You are on page 1of 5

Case 1:12-cv-00171-AWI-GSA Document 33

Filed 05/04/12 Page 1 of 5

1 2 3 4 5 6 7

KATHRYN KENEALLY Assistant Attorney General G. PATRICK JENNINGS COLIN C. SAMPSON Trial Attorney, Tax Division U.S. Department of Justice P.O. Box 683, Ben Franklin Station Washington, D.C. 20044-0683 Telephone: (202) 307-6648 E-mail: Guy.P.Jennings@usdoj.gov Colin.C.Sampson@usdoj.gov Attorneys for the United States of America

8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 STEVEN BOOTH, and LOUISE BOOTH, ) ) ) Plaintiffs, ) ) v. ) ) MICHAEL SCOTT IOANE, ) ACACIA CORPORATE MANAGEMENT, LLC, ) et al., ) ) Defendants. ) ) ) MICHAEL SCOTT IOANE; ) ACACIA CORPORATE MANAGEMENT, LLC, ) ) Cross-claimants, ) ) v. ) ) STEVEN BOOTH, LOUISE BOOTH, ) UNITED STATES OF AMERICA, et al. ) ) Cross-defendants. ) ) Case No. 1:12-CV-171 AWI GSA UNITED STATES OPPOSITION TO MOTION TO DISMISS BENJAMIN B. WAGNER Eastern District of California Of Counsel IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA

Date: May 21, 2012 Time: 1:30 p.m. Place: Courtroom 2, 8th Floor Judge: Hon. Anthony W. Ishii

Cross-claim defendant, the United States of America (United States), by and through undersigned counsel, hereby submits a response to the motion to dismiss by Michael Ioane and

Case 1:12-cv-00171-AWI-GSA Document 33

Filed 05/04/12 Page 2 of 5

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Acacia Corporate Management, LLC (Acacia) (Doc. No. 27). As a threshold matter, it is difficult to identify which motion to respond to. The defendants have filed three versions of the pending motion, from doc. 21 through doc. 27. Assuming that the last-filed document is operative, it is defectively noticed. Document 27 was electronically filed on April 25, a filing date that is untimely for a May 21 hearing date under Local Rule 230(b), which requires a minimum of 28 days of notice before a motion hearing. The certificate of service, by attorney William McPike, declares electronic filing and service on April 23, but is attached to a pleading electronically filed and noticed April 25. The United States objects to the inadequate notice. In accordance with prior orders by the Magistrate Judge, which suggests matching hearing dates in the related cases, the United States requests that the hearing of this motion be continued to June 25, at 1:30 p.m., when a related motion is set to be heard. CASE SUMMARY V. Steven Booth (Dr. Booth) and Louis Q. Booth (the Booths) own a chiropractic business in Bakersfield, California. In 1995, Dr. Booth became involved in an abusive taxavoidance transaction which led him to transfer his business and three parcels of real property into sham trusts. The properties transferred by the Booths were all in Bakersfield, California, and included 1927 21st Street, 5705 Muirfield Drive, and 5717 Roundup Way (collectively the Subject Properties). The Internal Revenue Service examined the individual income tax liability of the Booths for 1995 through 1997 and assessed substantial tax liabilities. The Service began pursuing the Booths to collect the tax due. (Declaration of V. Steven Booth, Ex. A to Declaration of G. Patrick Jennings in Support of Opposition to Motion to Dismiss.) The Booths hired Michael S. Ioane to assist them in evading tax collection. Mr. Ioane persuaded the Booths to transfer the Subject Properties for no consideration from an earlier set of sham trusts to the name of Acacia Corporate Management LLC (Acacia). (Ex. A, 6-8.) The Booths and Mr. Ioane were criminally indicted on a charge (among others) of conspiring to defraud the Internal Revenue Service. The transfer of properties outlined above -2United States Opposition to Motion to Dismiss

