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United States of America v. Anthony D. Cuda and Brian Dankis

October 4, 2011

UNITED STATES OF AMERICA, PLAINTIFF,
v.
ANTHONY D. CUDA AND BRIAN DANKIS, DEFENDANTS.



The opinion of the court was delivered by: Judge Nora Barry Fischer

MEMORANDUM OPINION

I.INTRODUCTION

In this action, the United States of America ("United States") seeks to reduce to judgment the trust fund recovery penalty assessments made against the Defendants, Anthony D. Cuda ("Cuda") and Brian Dankis ("Dankis"). (Docket No. 1 at ¶ 1). Pending before the Court is the United States' Motion for Summary Judgment. (Docket No. 33). The motion is fully briefed and is ripe for disposition. After consideration of the parties' briefing and the record before it, this Court finds that summary judgment is appropriate. Therefore, the United States' motion is GRANTED.

II.BACKGROUND

a.The Complaint and Answer

The Complaint alleges that Cuda, on behalf of Seneca Area Emergency Services, Inc. ("SAES"), was required to collect, account for, and pay to the Internal Revenue Service ("IRS") certain taxes under the Federal Withholding and Federal Insurance Contributions Act ("FICA") for the taxable periods that ended March 31, June 30, September 30, and December 31, 2005. (Docket No. 1 at ¶ 9). The United States alleges that Cuda willfully failed in these duties. (Id. at ¶ 10). Trust fund penalties in the amount of $73,680.69 were assessed against Cuda. (Id. at ¶ 11). The United States claims that Cuda was given notice of these penalties. (Id. at ¶ 12). Because statutory additions continued to accrue, the total penalty was $79,078.66 at the filing of the Complaint. (Id. at ¶¶ 14-15). Accordingly, the United States requests that this Court render judgment against Cuda in the amount of $79,078.66, plus statutory additions accruing from May 10, 2010, until paid. (Id. at ¶ A).

Defendant Cuda's Answer is unsurprising. Defendant claims that he was not a person required to collect, account for, and pay the taxes. (Docket No. 3 at ¶ 9). Instead, Cuda avers that Dankis was the chief financial officer and would have been the person required to collect, account for, and pay the taxes. (Id.). The Answer admits all allegations as to Dankis. (Id. at ¶¶16-23).

b.Statement of Facts

SAES is a non-profit corporation that provides ambulance and emergency medical services to certain communities outside of Pittsburgh. (Docket No. 37 at ¶ 1). Dankis began volunteering with SAES in 1997 and was hired as a paid paramedic in 1999. (Docket No. 33-5 at 11:8-11:14) (hereinafter, Dankis Dep.). Cuda joined SAES in 1998 as a volunteer paramedic and was later hired as Operations Director and Chief, a paid position in which Cuda was tasked with overseeing day-to-day operations of SAES. (Docket No. 33-4 at 11:8-11:14) (hereinafter, Cuda Dep.). In October of 2005, Cuda hired Jeffrey Benincosa ("Benincosa") to handle SAES's in-house billing. (Docket No. 33-6 at 16:3-24) (hereinafter, Benincosa Dep.).

As Operations Director and Chief, Cuda was initially responsible for recruiting volunteers, maintaining employee schedules, handling patient complaints, and community outreach programs, among other things. (Cuda Dep. at 13:20-14:8). He eventually had the authority to: authorize the billing of patients and insurance companies, hire and fire employees underneath him, attend board meetings, help craft company policy, open and close company bank accounts, help determine employee salaries, sign certain documents and checks on SAES's behalf, review and submit employee hours to payroll, order supplies, and provide input on how to prioritize SAES's bill payments. (Docket No. 34 ¶ 21) (citing various segments of the Cuda, Dankis and Benincosa Depositions). Cuda was not in charge of SAES's administrative department, which controlled finances, though he frequently assisted the department. (Cuda Dep. at 13:3-13:8; 32:18-34:1). While Cuda did not have a financial background, he would occasionally handle payroll when SAES's chief financial officer was unavailable. (Cuda Dep. at 43:17-22; 113:18-25).

In 2003, Cuda promoted Dankis to assistant director, and Dankis began reporting directly to Cuda. (Dankis Dep. at 13:1-7). That same year, office manager Gary Pennington began embezzling money from SAES and stopped paying the company's bills, including its federal payroll taxes. (Cuda Dep. at 28:7-29:10; 29-15-20; 38:1-16; 95:3-8). In May 2003, Cuda learned that Pennington had not paid SAES's federal payroll taxes for over a year, and sometime in 2004 he met with the Internal Revenue Service ("IRS") to discuss the outstanding taxes. (Cuda Dep. 39:22-40:8; 67:23-68:12; 68:23-69:13). Pennington was discharged from his position as office manager in 2004, and Cuda and the board of directors delegated the office manager's responsibilities, including the responsibility of managing accounts payable, to Dankis. (See Dankis Dep. 13:15-22; Benincosa Dep. at 26:14-22).

