Phony legal document used by a Pembina to try to purchase goods. (Very long)
http://www.quatloos.com/Q-Forum/viewtopic.php?f=27&t=4013&p=61542&hilit=pembina#p61542Surprise! Non-Negotiable Bills Of Exchange Don't Work!
by The Observer on Fri Mar 27, 2009 10:45 am
UNITED STATES OF AMERICA,
Plaintiff,
v.
MICHAEL ALAN REED, INDIVIDUALLY AND AS TRUSTEE OF TWO PONDS.
CHAKRA, INDIGO, CIRCLE PHASE, AND BLACK CANYON PROPERTIES;
LOREN BROWN, AS TRUSTEE OF PEMBINA NATION TRIBAL COUNCIL AND SUNTASSO;
AND JOHN SHERIDAN, AS TRUSTEE OF BLACK CANYON PROPERTIES;
STEVE NELSON, AS TRUSTEE OF CANYON INVESTMENTS;
RAY COX, AS TRUSTEE OF TWO PONDS, CHAKRA, INDIGO, AND CIRCLE PHASE,
Defendants.
Release Date: MARCH 23, 2009
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
WESTERN DIVISION
AMENDED MEMORANDUM OPINION AND ORDER REGARDING PLAINTIFF'S AND
MICHAEL REED'S CROSS-MOTIONS FOR SUMMARY JUDGMENT
TABLE OF CONTENTS
I. INTRODUCTION AND BACKGROUND
A. Procedural Background
B. Factual Background
II. LEGAL ANALYSIS
A. Summary Judgment Standards
B. Analysis Of Issues
1. Defendant Reed's Motion for Summary Judgment
a. Necessity of a response to Reed's answer
b. Reed's "payment" of his tax liabilities
2. The government's Motion for Summary Judgment
a. Federal income tax liabilities
b. Foreclosure of liens
c. Sale of property
III. CONCLUSION
I. INTRODUCTION AND BACKGROUND
A. Procedural Background
On October 4, 2007, plaintiff United States ("the government") filed its complaint and on April 10, 2008, filed its amended complaint in this matter seeking to reduce to judgment tax assessments against defendant Michael Reed, to foreclose federal tax liens, to set aside fraudulent conveyances, and to have the proceeds of the foreclosure sales distributed. Both the government and defendant Reed have filed motions for summary judgment in this case (Dkt. Nos. 68 and 75). In his motion, defendant Reed contends, inter alia, that the government is in default because it has not responded to Reed's answer and that he has satisfied his tax liabilities to the government by submitting $ 3,000,000 in payment to the court and the government. The government has filed a timely resistance to defendant Reed's motion.
In its motion for summary judgment, the government asserts that judgment should be entered against defendant Reed for unpaid taxes for the period of 1998 through 2003 and penalties under 26 U.S.C. section 6702 for the period of 1998 through 2003. The government also requests that the court enter judgment declaring that defendants Pembina National Tribal Council and Suntasso have no interest in certain real and personal property. The government further argues in its summary judgment motion that it is entitled to foreclose federal tax liens it has on certain real and personal property which arose as a result of defendant Reed's unpaid federal tax liabilities and apply the proceeds of the sale of that property against Reed's unpaid federal tax liabilities. Defendant Reed has not filed a response to the government's motion.
B. Factual Background
The summary judgment record reveals that the following facts are undisputed.
Defendant Michael Reed has not filed a federal income tax return since 1998. Defendant Reed submitted a 2002 Form 1040 that failed to report his income and 2002 Forms 1099 that reported zero income and purported to rebut previously filed 2002 Forms 1099 submitted to the Internal Revenue Service ("IRS") by third-parties that reported income to defendant Reed in 2002.
Prior to May 13, 1998, defendant Reed held title to real property legally described as:
(1) The West 425 feet of the North 400 feet of the Southeast
Quarter of Section 34, Township 100 North, Range 36 West of the
5th P.M., Dickinson County, Iowa ("the 255th Avenue Property");
(2) Real property legally described as:
Sec/twp/mg/1870-6-8- Legal W 30' of Lot 8 blk 6 Osborne's
Addn. to Spirit Lake, City of Spirit Lake, Dickinson County,
Iowa ("the 19th Street Property")
On May 13, 1998, defendant Reed transferred title to the 255th Avenue Property to Two Ponds for no consideration. On May 13, 1998, defendant Reed transferred title to the 19th Street Property to Circle Phase for no consideration.
In 1999, defendant Reed sent a letter and affidavit to the IRS contesting the applicability of federal income tax to him. Also in 1999, defendant Reed sent to the IRS a "Non-Negotiable Bill of Exchange" in the purported amount of $ 51,635,000. Along with the "Non-Negotiable Bill of Exchange", defendant Reed sent a copy of his birth certificate, indicating that he was born in the United States, driver's license, and social security card.
