Michael Ioane Clients Lose Again

[The Observer]

UNITED STATES OF AMERICA,
Plaintiff,
v.
VINCENT STEVEN BOOTH, LOUISE Q. BOOTH, MICHAEL SCOTT IOANE,
ACACIA CORPORATE MANAGEMENT, LLC. AND MARIPOSA HOLDINGS, INC.,
Defendants.

Release Date: AUGUST 31, 2012

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF CALIFORNIA

ORDER RE: MOTION TO DISMISS

I. History 1

Defendants Vincent Steven and Louise Q. Booth ("Booths") are a married couple who file joint tax returns. In 1999, Plaintiff United States ("United States") made tax assessments against the Booths for deficiencies in the tax years 1995-1997. The Booths hired defendant Michael Scott Ioane ("Michael Ioane") to help them evade tax collection. The Booths owned three parcels of property (the "Properties") in Bakersfield, CA. On December 5, 2005, the Booths transferred ownership of the Properties to defendant Acacia Corporate Management ("Acacia") and Michael Ioane, in an alleged attempt to put it out of the reach of the United States. On December 22, 2005, the United States put a tax lien on the Properties on the basis that Michael Ioane and Acacia are nominees/alter egos of the Booths.

On April 9, 2009, a grand jury in Sacramento indicted the Booths and Ioane on various criminal charges related to tax evasion (Criminal Case No. 09-0142). On September 24, 2009, the United States filed this present suit to reduce the tax assessments to a judgment of $ 4,055,264.44, against the Booths only. This case was stayed on January 19, 2010, pending the outcome of the criminal case. Doc. 16. The Booths reached a plea bargain with the United States: Vincent Booth plead guilty to one count of conspiracy to defraud the United States, all other charges against him and Louise Booth were dismissed. The Booths cooperated with the United States's criminal prosecution of Michael Ioane; Vincent Booth testified against Ioane at his trial. On October 3, 2011, a jury found Michael Ioane guilty of conspiracy to defraud the United States and presenting fictitious obligations intended to defraud. The stay in the present case was lifted on December 6, 2011. Doc. 32. Michael Ioane has appealed the conviction, and the Ninth Circuit has indicated that there is "a 'substantial question' of law or fact that is 'fairly debatable,' and that 'if that substantial question is determined favorably to defendant on appeal, that decision is likely to result in reversal or an order for a new trial of all counts on which imprisonment has been imposed.'" Doc. 48, Part 1, March 20, 2012 Ninth Circuit Order. The United States filed an amended complaint on February 10, 2012, which added Michael Ioane, Acacia, and Mariposa Holdings, Inc. ("Mariposa") as defendants (collectively "Ioane Group"). Doc. 39. This suit seeks to reduce the Booths' tax assessments to a judgment and to foreclose on the Properties.

The present case is only one of several civil suits dealing with the event surrounding the Booths' tax evasion and alleged attempts to shield the Properties from the United States's reach. Civ. Case Nos. 07-0620, 07-1129, and 12-0171. A motion to consolidate these cases was denied. Case No. 07-1129, Doc. 140.

The present motion is brought by the Ioane Group to dismiss the United States's claim. Doc. 46. The Booths have not filed a motion to dismiss. The Ioane Group challenges subject matter jurisdiction under 26 U.S.C. section 7401, their inclusion in the amended complaint, and alleges this suit is duplicative of Case No. 07-1129. The United States opposes the motion. Doc. 53. The matter was taken under submission without oral argument.

The United States has subsequently filed a new motion to amend in order to add the Franchise Tax Board of the State of California as an additional defendant. Doc. 60. That matter will be heard before Magistrate Judge Austin.

II. Legal Standards

A. Fed. Rule Civ. Proc. 12(b)(6)

Under Federal Rule of Civil Procedure 12(b)(6),a claim may be dismissed because of the plaintiff's "failure to state a claim upon which relief can be granted." A dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal theory or on the absence of sufficient facts alleged under a cognizable legal theory. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact). . . . a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007), citations omitted. "[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss. Determining whether a complaint states a plausible claim for relief will, as the Court of Appeals observed, be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged -- but it has not shown that the pleader is entitled to relief." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009), citations omitted. The court is not required "to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). The court must also assume that "general allegations embrace those specific facts that are necessary to support the claim." Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 889 (1990), citing Conley v. Gibson, 355 U.S. 41, 47 (1957), overruled on other grounds at 127 S. Ct. 1955, 1969. Thus, the determinative question is whether there is any set of "facts that could be proved consistent with the allegations of the complaint" that would entitle plaintiff to some relief. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002). At the other bound, courts will not assume that plaintiffs "can prove facts which [they have] not alleged, or that the defendants have violated . . . laws in ways that have not been alleged." Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983).

