mr. Kennedy signed several of the payroll tax returns. He also signed some payroll checks knowing that unpaid taxes were outstanding. So he too was found to be a “responsible person.”
The Tax Lady was not there for them when the decision was handed down. Roni Deutch, the Tax Lady (or perhaps Former Tax Lady) is no longer practicing law according to a post by Joe Kristan
