United States v. Richard Witkemper ( 2022 )


Menu:
  •                                In the
    United States Court of Appeals
    For the Seventh Circuit
    ____________________
    No. 21-2029
    UNITED STATES OF AMERICA,
    Plaintiff-Appellee,
    v.
    RICHARD E. WITKEMPER and ELLEN F. WITKEMPER,
    Defendants-Appellants.
    ____________________
    Appeal from the United States District Court for the
    Southern District of Indiana, Indianapolis Division.
    No. 1:18-cv-00873 — James R. Sweeney II, Judge.
    ____________________
    ARGUED JANUARY 11, 2022 — DECIDED FEBRUARY 28, 2022
    ____________________
    Before EASTERBROOK, SCUDDER, and KIRSCH, Circuit Judges.
    SCUDDER, Circuit Judge. This case began when Richard Wit-
    kemper, the owner of a small business, failed to withhold fed-
    eral payroll taxes from his employees’ wages. The failure
    caught up to him when the United States sued him and his
    wife to collect the unpaid taxes and related penalties. A bench
    trial ended in the government’s favor, and the Witkempers
    now appeal the district court’s determination that the govern-
    ment’s collection efforts fell within the prescribed statute of
    2                                                   No. 21-2029
    limitations. This issue presented is not close, and the Witkem-
    pers’ counsel never should have pressed the point on appeal.
    We affirm.
    I
    A
    Richard Witkemper was the president and sole share-
    holder of Maximum Spindle Utilization, Inc., a small manu-
    facturing company in southern Indiana. The company had
    employees, but from 2004 to 2006 never complied with its ob-
    ligation to withhold and remit federal income and insurance
    contribution taxes—so-called FICA taxes.
    Maximum Spindle eventually went bankrupt. And be-
    cause it could not fully collect the company’s unpaid taxes
    during the bankruptcy proceedings, the IRS turned its atten-
    tion to Richard Witkemper. In February 2008 the Service
    lodged an assessment totaling $385,705.54 and recorded a no-
    tice of a federal tax lien at the same time.
    Witkemper seemed to respond to these developments, at
    least at first, by expressing a desire to settle with the IRS. In
    July 2008 he sent the IRS a signed Offer in Compromise—
    effectively a settlement offer. The next month, the Service
    accepted the Offer and the Witkempers’ accompanying $150
    filing fee. And soon after, Witkemper began making $500
    payments, the required monthly minimum under the
    compromise. But apparently Witkemper fell on hard times or
    otherwise had second thoughts about making additional
    payments and sought to rescind the settlement. In February
    2009, after the settlement had been in effect only 205 days, the
    IRS approved Witkemper’s request to withdraw the Offer in
    Compromise.
    No. 21-2029                                                     3
    Things only turned for the worse from there. Likely to
    evade enforcement of the federal tax liens, Witkemper then
    set in motion certain property transfers. To start, he and his
    wife purported to transfer their interest in their family home
    to their children. But after a series of subsequent transfers, the
    property ended up back with the Witkempers. In another
    sequence of transactions, Richard Witkemper transferred a
    commercial property interest he had to his wife. She
    eventually sold that property at a profit of $202,931.01, which
    she deposited into her checking account and used to pay
    personal expenses. Neither property transfer was made in
    exchange for any consideration, and the IRS viewed both
    transactions as essentially fraudulent conveyances.
    By March 2018 the IRS ran out of patience and sued both
    Richard and Ellen Witkemper in federal court in southern
    Indiana to recover proceeds from the fraudulent property
    transfers and the unpaid FICA taxes and related penalties.
    The case proceeded to a one-day bench trial in October 2020.
    The district court ruled in the government’s favor.
    At trial, the Witkempers had no response to the merits of
    the government’s position on the unpaid FICA taxes and re-
    lated penalties, or for that matter on the challenged property
    transfers. Without a substantive defense, they turned to pro-
    cedure and sought to challenge the timeliness of the govern-
    ment’s collection and related notification actions.
    First, the Witkempers argued that the government could
    not prove that its initial assessment of the FICA tax penalties
    fell within the deadline prescribed by Congress. They backed
    the contention solely by pointing to what they viewed as un-
    reliable government records containing various clerical er-
    rors.
    4                                                  No. 21-2029
    Second, the Witkempers claimed that because the govern-
    ment filed its federal complaint on March 16, 2018—more
    than 10 years after it assessed the FICA recovery penalties—
    the lawsuit was outside the applicable statute of limitations.
    And while an active Offer in Compromise would typically toll
    that 10-year period, the Witkempers argued that the govern-
    ment was not entitled to an extension of 205 days—the
    amount of time the Offer in Compromise had been in effect—
    because there was never an Offer in effect. Indeed, the Wit-
    kempers insisted that the Offer in Compromise on file with
    the IRS reflected forged signatures. And, as best we can tell,
    Richard Witkemper advanced this position without contest-
    ing that he had made payments pursuant to the terms and
    conditions of the Offer in Compromise.
    The district court found none of this persuasive. In a
    lengthy opinion replete with careful factual findings, the
    district court concluded that each of the government’s efforts
    to collect—both in assessing penalties and filing suit against
    the Witkempers—were timely. From there the district court
    saw no merit to the Witkempers’ claims that the government’s
    paperwork was rife with forgery. In the end, the district court
    entered judgment in the government’s favor in the amount of
    $385,705.54.
    The Witkempers now appeal.
    B
    We have no trouble affirming the district court’s ruling for
    the IRS. The government’s proof of unpaid FICA taxes and
    related penalties, to say nothing of the fraudulent property
    conveyances, was overwhelming. Indeed, we have a hard
    time seeing why the Witkempers chose to go to trial. The
    No. 21-2029                                                   5
    district court’s opinion shows that the government’s case
    against them was open and shut.
    What most concerns us is how the Witkempers have
    approached their appeal. In raising two primary arguments,
    they proceed as if the bench trial never happened. Even more,
    they have paid no attention to the controlling—and
    deferential—standard under which we review the district
    court’s findings of fact.
    First, as to the initial assessment, the Witkempers argue on
    appeal, as they did at trial, that the government cannot prove
    it assessed penalties on February 18, 2008. They allege that the
    IRS’s Certificates of Assessment are unreliable and
    fraudulent, given what appear to be typographic errors on at
    least one document. But these small clerical errors, as the
    district court explained, fall well short of showing the
    government documents lack authenticity or are unreliable.
    Though there may be some small inconsistencies in the
    Certificates of Assessment, the Witkempers point to no
    evidence that calls into question the date of the original
    assessment. In fact, aside from the Certificates of Assessment,
    there was other unchallenged evidence presented at trial that
    corroborated the February 18 assessment date.
    Second, despite the Witkempers’ insistence to the contrary,
    we see no issue with the government’s timeliness in filing this
    lawsuit. The Witkempers are right that a 10-year statute of
    limitations applies to suits to recover penalties and that the
    relevant time to sue tolls upon the government’s acceptance
    of an Offer in Compromise. See 
    26 U.S.C. §§ 6502
    (a);
    6331(i)(5), 6331(k)(1)(A). But those observations do little to
    help the Witkempers. The evidentiary record contained more
    than enough to support the district court’s finding that
    6                                                    No. 21-2029
    Richard Witkemper signed and submitted an Offer in Com-
    promise and that the government received and accepted that
    Offer. The government pointed out that Witkemper, despite
    professing to have not signed the settlement, acknowledged
    much of the other handwriting on the very same Offer was
    his. And the government entered into evidence hundreds of
    uncontested examples of his signature on other documents.
    Even more, despite claiming he never signed the Offer, Wit-
    kemper does not dispute that he submitted the many hun-
    dreds of dollars in payments and fees associated with it.
    There is no way on this evidentiary record to say we are
    “left with a definite and firm conviction that a mistake has
    been committed.” Anderson v. Bessemer City, 
    470 U.S. 564
    , 573
    (1985) (quoting United States v. United States Gypsum Co., 
    333 U.S. 364
    , 395 (1948)). Based on the overwhelming evidence
    presented at trial, the district court was well within bounds in
    assessing the credibility of and rejecting Witkemper’s testi-
    mony that he did not sign the document. See Morisch v. United
    States, 
    653 F.3d 522
    , 529 (7th Cir. 2011) (“The credibility deter-
    minations that a judge renders as the finder of fact command
    a high degree of deference.”) (quoting Gicla v. United States,
    
