Case 1:11-cv-00932-SS Document 1

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IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS AUSTIN DIVISION UNITED STATES OF AMERICA, Plaintiff, v. THOMAS W. SEGNER, BARBARA M. SEGNER, SOUND WAVE ELECTRONICS LLC, and GILLESPIE COUNTY Defendants. ) ) ) ) ) ) ) ) ) ) )

Civil No. 1:11-cv-932

UNITED STATES COMPLAINT Plaintiff, United States of America, pursuant to 26 U.S.C. 7401, at the direction of the Attorney General of the United States, or his delegate, and at the request of the Secretary of the Treasury, or his delegate, files this Complaint against Defendants, Thomas W. Segner, Sound Wave Electronics LLC, Barbara M. Segner, and the other named defendants and states as follows: NATURE OF ACTION 1. This is a civil action brought by the United States of America pursuant to 26

U.S.C. 7401, 7402 and 7403, to (1) reduce to judgment federal tax liabilities assessed against Thomas W. Segner, individually; against Sound Wave Electronics, LLC; and against Thomas W. Segner and Barbara M. Segner, jointly; (2) foreclose on certain real property of Thomas W. Segner and Barbara M. Segner; and (3) enjoin Thomas W. Segner and any and all entities under his control (including Sound Wave Electronics) from failing to timely file and/or pay federal employment and unemployment tax returns and deposits.

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JURISDICTION AND VENUE 2. This Court has jurisdiction over this action pursuant to 26 U.S.C. Sections 7402

and 7403, and 28 U.S.C. Sections 1340 and 1345. 3. Venue of this action properly lies in this district pursuant to 28 U.S.C. Sections

1391(b) and 1396. THE PARTIES 4. 5. Plaintiff is the United States of America. Defendant, Thomas W. Segner (Mr. Segner), is a taxpayer in this action and can

be served at his residence in Fredericksberg, Texas. Mr. Segner owes delinquent income (1040), employment (941), and unemployment (940) taxes, penalties and interest. Mr. Segner further owes trust fund recovery penalties as he was the responsible person of Sound Wave Electronics, LLC, (pursuant to 26 U.S.C. 6672) who willfully failed to collect, truthfully account for, and/or pay over to the United States certain payroll trust funds. 6. Defendant, Barbara M. Segner (Ms. Segner), is a taxpayer in this action and can

be served at her residence in Fredericksberg, Texas. Barbara M. Segner is the wife of Thomas W. Segner (collectively, Mr. and Ms. Segner), and owes, jointly with Mr. Segner, delinquent income (1040) taxes, penalties and interest. Mr. and Ms. Segner own certain real property, more fully described below in paragraph 21, against which the United States seeks to foreclose its federal tax liens. 7. Defendant, Sound Wave Electronics, LLC (Sound Wave Electronics), is a

single-member, single-manager, limited liability company organized under the laws of Texas. Sound Wave Electronics is a taxpayer in this action, and owes delinquent employment (941)

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taxes, penalties and interest. Sound Wave Electronics can be served by through its sole-member, sole-manager and registered agent, Thomas W. Segner. 8. Defendant, Gillespie County is a party to this action pursuant to 26 U.S.C.

7403(b) as it may claim an interest in the subject property through delinquent ad valorem tax liens. THE TAX LIABILITY History of Mr. Segners Businesses 9. Mr. Segner operated an electronics store, First Choice Enterprises, as a sole

proprietorship. From 2001 through 2009, Mr. Segner consistently and repeatedly neglected or refused to full pay federal employment (941) and unemployment (940) taxes as set forth in the table below in paragraph 12. As First Choice Enterprises was run as a sole proprietorship, Mr. Segner, himself, was the employer for purposes of payroll taxes, and personally incurred the 940 and 941 liability. 10. On March 25, 2009, Mr. Segner formed Sound Wave Electronics, LLC to operate

his electronics store in lieu of First Choice Enterprises. Mr. Segner is the sole member, sole manager, and the registered agent of Sound Wave Electronics. Sound Wave Electronics, since its inception and brief history, has also consistently and repeatedly neglected or refused to pay accruing federal employment (941) taxes as set forth below in paragraph 15. 11. Mr. Segner was a responsible person (within the meaning of 26 U.S.C. 6672) of

Sound Wave Electronics who willfully failed to withhold, truthfully account for, and/or pay over the funds withheld from his employees wages that were to be held in trust for the United States. As such, Mr. Segner incurred trust fund recovery penalty liabilities as set forth below in paragraph 12.

