USA v. Wade et al

MOTION for Summary Judgment and Memorandum in Support

D. UtahJune 16, 2017

1 DAVID A. HUBBERT Acting Assistant Attorney General VIRGINIA CRONAN LOWE (pro hac vice) RICK WATSON (pro hac vice) Trial Attorneys, Tax Division U.S. Department of Justice P.O. Box 683 Ben Franklin Station Washington, D.C. 20044-0683 Telephone: (202) 307-6484 (202) 353-0300 VirginiaCronan.Lowe@usdoj.gov Rickey.Watson@usdoj.gov Of Counsel: JOHN W. HUBER (#7226) United States Attorney Counsel for the United States of America UNITED STATES DISTRICT COURT DISTRICT OF UTAH UNITED STATES OF AMERICA, Plaintiff v. STANLEY L. WADE et al. Defendants. ______________________________________ RONALD C. BARKER, Counter-claimant and Cross-claimant v. UNITED STATES OF AMERICA et al. Counter-claim and Cross-claim Defendants Case No. 2:15-cv-00883-DS UNITED STATES’ MOTION FOR SUMMARY JUDGMENT Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 1 of 67 2 Comes now the United States of America, by and through its undersigned counsel, to hereby move pursuant to Fed.R.Civ.P. 56 for the entry of summary judgment in its favor. The United States submits the following in support of this motion. I. PROCEDURAL HISTORY The United States of America, by and through its undersigned counsel, hereby moves pursuant to Federal Rule of Civil Procedure 56 for entry of summary judgment in its favor against defendants Stanley L. Wade (“Wade”), Janet B. Wade, and the following entities: Cherry Hills UBO, Cherry Hills Apartments Business Trust, Del Monico Apartments Business Trust, El Caliente Apartments Business Trust, Hill Rise Apartments Business Trust, Hill Rise UBO, La Parisienne Apartments Business Trust, Sades Apartments, Shangri-La UBO, Wade Sandy a/d/a Wade Sandy Business Trust, Palisades Business Trust, and Crestwood Cove Apartments Business Trust d/b/a Cottonwood Business Trust (hereinafter “the entities”). On December 15, 2015, the United States filed this suit to reduce to judgment the federal income tax liabilities for tax years 1993 through 2004, assessed against Wade, and to foreclose the federal tax liens against his interest in the parcels of real property set forth in the complaint (hereinafter “the Subject Properties”). Janet and the entities were named as parties to this action because they may claim an interest in some or all of the Subject Properties. Several defendants with recorded mechanic’s liens were named pursuant to 26 U.S.C. (“I.R.C.”) § 7403(b). Those defendants have either stipulated that they have no interest in any of the Subject Properties or Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 2 of 67 3 have been defaulted by the Clerk of this Court.1 Finally, the United States named Ronald C. Baker as a defendant based on a recorded attorney’s lien.2 II. SUMMARY Stanley Wade has a long history of hiding income from his multi-million dollar rental real estate business and failing to report and pay the resulting federal income tax liabilities. This history includes two separate felony convictions for tax crimes by this Court. Soon after his release from prison for his first conviction, and while still on probation, Wade initiated a scheme designed to both hide his millions of dollars in income from the IRS, and defeat any efforts by the United States to collect his prior tax debts. In October 1992, Wade purported to create a series of so-called “unincorporated business organizations,” or “UBOs.” In November 1992, he and his wife recorded numerous deeds purporting to transfer his ownership of several apartment buildings and other parcels of real property to these UBOs. The Wades also purported to transfer other assets to these UBOs, including certificates of deposits, securities, bank accounts, and their personal residences. None of these alleged transfers involved the exchange of any consideration on the part of UBOs, nor did anything related to their operation actually change in any respect. After allegedly transferring his assets to the fictitious UBOs, Wade reported only a trivial amount of income on federal income tax returns submitted for 1993 through 2002, and failed to file any returns for tax years 2003 and 2004. As a result, millions of dollars of income that should have been reported for each of the tax years between 1993 and 2004, inclusive went 1 The United States is filing a separate motion for default judgment with regard to these defendants. 2 The United States is not filing a dispositive motion concerning Mr. Baker’s counterclaim because, as to the United States, the sole issue is a dispute over priorities in any funds arising from foreclosure of the tax liens. That matter is better resolved after any foreclosure sale(s) ordered by the Court are completed. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 3 of 67 4 unreported. Wade engaged in this illegal conduct despite being advised by his attorney in May, 1993, that the UBOs provided no exception for the reporting of the income from the apartment buildings owned and operated by the Wades, and that the failure to report that income would “cause the IRS to see red and thus prosecute the matters criminally.” On December 30, 2002, Wade filed a no asset bankruptcy under Chapter 7 of the Bankruptcy Code. See In re Stanley Wade, #02-41993 (Bankr. D. Utah 2002). On the schedules and documents submitted under oath in connection with this filing, Wade falsely stated that he had no management or ownership interest in any business, and that he had no real property or other assets. At the time of these submissions, Wade owned real estate with an estimated value of at least $25 million, titled in the names of the sham UBOs, corporations and/or business trusts under his direct control. Wade also failed to list the IRS as a creditor on his bankruptcy filings, despite the tax liabilities assessed as a result of his 1990 conviction and subsequent assessment of over $1 million in tax liabilities against him by the IRS. Based on these intentional omissions and false statements, Wade received a bankruptcy discharge pursuant to 11 U.S.C. § 727 on April 11, 2003. In March 2004, the Wades were indicted for several tax related crimes and for the 2002 false bankruptcy filing. On March 4, 2005, the Wades filed an affidavit under oath in a Utah court stating “[w]e or certain trusts or business entities legally or equitably owned by us are the owners” of the apartment complexes then purportedly titled in the name of the UBOs or other entities, and at issue in this case. The affidavit also stated “[w]e acknowledge and agree that our family or business entities owned or controlled by our family are the legal and beneficial owners” of the apartment complexes at issue in this case. