Opinion
Docket No. 000188-2003
02-12-2013
Re: John J. Tredy v. Director, Division of Taxation
John J. Tredy Ringwood, New Jersey Jill C. McNally Deputy Attorney General Division of Law R.J. Hughes Justice Complex
NOT FOR PUBLICATION WITHOUT APPROVAL OF
THE TAX COURT COMMITTEE ON OPINIONS
Patrick DeAlmeida
Presiding Judge
John J. Tredy
Ringwood, New Jersey
Jill C. McNally
Deputy Attorney General
Division of Law
R.J. Hughes Justice Complex
Dear Mr. Tredy and DAG McNally:
This letter constitutes the court's opinion granting the Director, Division of Taxation's motion for partial summary judgment in the above-referenced matter. For the reasons explained more fully below, the court concludes that plaintiff is a responsible officer of T&S Tire Service, Inc. and is, therefore, responsible for the company's outstanding tax liabilities memorialized in the Director's November 4, 2002 final determination. The question of whether the statute of limitation bars any of the assessments the Director seeks to enforce against plaintiff is not addressed in this opinion.
I. Findings of Fact and Procedural History
This letter opinion sets forth the court's findings of fact and conclusions of law on defendant's motion for summary judgment. R. 1:7-4. The following findings of fact are based on the certifications and exhibits submitted on the motion.
During the period January 1979 through September 2000, plaintiff John J. Tredy was the Controller of T&S Tire, Inc. ("T&S"), a New Jersey corporation headquartered in Saddle Brook. The company, an authorized representative of Goodyear Tire & Rubber Company merchandise, operated retail tire and car repair stores in Carlstadt and Wayne under the trade name Bergen Tire Company.
It is undisputed that over an extended period of time T&S Tire, Inc., through Bergen Tire Company, collected sales and use tax and motor fuels tax from customers and failed to remit those taxes to the Director, Division of Taxation. In addition, the company withheld gross income tax from the paychecks of its employees and failed to remit the withheld taxes to the Director. As a result of this illegal activity, plaintiff was charged with criminal acts.
On October 1, 2002, plaintiff was indicted by the State Grand Jury on eight counts. Count Two of the Indictment (Purposely Failing to Turn Over Sales Taxes - Second Degree) alleged that between on or about July 1, 1997 and on or about August 31, 2000, plaintiff "having collected sales taxes in an amount of $75,000 or more as required by the tax laws of this State, did purposely fail to turn over the same to the Director of Taxation in the manner and at the time prescribed by law . . . ."
Count Three of the Indictment (Purposely Failing to Turn Over Employee Withholding -Third Degree) alleges that on or about July 1, 1997 and on or about August 31, 2000, plaintiff "having withheld employees (sic) gross income taxes as required by the tax laws of this State, did purposely fail to turn over the same to the Director of Taxation in the manner and at the time prescribed by law . . . ."
Count Four of the Indictment (Misapplication of Entrusted Property - Second Degree) alleges that between on or about July 1, 1994 and on or about August 31, 2000 plaintiff "did dispose of property withheld for the benefit of the government of this State, that is, collected sales taxes in an amount in excess of $75,000, in a manner [plaintiff] then knew was unlawful and involved a substantial risk of loss or detriment to the State of the said taxes . . . ."
Count Five of the Indictment (Misapplication of Entrusted Property - Second Degree) alleges that between on or about January 1, 1994 and on or about August 31, 2000, plaintiff "did dispose of property withheld for the benefit of the government of this State, that is, withheld employee gross income taxes in an amount in excess of $75,000, in a manner [plaintiff] then knew was unlawful and involved substantial risk of loss or detriment to the State of the said taxes . . . ."
The remaining counts of the Indictment alleged that plaintiff bribed a Division of Taxation investigator to influence the performance of his official duties and engaged in theft by deception by creating unauthorized credit card billings on customer accounts. All of the allegations set forth in the Indictment concern plaintiff's acts as Controller of T&S.
