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United States v. Hartman

United States Court of Appeals, Sixth Circuit

July 25, 2018

United States of America, Plaintiff-Appellee,
v.
Jon R. Hartman, Defendant-Appellant.

          Appeal from the United States District Court for the Eastern District of Michigan at Detroit. 2:16-cv-11002-Mark A. Goldsmith, District Judge.

         ON BRIEF:

          Thomas A. Klug, KLUG LAW FIRM, Okemos, Michigan, for Appellant.

          Teresa E. McLaughlin, Marion E.M. Erickson, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.

          Before: SUTTON, McKEAGUE, and KETHLEDGE, Circuit Judges.

          OPINION

          SUTTON, Circuit Judge.

         After Jon Hartman and Dan Ott co-founded Spectrum Tool & Design, they divvied up management responsibilities. Ott was supposed to handle the company's payroll taxes, a task that required him to withhold federal taxes from employees' wages and send the money to the Internal Revenue Service on a regular basis. When Spectrum encountered financial difficulties, however, Ott failed to pay the taxes several times in 2004 and 2005. After Spectrum went bankrupt, the government sued Hartman to recover the unpaid taxes, and the district court granted the government's motion for summary judgment. Because Hartman "willfully" failed to pay Spectrum's taxes, we affirm.

         I.

         This case revolves around a facet of life familiar to any American who receives a paycheck: tax withholding. Federal law requires employers to withhold taxes from their employees' wages to account for the income, Social Security, and Medicare taxes each individual owes. Known as "payroll taxes" or "trust fund taxes," they represent an essential means by which the federal government collects taxes from its citizens. See Slodov v. United States, 436 U.S. 238, 243 (1978). So essential, the federal government imposes personal liability for outstanding payroll taxes on anyone who (1) was "required to" pay these taxes and (2) "willfully" failed to pay the funds to the Internal Revenue Service. 26 U.S.C. § 6672(a).

         After co-founding their business, Hartman and Ott initially relied on an outside automated payment company to manage Spectrum's payroll. Hartman told the company the number of hours his employees worked and their wages. And the company told him the amount Spectrum owed (including corresponding payroll taxes) and issued checks for his signature.

         In December 2003, Spectrum could not afford to pay its employees' wages and the appropriate payroll taxes. When the automated payment company learned about the shortfall, it dropped Spectrum as a client. Hartman and Ott made arrangements to pay their employees' wages but not the payroll taxes. Hartman delegated responsibility for managing future payroll taxes to Ott, who chose to handle the task himself with the help of a software program called Peachtree. Hartman continued to sign the company's other checks, including employees' wages.

         Hartman realized something was amiss when he found unmailed checks made payable to the Internal Revenue Service on Ott's desk in July 2004. Hartman confirmed that Ott had not been paying Spectrum's payroll taxes. Hartman phoned the Internal Revenue Service and met with an agent, who informed him that Spectrum should pay its current taxes going forward and make up the shortfall over time. In October, the Revenue agent told Hartman that Spectrum still was not paying its current taxes.

         Hartman nonetheless left Ott in charge of the company's payroll obligations, convinced his partner had paid the payroll taxes after seeing notations to that effect when he reviewed entries in Peachtree, the company's accounting software. Hartman's "best guess" was that Ott paid the older back taxes instead of Spectrum's ongoing payroll obligations, perhaps misapprehending the agent's instructions. R. 21-2 at 34. When Hartman and Ott met with the Internal Revenue Service agent again in October 2004, Hartman signed tax forms under penalty of perjury that spelled out Spectrum's delinquencies, though Hartman claims that he did not prepare or review the forms.

         After Hartman met with the Revenue agent a second time, he realized the company could not pay the government what it owed. Hartman sought the advice of a tax attorney, who advised Spectrum to seek protection under Chapter 11 of the Bankruptcy Code. Hartman did just that in January 2005. ...


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