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Assessments Against Mr. Segner, Individually 12. A duly-authorized delegate of the Secretary of the Treasury made timely and

proper assessments against, and gave notice and demand to Mr. Segner for unpaid federal employment (941) and unemployment (940) tax, penalties, statutory additions, and interest; and federal trust fund recovery penalties (pursuant to 26 U.S.C. 6672), statutory additions and interest for the tax periods set forth in the table below:
TYPE OF TAX TAX PERIOD DATE OF ASSESSMENTS AMOUNT DUE THROUGH July 20, 2011 DATE FEDERAL TAX LIEN RECORDED IN GILLESPIE COUNTY

941 941 941 941 941 941 941 941 941 941 941 941 941 941 941 941 941 941 941

09/30/2001 12/31/2001 12/31/2002 03/31/2003 12/31/2003 03/31/2004 06/30/2004 09/30/2004 12/31/2004 03/31/2005 06/30/2005 09/30/2005 12/31/2005 03/31/2006 06/30/2006 09/30/2006 12/31/2006 03/31/2007 06/30/2007

07/06/2009 07/06/2010 07/09/2007 07/09/2007 07/09/2007 07/09/2007 07/09/2007 07/09/2007 07/09/2007 07/09/2007 07/09/2007 07/09/2007 07/09/2007 01/05/2009 01/05/2009 01/05/2009 01/05/2009 10/01/2007 10/01/2007

$26,043.63 $27,803.18 $637.75 $32.21 $7,551.79 $9,072.87 $20,740.48 $20,535.40 $20,305.17 $19,664.53 $19,404.86 $19,135.86 $18,845.86 $18,564.52 $18,492.50 $16,711.59 $12,981.28 $1,341.04 $1,336.64

10/04/2010 10/04/2010 10/06/2008 10/06/2008 10/06/2008 10/06/2008 10/06/2008 10/06/2008 10/06/2008 10/06/2008 10/06/2008 10/06/2008 10/06/2008 03/04/2009 03/04/2009 03/04/2009 03/04/2009 10/06/2008 10/06/2008

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TYPE OF TAX

TAX PERIOD

DATE OF ASSESSMENTS

AMOUNT DUE THROUGH July 20, 2011

DATE FEDERAL TAX LIEN RECORDED IN GILLESPIE COUNTY

941 941 941 941 940 6672 6672 6672

06/30/2008 09/30/2008 12/31/2008 03/31/2009 12/31/2009 12/31/2009 03/31/2010 06/30/2010

11/03/2008 12/29/2008 03/29/2009 06/29/2009 03/22/2010 05/02/2011 05/02/2011 05/02/2011

$14,959.89 $12,987.24 $9,292.29 $476.63 $310.71 $2,655.98 $3,296.69 $1,647.86 TOTAL $324,828.45

03/04/2009 03/04/2009 05/21/2009 02/23/2010 07/19/2010 08/03/2011 08/03/2011 08/03/2011

13.

Proper notice of and demand for payment of the assessments referred to above

was mailed to Mr. Segner on or about the date of the assessments. 14. The United States recorded a Notices of Federal Tax Lien against Mr. Segner in

the real property records of Gillespie County as shown in the chart above. Assessments Against Sound Wave Electronics 15. A duly-authorized delegate of the Secretary of the Treasury made timely and

proper assessments against, and gave notice and demand to Sound Wave Electronics for unpaid federal employment (941) tax, penalties, statutory additions, and interest for the tax periods set forth in the table below:
TYPE OF TAX TAX PERIOD DATE OF ASSESSMENTS AMOUNT DUE THROUGH July 20, 2011 DATE FEDERAL TAX LIEN RECORDED IN GILLESPIE COUNTY

941 941 941

12/31/2009 03/31/2010 06/30/2010

03/29/2010 06/14/2010 10/04/2010

$3,157.95 $6,702.05 $3,555.25

07/30/2010 09/29/2010 11/04/2010

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TYPE OF TAX

TAX PERIOD

DATE OF ASSESSMENTS

AMOUNT DUE THROUGH July 20, 2011

DATE FEDERAL TAX LIEN RECORDED IN GILLESPIE COUNTY

941 941

03/31/2011 06/30/2011

07/04/2011 09/26/2011

$1,850.79 $2,518.551 TOTAL $17,784.59

08/01/2011 --

16.

