Opinion
20894-19 6791-20 10830-20 17749-21 17771-21
10-04-2023
NOEL M. PARDUCCI & KENNETH L. PARDUCCI, ET AL., Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
RONALD L. BUCH JUDGE.
This case is calendared for trial on December 4, 2023, in Reno, Nevada. On September 18, 2023, the Commissioner filed a Motion to Enforce Subpoenas to David Kassler and Pacific West Finance and Development Co. (Pacific West). Neither Mr. Kassler nor Pacific West have filed motions to modify or quash per Rule 147(d)(3). We will grant the Commissioner's motion.
Background
The Commissioner issued subpoenas duces tecum to David Kassler and Pacific West. These subpoenas sought documents and correspondence related to their dealings with Dennis Simpson, one of the petitioners in these cases, any person acting on behalf of Mr. Simpson, and any entity that Mr. Simpson had an interest in. Specifically, the documents sought through the subpoena relate to the issues of (1) whether Mr. Simpson and his trust, Scenic Trust, are liable for the civil fraud penalty under section 6663, and (2) whether Mr. Simpson is liable for fraudulently failing to file an income tax return for taxable year 2013 under section 6651(f).
The Commissioner subpoenaed documents from Mr. Kassler but found his response lacking. Mr. Kassler, through counsel, sent 130 documents to the Commissioner. The Commissioner did not find the 130 documents provided sufficiently reflective of the "deep business relationship" that Mr. Simpson described having with Mr. Kassler during his deposition.
The Commissioner attempted to reconcile this shortfall by scheduling to meet and confer, but Mr. Kassler did not oblige. John Kirby, counsel to Mr. Kassler and Pacific West, informed the Commissioner that Mr. Kassler deemed the response to be sufficient. Mr. Kirby further informed the Commissioner that Mr. Kassler's document retention policy only required that he retain documents for three years. Notwithstanding this policy, some of the documents provided by Mr. Kassler bore dates of 2016 and related to a transaction in 2016, among other things. (We further note, the question when responding to a request for documents is what is in the responding party's possession, custody, or control, regardless of what any document retention policy might be.)
The Commissioner then issued a subpoena to Pacific West but received no response. The Commissioner soon discovered the CEO, CFO, Director, and Secretary of this company were Mr. Kassler. Further, Mr. Kirby informed the Commissioner that Mr. Kassler would be hospitalized until September 25, 2023. The Commissioner subsequently filed a motion to enforce the subpoenas.
Discussion
Per Rule 147, the Commissioner seeks an Order enforcing the subpoena served on David Kassler on July 13, 2023, and Pacific West Finance and Development Co. on August 2, 2023. Rule 147 states that a party may use a subpoena to direct a third party to give testimony at trial and to "command each person to whom it is directed [ . . . ] produce designated documents, electronically stored information, or tangible things in that person's possession, custody or control." Rule 147(a)(1)(A)(iii), (B). Individuals served with such a subpoena must comply with its commands. Estate of Nail v. Commissioner, 59 T.C. 187, 189 (1972) (citing Blair v. Oesterlein Co., 275 U.S. 220 (1927)).
However, upon motion, the Court may quash or modify the subpoena if it imposes an "undue burden," meaning a burden that outweighs the value of the subpoenaed information to the serving party. See Amazon.com, Inc. v. Commissioner, T.C. Memo. 2014-245, at *8-9; Rule 147(b). This power is left up to the discretion of the Court. Id. at 8; Grandbouche v. Commissioner, 99 T.C. 604, 617 (1992). Given Mr. Kassler and Pacific West Finance and Development Co.'s business relationship with Mr. Simpson and Scenic Trust, the documents sought by the Commissioner are discoverable. And no one has filed a motion to quash or modify the Commissioner's subpoenas. Therefore, we may grant the Commissioner's Motion to enforce the subpoenas.
To reflect the foregoing, it is
ORDERED that the Commissioner's Motion to Enforce Subpoena is granted in that Mr. Kassler and Pacific West Finance and Development Co. shall respond to their respective subpoenas by October 27, 2023. It is further
ORDERED that, in addition to regular service, the Clerk shall serve a copy of this order on Mr. Kirby at the following address: John Kirby, 401 West A Street, Suite 1150, San Diego, CA 92101.