In deciding whether to dismiss a claim under Fed. Rule Civ. Proc. 12(b)(6), the Court is generally limited to reviewing only the complaint. "There are, however, two exceptions. . . . First, a court may consider material which is properly submitted as part of the complaint on a motion to dismiss . . . If the documents are not physically attached to the complaint, they may be considered if the documents' authenticity is not contested and the plaintiff's complaint necessarily relies on them. Second, under Fed. Rule Evid. 201, a court may take judicial notice of matters of public record." Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001), citations omitted. The Ninth Circuit later gave a separate definition of "the 'incorporation by reference' doctrine, which permits us to take into account documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the plaintiff's pleading." Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005), citations omitted. "[A] court may not look beyond the complaint to a plaintiff's moving papers, such as a memorandum in opposition to a defendant's motion to dismiss. Facts raised for the first time in opposition papers should be considered by the court in determining whether to grant leave to amend or to dismiss the complaint with or without prejudice." Broam v. Bogan, 320 F.3d 1023, 1026 n.2 (9th Cir. 2003), citations omitted.

If a Fed. Rule Civ. Proc. 12(b)(6) motion to dismiss is granted, claims may be dismissed with or without prejudice, and with or without leave to amend. "[A] district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc), quoting Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995). In other words, leave to amend need not be granted when amendment would be futile. Gompper v. VISX, Inc., 298 F.3d 893, 898 (9th Cir. 2002).

B. Fed. Rule Civ. Proc 12(b)(1)

Fed. R. Civ. Proc. 12(b)(1) allows for a motion to dismiss based on lack of subject matter jurisdiction. It is a fundamental precept that federal courts are courts of limited jurisdiction. Vacek v. UPS, 447 F.3d 1248, 1250 (9th Cir. 2006). Limits upon federal jurisdiction must not be disregarded or evaded. Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 374 (1978). "A federal court is presumed to lack jurisdiction in a particular case unless the contrary affirmatively appears." A-Z Int'l v. Phillips, 323 F.3d 1141, 1145 (9th Cir. 2003); General Atomic Co. v. United Nuclear Corp., 655 F.2d 968 (9th Cir. 1981). The plaintiff has the burden to establish that subject matter jurisdiction is proper. Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994). A Rule 12(b)(1) motion may be either facial, where the inquiry is confined to the allegations in the complaint, or factual, where the court is permitted to look beyond the complaint to extrinsic evidence. Wolfe v. Strankman, 392 F.3d 358, 362 (9th Cir. 2004).

When a defendant makes a factual challenge "by presenting affidavits or other evidence properly brought before the court, the party opposing the motion must furnish affidavits or other evidence necessary to satisfy its burden of establishing subject matter jurisdiction." Safe Air For Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). The court need not presume the truthfulness of the plaintiff's allegations under a factual attack. White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000). Where the jurisdictional issue and the merits of the case are not factually completely intermeshed or intertwined, the court may consider the evidence presented with respect to the jurisdictional issue and rule on that issue, including resolving factual disputes when necessary. St. Clair v. Chico, 880 F.2d 199, 201-02 (9th Cir. 1989).

III. Discussion

First, the Ioane Group challenges subject matter jurisdiction. "No civil action for the collection or recovery of taxes, or of any fine, penalty, or forfeiture, shall be commenced unless the Secretary authorizes or sanctions the proceedings and the Attorney General or his delegate directs that the action be commenced." 26 U.S.C. section 7401. The Ioane Group argues "Booth's 'quiet title' action [Case No. 12-0171] is only masquerading as a tax collection action by the United States in this case. . . . Not only is it a sham proceeding, it is also something barred by 26 U.S.C. section 7401 since there is no statutory authorization for the action." Doc. 47. Brief, 3:4-16. This argument addresses the propriety of Case No. 12-0171 but is not strictly relevant to this case. To the extent the Ioane Group is challenging the subject matter jurisdiction of this case, the United States has provided evidence of appropriate authorization. Doc. 53, Part 2, Ex. 1.

The United States filed the first amended complaint on February 10, 2012. The Ioane Group's second argument is that "there is nothing to indicate the Court ever allowed this, or that the United States even filed any sort of motion for leave to amend or add parties." Doc. 47, Brief, 4:19-20. The United States argues that amendment was permitted by the January 13, 2012 scheduling order. The cited portion of the order simply states "Plaintiff shall file an amended complaint on or before February 10, 2012" with no mention of additional parties. Doc. 37, 2:8-9. However, the United States asserts that they did indeed seek leave to add parties. Doc. 53, Opposition, 8:3-5. The court credits the assertion of the United States as no representative of the Ioane Group took part in the telephonic scheduling conference on January 12, 2012.