On November 4, 2002, shortly after issuance of the Indictment, the Director, Division of Taxation issued a final determination finding plaintiff to be a responsible officer of T&S and, as a result, personally liability for the taxes collected by the company but not remitted to the Director. At the time, the outstanding tax liabilities, with penalties and interest, were calculated to be $2,694,055. The final determination concerned sales and use taxes for the period 1987 through 2000; sale and use taxes (motor fuels taxes) for the period 1993 through 1995, and gross income tax - employer withholdings for the period 1990 through 1999.
On January 30, 2003, plaintiff filed a Complaint in this court challenging the Director's final determination.
On June 4, 2003, plaintiff pleaded guilty in the Superior Court to Counts Four and Five of the Indictment alleging misapplication of taxes collected by T&S. Plaintiff also pleaded guilty to Count One of the Indictment alleging credit card fraud. In his plea allocution plaintiff admitted under oath that as the Controller of T&S, trading as Bergen Tire Company, he collected taxes from customers and employees and failed to remit those taxes to the Director:
[COUNSEL]: With respect to count four, between January 1, 1994, and August 31, 2000; were you employed by Bergen Tire Company as the comptroller?
[MR. TREDY]: Yes.
[COUNSEL]: And did, um, - were - was certain amounts of money, uh, for - collected for sales taxes, that exceeded the sum of $75,000, by Bergen Tire Company?
[MR. TREDY]: Yes.
[COUNSEL]: And, did - did you know that this money, uh, belonged to or, uh, was obligated to be paid to the State of New Jersey?
[MR. TREDY]: Yes.
[COUNSEL]: And did you, uh, dispose of the money for other purposes and not remit the money to the State of New Jersey?
[MR. TREDY]: Yes.
* * *
[COUNSEL]: With respect to count five, between January 1, 1994, and August 31, 2000; were you employed as the comptroller of Bergen Tire?
[MR. TREDY]: Yes.
[COUNSEL]: And, were certain employee gross income taxes withheld, in an amount in excess of $75,000?
[MR. TREDY]: Yes.
[COUNSEL]: And, did you know that this money, belonged to, or should have been remitted to the State of New Jersey?
[MR. TREDY]: Yes.
[COUNSEL]: And, was the withheld money used for - purposes other than remitting, of said money, to the State of New Jersey?
[MR. TREDY]: Yes.
* * *
[DAG PORTER]: And, just on - on both of the tax issues, you knew it was unlawful when you dealt with the money, as you did; is that correct, Mr. Tredy?
[MR. TREDY]: Yes.
During the plea allocution proceeding, the Superior Court expressly noted that the plea agreement did not erase plaintiff's civil liability for the taxes associated with his criminal conduct. The court and counsel discussed on the record plaintiff's pending Tax Court action:
[DAG PORTER]: Mr. Tredy currently has an appeal pending in the, um, -- with regard to a civil tax liability, in connection with his employment at Bergen Tire.
I have spoken with the New Jersey Division of Taxation, they have, uh, expressed the desire to litigate that, and, umm, agree that there's no need, in this case, for there to be a restitutionary component, uh, of this plea.
* * *
[THE COURT:] Let me get this straight. There is still a possible liability for Mr. Tredy, for the taxes owed, but that would be a civil matter. And in no way, they are extinguished or wiped out by this plea.
[DAG PORTER]: Correct, Your Honor. N - in no way affected - that - that civil appeal, by Mr. Tredy, umm, will not be affected by this plea; it's my understanding. Uh, the - the amounts of that, that he will be free to litigate that appeal, as will the New Jersey Division of Taxation. And that's why we have carved out from this plea agreement, any restitutionary component.
* * *
[THE COURT]: You understand, you will have a record as a convicted felon, as a result of this plea.
[MR. TREDY]: Yes.
[THE COURT]: And you're still responsible to pay back restitution, not by way of this plea, but by a civil judgment, if you are not success (sic) with that matter.
[MR. TREDY]: Yes.
[THE COURT]: This does not wipe out any obligations that you may have, as a result, of any civil suit.
[MR. TREDY]: Yes.
Plaintiff was subsequently sentenced to four years in the custody of the Commissioner of the Department of Corrections. The Tax Court proceeding was stayed during plaintiff's incarceration. After plaintiff's release from prison, the Tax Court action was returned to active list.