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 4 of 67 5 On March 21, 2005, Wade was convicted of engaging in a conspiracy to defraud the United States based on his transfer of the apartment complexes into the UBOs. He was also convicted of three counts of tax evasion for knowingly and willingly signing and submitting federal income tax returns for tax years 1997, 1998, and 1999 omitting at least $4.6 million of taxable income generated from the operation of the apartment complexes at issue here, and one count of tax evasion related to his failure to pay the tax liabilities related to a criminal conviction against him in 1990 with regard to his 1982 and 1983 tax years. Finally, Wade was convicted of two counts related to his 2002 fraudulent bankruptcy filing. See United States of America v. Wade, 2:04-cr-0141-TS. Janet Wade was permitted to enter into a pretrial diversion agreement rather than face trial. Pursuant to the diversion agreement, Janet was required to submit correct tax returns for herself for the years 1993 through 2004, and to pay her half of the resulting tax liabilities. Janet hired an accountant who worked closely for several months with an IRS representative to construct accurate income tax returns for the years 1993 through 2004 which reported half of the rental income from the Subject Properties, and she paid the income tax reported on each of these returns, with the exception of 1993. Using the information reported by Janet on her returns for the years 1993 through 2004, the IRS made federal income tax assessments against Wade for the tax years 1993 through 2004. In 2011, Wade filed a mandamus proceeding in this Court, Wade v. Regional Director, Internal Revenue Service, Civil No. 11-4184, in which he sought an order directing the IRS to withdraw tax liens filed against certain of his properties and to desist from further tax collection efforts with regard to the tax years 1993-2004. The Court granted summary judgment in favor of Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 5 of 67 6 the United States and dismissed Wade’s suit. See Wade v. Regional Director, 504 Fed.Appx. 748 (10th Cir. 2012). Based on these facts, as demonstrated below, the United States is entitled to summary judgment in this case against Stanley Wade, Janet Wade, and the entities on all the claims listed in its Complaint. III. STATEMENT OF ELEMENTS AND UNDISPUTED MATERIAL FACTS A. Reduce Federal Tax Assessments for Years 1993 Through 2004 To Judgment LEGAL ELEMENT: Pursuant to I.R.C. §§ 6201 and 6203, a delegate of the Secretary of the Treasury made timely and correct assessments for federal individual income taxes, plus statutory penalties and interest accruing thereto, against Mr. Wade for tax years 1993 through 2004. Undisputed Material Facts 1. In 2004, Stanley L. Wade and Janet Wade were each charged in a nine-count indictment. United States v. Wade, 203 Fed. Appx. 920 (10th Cir. 2006). Count 1 alleged that the Wades conspired to defraud the IRS by transferring ownership of various apartment complexes into sham entities called “Unincorporated Business Organizations” (“UBOs” or “business trusts”) and not reporting the income from them. Id. The indictment alleged that the complexes generated gross rental receipts in excess of $7 million, taxable income of $4 million, and a tax liability of over $1.5 million for the years 1996-1999. Id. The Wades were accused of conspiring to hide ownership of the complexes not only to conceal income and evade tax, but also to conceal a source of payment of an outstanding tax liability from 1982–84 in excess of $1 million. Id. Count 1 also alleged that the Wades conspired to file for bankruptcy fraudulently, with Stanley Wade representing that he had no real property assets. Id. Counts 2–5 charged the Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 6 of 67 7 Wades with evasion of assessment for tax years 1997–99 and evasion of payment for 1982–84 in violation of 26 U.S.C. §7201 and 18 U.S.C. §2. Count 6 alleged that Stanley Wade committed bankruptcy fraud in violation of 18 U.S.C. § 157, and count 8 charged him with making a false statement in a bankruptcy proceeding in violation of 18 U.S.C. § 152. Id. Counts 7 and 9 alleged the same bankruptcy charges against Janet Wade. See Deposition of Janet Wade (“Janet Wade Depo.”), 86:8-25 and Exhibit 14 thereto (attached as Exhibit 1 to Declaration of Virginia Cronan Lowe (“Lowe Decl.”)). 2. Janet Wade entered into an Agreement For Pretrial Diversion with regard to the indictment. See Janet Wade Depo., Exhibit 15. After a seven-day jury trial in March of 2005, Stanley Wade was convicted on all charges against him. Wade, 203 Fed. Appx. at 923. 3. Pursuant to the terms of the Diversion Agreement, Janet Wade agreed to prepare Amended Federal Income Tax Returns for the years 1993 through 2004. Id. The amended returns were required to include half of the rental income from the apartment complexes rental property owned by Janet and Stanley Wade which included Cherry Hills Apartments, Del Monico Apartments, El Caliente Apartments, Hillrise Apartments, La Parisienne Apartments, Palisades Apartments, Shangri-La Apartments, and La Petite Academy. See Janet Wade Depo., 86:8-25. 4. In order to comply with the terms of the Diversion Agreement, Janet Wade hired an accountant, Daniel Rondeau, to prepare amended federal income tax returns for the years 1993 through 2004. See Janet Wade Depo., 85:4-14; Deposition of Daniel Rondeau (“Rondeau Depo.”), 10:17 – 11:3 (attached as Exhibit 2 to Lowe Decl.). