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Robert R. Graham v. United States of America

February 28, 2013


The opinion of the court was delivered by: Dolly M. Gee United States District Judge


This matter is before the Court following a bench trial which took place on November 13, 2012. Robert L. Coit and Barbara Ann Landan appeared on behalf of Plaintiff, Robert R. Graham. Robert F. Conte and Valerie L. Makarewicz appeared on behalf of Defendant, United States of America.

Having carefully reviewed the evidence and the arguments of counsel, as presented at trial and in their written submissions, the Court makes the following findings of fact and conclusions of law pursuant to Rule 52 of the Federal Rules of Civil Procedure.


1. On July 2, 2008, Plaintiff Robert R. Graham filed a Claim for Refund and Request for Abatement with the Internal Revenue Service ("IRS") seeking reimbursement for a Trust Fund Recovery Penalty ("TFRP") collected from him pursuant to 26 U.S.C. § 6672. (Trial Ex. 1.) The IRS denied Graham's claim on September 10, 2009. (Trial Ex. 3.)

2. On August 9, 2011, Graham filed a Complaint against the United States of America seeking a refund of his TFRP payment [Doc. #1].

Murray Trenchless

3. Graham began working for Murray Trenchless ("M.T."), a construction company located in Yorba Linda, California, in May 1998. (Admitted Facts D, E.) Graham worked as M.T.'s Construction Manager. (Id.) John Murray was the President of M.T.

4. M.T. filed for bankruptcy on December 26, 2000. (Admitted Fact G.) Graham knew that M.T. had declared bankruptcy. (Admitted Fact H.) Graham was not listed as a creditor on M.T.'s bankruptcy schedules. (Trial Ex. 121.)

5. When M.T. filed for bankruptcy, it had failed to pay more than $50,000 in federal taxes for the periods ending December 31, 1999 and March 31, 2000.*fn1 (Trial Ex. 126.)

Formation of Underground Ventures

6. Around the time of M.T.'s bankruptcy, Murray told Graham that forming a new company, Underground Ventures ("U.V."), would be a way to continue working and save M.T.'s equipment and machinery from the bankruptcy. (Admitted Fact I.) Murray did not have experience in the underground construction business.

7. U.V. did the same type of work and occupied the same office as had M.T. (Admitted Facts E, J, K.)

8. Graham invested $40,000.00 when U.V. was formed. Of that investment, $10,000.00 was to go to U.V., and the balance was to go to three affiliated companies. In exchange, Graham was to receive a 4% ownership in U.V., but no shares ever issued.

9. Murray told Graham that 94% of U.V.'s shares were to be issued in Mark Flach's name, to be held on behalf of Murray. In fact, 93.5% of U.V.'s shares were issued to Flach.*fn2 (Trial Ex. 12 at 2.)

Graham's Position as an Officer of U.V.

10. Graham was the named Vice President of U.V. (Admitted Fact L.) Graham was listed and signed as U.V.'s Vice President on the company's May 15, 2000 filing with the Employment Development Department, which is a taxing authority for the State of California. (Admitted Fact P.) Mark Flach was the company's Treasurer and Patricia Steffens was the company's Secretary. (Admitted Facts M, N.)

11. U.V.'s organizational minutes, dated April 3, 2000, name Graham as Vice President. (Trial Ex. 115 at H4.) The minutes are not signed. (Id. at H12.)

12. Even though Murray was not an officer of U.V., Graham testified that he considered Murray to be "the boss" at U.V., and he believed that Murray had final decision-making authority on all administrative matters at the company. Murray testified that he was a "consultant" at U.V.

13. Graham was authorized by Murray to represent himself as the President of U.V. to customers and potential customers. (Admitted Fact O.)

14. Graham identified himself as the company's president on authorization documents filed with U.V.'s bank, Whitney National Bank. (Admitted Fact U.)

15. Graham held himself out as an officer and "co-owner and President" of U.V. on at least one job application. (Trial Ex. 109.) Graham's Managerial Authority at U.V.

16. At U.V., Graham continued to work primarily out of the office as Construction Manager at sites all over the country, as he had done at M.T. While in the field, Graham called the U.V. office several times each day.

17. Graham's experience made him uniquely qualified to solicit and carry out construction projects for U.V.

18. Graham solicited, qualified, and signed U.V.'s work contracts. (Admitted Fact CC.) He procured project bids and estimated the resources, including equipment, manpower, and number of hours that the company would need to carry out a project. Murray used the ...

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