Third, the Ioane Group argues the United States's claims are barred since "The stipulated Judgment (settlement agreement, between those parties, and findings of facts of this Court, (Honorable Judge Ishii) establish that the Booths have had no interest in the subject real properties." Doc. 47, Brief, 2:1-4. The Ioane Group is referring to Case No. 07-1129 in which the Ioane Group sued the Booths, certain trusts associated with the Booths, and the United States, seeking to quiet title on the Properties. 07-1129, Doc. 1. The Ioane Group then reached a "Quiet Title Pursuant to Binding Stipulated Settlement and Agreement Between the Parties Herein" ("Stipulated Settlement") with the Booths, which the court approved. 07-1129, Doc. 10. In the Stipulated Settlement, the Ioane Group and the Booths agreed that the Properties belonged to the Ioane Group, and that at the Properties were not subject to any government liens at the time they were transferred. The United States was not a party to the Stipulated Settlement. Then, the Ioane Group filed an amended complaint without leave of court pursuant to the then applicable Fed. Rule Civ. Proc. 15(a)(1)(A); the new complaint again named the Booths as defendants. 07-1129, Doc. 28. The Ioane Group made a motion for final judgment against the Booths pursuant to Fed. Rule Civ. Proc. 54(b) to settle the case against those defendants while litigation continued with the United States. 07-1129, Doc. 37. The motion was denied, with the court stating that "[t]he settlement agreement purports to determine rights to the Propert[ies] as between [the Ioane Group and Booths.] However, ownership of the Properties is completely intertwined with the dispute between [the Ioane Group] and the United States." 07-1129, Doc. 64, 8:21-23. Instead of waiting for resolution of the case, the Ioane Group voluntarily dismissed the Booths from the case. The dismissal was unilateral under the then applicable Fed. Rule Civ. Proc. 41(a)(1), requiring no court approval to be effective; pointedly, it was not by stipulation of the parties and made no reference to any settlement. 07-1129, Doc. 66. Under Fed. Rule Civ. Proc. 41(b), such a dismissal was without prejudice. Thus, there was no final judgment against the Booths in 07-1129.

With reference to Case No. 07-1129, the Ioane Group argues "If the United States actually had any claim against the properties, it would have been required by F.R.Civ. P. 13 to file a 'mandatory' counterclaim or intervened per F.R.Civ.P. 24 on notice and timely motion in that case." Doc. 47, Brief, 4:26-28. The United States points out "the nature and purpose of the statutes authorizing government tax collection suits demonstrate Congress' intent that such suits were not to be compulsory counterclaims." Caleshu v. United States, 570 F.2d 711, 713 (8th Cir. 1978). The United States's argument is persuasive. The Ioane Group has not provided any case law that suggests United States has given up its claim.

In the alternative, the Ioane Group asks for this case (and the related cases) to be stayed pending resolution of Michael Ioane's criminal appeal to avoid prejudicing his Fifth Amendment rights. Doc. 47, Brief, 2:16-19. As a general rule, "where trial in the parallel criminal proceeding has concluded, and a conviction is being challenged on appeal, the analysis shifts against staying the civil proceedings." Taylor v. Ron's Liquors Inc., 2011 U.S. Dist. LEXIS 15916, *5-6 (N.D. Cal. Feb. 8, 2011). To prevail, a party must "explain[] what the issues are in his criminal appeal [and] how precisely his rights will be jeopardized." Edward v. New United Motors Mfg., 2008 U.S. Dist. LEXIS 88900, *2 (N.D. Cal. Oct. 22, 2008). Michael Ioane has not clarified whether he would receive a new trial even if he prevailed in his appeal. If the Ioane Group wish to have this case stayed, they must make a formal motion and explain how Michael Ioane's rights would be jeopardized.

IV. Order

The Ioane Group's motion to dismiss is DENIED.

IT IS SO ORDERED.

Dated: August 31, 2012

FOOTNOTES:

/1/ The factual history is provided for background; the assertions contained therein are not necessarily taken as adjudged to be true. The legally relevant facts relied upon by the court are discussed within the analysis.

[LPC]

I don't think that the clients are losing. I think they're out of it. I think it's Ioane himself who losing now.

The Booths cooperated with the United States's criminal prosecution of Michael Ioane; Vincent Booth testified against Ioane at his trial.

So the clients have made their peace with the US on the criminal side.

This suit seeks to reduce the Booths' tax assessments to a judgment and to foreclose on the Properties.

The present case is only one of several civil suits dealing with the event surrounding the Booths' tax evasion and alleged attempts to shield the Properties from the United States's reach. Civ. Case Nos. 07-0620, 07-1129, and 12-0171. A motion to consolidate these cases was denied. Case No. 07-1129, Doc. 140.

The present motion is brought by the Ioane Group to dismiss the United States's claim.

So Ioane is fighting the IRS, and not the clients.