After the close of discovery, the Director moved pursuant to R. 4:46-2 for summary judgment. The Director seeks an Order affirming his November 2, 2002 final determination finding plaintiff to be a responsible officer of T&S.
Plaintiff opposed the motion. He argues that he is not a responsible officer of T&S. Plaintiff also argues that a portion of the Director's assessment is barred by the statute of limitations. The court converted defendant's motion into a request for partial summary judgment on the question of plaintiff's responsible officer status. The statute of limitation question will be decided separately.
II. Conclusions of Law
Summary judgment should be granted where the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law. R. 4:46-2 (c). In Brill v. Guardian Life Ins. Co. of Amer., 142 N.J. 520, 523 (1995), our Supreme Court established the standard for summary judgment as follows:
[W]hen deciding a motion for summary judgment under Rule 4:46-2, the determination whether there exists a genuine issue with respect to a material fact challenged requires the motion judge to consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party in consideration of the applicable evidentiary standard, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party.
In addition, the court's analysis is influenced by the familiar principle that the Director's interpretation of tax statutes is entitled to a presumption of validity. "Courts have recognized the Director's expertise in the highly specialized and technical area of taxation." Aetna Burglar & Fire Alarm Co. v. Director, Div. of Taxation, 16 N.J. Tax 584, 589 (Tax 1997)(citing Metromedia, Inc v. Director, Div. of Taxation, 97 N.J. 313, 327 (1984)). The scope of judicial review of the Director's decision with respect to the imposition of a tax "is limited." Quest Diagnostics, Inc. v. Director, Div. of Taxation, 387 N.J. Super. 104, 109 (App. Div.), certif. denied, 188 N.J. 577 (2006). The Supreme Court has directed the courts to accord "great respect" to the Director's application of tax statutes, "so long as it is not plainly unreasonable." Metromedia, supra, 97 N.J. at 327. See also GE Solid State, Inc. v. Director, Div. of Taxation, 132 N.J. 298, 306 (1993)("Generally, courts accord substantial deference to the interpretation an agency gives to a statute that the agency is charged with enforcing.")(citations omitted).
"When an administrative agency interprets and applies a statute it is charged with administering in a manner that is reasonable, not arbitrary or capricious, and not contrary to the evident purpose of the statute, that interpretation should be upheld, irrespective of how the forum court would interpret the same statute in the absence of regulatory history." Blecker v. State, 323 N.J. Super. 434, 442 (App. Div. 1999). "[C]ourts are not free to substitute their judgment as to the wisdom of a particular administrative action for that of the agency so long as that action is statutorily authorized and not otherwise defective because arbitrary or unreasonable." Sutton Warehousing, Inc. v. Director, Div. of Taxation, 290 N.J. Super. 686, 697 (App. Div. 1996)(quotations omitted). "However, despite that deference, an administrative agency's interpretation will not be followed when the agency extends a statute 'to give it a greater effect than its language permits.'" Oberhand v. Director, Div. of Taxation, 193 N.J. 558, 568 (2008)(quoting GE Solid State, supra, 132 N.J. at 306).
The court finds that plaintiff raised no genuine issues of material fact that would preclude the court from deciding the legal question of whether plaintiff is a responsible officer of T&S.
The Legislature has provided that an entity's corporate officers and employees will have personal liability for the entity's outstanding tax obligations in defined circumstances. According to N.J.S.A. 54:32B-2(w), a "person required to collect" sales tax includes "any officer or employee of a corporation or of a dissolved corporation who as such officer or employee is under a duty to act for such corporation in complying with any requirement of" the Sales and Use Tax Act. The personal liability of persons required to collect sales tax is established in N.J.S.A. 54:32B-14(a). That statute provides "[e]very person required to collect any tax imposed by this act shall be personally liable for the tax imposed, collected or required to be collected under this act."
N.J.S.A. 54A:9-6(g), a provision of the Gross Income Tax Act, establishes the penalty for failure to remit withheld taxes to the Director:
[a]ny person required to collect, truthfully account for, and pay over the tax imposed by this act 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 the 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 tax evaded, or not collected, or not accounted for and paid over.N.J.S.A. 54A:9-6(l) provides that purposes of subsection (g) of the statute, "the term person or employer includes an individual, corporation or partnership or an officer or employee of any corporation (including a dissolved corporation) or a member or employee of any partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs."