Case 1:12-cv-00171-AWI-GSA Document 33

Filed 05/04/12 Page 3 of 5

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

was part of the evidence presented at the criminal trial. (Ex. A, 10.) Dr. Booth pleaded guilty and Mr. Ioane was convicted by a jury of conspiring to defraud the Internal Revenue Service, among other charges, on October 3, 2011, and is appealing the verdict. See United States of America v. Booth, et al., 1:09-cr-142-LJO-3 (E. D. Cal. Doc. No. 138). Dr. Booth as a condition of his plea agreement was required stop concealing his property through the use of nominees. The Booths filed the underlying action in this case seeking to quiet title to the Subject Properties. At a time when Dr. Booth was still conspiring with Mr. Ioane, he stipulated to quiet title in Acacia and Mr. Ioane. Dr. Booth has now admitted that those representations were false, and the United States has moved for reconsideration of the order entered on the stipulation. (Doc. No. 141, Acacia v. United States, 1:07-CV-01129-AWI-GSA E.D. Cal.) (hearing set June 25, 2012 at 1:30 p.m.) Acacia and Mr. Ioane now seek to dismiss the Booth quiet title action, arguing that (1) the action is an unauthorized government tax collection action, (2) it duplicates the Acacia quiet title action and the foreclosure claim in the case of United States v. Booth, Acacia, et al., Case No. 1:09-CV-1689 AWI-GSA (E.D. Cal.). The United States disagrees with the first argument and agrees with the second, provided that the dismissal is without prejudice. QUESTIONS PRESENTED 1. Whether the Court should dismiss the case with prejudice because it is an unauthorized government tax collection case. 2. Whether the Court should dismiss the case without prejudice because it duplicates relief available in the government foreclosure action. ARGUMENT The Booths filed a quiet title action in state court to attempt to recover their hidden property. Dr. Booths plea agreement provided that he would seek to recover his property. The defendants are correct that the United States asserts federal tax liens on the Subject Properties relating to the tax liabilities of the Booths. If no other opportunity appears to collect the tax -3United States Opposition to Motion to Dismiss

Case 1:12-cv-00171-AWI-GSA Document 33

Filed 05/04/12 Page 4 of 5

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

liabilities, then it is likely that some or all of the Subject Properties will be sold by the United States, if the Court permits. This sale would benefit the Booths, who would partially or fully satisfy their judgment in this case, which otherwise would encumber their future for many years. Although the recovery by the Booths may indirectly benefit the United States, it does not follow that the Booths action is a government case. Now that the criminal stay is lifted, the United States, with the permission of the Court, has filed an amended complaint to foreclose on the Subject Properties. The defendants can cite no case authority for their argument that the Booth quiet title case is a government case. The Court is respectfully requested not to dismiss this case with prejudice. The United States has amended its action against the Booths to include a foreclosure claim on the Subject Properties. United States v. Booth, Acacia, et al., Case No. 1:09-CV-1689 AWI-GSA (E.D. Cal.). In such a case, the United States is required under 26 U.S.C. 7403(b) to name all claimants and resolve true ownership of property. All persons having liens upon or claiming any interest in the property involved in such action shall be made parties thereto. 26 U.S.C. 7403(b). Accordingly, Mr. Ioane and Acacia are defendants in United States v. Booth. Their rights, if any, and the interests of the Booths will be fully resolved in that case.1 The instant Booth quiet title action, which should have named all claimants but did not name the United States, is defective in failing to include a necessary party. The action should be dismissed without prejudice for failing to name the United States, and to avoid a multiplicity of actions. // //

The case of Acacia v. United States, 1:07-CV-1129 AWI-GSA cannot resolve said claims because the Booths were dismissed before judgment was entered. (Doc. No. 66). -4United States Opposition to Motion to Dismiss

Case 1:12-cv-00171-AWI-GSA Document 33

Filed 05/04/12 Page 5 of 5

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Of Counsel: 18 19 20 21 22 23 24 25 26 27 28 -5United States Opposition to Motion to Dismiss

CONCLUSION This motion is defectively noticed and the hearing should be continued, with the numerous other pending motions, to be heard June 25, 2012. The argument that the Booth quiet title action is a government case, where the United States is a cross-claim defendant, is implausible and without factual or legal support. The instant case duplicates the relief at issue in the United States v. Booth case, and so this case should be dismissed without prejudice. Dated: May 4, 2012 Respectfully submitted, KATHRYN KENEALLY Assistant Attorney General /s/ G. Patrick Jennings G. PATRICK JENNINGS COLIN C. SAMPSON Trial Attorneys, Tax Division U.S. Department of Justice Post Office Box 683 Ben Franklin Station Washington, D.C. 20044 Telephone: (202) 514-6062

BENJAMIN B. WAGNER United States Attorney Attorneys for the United States of America

You might also like