Third, the Ioane Group argues the United States's claims are barred since "The stipulated Judgment (settlement agreement, between those parties, and findings of facts of this Court, (Honorable Judge Ishii) establish that the Booths have had no interest in the subject real properties." Doc. 47, Brief, 2:1-4. The Ioane Group is referring to Case No. 07-1129 in which the Ioane Group sued the Booths, certain trusts associated with the Booths, and the United States, seeking to quiet title on the Properties. 07-1129, Doc. 1. The Ioane Group then reached a "Quiet Title Pursuant to Binding Stipulated Settlement and Agreement Between the Parties Herein" ("Stipulated Settlement") with the Booths, which the court approved. 07-1129, Doc. 10. In the Stipulated Settlement, the Ioane Group and the Booths agreed that the Properties belonged to the Ioane Group, and that at the Properties were not subject to any government liens at the time they were transferred.

One possible interpretation of what is happening is that the Booths have given up trying to save the properties, and Ioane is now trying to claim the properties for himself against both the IRS and his own clients.

It's also possible that the Booths are still playing a game in which they pretend not to have any interest in the properties, and Ioane is still working on their behalf to protect the properties from the IRS, but such a game would probably violate the terms of their plea agreements with the government.

So it looks to me that Ioane is in this for himself, and losing.

[The Observer]

It's also possible that the Booths are still playing a game in which they pretend not to have any interest in the properties, and Ioane is still working on their behalf to protect the properties from the IRS, but such a game would probably violate the terms of their plea agreements with the government.

I vote for this option, only because the suit aims to reduce the liens to judgement and foreclose the liens against the Booths, not Ioane. The only reason to do so would be so that the government can reach what belongs to the Booths, not Ioane, far easier than pursing the alter ego/nominee that they have established. The stipiulated agreement is worthless since the whole point of the property transfers were to put them out of the reach of the tax lien and the government was not included in the stip. Given that other than the plea bargain, the Booths haven't shown any efforts to clear up the mess regarding their fraudulent transfers, I have to consider that they probably following directons from Ioane on how to save their property, even if they couldn't save themselves.

So in my non-attorney viewpoint, they have lost again.

[ArthurWankspittle]

I think I'm with LPC on this. I think the Booths have done a plea bargain to stay out of jail and have dropped any effort to shelter the land from the IRS. The IRS takes the land and sells it to settle the tax and penalties arising from the avoidance arranged by Ioane, the Booths stay out of jail. Ioane's claim to the land will be part of the dispute and charges against him. He presumably can't claim to own a piece of land transferred to him, or his trust/agent setup if that transfer is part of an illegal move to avoid taxes, which is what seems to be going on.

[The Observer]

UNITED STATES OF AMERICA,
Plaintiff,
v.
VINCENT STEVEN BOOTH, LOUISE Q. BOOTH,
MICHAEL SCOTT IOANE, ACACIA CORPORATE MANAGEMENT, LLC,
MARIPOSA HOLDINGS, INC., AND ALPHA ENTERPRISES, LLC,
Defendants.

Release Date: JANUARY 13, 2014

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF CALIFORNIA

FINDINGS OF FACT AND CONCLUSIONS OF LAW

I. FINDINGS OF FACT

1. The parties in this case are the United States of America ("United States"), State of California Franchise Tax Board ("FTB"), Vincent Steven and Louise Q. Booth ("Booths"), Michael Scott Ioane ("Ioane"), Alpha Enterprise LLC, Acacia Corporate Management LLC ("Acacia") and Mariposa Holdings Inc. ("Mariposa"). The United States is the plaintiff; all other parties are defendants. This case concerns the ownership of three properties: 5705 Muirfield Drive, Bakersfield, CA ("Muirfield"); 5717 Roundup Way, Bakersfield, CA ("Roundup"); and 1927 21st Street, Bakersfield, CA ("21st Street") (collectively the "Subject Properties"). This case, Civ. Case. No. 09-1689, is related to two other cases, Civ. Case Nos. 07-1129 and 12-0171. The present case is the first to come to trial.

2. Vincent Booth has been a chiropractor for over thirty years. Vincent and Louise Booth have been married since 1989; they have four children together. Trial Transcript, 42:18-43:7.

3. Vincent Booth purchased Muirfield, a townhouse/condominium, in 1986 with a mortgage. The Booths fully paid off the loan in 1992. The Booths lived at Muirfield until December 1994. Thereafter, the Booths leased out Muirfield, receiving proceeds from the rent. In addition, Vincent Booth's mother lived at Muirfield for a short while. Trial Transcript, 47:12-52:1. Joint Exhibits 301, 302, and 304.

4. The Booths purchased Roundup, a single family residence, on December 29, 1994 with mortgage from World Savings and Loan Association. The Booths fully paid off the loan using proceeds of Vincent Booth's chiropractic practice in 2002. The Booths have lived at Roundup from December 1994 through the present. Trial Transcript, 43:8-47:11 and 279:23-280:12; Joint Exhibits 305, 206, and 325.