On August 2, 2002, the IRS sent defendant Reed written notice of the IRS's proposed tax assessments for Reed's unpaid federal income tax liabilities for the period of 1998 through 2002. In October 2002, defendant Reed called the IRS to determine the outstanding balance of his federal tax liabilities for the period of 1998 through 2002. Defendant Reed submitted a check to the IRS dated November 11, 2002, in the amount of $ 260,000 that was drawn on a closed bank account. Defendant Reed also submitted a check to the IRS dated December 18, 2002, in the amount of $ 5,200 that was drawn on a closed bank account. Defendant Reed knew at the time he submitted the checks to the IRS in the amounts of $ 260,000 and $ 5,200 that those checks were drawn on a closed bank account.
On February 11, 2004, the IRS sent a letter to defendant Reed to request the payment of his unpaid federal tax liabilities for the tax years 1998 through 2000. On February 11, 2004, the IRS also sent defendant Reed a letter notifying him that he had not filed a Form 1040 for the 2001 and 2002 tax years. On February 23, 2004, the IRS sent defendant Reed a Notice of Intent to Levy, via certified mail, and informed him of the possibility of filing a Notice of Federal Tax Lien for his unpaid federal tax liabilities for the tax years 1998 through 2000.
Defendant Reed identified Bryan Malatesta as his representative on IRS Form 2848, power of attorney and declaration of representative. On December 29, 2003, Malatesta was enjoined from representing others before the IRS because he sold abusive tax schemes.
On March 11, 2004, the IRS filed a Notice of Federal Lien against defendant Reed. On March 16, 2004, defendant Reed, as a purported trustee of Two Ponds, transferred title to the 255th Avenue Property to Pembina Nation Tribal Council. On March 16, 2004, defendant Reed, as a purported trustee of Circle Phase, transferred title to the 19th Street Property to Pembina Nation Tribal Council. On March 23, 2004, Indigo transferred title to a red and white 1974 GMC truck (VIN: ending in 0221), a blue 2001 Ford pick-up (VIN: ending in 6253), and a silver 2004 Toyota Sequoia (VIN: ending in 7851), to Suntasso. On March 23, 2004, Chakra transferred title to a red 1947 Indian Chief motorcycle (VIN: ending in 5320), a black/red 2002 Indian Chief motorcycle (VIN: ending in 6180), and a red 1991 Harley-Davidson motorcycle (VIN: ending 2735), to Suntasso.
On July 15, 2005, the IRS filed Notices of Federal Tax Liens against Two Ponds, Suntasso, and Pembina Nation Tribal Council as nominees and/or transferees of defendant Reed. On August 5, 2005, defendant Reed sent to IRS Revenue Officer Nancy Alderton a "Complaint" in which he alleged that he was not "a legal term 'taxpayer' 'person' or 'individual' subject to the Internal Revenue Code." On August 22, 2006, Pembina Nation Tribal Council transferred title to the 19th Street Property and the 255th Avenue Property to Black Canyon Properties.
On October 26, 2006, Suntasso transferred title to the red and white 1974 GMC truck, the blue 2001 Ford pick-up, the silver 2004 Toyota Sequoia, the red 1947 Indian Chief motorcycle, the black/red 2002 Indian Chief motorcycle, and the red 1991 Harley-Davidson motorcycle, to Canyon Investments. Pembina Nation Tribal Council and Suntasso, through their purported former trustee, Loren Brown, disclaimed any interest in the subject real estate and personal property.
Defendant Michael Reed has resided at the 255th Avenue Property from 1998 to the present. He does business at the 255th Avenue Property. Defendant Reed used nominee or sham entities, including Black Canyon Properties, Canyon Investments, and Suntasso, to conceal his assets, and to hinder and/or delay the collection of his federal income tax liabilities. Defendant Reed transferred title to the 255th Avenue Property to trust to avoid the collection of his federal income tax liabilities. He transferred title to the 255th Avenue Property to nominee or sham entities, including Black Canyon Properties. Defendant Reed transferred title to the 255th Avenue Property for no or nominal consideration. Defendant Reed still exercises dominion and control over the 255th Avenue Property. Black Canyon Properties holds the 255th Avenue Property as Reed's nominee or alter ego. Defendant Reed continues to personally use the 255th Avenue Property. Defendant Reed is the true, de facto, and equitable owner of the 255th Avenue Property.
Defendant Reed transferred title to the 19th Street Property to avoid the collection of his federal income tax liabilities. He transferred title to the 19th Street Property to nominee or sham entities including Black Canyon Properties. Defendant Reed transferred the title to the 19th Street Property for no or nominal consideration. Defendant Reed, however, still exercises dominion and control over the 19th Street Property. He uses the 19th Street Property for his own personal and business purposes. He continues to personally use the 19th Street Property. Black Canyon Properties holds the 19th Street Property as Reed's nominee or alter ego. Defendant Reed is the true, de facto, and equitable owner of the 19th Street Property.