    572 F.3d 407
    , 414 (7th Cir. 2009)). Plain and simple, the district
    court saw the case as overwhelmingly lopsided in the govern-
    ment’s favor. So do we.
    II
    What we have seen in this appeal has troubled us. The
    Witkempers’ counsel, Jason Smith, has advanced arguments
    that have ignored the trial evidence and the deferential stand-
    ard under which we must review the district court’s findings
    of fact. When the government pointed this out in its opposi-
    tion brief, Smith never replied—despite seeking an extension
    No. 21-2029                                                   7
    of time within which to file a reply brief. And making matters
    worse, in oral argument Smith seemed surprised at the
    Court’s questions about the trial evidence and standard gov-
    erning our appellate review.
    Unfortunately, we saw much of the same from Smith in
    another recent appeal, Galloway v. Commissioner of Internal
    Revenue, 
    2022 WL 400955
     (7th Cir. 2022). There, Smith pressed
    arguments expressly foreclosed by statute; indeed, we lacked
    the authority to even consider the claims in his brief. In that
    case, too, the government pointed out Smith’s obvious defi-
    ciencies to no avail—he once again failed to file a reply brief.
    And in oral argument Smith had no response to the substance
    of the government’s position.
    Right to it, Smith’s performance over these two recent ap-
    peals falls well below the standards we expect from lawyers
    authorized to practice in our Court. See Sambrano v. Mabus,
    
    663 F.3d 879
    , 882 (7th Cir. 2011) (describing the role courts
    have in protecting litigants from deficient legal representa-
    tion). Twice in as many months, Smith has pressed frivolous
    arguments with no realistic prospect of prevailing. And so,
    too, are we aware that a district court in this Circuit recently
    imposed disciplinary sanctions against Smith in an order that
    did not mince words about his unacceptable performance. See
    generally Order Overruling Defendant’s Objections to Magis-
    trate Judge’s Report and Recommendation, Jackson County
    Bank v. DuSablon, No. 1:18-cv-01346 (N.D. Ill. Feb. 12, 2020),
    ECF No. 81. In all of these cases Smith represented clients who
    deserved better.
    Under Rule 46 of the Federal Rules of Appellate Proce-
    dure, we may suspend or disbar a member of our bar if that
    individual engages in “conduct unbecoming of a member of
    8                                                 No. 21-2029
    the court’s bar,” Fed. R. App. P. 46(b)(1)(B)—conduct which
    is “contrary to professional standards [and] shows an unfit-
    ness to discharge continuing obligations to clients or the
    courts, or conduct inimical to the administration of justice.”
    In re Snyder, 
    472 U.S. 634
    , 645 (1985).
    Not taking this step lightly, what we have witnessed in
    this case and the recent Galloway appeal leads us to question
    Smith’s fitness to practice before our Court. Accordingly, we
    order Jason Smith to show cause within 21 days of this
    decision why he should not be removed or suspended from
    the bar of this Court under Rule 46 of the Federal Rules of
    Appellate Procedure.
    AFFIRMED WITH ORDER TO SHOW CAUSE.