5. The Booths attended a seminar held by the National Trust Services in San Jose, California in 1995. The purpose of attending the seminar was to learn how to avoid paying taxes. Trial Transcript, 58:17-60:10 and 282:10-283:19.

6. The Booths did not pay federal income taxes for 1995-1997. The Booths and the United States have come to a settlement as to those liabilities (tax, interest, and penalties): the Booths agree to pay the United States $ 653,314.71 plus interest from February 28, 2013. Doc. 154.

7. The Booths did not pay state income taxes for 2000-2002. The FTB claims the Booths owe $ 153,573.50 as of May 15, 2013 for the tax years 2001-2002. The amount owed for tax year 2000 has been resolved. Joint Exhibit 407.

8. At the National Trust Services seminar, the Booths formed the Alpha Omega Trust, Aligned Enterprises Trust, and Agape Trust with the assistance of James Baker, a person affiliated with the seminar organizers. The Booths were trustees of these three trusts. Any monies put into them came from Vincent Booth's chiropractic practice. The Booth children were the beneficiaries of Alpha Omega Trust; the Alpha Omega Trust was the beneficiary of the Aligned Enterprises Trust and the Agape Trust. Trial Transcript, 58:17-60:19, 61:22-62:25, and 282:10-283:19; Joint Exhibit 406.

9. Louise Booth quitclaimed her interest in Roundup to Vincent Booth on July 16, 1996. Vincent Booth then quitclaimed his interest in both Roundup and Muirfield to the Alpha Omega Trust on July 22, 1996. Trial Transcript, 69:12-22 and 283:24-284:1; Joint Exhibits 307 and 308.

10. The Booths received nothing from Alpha Omega Trust in exchange for Roundup and Muirfield. Trial Transcript, 284:2-8.

11. In through the mid-1990s, Vincent Booth's chiropractic practice was located in rented office space at 21st Street, a commercial building. In July 1996, Vincent Booth as trustee of the Aligned Enterprises Trust, purchased 21st Street with a loan from Reinhilde Schwartz, the seller. The Booths paid off the loan with proceeds from the chiropractic practice. Louise Booth said she thought of the Aligned Enterprises Trust as just another means by which the Booths could own property. Vincent Booth's chiropractic practice remained at 21st Street until 2006. Trial Transcript, 55:1-58:16, 137:13-17, 188:16-189:25, 280:22-281:1, and 286:15-17; Joint Exhibit 309.

12. The United States contacted the Booths concerning their income tax obligations in 1998. The Booths then contacted Ioane on the recommendation of James Baker. Trial Transcript, 71:15-72:13.

13. Ioane worked for the Booths for several years. Ioane characterizes their relationship as: "we had a retainer agreement. . . . if they have documents they want me to prepare, I would prepare them, and it also has in that agreement that they were required to speak to their attorneys and CPA to confirm that the documents were correct. So whatever documents Mr. Booth or Mrs. Booth asked me to prepare for them, I would prepare for them in accordance with our retainer agreement. . . . we were in the business of preparing documents and selling trusts." Trial Transcript, 401:25-402:1, 415:2-11, and 419:17-19.

14. The Booths paid Ioane between $ 70,000-$ 100,000 per year for five or six years from 1998 on. The Booths hired Ioane to help them deal with the United States' tax inquiries and to avoid paying income tax due from prior years. Trial Transcript, 75:24-76:9, 83:19-84:17, and 292:25-293:18.

15. Ioane advised that the Booths should put liens on the Subject Properties to shield them from the United States. Trial Transcript, 92:2-13; United States Exhibit 21.

16. The Booths created Southern Financial Trust. Vincent Booth's coworkers, John Innis and Tomas Rios, were the trustees of Southern Financial Trust. John Innis signed Southern Financial Trust documents at Vincent Booth's direction without reading their contents. Trial Transcript, 95:23-96:9, 97:21-25, and 104:9-105:7, 225:20-226:14.

17. The Booths created liens on the Subject Properties in 2000. In these liens (one for each of the Subject Properties), the Booths, as trustors and trustees of the Alpha Omega Trust and Aligned Enterprises Trust, promised to pay Southern Financial Trust $ 4,166.67 per month for 60 months. Each lien was notionally for $ 500,000 transferred from Southern Financial Trust to Alpha Omega Trust and Aligned Enterprises Trust for a total of $ 1.5 million. No actual money ever changed hands. Southern Financial Trust never paid $ 1.5 million and the Booths never made any monthly payments to Southern Financial Trust. Trial Transcript, 92:18-103:10; Joint Exhibits 315, 316, and 318; United States Exhibit 50.

18. Meanwhile, the United States filed a notice of federal tax lien against the Booths, recorded on March 15, 2000. The United States had made tax assessments against the Booths in October and November 1999. Trial Transcript, 338:25-339:2 and 610:21-611:4; Joint Exhibit 317.

19. The Booths substituted Tomas Rios and Lorne McCan, Vincent Booth's coworker and friend, as trustees of Alpha Omega Trust and Aligned Enterprises Trust in July 2000, after the liens on the Subject Properties in favor of Southern Financial Trust were created. Tomas Rios and Lorne McCan gave Vincent Booth signature stamps to use to sign documents for him. Lorne McCan signed documents the Booths gave him without knowing their purpose. Trial Transcript, 200:20-201:16 and 211:14-212:20; Joint Exhibits 320, 321, and 322.

20. Sometime in 2000, the Booths then formed the Bakersfield Properties and Trust Company. The Booths set it up for the purpose of holding the Subject Properties. Jean Liascos, Louise Booth's sister was named the trustee. Jean Liascos was told what to do and what to sign with respect to Bakersfield Properties and Trust Company by Vincent Booth. Trial Transcript, 120:15-121:12, 123:3-15, and 243:13-20; United States Exhibit 26.

21. Alpha Omega Trust and Aligned Enterprises Trust transferred the Subject Properties to Bakersfield Properties and Trust Company; the transfers were signed by Tomas Rios and Lorne McCan as trustees for Alpha Omega Trust and Aligned Enterprises Trust on August 2, 2000 but were not recorded until January 11, 2002. No money exchanged hands in the transactions. Trial Transcript, 128:7-131:25; Joint Exhibits 322, 323, and 324.

22. Acacia was founded in April 2003 and is owned by Ioane's children. Steven Stucker was the manager. He described his role as a nominee officer of Acacia, "we have really no power to make decisions or act independently of the -- either the stockholders of the corporation or the person who signs the agreement with the nominee. That person or the stockholders would give the direction, and they are the ones who -- who are responsible for what actually happens. They make the decisions on behalf of the company." Steven Stucker took direction from Ioane for his actions as nominee officer of Acacia. Trial Transcript, 348:23-350:9, 354:8-14, 358:1-5, 500:8-9.

23. Bakersfield Properties and Trust Company transferred the Subject Properties to Acacia on December 5, 2005. Acacia in turn transferred a 5% interest in each of the Subject Properties to Ioane; the transfer was signed the next day, on December 6, 2005 but was not recorded until March 3, 2011. Vincent Booth and Jean Liascos, who signed the transfers on behalf of Bakersfield Properties and Trust Company, state that no money exchanged hands in the transactions. Jean Liascos further did not believe the transfers were sales or real changes in ownership. The Booths transferred the Subject Properties to Acacia to further distance them from the United States' efforts to collect tax payments. Trial Transcript, 133:6-134:19, 136:23-137:4, and 264:4-265:7; Joint Exhibits 341, 342, 343, 365, 366, and 367.

24. Ioane states that Acacia gave Bakersfield Properties and Trust Company a total of $ 5,000 in exchange for the Subject Properties, but there is no documentation supporting his claim. The court finds this testimony to be non-credible. Trial Transcript, 432:6-12.

25. The United States filed notices of federal tax liens on the Subject Properties, recorded on December 22, 2005. Joint Exhibits 344, 345, and 346.

26. As of 2007, the Booths were still paying Ioane to help them keep the Subject Properties from the United States tax authorities. To that end, Acacia and Ioane sued the Booths and Bakersfield Properties and Trust Company over legal ownership of the Subject Properties in Civ. Case No. 07-1129. Acacia, Ioane, the Booths, and Bakersfield Properties and Trust Company entered into a collusive stipulated settlement quieting title to the Subject Properties in favor of Acacia and Ioane to further the Booths efforts to keep the Subject Properties out of the hands of the United States. Trial Transcript, 151:12-153:12; United States Exhibit 45.

27. The FTB filed a notice of state tax lien against the Booths, recorded on March 17, 2008. Joint Exhibit 408.

28. Mariposa was a trust originally initiated by Vincent Booth but not used by him personally. Instead, he turned it over to Ioane to set up and use. Trial Transcript, 148:4-149:2.

