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United States v. Miles: US District Court:TAX - installment payment orderIN THE UNITED STATES DISTRICT COURT FOR THEDISTRICT OF MINNESOTA United States of America, ) ) Plaintiff, ) ) v. ) Civ. No. 05‐00084 MJD/SRN ) Mark Miles, et al., ))) Defendants. ) Findings of Fact, Conclusions of Law, and Order A hearing on the United States’ Motion for Installment Payment was held on November 9, 2007. Michael R. Pahl of the U.S. Department of Justice appeared on behalf of Plaintiff. Steven R. Hedges of the James H. Gilbert Law Group appeared on behalf of appeared on behalf of Defendant Mark Miles. Based on the evidence submitted and testimony taken at the hearing, the Court finds as follows: 1. On January 13, 2005, the United States brought suit against Mark Miles to, among other things, reduce to judgment federal taxes assessed against him for his failure in 1994, 1996, and 1998 to pay over employment taxes to the IRS. -2- 2. On June 12, 2007, this Court entered a Revised Judgment in favor of the United States and against Mark Miles in the amount of 7,713.94, plus interest and penalties accruing after October 31, 2005. 3. After payments were made to the United States through the sale of Miles’ former residence, the balance owed by Mark Miles on the judgment was reduced to 1,296.63, plus interest. 4. The total amount due from Mark Miles is 0,238.07 with interest to September 7, 2007. 5. Since the revised judgment was entered, Mark Miles has not made any voluntary payment on the judgment. 6. Since incurring a debt to the IRS in 1994 that forms the basis of the present judgment entered against him, Mark Miles has not made any voluntary payments to the IRS. 7. Miles refused to make any payments to the IRS even after he was served with an IRS levy seeking 2 in monthly rents on a property that he rented to his daughter and son‐in‐law. 8. After the revised judgment was entered, the United States served -3- Miles with post‐judgment discovery. 9. Miles refused to respond to this discovery until the United States brought a motion to compel, which this Court granted on August 10, 1997. 10. After Mark Miles provided the required documents to the United States, the United States, relying on documents produced by Miles, brought a motion for an installment payment order, asserting that Miles has substantial earnings from self‐employment. 11. In its motion, the United States, relying on documents produced by Miles, asserted that Mark Miles earns at least on average ,920 a year, that his income well exceeds average monthly expenses for other taxpayers, and that based on IRS national standards, Miles can afford to make ,500 monthly payments on the judgment. 12. In his response, Miles asserted that he makes an average of ,382 a year, that his expenses significantly exceed his income, and thus that he cannot afford to make any payments on the judgment. 13. In his response, Miles attached purported amended federal income tax returns for the 2002 and 2003 tax years, which were prepared -4- after the United States filed its motion based on previously filed returns showing that Mark Miles earns on average ,920 a year. 14. IRS revenue agent Nona Bosshart is investigating Mark Miles’ federal income tax liability for the 2000 through 2005 tax years and the federal tax liability of Mark Miles’ corporation, Greener Pastures, for the 2000 through 2003 tax years. 15. At the hearing on November 9, 2007, Bosshart was called to rebut Miles’ claim that his average income is ,382 and that he is thus unable to make any payments on the judgment. 16. Bosshart credibly testified that after Mark Miles had incurred a debt to the United States of over 0,000, Mark and Sharon Miles (husband and wife) orchestrated a fraudulent scheme in 2000 to acquire the Miles’ former residence–the Wild Canyon property–at one time worth an estimated million–and to keep this property from Mark Miles’ largest creditor, the IRS, by having Sharon Miles hold title to the property in her name alone. 17. Bosshart credibly testified that in 2000, Mark Miles, owner of Greener Pastures, contributed ,000 of Greener Pastures’ money -5- for the purchase of the Wild Canyon property. 18. Bosshart credibly testified that in order to obtain refinancing loans for the Wild Canyon property, Mark Miles presented 2000 and 2001 federal income tax returns to a mortgage company claiming that his wife earned a six‐figure income from Greener Pastures. 19. Bosshart credibly testified that in direct contradiction of the federal income tax returns provided to the mortgage company, Mark Miles filed federal income returns with the IRS for 2000 and 2001 listing Sharon Miles as a “homemaker” employed by PetsMart who earned approximately ,000 a year. 20. Bosshart credibly testified that in August of 2001, Mark and Sharon Miles entered into a bogus 0,000 mortgage naming Mark Miles’s business, Greener Pastures as the mortgagor and Sharon Miles as the mortgagee. 21. Bosshart credibly testified that this mortgage was entered into so that Mark Miles could funnel Greener Pastures’ funds into Wild Canyon for home improvements, could falsely claim the improvements as business expenses on Greener Pastures’ tax -6- returns, and could avoid paying federal income tax on amounts he paid over to Sharon Miles. 22. An appraisal of the Wild Canyon property dated November 4, 2002 valued the property at 0,000 (doubling the property’s value in two years, while Mark Miles’s federal tax debt went unpaid) and described the extensive renovations to the property paid for by Greener Pastures: Given the recent updates to subject property, and given the “top‐end materials used in this renovation process, the subject should therefore be considered “like brand new.” In addition to the owner having 0,000 in receipts verifying materials and labor costs, the following are some (not all) other specifics in regards to renovation process: New roof with upgraded timberline shingles. Front entryway torn out and completely updated and replaced. Home’s interior was gutted to outer walls and rebuilt with: New studwork upgraded Douglas fir (anti‐moisture) studs and new insulation including aluminum reflex and addition of upgraded extra ice and water sheathing. New windows including replacement of 8 skylights. New plumbing, and all new electrical work. New furnace, new (recirculating) water heater, added air exchanger. All doors replaced. Custom interior millwork with new wood flooring throughout, trim and ceiling finished with black walnut, cedar and oak (including tongue and groove installed in vaulted -7- ceiling. New ceiling to floor (two way) stone fireplace. All new appliances, completely refurbished 6 separate baths, with custom (heated) tile put in 3 of the baths with all new bath appliances and furnishings. New whirlpool bath added as well as a new sauna. Basement had finishing of an oversize laundry room and new “Chicago brick” fireplace added. 