Pursuant to N.J.S.A. 54:39-35, a provision of the Motor Fuels Tax statute repealed effective 2011,
[t]he terms "distributor," "importer," "gasoline jobber," "retail dealer," "wholesale dealer," "storage facility operator," "seller of special fuels," "user of special fuels," and "person," as used in this chapter, shall include an officer, director, stockholder or employee of a corporation, or a member of a partnership, who as such officer, director, stockholder, employee or member is under the duty to perform the act in respect of which the violation occurs.
Such person or persons, individual or individuals shall be personally liable for the tax imposed, collected or required to be paid, collected or remitted under this chapter.
Our courts have established criteria for applying these statutes to determine whether an officer or employee is responsible for the outstanding tax liabilities of the corporation for which her or she works. In Cooperstein v. Director, Div. of Taxation, 13 N.J. Tax 68, 81 (Tax 1993), aff'd, 14 N.J. Tax 192 (App. Div. 1994), certif. denied, 140 N.J. 329 (1995), the court explained that the statutes require "a fact-sensitive pragmatic inquiry into the corporate activities of an officer or employee before personal liability can be imposed." In order to make this determination the court must weigh a number of factors:
1. The contents of the corporate by-laws;Id. at 88. It is not necessary for each factor to be satisfied in order to establish responsible officer liability. "The nine factors are each examined and then the court must make a qualitative determination based on the totality of the analysis." Lorenzo v. Director, Div. of Taxation, 14 N.J. Tax 577, 583 (Tax 1995). Importantly, there is
2. Status as an officer and/or stockholder;
3. Authority to sign checks and actual exercise of that authority;
4. Authority to hire and fire employees and actual exercise of that authority;
5. Responsibility to prepare and/or sign tax returns;
6. Day-to-day involvement in business or responsibility for management;
7. Power to control payment of corporate creditors and taxes;
8. Knowledge of the failure to remit taxes when due; and
9. Derivation of substantial income or benefits from the corporation.
no case which stands for the proposition that if another individual is also responsible, or perhaps has greater responsibility, the lesser involved individuals are absolved of all liability. On the contrary, the statute expressly applies to "any" responsible persons not just to the person most responsible for the payment of taxes. There may be - indeed there usually are - multiple responsible persons in any company.
[Skaperdas v. Director, Div. of Taxation, 14 N.J. Tax 103, 113 (Tax 1994), aff'd, 16 N.J. Tax 454 (App. Div. 1996)(quotations omitted).]
The court concludes that plaintiff's guilty plea to counts Four and Five of the Indictment establish, as a matter of law, that plaintiff is a responsible officer of T&S for State tax purposes. Those counts of the Indictment allege a violation of N.J.S.A. 2C:21-15, misapplication of entrusted property and property of government or financial institution. The statute provides in relevant part that:
[a] person commits a crime if he applies or disposes of property that has been entrusted to him as a fiduciary, or property belonging to or required to be withheld for the benefit of the government . . . in a manner which he knows is unlawful and involves substantial risk of loss or detriment to the owner of the property or to a person for whose benefit the property was entrusted whether or not the actor has derived a pecuniary benefit. "Fiduciary" includes trustee, guardian, executor, administrator, receiver and any person carrying on fiduciary functions on behalf of a corporation or other organization which is a fiduciary.At his plea allocation, plaintiff admitted that as an officer of T&S he collected sales and use tax from customers and failed to remit those taxes to the Director. In addition, he admitted that as an officer of T&S he withheld gross income tax from the paychecks of employees of T&S and failed to remit the withheld taxes to the Director. Plaintiff accepted criminal liability for his acts as the controller of T&S with respect to the diversion of taxes to purposes other than remittance to the Director.
* * *
For the purposes of this section, the term "benefit derived" shall include but shall not be limited to the amount of any tax avoided, evaded or otherwise unpaid or improperly retained or disposed of.
[N.J.S.A. 2C:21-15.]