29. The Booths invested in a property development project with Treble LLC in 2004. The Booths agreed to pay $ 10,000 a month (through Southern Financial Trust) for a total of $ 950,000 to Treble LLC, and transferred the liens on the Subject Properties (beneficiary Southern Financial Trust) to Treble LLC as collateral. Vincent Booth told Robert Bell, a partner of Treble LLC and its developer, that Ioane represented the Booths in dealing with Treble LLC. The Booths fell behind on their payments in 2006. The Booths had invested a total of approximately $ 490,000 into Treble LLC. To resolve the problem, Treble LLC came to an agreement with Southern Financial Trust to end and repay the Booths' limited investment. The United States contacted Treble LLC about the Booths' tax problems, and levied on Southern Financial Trust's payout from Treble LLC. In December 2005, Ioane told Robert Bell that Southern Financial Trust's interest in the development project was being transferred to Mariposa. To extricate Treble LLC from the tax controversy, Robert Bell agreed to pay Mariposa a total of $ 427,000 and to transfer the liens on the Subject Properties to Mariposa on June 9, 2009. At the time he made the agreement, Robert Bell believed that the Booths controlled Mariposa and that Southern Financial Trust's interest in Treble LLC was being transferred to Mariposa. The United States then levied on the payout Mariposa received from Treble LLC. Trial Transcript 140:22-148:3, 490:11-22; 503:20-25; 551:6-552:8, 555:8-10, 577:19-23, 581:13-586:6, 590:14-593:11, and 606:1-25; Joint Exhibits 331, 335, 337, and 338; Ioane, Acacia, and Mariposa Exhibit 224.

30. Mariposa transferred some interest in one of the Subject Properties to Alpha Enterprises LLC. However, that interest was reconveyed to Mariposa. Trial Transcript, 505:3-25.

31. Ioane and the Booths were indicted on various tax evasion charges on April 9, 2009. Vincent Booth plead guilty and testified against Ioane at trial. Charges against Louise Booth were dropped. Ioane was convicted in a jury trial on October 3, 2011. Trial Transcript, 154:3-15. United States Exhibits 53, 54, 55, and 56.

32. Throughout the period of these various transfers, the Booths resided at Roundup. A rental agreement between the Booths and Acacia was signed December 7, 2005. Steven Stucker states that Ioane told him Acacia was collecting rent on the Subject Properties. Ioane himself states that he "assume[s] that Acacia is [collecting rent]. . . . I have pretty strong knowledge that they collect rent." Louise Booth states that Acacia and Ioane are currently collecting rental payments on Muirfield and 21st Street. Trial Transcript, 51:10-52:1; 70:3-19; 181:17-182:3, 262:20-22, 385:9-386:6; 389:2-9, 473:19-474:5, 637:14-639:5; Joint Exhibit 380.

33. This suit was filed on September 24, 2009. Doc. 1, Complaint.

II. CONCLUSIONS OF LAW

34. "Where the assessment of any tax imposed by this title has been made within the period of limitation properly applicable thereto, such tax may be collected by levy or by a proceeding in court, but only if the levy is made or the proceeding begun -- (1) within 10 years after the assessment of the tax." 26 U.S.C. section 6502(a). The taxes the United States are seeking to collect from the Booths were assessed in October and November 1999. This suit was filed within ten years of the relevant assessments.

35. "'A nominee is one who holds bare legal title to property for the benefit of another' . . . in making nominee determinations in a tax lien context, we must 'look initially to state law to determine what rights the taxpayer has in the property the Government seeks to reach.'" Fourth Inv. LP v. United States, 720 F.3d 1058, 1066-67 (9th Cir. 2013), quoting Scoville v. United States, 250 F.3d 1198, 1202 (8th Cir. 2001) and Drye v. United States, 528 U.S. 49, 58 (1999). Under California law, a nominee ownership relationship is determined by considering six factors in a totality of the circumstances test with no single factor being dispositive: "(1) whether inadequate or no consideration was paid by the nominees; (2) whether the properties were placed in the nominees' names in anticipation of a lawsuit or other liability while the transferor remains in control of the property; (3) whether there is a close relationship between the nominees and the transferor; (4) failure to record the conveyances; (5) whether the transferor retained possession; and (6) whether the transferor continues to enjoy the benefits of the transferred property." Fourth Inv. LP v. United States, 720 F.3d 1058, 1070 (9th Cir. 2013).

36. The Booths transferred Muirfield and Roundup to Alpha Omega Trust. Alpha Omega Trust paid no consideration. They were transferred in anticipation of impending litigation involving the Booths' tax liability. The relationship between the Booths and Alpha Omega Trust was close. The transfers were recorded. The Booths retained possession and benefit of the properties. Under the totality of circumstances, Alpha Omega Trust was a nominee of the Booths and the transfers were shams.

37. The Booths purchased 21st Street for the Aligned Enterprises Trust. Aligned Enterprises paid no consideration. 21st Street was purchased in Aligned Enterprises Trust's name in anticipation of impending litigation involving the Booths' tax liability. The relationship between the Booths and Aligned Enterprises Trust was close. The transfer was recorded. The Booths retained possession and benefit of the properties. Under the totality of circumstances, Aligned Enterprises Trust was a nominee of the Booths and the transfer was a sham.

38. The Booths created liens on the Subject Properties for the benefit of Southern Financial Trust. Southern Financial Trust paid no consideration for the benefit. The liens were created in anticipation of impending litigation involving the Booths' tax liability. The relationship between the Booths and Southern Financial Trust was close. The transfers were recorded. The Booths retained possession and benefit of the Subject Properties. Under the totality of circumstances, Southern Financial Trust was a nominee of the Booths and the transfers were shams.

