The opinion of the court was delivered by: RAYMOND J. BRODERICK
After Mr. Corigliano filed suit in this Court for recovery of his partial payment of the assessment, the United States filed a counterclaim against him, seeking to reduce to judgment the balance of the assessment against Mr. Corigliano, together with statutory interest. The United States also filed a third-party complaint against third-party defendant Edward M. Weaver. This third-party claim against Mr. Weaver is based on the IRS's determination that Mr. Weaver was also a responsible person pursuant to Section 6672 who had willfully failed to see that employment taxes were collected and remitted to the government by Generic. Mr. Weaver was an officer and the accountant of Generic. The assessment against him is based on the entire tax period ending September 30, 1993.
Mr. Weaver paid a portion of the assessment. In its third-party claim, the United States seeks to reduce to judgment the balance of the assessment against Mr. Weaver, together with statutory interest. In his answer, Mr. Weaver denies that he was a "responsible party" under Section 6672, and has requested judgment in his favor.
A non-jury trial was held before this Court on June 1, 1993 and June 2, 1993. On the basis of the evidence presented at trial, and for the reasons set forth below, this Court finds that, pursuant to 26 U.S.C. § 6672, neither Mr. Corigliano nor Mr. Weaver was a responsible person who willfully failed to collect and remit to the government the employment taxes withheld from the employees of Generic.
Based on the evidence presented at trial, the Court makes the following findings of fact:
Generic was a corporation which provided computer software and hardware to various companies. It also provided maintenance of the software and hardware. Generic was founded in April, 1984, by Mr. Corigliano and Kenneth Owens. Mr. Owens is not a party to this suit. Mr. Corigliano and Mr. Owens each owned fifty percent of the corporation.
In 1986, two other shareholders were brought in, resulting in Mr. Corigliano retaining 30% ownership. Also at this time, Mr. Owens took over the management of the company. Management decisions were made by a committee of all shareholders (hereinafter cited "shareholder committee"), on a share-weighted basis, as established in the corporate by-laws. Mr. Corigliano was a member of the shareholder committee, and was in charge of sales and the supervision of the employees of the sales department. Mr. Owens, however, controlled the majority of votes of the shareholder committee.
In 1987, two more shareholders were added, resulting in Mr. Corigliano retaining 26% of the shares. He became president of Generic in 1988, but Mr. Owens continued to run the management of the company and to control the majority of votes of the shareholder committee. Further, Mr. Owens often acted on his own when a majority vote had gone against him. Generic, however, was making significant amounts of money, and relations on the shareholder committee remained amicable.
All shareholders received a salary plus benefits and bonuses. They also received "perks."
Generic had three bank accounts. Funds were kept in a money market account until transferred as needed into a general business account and a payroll account. Checks drawn on the general business account required the signature of two officers. Checks drawn on the payroll account required the signature of one officer. Generic did not maintain a separate account for payroll taxes.
Although Mr. Weaver became the nominal treasurer of Generic in May of 1987, he had no stock in the company and was not a member of the shareholder committee, nor of any other board or committee. He was given the title of treasurer for check signing convenience: the bank required that only officers have check signing authority and there were many occasions when two shareholder-officers were not present to sign checks. He did not have authority to transfer funds from the money market account into ...