Standing alone, plaintiff's admission of guilt is sufficient to support a finding that he is a responsible officer of T&S. It is not possible to articulate a coherent rationale for a conclusion that plaintiff's acts as the controller of T&S with respect to the failure to remit taxes are sufficient to constitute felonies justifying incarceration, but are insufficient to meet the civil standard for responsible officer status. In admitting to the allegations in Counts Four and Five of the Indictment, plaintiff also implicitly admitted that his failure to act as controller of T&S rendered him personally liable for taxes he collected and withheld and subsequently diverted from the State treasury. To conclude to the contrary would ignore the admissions plaintiff made under oath to the Superior Court after consultation with his attorney, who appeared on the day of the plea allocution. The court's inquiry could end here.
However, for the sake of a complete record, the court also concludes that application of the Cooperstein standards to the facts about which there exists no genuine dispute results in a finding that plaintiff is a responsible officer of T&S. The Cooperstein factors are discussed in turn:
1. The contents of the corporate by-laws.
The T&S by-laws are not in the record.
2. Status as an officer and/or stockholder.
Plaintiff was not a named officer or stockholder of T&S. He was, however, the controller of the company and at least partially responsible for its financial affairs during the periods at issue. Company officer status is not necessary for responsible officer liability, as personal liability extends to any employee under a duty to act on behalf of the corporation with respect to taxes, whether or not a corporate officer. See N.J.S.A. 54A:9-6(g) (Gross Income Tax Withholdings); N.J.S.A. 54:32B-14(a)(Sales and Use Tax); N.J.S.A. 54:39-35 (Motor Fuels Tax).
3. Authority to sign checks and actual exercise of that authority.
Although plaintiff argues that the President of T&S had the ultimate authority to sign checks for the company, he also admitted that he had control of a stamp of the President's signature and that he used the stamp on occasion to sign checks for T&S. In his opposition to defendant's motion, plaintiff concedes that he "spent an hour a week writing checks" when the accounts payable clerk for T&S was not available. In addition, plaintiff admitted that as controller for T&S he was responsible for overseeing all financial aspects of the company.
4. Authority to hire and fire employees and actual exercise of that authority.
During discovery plaintiff admitted that he interviewed employees, trained employees and conducted employee reviews at T&S. Plaintiff asserts that after interviewing candidates for employment, he would give his recommendation to hire to the President of T&S, who had the ultimate authority on the subject. Accepting these unproven allegations as true for the purposes of this motion, the court concludes that plaintiff was closely involved in the hiring and supervision of employees, even if he did not have the final authority to hire and fire.
5. Responsibility to prepare and/or sign tax returns.
Plaintiff admitted to significant responsibilities with respect to the preparation of T&S's tax returns. He conceded that he had daily oversight of the financial affairs of the company's retail operations and that he collected all financial documents necessary for company's accountant to prepare T&S tax returns. Plaintiff also admitted to having "in an emergency" completed monthly or quarterly tax returns for T&S and to having submitted checks to taxing authorities on behalf of the company. Most significantly, during his guilty plea allocution plaintiff accepted criminal liability for the failure to remit to the Director taxes collected and withheld by T&S.
6. Day-to-day involvement in business or responsibility for management.
In response to Interrogatories plaintiff conceded that he "oversaw day to day happenings of the retail stores" of T&S. He admitted that he "went over daily reports" with the principals of T&S, "talked to vendors and handled any problems" after discussions with the principals and that "all problems [and] issues would come to" plaintiff, who would seek final approval for solutions from the T&S principals. Plaintiff oversaw numerous T&S employees and was responsible the company's retail operations - the very center of sales and motor fuels tax collection. In addition, plaintiff conceded that he had supervisory responsibility over the accounting department and collected the necessary financial documentation for the company's accountants. He was, in short, a high level manager of T&S.
7. Power to control payment of corporate creditors and taxes.
Plaintiff's guilty plea to Counts Four and Five of the Indictment establish that he had the power to control payment of taxes, given that he accepted criminal responsibility for having collected sales tax and withheld gross income tax and having not remitted those taxes to the Director. As noted above, plaintiff also admitted that on occasion he made payments to tax authorities on behalf of T&S. In addition, plaintiff's guilty plea to Count One of the Indictment alleging credit card fraud suggests plaintiff had a hand in determining which of the creditors of T&S would be paid, as the fraud charges related to illegally raising funds from customer's credit card accounts to make payments to T&S's creditors. In fact, plaintiff admitted to deciding which bills to pay on behalf of T&S on occasion, while contending that the company President "usually" made those determinations. Plaintiff also conceded to being aware of tax liens lodged against the company for failure to remit taxes for the period 1987 through 1993.
During a 1994 deposition in the divorce proceeding of a T&S principal plaintiff testified as follows:
I'm responsible for the accounting department, preparing all financial parts to hand over to Herb, who is the outside accountant, to come up with a final report for the year end.At that deposition plaintiff also admitted that he "sometimes" has input "into the decision as to what bills are paid what bills are not paid" at T&S.
8. Knowledge of the failure to remit taxes when due.
Plaintiff admitted during his plea allocution that he was aware of the fact that T&S had collected taxes and had not remitted those taxes to the Director. In fact, he accepted criminal liability for having misapplied the taxes collected by the company. Notably, plaintiff also admitted in his opposition papers that he was aware that T&S failed to turn over social security taxes withheld from employees' paychecks, resulting in action by the Internal Revenue Service. Plaintiff also made significant concessions regarding his knowledge of the company's failure to pay taxes during the 1994 deposition:
Q. With respect to state liens, you indicated there were three. Are there any against T&S Tire?It is clear that plaintiff knew for years that T&S had been collecting and withholding taxes and diverting those taxes to other purposes. Yet, plaintiff continued to serve as the controller of T&S, to complete tax returns for the company, and to oversee its financial operations.
A. Yes.
Q. How much or how many are there against T&S Tire?
A. I believe there is one.
Q. How much is due?
A. I would say - let's see. It started out at around 700, I would say, maybe 600.
Q. 600,000?
A. Yes.
Q. When was the lien first levied against the business?
A. A couple years ago.
Q. What's the basis for the lien?
A. Sales taxes, gross income taxes.
Q. Have any state withholding taxes that you've collected from employees, have you failed to send in any of that money?
A. Over the years, recently? What time period?
Q. Well, as part of the basis for this particular lien. Is it just sales tax the business collected and gross income tax on the corporation that wasn't paid?
A. No, no. It's gross withholding taxes and sales taxes.
Q. Have the monies actually been withheld from the employees and not sent in or -
A. Yes.
9. Derivation of substantial income or benefits from the corporation.
Plaintiff received a modest salary and a company car as compensation for his employment as controller of T&S. In addition, in the papers he filed in opposition to the Director's motion, plaintiff admitted to having loaned considerable sums of money to the principals of T&S. This admission suggests that plaintiff had a greater financial stake in the operations of the company that is suggested by his salary and benefits.
The Director alleges that plaintiff received in excess of $2,000,000 in unauthorized payments from T&S as a result of his criminal conduct. Plaintiff denies this allegation. The court is not satisfied that no genuine issue exists with respect to this material fact. It is not necessary for the court to determine the accuracy of the Director's allegation, as the material facts about which there is no genuine issue are sufficient to establish that plaintiff is a responsible officer of T&S, whether or not he received in excess of $2,000,000 as a result of his criminal conduct.
A balancing of these factors leads to the conclusion that plaintiff was a responsible officer of T&S during the periods at issue. The undisputed facts conclusively establish that plaintiff had a significant role in the operation and financial affairs of T&S. He exercised his authority to sign checks for the company, to complete T&S tax returns, to make tax payments on behalf of T&S and to oversee all of the financial departments of the company. Plaintiff was aware that T&S was collecting and withholding taxes and not remitting those taxes to the appropriate government authorities. He engaged in credit card fraud on behalf of the company, using customer account numbers to raise operating funds for T&S. Ultimately, plaintiff accepted criminal liability for the company's improper diversion of State taxes over which he had control as an employee of T&S. The Director's responsible officer determination is supported by substantial credible evidence, the truth of which has not been seriously contested by plaintiff.