Proper notice of and demand for payment of the assessments referred to above

was mailed to Sound Wave Electronics on or about the date of the assessments. 17. The United States recorded a Notices of Federal Tax Lien against Sound Wave

Electronics in the real property records of Gillespie County as shown in the chart above. Assessments Against Mr. and Ms. Segner, Jointly 18. A duly-authorized delegate of the Secretary of the Treasury made timely and

proper assessments against, and gave notice and demand to Mr. and Ms. Segner, jointly, for unpaid income (1040) tax, penalties, statutory additions, and interest for the tax periods set forth in the table below:
TYPE OF TAX TAX PERIOD DATE OF ASSESSMENTS AMOUNT DUE THROUGH July 20, 2011 DATE FEDERAL TAX LIEN RECORDED IN GILLESPIE COUNTY

1040 1040 1040 1040

2005 2006 2007 2008

08/11/2008 08/11/2008 04/13/2009 06/01/2009

$12,737.61 $15,122.25 $37,634.09 $12,399.91 TOTAL $77,893.86

06/01/2010 06/01/2010 06/01/2010 06/01/2010

The 06/30/2011 liability amount (of $2,518.55) is current through October 25, 2011 instead of July 20, 2011.

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19.

Proper notice of and demand for payment of the assessments referred to above

was mailed to the Segners on or about the date of the assessments. 20. The United States recorded a Notices of Federal Tax Lien against Mr. and Ms.

Segner in the real property records of Gillespie County as shown in the chart above. THE SUBJECT PROPERTY 21. Through a Deed of Trust, dated July 23, 1990, and recorded in the real property

records of Gillespie County, Defendants Thomas W. Segner and Barbara M. Segner became the owner of certain real property located in Fredericksburg, Texas 78624 and legally described in Exhibit A, attached hereto (the subject property). COUNT I (Reduce Assessments to Judgment) 22. The United States is seeking a judgment that determines the parties tax indebtedness

to the United States as follows: a. that Mr. Segner, individually, is indebted to the United States in the amount of $324,828.45, plus interest to accrue from July 20, 2011, for federal employment (941), unemployment (940), and trust fund recovery (6672) liabilities, described above in paragraph 12; that Sound Wave Electronics is indebted to the United States in the amount of $17,784.59, plus interest to accrue from July 20, 2011, for federal employment (941) liabilities, described above in paragraph 15; and that Mr. and Ms. Segner, jointly, are indebted to the United States in the amount of $77,893.86, plus interest to accrue from July 20, 2011, for federal individual income (1040) liabilities, described above in paragraph 18.

b.

c.

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COUNT II (Foreclose Federal Tax Liens) 23. The United States is seeking the enforcement of its federal tax liens, pursuant to 26

U.S.C. 7403(c), against the subject properties described above to pay the unpaid tax liabilities, penalties and interest of Mr. Segner, individually, and of Mr. and Mrs. Segner, jointly. 24. Pursuant to 26 U.S.C. 6321, a federal tax lien attached to Mr. and Ms. Segners

interest in the subject property upon the assessment of the taxes described in the charts above in paragraphs 12 and 18. This lien was perfected against third party creditors described in 26 U.S.C. 6323(a) when the notices of federal tax liens were filed. The United States seeks to foreclose the lien, sell the properties, and apply the proceeds to the above referenced tax liabilities. COUNT III (Request for Injunctive Relief) 25. As shown in the chart above in paragraphs 12 and 15, Mr. Segner has not full paid

his federal employment tax (941) or unemployment (940) tax liability for either First Choice Enterprises or Sound Wave Electronics. In fact, in the time period between the first quarter of 2001 and second quarter of 2011, Mr. Segner has assessed federal employment tax (941) delinquencies for 29 of the 42 quarters his businesses were in operation. 26. The United States thus seeks an injunction requiring Mr. Segner and any and all

entities controlled by him (including Sound Wave Electronics) do the following for all employment taxes falling due after the injunction date: a. Timely make federal tax deposits, according to federal deposit regulations, of FUTA, FICA, and withholding tax liabilities; Timely file all federal employment and unemployment tax returns (Forms 940 and 941); Timely pay all tax liabilities due on each 940 and 941 return;

b.

c.

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d.

Be prohibited from paying other creditors or transferring funds to Mr. Segner directly, or to any third party at his request before paying federal employment tax liabilities; and Be required to file monthly reports with the Service attesting that all tax deposits have been made. 26 U.S.C. 7402(a) provides broad authority for the United States to seek and

e.