16 feet of mirrors added to several rooms throughout home. Finishing of garage to include “infrared heat.” 23. Bosshart credibly testified that in addition to the extensive home improvements discussed above, Mark Miles signed checks from Greener Pastures’ corporate account that were used to pay Sharon Miles’ monthly mortgage payments on the Wild Canyon property. 24. Bosshart credibly testified that if Mark Miles had used Greener Pastures’ funds to pay the United States rather than to pay for lavish improvements to the Wild Canyon property, Miles would have satisfied his debt to the United States. 25. Bosshart credibly testified that Mark Miles, with no oversight from any other person, controls his businesses, decides how to spend company money, directs his accountant how to account for expenses, and has debit cards that he has used for personal expenses. -8- 26. Bosshart credibly testified that as an example of Mark Miles’ use of corporate debit cards for personal expenses, Mark Miles ate out six nights in a row at a Woodbury bar and restaurant, incurring 5 in expenses, or a night. 27. The testimony of both Mark Miles and James VanderGriend established that, while Sharon Miles purports to be in the truck leasing business, the “business” consists merely of signing her name on loans obtained by Mark Miles to purchase trucks for Greener Pastures. The “trucking” income attributed to Sharon Miles on the Miles’ 2003 through 2006 federal income tax returns submitted to the Court should be treated as taxable income to Mark Miles, thus rendering Mark Miles’ average income for these years well in excess of the original ,920 estimated by the United States. 28. Sharon Miles does nothing of economic substance to justify the payments to her by Greener Pastures in the amounts of 6,000 in 2003, ,376 in 2004, and ,646 in 2005, and ,966 in 2006, as reported on the Miles’ federal income tax returns, and thus this income should be treated as Mark Miles’ income for installment -9- payment purposes. 29. Bosshart credibly testified that in preparation for the hearing, she viewed Miles’ present residence, which Miles began renting for ,400 a month after this Court entered the judgment against him. 30. Bosshart credibly testified that Mark Miles could easily reduce his monthly expenses by moving out of this expensive home and moving into more reasonable accommodations with rent under ,000 a month in Woodbury, Minnesota. 31. Bosshart credibly testified that while Mark Miles claims to have incurred medical expenses that should reduce the amount he be required to pay under the installment agreement, Miles did not produce any evidence that he, in fact, paid any of these expenses. 32. Miles’ testimony that he has no ability to make any payments to the United States was not credible. 33. In making this credibility finding, the Court notes that Miles’ refusal to answer the government’s trial attorney’s questions on crossexamination was so flagrant that the Court had to take the extraordinary step of warning Miles that he would be taken into -10- custody if his behavior continued. 34. In making this credibility finding, the Court finds that Miles has a long history of using Greener Pastures funds for personal expenses, of using his wife as a nominee or alter ego for federal tax purposes, of falsely reporting items on federal tax returns, including grossly under‐reporting his Greener Pastures income since at least 2000. 35. In making this credibility finding, the Court finds that if, as asserted by Miles in his Memorandum of Law that “[t]heir average annual taxable income for the past five years (2002 through 2006) has been ,382,” the Miles would be unable to pay the ,400 rent on their present residence, and would not have had sufficient income to fund the improvements to the Wild Canyon property or to make mortgage payments as referenced in the checks introduced by the United States at the hearing. 36. While Miles claims that he incurred ,000 in healthcare expenses in 2006 that should treated as an additional expense to him and thus reduce the amount of his monthly installment payment, Miles admitted that his wife, Sharon Miles, pays the Miles’ healthcare -11- expenses. 37. The testimony of Miles’ accountant, James VanderGriend, was not helpful to the Court and not credible given VanderGriend’s long association with Miles and VanderGriend’s repeated preparation of returns used by the Miles to fraudulently obtain mortgages or to misrepresent their true income to the IRS as set forth above. Conclusions of Law 1. The Federal Debt Collection Procedure Act of 1990, 28 U.S.C. § 3001, et seq. (“the Act”) provides a comprehensive statutory framework for the collection of debts owed to the United States. 2. Section 3204 of the Act ( 28 U.S.C. § 3204) specifically authorizes a district court to order a judgment debtor with “substantial” earnings from self employment to “make specified installment payments to the United States.” 3. An installment payment order under 28 U.S.C. § 3204 is reasonable here considering the substantial exempt and non‐exempt income earned by Miles, his reasonable living expenses, and the size of the judgment. -12- Order For the reasons set forth above, it is ORDERED: 1. The United States’ Motion for Installment Payment Order [Docket No. 95] is GRANTED. 2. Under 28 U.S.C. § 3204, the judgment debtor, Mark Miles, shall pay the sum of ,500 per month beginning March 1, 2008, to be applied to the judgment debt in this action until the judgment debt, including all interest, penalties, costs, and the ten‐percent surcharge imposed by 28 U.S.C. § 3011, is fully satisfied. 3. The monthly ,500 payments should be made by check made payable to “United States Treasury” and should be mailed to the following address (in time to arrive at the Department of Justice by the tenth day of the month): MICHAEL R. PAHL Trial Attorney, Tax Division U.S. Department of Justice P.O. Box 7238 Ben Franklin Station Washington, D.C. 20044 LET JUDGMENT BE ENTERED ACCORDINGLY. Dated: February 3, 2008 s / Michael J. Davis The Honorable Michael J. Davis United States District Court Judge |
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