In opposition to the Director's motion, plaintiff submitted several unsworn statements in which he denied responsibility for the financial affairs of T&S, alleging that all financial decisions were made by company principals. Plaintiff paints a picture of having been made the scapegoat for the criminal acts of others at T&S. According to plaintiff, he merely followed the orders of T&S principals and, although aware of their financial misdeeds, was determined to have company remit to the Director all taxes it collected and withheld. Plaintiff, however, produced no evidence supporting his self-serving allegations.
Plaintiff's opposition papers list witnesses he would call at trial. He asserts that the witnesses will testify that the principals of T&S were deeply involved in financial misdeeds. In addition, plaintiff submitted unsworn letters from coworkers dated September 27, 2000. In one letter the co-worker appears to implicate plaintiff by stating that plaintiff was aware that principals of T&S had withheld social security taxes from the co-worker's paycheck without remitting those taxes to the federal government. The co-worker also states that "many times" checks were issued on behalf of T&S without the knowledge of company principals. The other co-worker states that she could not recall any transaction taking place without the approval of the principals of T&S.
There are multiple reasons why the "evidence" submitted by plaintiff in opposition to the Director's motion does not raise genuine issues of material fact precluding summary judgment. First, none of the statements on which plaintiff relies are in the form of an affidavit or certification. They are, therefore, inadmissible hearsay, except to the extent that they constitute admissions by plaintiff. In addition, plaintiff's conviction of credit card fraud and misappropriation of entrusted funds undermines his credibility, see N.J.R.E. 609, rendering his statements suspect. Even if accepted as true, a plaintiff's self-serving assertions alone will not create a question of material fact sufficient to defeat a summary judgment motion. Martin v. Rutgers Cas. Ins. Co., 346 N.J. Super. 320, 323 (App. Div. 2002).
Furthermore, plaintiff's statements do not deny his involvement in the financial affairs of T&S or his knowledge that the company was not remitting taxes it collected and withheld. Plaintiff merely minimizes his role in the company's illegal acts and attempts to deflect blame to the principals of T&S. However, as noted above, responsible officer liability may attach to multiple employees and officers of a company. It is not the most responsible officer who is personally liable for taxes not remitted to the Director. Every responsible officer who satisfies the Cooperstein standards is responsible for taxes collected and withheld but diverted from the State treasury. Even if the court accepts as true that the principals of T&S were the masterminds of the company's misdeeds and that plaintiff was an unwilling participant in their activities - a state of affairs contradicting plaintiff guilty plea allocution - plaintiff still is a responsible officer of T&S. Plaintiff's involvement in the company's operations, financial affairs, and diversion of taxes was direct, personal and pervasive.
The letters submitted by plaintiff do not raise a genuine issue of material fact. As a threshold matter, the documents are hearsay. In addition, one letter expressly states that plaintiff was aware T&S had withheld taxes from the paychecks of the author of the letter but did not remit those taxes to the federal government, hardly suggesting that the Cooperstein standards were not met in this case. The other letter merely indicates that the principals of T&S were aware of the company's financial transactions. Again, the fact that others at T&S may have had a hand in the company's illegal diversion of taxes does not suggest that plaintiff is not personally responsible for the payment of those taxes.
The court notes that the Internal Revenue Service assessed a penalty against plaintiff under I.R.C. §6672 as a responsible officer of T&S for the employer trust fund portion of federal employee withholdings taxes not remitted to the federal government. The standards for a determination of responsible officer status under federal law are similar to those under New Jersey law. See 26 U.S.C. §6672(a); Kordopatis v. United States, 949 F. Supp. 1217, 1225-1226 (E.D. Pa. 1997). It appears that plaintiff did not dispute the IRS determination and has entered into a payment plan to satisfy the penalty imposed by the federal government. In light of the overwhelming evidence establishing that plaintiff is a responsible officer of T&S under New Jersey law, the court need not determine the significance from an evidentiary standpoint of the IRS determination of his responsible officer status under federal law.
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The court will enter an Order granting the Director's motion for partial summary judgment and declaring plaintiff to be a responsible officer of T&S Tire, Inc., as determined in the Director's November 2, 2002 final determination. A briefing schedule on the statute of limitations question will follow.
Very truly yours,
Patrick DeAlmeida, P.J.T.C.