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Perrenod v. United States

United States District Court, Ninth Circuit

July 3, 2013

UNITED STATES OF AMERICA, et al., Defendant.


WILLIAM ALSUP, District Judge.


In this action involving unpaid payroll taxes, defendants move for summary judgment. To the extent stated below, summary judgment is GRANTED IN PART and DENIED IN PART.


The construction company Parallax Design and Construction, Inc. was incorporated in San Francisco in 2001 by plaintiff George Perrenod (president and CEO), Martin Romo (secretary and vice president of operations), and Stanley Thompson (CFO and treasurer). Due to the wrongdoing of Thompson, it was an ill-fated venture.

Each individual owned one-third of the interest in the corporation (Dkt. No. 29 at 5). Perrenod's salary was the highest of the three officers and was based on what the officers believed was the industry standard ( ibid. ). Perrenod was in charge of marketing and hiring and firing upper management employees (though he later took over the company's finances after Thompson was terminated). Thompson was responsible for payroll, preparing tax returns, accounting, bookkeeping, issuing and depositing checks, banking, and insurance. He also produced quarterly financial statements ( id. at 6). Romo was responsible for hiring the majority of the company's regular employees, worked with plaintiff to make policy and strategic decisions, and was in charge of day-to-day operations (Dkt. No. 29 at 6).

Parallax had no office when incorporated so Thompson kept the company's financial records at his home office where he did the majority of his work (Dkt. No. 1 at 4). He had complete control of the company's financial records and eventually changed Parallax's corporate address to his personal residence.

Parallax maintained its finances through Bank of the West from its founding until April 2005. The three officers had signatory authority over the accounts, but every check had to be signed by two of the three officers for security reasons. Prior to April 2005, most checks where signed by Thompson and Romo (Dkt. No. 39 at 23). Thompson was primarily in charge of the vendors' accounts, but Perrenod had some contact with the vendors (Dkt. No. 1 at 4).

In early 2005, Perrenod started receiving complaints from vendors and subcontractors that they had not been paid in several months. Perrenod asked Thompson to prepare an accounts payable report so that they could evaluate the truth of these claims at a shareholder's meeting. The report Thompson prepared was inconsistent with the claims of the vendors and subcontractors. Perrenod requested that Thompson prepare checks for the outstanding balances owed to the vendors and subcontractors, but instead Thompson wrote checks made out to himself and told Perrenod that Parallax owed him money based upon a previous loan (Dkt. No. 39 at 18-19).

In April 2005, Perrenod and Romo terminated Thompson by voting him out of the company at a directors' meeting (Dkt. No. 37). After his termination, Thompson refused to return the financial records, computers, or accounting software he used as treasurer and CFO of Parallax (Dkt. No. 29. at 7). Perrenod then began calling all of the company's creditors to identify outstanding balances. Perrenod's subsequent investigation revealed that Thompson had embezzled hundreds of thousands of dollars from the company and had failed to pay multiple creditors ( id. at 16).

Even after his termination, Thompson used Parallax letterhead to defraud other entities. He filed fraudulent tax records so that returns that should have gone to Parallax instead went to his personal account (Dkt. No. 29 at 6). Perrenod alleges that Thompson also defrauded other entities, and fraudulently used Perrenod's identity to obtain credit cards in Perrenod's name. The State of California later pursued felony criminal charges against Thompson. Thompson pleaded no contest to felony counts for grand theft and tax fraud in 2007 (Dkt. No. 38 at 1).

Plaintiff took over the finances of Parallax after Thompson was fired in 2005. He hired Wells Fargo to file and pay Parallax's employment taxes (Dkt. No. 29 at 13). He was able to pay the amount owed to each subcontractor except one to whom Parallax continued to owe $10, 000. Plaintiff also placed a call to the IRS in May 2005 to determine the late penalty for Parallax's failure to pay its withholdings payments for the fourth quarter of 2003 (Dkt. No. 29 at 7). He did not inquire about other tax periods.

Perrenod began winding up Parallax in 2005. He subsequently hired Shwiff, Levy & Polo LLP to help file corporate returns for 2005. The record does not reveal when Perrenod first learned that Parallax had not paid payroll withholding for the third and forth quarters of 2004.

In 2010, the IRS assessed penalties of $25, 763.65 and $25, 150.55 against Perrenod in his individual capacity for the third and fourth quarters of 2004. The outstanding balances as of today are ...

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