Defendant Reed transferred title to the red and white 1974 GMC truck, the blue 2001 Ford pick-up, the silver 2004 Toyota Sequoia, the red 1947 Indian Chief motorcycle, the black/red 2002 Indian Chief motorcycle, and the red 1991 Harley-Davidson motorcycle (collectively "the subject personal property"), to trusts to avoid the collection of his federal income tax liabilities. He transferred title to the subject personal property to nominee or sham entities, including Canyon Investments and Suntasso. He transferred the subject real property for no or nominal consideration. Defendant Reed still exercises dominion and control over the subject real property. He continues to use the subject personal property for his own personal and/or business use. Suntasso and Canyon Investments hold the subject personal property as Reed's nominee or alter ego. Defendant Reed is the true, defacto, and equitable owner of the subject personal property.
A delegate of the United States Secretary of the Treasury made proper and timely assessments against and gave notice of and demand for payment from defendant Michael Reed for unpaid federal income taxes, statutory additions and penalties assessed under 26 U.S.C. section 6702 as follows:
Assessment Amount of Unpaid Balance as
Type (Tax Year) Date(s) Assessment of 8/12/2008
_______________________________________________________________________
Form 1040 (1998) 10/6/2003 Est. Tax Penalty- $ 95,818.37
$ 1,637.00
Late Filing
Penalty-$ 8,051.00
Tax-$ 35,785.00
Interest-$ 16,528.57
Failure to Pay
Penalty-$ 8,946.25
Total: $ 70,947.82
Form 1040 (1999) 12/8/2003 Est. Tax Penalty- $ 295,060.30
$ 5,690.00
Late Fling Penalty-
$ 26,453.00
Tax-$ 117,572.00
Interest-$ 40,222.66
Failure to Pay
Penalty-$ 25,865.84
Total: $ 215,803.50
Form 1040 (2000) 12/30/2002 Dishonored Check $ 175,549.07
2/17/2003 Penalty-$ 5,200.00
4/14/2003 Dishonored Check
12/8/2003 Penalty-$ 104.00
Dishonored Check
Penalty-$ 104.30
Est. Tax Penalty-
$ 3,972
Tax-$ 74,365.00
Total: $ 100,475.30
Form 1040 (2001) 11/15/2004 $ 39,329.49 $ 66,984.84
Form 1040 (2002) 11/15/2004 $ 16,959.69 $ 27,327.67
Form 1040 (2003) 11/14/2005 $ 43,357.84 $ 62,292.41
6702 Penalty 5/16/2005 $ 500.00 $ 631.44
(1998)
6702 Penalty 5/16/2005 $ 500.00 $ 631.44
(1999)
6702 Penalty 5/16/2005 $ 500.00 $ 631.44
(2000)
6702 Penalty 5/16/2005 $ 500.00 $ 631.44
(2001)
6702 Penalty 3/28/2005 $ 500.00 $ 636.51
(2002)
6702 Penalty 5/16/2005 $ 500.00 $ 631.44
(2003)
________________________________________
Total: $ 489,873.64 $ 726,826.37
Defendant Reed has not paid the assessed amounts set out above and remains indebted to the government for the unpaid balance plus statutory additions and interest accruing from the dates of assessment. The unpaid balance as of August 12, 2008, including unassessed interest and costs, is $ 726,826.37.
The United States Internal Revenue Service filed with the County Recorder of Dickinson County, Iowa, Notices of Federal Tax Liens relating to the assessments against the following persons and entities:
Date of Notice of
Name of Person Tax Period(s) Federal Tax Lien
or Entity Type of Tax Ending Filed:
______________________________________________________________________
Michael Reed 1040 12/31/1998 3/11/2004
12/31/1999
12/31/2000
Two Ponds (as 1040 12/31/1998 7/15/2005
transferee or 12/31/1999
nominee of 12/31/2000
Michael Reed)
Pembina Nation 1040 12/31/1998 7/15/2005
Tribal Council (as 12/31/1999
transferee or 12/31/2000
nominee of
Michael Reed)
Suntasso (as 1040 12/31/1998 7/15/2005
transferee or 12/31/1999
nominee of 12/31/2000
Michael Reed)
The government seeks to foreclose federal tax liens on the following real and personal property:
(1) The 255th Avenue Property;
(2) the 19th Street Property;
(3) 1947 red Indian Chief motorcycle (VIN: ending in 5320);
(4) 1974 red and white GMC truck (VIN: ending in 0221);
(5) 2002 black/red Indian Chief motorcycle (VIN: ending in 6180);
(6) 2001 blue Ford pick-up (VIN: ending in 6253);
(7) 1991 red Harley-Davidson motorcycle (VIN: ending 2735);
(
2004 silver Toyota Sequoia (VIN: ending in 7851); and,
(9) 1971 white Fan motorhome (VIN: ending in 6900).