39. Alpha Omega Trust and Aligned Enterprises Trust transferred the Subject Properties to Bakersfield Properties and Trust Company. Bakersfield Properties and Trust Company paid no consideration for the benefit. The transfers took place after the United States recorded a notice of tax lien against the Booths and in anticipation of impending litigation involving the Booths' tax liability. The relationship between the Booths and Bakersfield Properties and Trust Company was close. The transfers were recorded. The Booths retained possession and benefit of the Subject Properties. Under the totality of the circumstances, Bakersfield Properties and Trust Company was a nominee of the Booths and the transfers were shams.

40. Bakersfield Properties and Trust Company transferred the Subject Properties to Acacia which then transferred a partial interest to Ioane. Acacia and Ioane paid no consideration for the benefit. The transfers took place after the United States recorded a notice of tax lien against the Booths and in anticipation of impending litigation involving the Booths' tax liability. The relationship between the Booths and Acacia and Ioane was close. The transfers were recorded. The Booths retained possession of Roundup, though Acacia and Ioane began collecting rent from the Subject Properties. Though the evidence surrounding this transfer is more divided, under the totality of the circumstances, Acacia and Ioane were nominees of the Booths and the transfers were shams.

41. Southern Financial Trust transferred the interest in the investment with Treble LLC (secured by benefit of the liens on the Subject Properties) to Mariposa. Mariposa paid no consideration for the benefit. The transfers took place after the United States had levied on proceeds from Southern Financial Trust's investment in Treble LLC. At the time, the relationship between the Booths and Ioane, who controlled Mariposa was close. The Booths retained possession of Roundup, though Acacia and Ioane began collecting rent from the Subject Properties. Though the evidence surrounding this transfer is more divided, under the totality of the circumstances, Mariposa was a nominee of the Booths and the transfer was a sham.

42. All of the transfers of the Subject Properties were shams. "A sham contract is a pretense undertaken for the purpose of deceiving a third party." FPI Development, Inc. v. Nakashima, 231 Cal. App. 3d 367, 401 n.18 (Cal. App. 3d Dist. 1991). In equity, these sham transfers are set aside as they were intended to be void in the first place. See Saks v. Charity Mission Baptist Church, 90 Cal. App. 4th 1116, 1134 (Cal. App. 2d Dist. 2001) ("it was intended to be void, i.e., a sham not intended between the parties as a jural act. . . . the notes were a sham, put together in order to fool the City, intended to have no legal impact as between the parties"), citations omitted. Thus these entities are deemed to have no interest in the Subject Properties. See United States v. Boyd, 2005 U.S. Dist. LEXIS 18466, *3-4 (E.D. Cal. 2005) (entity that is "mere nominee and/or alter ego" of transferor has no interest in the property).

III. ORDER

43. The United States' tax liens attach to the Subject Properties; the United States' claims have priority. The United States may satisfy the Booths' federal tax obligations on the Subject Properties.

44. The court makes no determination between the Booths and the FTB as to which party's claims have priority to the Subject Properties, the proceeds of liens attached to the Subject Properties, or the proceeds from the sale of the Subject Properties.

45. Ioane, Acacia, Mariposa, and Alpha Enterprises LLC have no legal interest in the Subject Properties, the proceeds of liens attached to the Subject Properties, or the proceeds from the sale of the Subject Properties.

IT IS SO ORDERED.

DATED: January 10, 2014

Anthony W. Ishii
Senior District Judge

[Famspear]

.....14. The Booths paid Ioane between $ 70,000-$ 100,000 per year for five or six years from 1998 on. The Booths hired Ioane to help them deal with the United States' tax inquiries and to avoid paying income tax due from prior years....

The Booths were not very bright people.

[notorial dissent]

I can't help feeling, that if they had just spent that money on a competent, real, tax adviser, that they would have been ever so much better off, even just giving the money away randomly wouldn't have done them as much harm in the end. I guess the old line about greed and stupidity still applies.

[The Observer]

I can't help feeling, that if they had just spent that money on a competent, real, tax adviser, that they would have been ever so much better off, even just giving the money away randomly wouldn't have done them as much harm in the end. I guess the old line about greed and stupidity still applies.

Yes, but a competent, real tax adviser would have told them that they would have to pay taxes, which is not the answer they were looking for. Which means that your last sentence is the guiding qualifier and they met both criteria in spades. Greedy, because they liked the answers Ioane was providing them, and stupid because they were still forking over a ton of money to him just to hear what they wanted to hear, despite the fact that this advice only got them jail time - and more.

[notorial dissent]

Eggzactly, greedy and stupid!!!!!