The opinion of the court was delivered by: John W. Sedwick United States District Judge
[Re: Motions at Docket 72 and 79]
At docket 72, defendant and cross-plaintiff United States of America ("government") moves for an order granting summary judgment in its favor and against plaintiff and cross-defendant Bradley A. Haslett ("Haslett") in the amount of $438,971.35*fn1 in federal tax assessments plus accrued statutory interest and additions from February 28, 2009, less any payment or credits. Haslett cross-moves for summary judgment in his favor at docket 79 and opposes the government's motion at docket 80. The government replies at docket 81. Neither party requested oral argument, and it would not assist the court.
Winward Electric Services, Inc. ("Winward") was an electrical contracting company originally formed in 1956. In 1999, Winward was purchased by and became a wholly-owned subsidiary of a holding company named CommSpan, Inc. ("CommSpan"). CommSpan was created for the sole purpose of acquiring Winward and three other electrical services companies - Aurora Electric, Inc. ("Aurora"), CTS, and CRA-TEK. At the time of the acquisition, Winward was operated by the following individuals: James Millerberg ("Millerberg"), who served as CEO; Toby Quesinberry ("Quesinberry"), who served as COO; Paul Jacobson ("Jacobson"), who served as CFO; and Dawn Dauber ("Dauber"), who served as Controller. Haslett owned and operated Aurora, but did not play a role in the management of Winward. As a holding company of four electrical services subsidiaries, CommSpan provided management services to the companies it oversaw, and each subsidiary paid management fees to CommSpan in return.*fn2
CommSpan managed 401(k) plans for the employees of its subsidiaries and ensured that its subsidiaries were covered by appropriate insurance policies. CommSpan also acted to capitalize its subsidiaries.
As a result of the acquisition, all of the subsidiaries' existing shares were extinguished and its shareholders received CommSpan stock in return. In exchange for the Aurora acquisition, Haslett received 805,000 of the 5,400,000 issued shares in CommSpan, which represented the fifth largest block of shares outstanding. Haslett remained in control of Aurora and also assumed a role as a director of CommSpan. CommSpan's other directors were Andrew Hidalgo ("Hidalgo") (who also served as CEO of CommSpan) and David Gerber ("Gerber") (who also served as COO and Secretary of CommSpan). On May 27, 2000, CommSpan's Board of Directors, including Hidalgo, Haslett, and Gerber, participated in a telephone conference to discuss Winward's financial difficulties. Also in attendance was Jacobson, Winward's CFO. During the telephone conference, CommSpan's Board members discussed various ways in which Winward's financial situation could be resolved. The course of action ultimately adopted was to cease making Winward's federal tax payments. Jacobson testified at his deposition that prior to making the decision all participants in the call were aware of the personal liabilities associated with a failure to pay trust fund taxes. Nevertheless, the decision was made because it was the "easiest" and would cause only short-term impact. In the meantime, it was agreed that Jacobson would negotiate a payment plan with the IRS.
Because Haslett was only a director at the time, he denies any role in the decision not to pay taxes for June, July, and August 2000, although he admits he attended the May 27, 2000 telephone conference during which the decision was made. According to Haslett, "the officers of Winward [subsequently] failed to make trust fund deposit[s] on the following pay periods in 2000[:] May 24, May 31, June 7, June 14, June 21, June 28, July 4, July 12, July 26, August 2, August 9, August 16, August 23 and August 30." Prior to this period, CommSpan sought to capitalize Winward by other means. In January 2000, Hidalgo and Gerber negotiated and guaranteed a $2.0 million line of credit for the benefit of Winward. Between January 2000 and September 2000, Jacobsen - CFO of Winward - was the only individual to draw down on the line of credit.
On September 29, 2000, Haslett became CEO of CommSpan. On the same day, Haslett obtained and personally guaranteed an increase in CommSpan's line of credit in the amount of $700,000, $300,000 of which was drawn down to pay Winward's trust fund taxes.*fn3 Haslett claims that, despite "[r]epeated admonishments," Winward's management ignored him and failed to pay its accumulated trust fund taxes on September 30, 2000 and again on December 31, 2001. Instead, those funds were used to pay other creditors. Winward and CommSpan collapsed in December 2001. After Haslett proved unable to save Winward or CommSpan, he took both entities into bankruptcy. This action and a concurrent action in the District of Utah followed. The Utah action has been stayed pending resolution of Haslett's claims and the claims against him in this court.
Federal Rule of Civil Procedure 56 provides that summary judgment should be granted when there is no genuine dispute about material facts and when the moving party is entitled to judgment as a matter of law. The moving party has the burden to show that material facts are not genuinely disputed.*fn4 To meet this burden, the moving party must point out the lack of evidence supporting the nonmoving party's claim, but need not produce evidence negating that claim.*fn5 Once the moving party meets its burden, the nonmoving party must demonstrate that a genuine issue exists by presenting evidence indicating that certain facts are so disputed that a fact-finder must resolve the dispute at trial.*fn6 The court must view this evidence in the light most favorable to the nonmoving party, must not assess its credibility, and must draw all justifiable inferences from it in favor of the nonmoving party.*fn7
Internal Revenue Code § 6672(a), provides in pertinent part that: 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 ...