27.

obtain civil injunctions, so long as injunctive relief is generally necessary or appropriate for the enforcement of the internal revenue laws. U.S. v. Ernst & Whinney, 735 F.2d 1296, 1301 (11th Cir. 1984). Before issuing an injunction, district courts have traditionally required the party seeking an injunction to establish the following four factors: the party is substantially likely to prevail; the party faces a substantial threat of irreparable harm if the injunction is denied; the party faces a harm that outweighs any potential harm posed by the injunction to the defendant, and the injunction will not jeopardize the public interest. See United States v. Buttorff, 761 F.2d 1056, 1059 (5th Cir. 1985). However, where a statute explicitly authorizes an injunction, as does 26 U.S.C. 7402(a), the Fifth Circuit has modified the traditional factors, treating irreparable injury as presumed from the fact that the statute has been violated. See Buttorff, 761 F.2d at 1059 and 1063 (statutory injunction case involving section 7408). The existence of a remedy at law for the government through criminal prosecution does not prohibit the Court from issuing an injunction. See Buttorff, 761 F.2d at 1063. 28. The United States may appropriately seek injunctions under 26 U.S.C. 7402(a) to prohibit employers from future pyramiding of federal employment taxes when the employers and their responsible persons have demonstrated a history of pyramiding federal trust fund taxes and have proven impervious to the Services administrative collection remedies. 29. 26 U.S.C. 3102(a) and 3402(a) require employers to withhold federal income and Federal Insurance Contributions Act (FICA) taxes from their employees wages. Employers hold

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these withheld taxes in trust for the United States and are generally required to deposit them on a regular basis, either monthly or semi-weekly. See 26 U.S.C. 6302 and 7501. Employers are also required to pay their own share of FICA taxes. See 26 U.S.C. 3111. As shown above, Mr. Segner has consistently failed as an employer to comply with these statutes, resulting in significant lost revenue to the United States. 30. The IRS has undertaken numerous administrative collection efforts, but have yielded little results. Furthermore, efforts to educate Mr. Segner as to the process and importance of these payroll tax statues have proved futile. Tax returns continue to be filed late, if at all, with little or no payments with them. The trust fund recovery penalty has proven an ineffective deterrent. Should the government foreclose and sell the subject property at issue in this suit, Mr. Segner will have even less of an incentive to comply with internal revenue laws, as he will have no other readily collectible assets. 31. The only harm posed by an injunction to Mr. Segner is that he must file tax returns and pay the taxes when due. Thus, Segner and his business will merely be required to follow the same federal tax laws every other employer must follow, not a harm for which he can justly complain. It is in the publics interest to order Mr. Segner to follow these laws because it is fundamentally unfair to other taxpayers that Mr. Senger may conduct business without doing so. Moreover, the public has a fundamental interest in stopping the drain on the Treasury caused by Mr. Segners pyramiding activities. 32. Therefore, the United States seeks an injunction to stop Mr. Segner, and any and all entities controlled by him, including Sound Wave Electronics, from their continued employment tax pyramiding activity. While an injunction is an extraordinary remedy, it is appropriate to prevent further pyramiding, as Mr. Segner has shown no intention of stopping.

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COUNT III (Ten Percent Surcharge for Costs of Collection) 33. 28 U.S.C. section 3011 authorizes the United States to recover a surcharge of 10%

of the amount of the debt in the event that the United States avails itself of the pre-judgment or post judgment relief as set forth in Subchapter B or C of the Federal Debt Collection Procedure Act, 28 U.S.C. 3001 et. seq., in order to cover the cost of processing and handling the litigation and enforcement under this chapter of the claim for such debt. FOR THESE REASONS, the United States requests the Court to Order, A. That Mr. Segner, individually, is indebted to the United States for the amount of

$324,828.45, plus interest and any statutory additions as provided by law from July 20, 2011. B. That Sound Wave Electronics, LLC, is indebted to the United States for the amount

of $17,784.59, plus interest and any statutory additions as provided by law from July 20, 2011. C. That Mr. and Ms. Segner, jointly, are indebted to the United States for the amount

of $77,893.86 plus interest and any statutory additions as provided by law from July 20, 2011.. D. That the subject property described above in paragraph 21 is subject to the claim of

the United States; the Court determine the validity of the claims of the defendants named herein against the properties; and also determine the priority of all respective claims as against the claim of the United States; E. That the United States has valid liens against the properties, that said liens be

foreclosed and the property be sold in accordance with the law and practice of this Court, and that the proceeds of such sale be distributed in accordance with the findings of the Court and the rights of the parties;

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F.

That the Court enter a permanent injunction against Mr. Segner, and any and all

entities under his control, as set forth in paragraph 26, above; G. That the United States is entitled to the 10% litigation surcharge set forth in 28 U.S.C.

Section 3011; and, H. That the United States have such further relief as this Court may deem just and

proper, including its costs herein.

ROBERT PITMAN United States Attorney

/s/ Curtis C. Smith CURTIS C. SMITH Attorney, Tax Division State Bar No. Arizona 026374 Department of Justice 717 N. Harwood, Suite 400 Dallas, Texas 75201 (214) 880-9734 (214) 880-9742 (FAX) Curtis.C.Smith@USDOJ.gov ATTORNEYS FOR THE UNITED STATES