In 2005, due to the financial ramifications of Pennington's actions and insufficient revenue, SAES could only manage to pay some of its bills, (Benincosa Dep. 24:6-14; Dankis Dep. at 65:14-66:17), and cuts were made to keep operating on a day-to-day basis. (Cuda Dep. at 22:5-17, 37:14-22, 45:23-46:12; Dankis Dep. at 32:20-25, 56:5-14). For the 2005 calendar year, Dankis, as SAES's chief financial officer, was responsible for all of the company's expenses, including tax payments to the IRS. (Cuda Dep. at 85:16-24). He would meet daily with John Tomichek*fn1 "to discuss the financials of the organization." (Docket No. 33-9 ¶ 12; Cuda Dep. at 43:10-15).

For the tax period ending on March 31, 2005, Federal Withholding and FICA taxes ("payroll taxes") withheld from the wages of SAES employees were not paid over to the IRS. (Docket No. 33-7 at 2). In May 2005, Dankis sent Cuda an e-mail notifying him of a "tax situation." (Cuda Dep. at 93:17-94:24; Dankis Dep. 69:24-71:21, 72:24-74:3; Docket No. 37 at 3). Despite the e-mail's clear reference to taxes, Cuda claims that he believed the e-mail was about mortgage issues pertaining to a refinancing of property, rather than the nonpayment of payroll taxes. (Cuda Dep. at 94:15-24).

SAES's payroll taxes for the tax period ending on June 30, 2005 were not paid to the IRS (Docket No. 33-7 at 8), and in July, Dankis received notification from SAES's accountant*fn2 that an IRS agent was attempting to collect the company's unpaid taxes for the year. (Dankis Dep. at 75:13-76:10). That same month, Cuda was made aware of the outstanding payroll taxes, and the IRS' demand for payments. (Cuda Dep. at 72:25-73:19; 74:15-25). Cuda spoke with Tomichek about the IRS situation, and Cuda suggested that Tomichek "follow up and make sure that it's . handled." (Cuda Dep. at 72:25-73:19). Cuda also discussed the situation with Dankis, who informed Cuda he would "take care of it." (Cuda Dep. at 78:19-79:12). Dankis falsely informed SAES's accountant that a tax payment had been made to the IRS. (Dankis Dep. at 77:19-78:13). Still, Dankis did not make any payments to the IRS. (Dankis Dep. at 78:11-79:5). On August 6, 2005, Dankis was notified that he and Cuda might have a 100% tax penalty assessed against them by the IRS for SAES's unpaid 2005 taxes, but he did not convey that information to Cuda. (Dankis Dep. at 81:12-14; 83:3-15). Despite the warning, payroll taxes owed to the IRS were not paid for the tax period ending on September 30, 2005. (Docket No. 33-7 at 12).

Though Cuda knew of, and had the authority to authorize payment of, the delinquent taxes, he did not do so and instead relied on Dankis' assurances that the payroll taxes would be handled. (Cuda Dep. at 78:19-79:12). Cuda does, however, claim that he would inform the chairman of the board when tax issues were brought to his attention. (Cuda Dep. at 79:6-12; 88:14-20). Cuda testified that Dankis did not, at any point, approach SAES's board of directors about the company's tax problems, nor did he keep Cuda properly apprised of the situation throughout the remainder of 2005. (Dankis Dep. at 43:2-10, 75:5-7). SAES kept operating despite the tax deficiency, and though the company received sufficient funds in 2005 to pay its outstanding payroll taxes, it used said funds for other financial obligations. (See Docket No. 33-13 (copies of SAEC's bank statements); Dankis Dep. 79:15-80:1).

In October 2005, Cuda hired Benincosa to oversee in-house billing for SAES (Benincosa Dep. at 16:3-24), and, when Dankis resigned later that year, Benincosa was promoted to office manager, taking on the responsibility of handling accounts receivable and accounts payable. (Benincosa Dep. at 17:1-18:14). As Dankis had done, Benincosa began reporting directly to Cuda and the Board of Directors. (Benincosa Dep. at 25:15-20, 27:23-28:1). On Dec. 7, 2005, due in part to its outstanding tax liability, SAES filed for bankruptcy protection under Chapter 11 of the bankruptcy code. (Cuda Dep. at 74:3-7; Docket No. 37 at 4).

Once again, SAES's payroll taxes were not paid for the tax period ending on December 31, 2005. (Docket No. 33-7 at 16). In late 2005, an IRS agent met with Benincosa to discuss SAES's unpaid payroll taxes for the 2005 calendar year. (Benincosa Dep. 31:8-33:6, 34:1-12). Benincosa informed Dankis*fn3 and Cuda about the IRS payroll tax problem, and both admitted to him that they were aware of the issues. (Benincosa Dep. at 34:19-35:18). While Cuda had notice of SAES's ongoing tax problems, he testified that he did not learn that no payments were being made towards the company's outstanding payroll taxes until 2006. (Cuda Dep. at 78:19-23; 85:11-24). There is nothing in ...


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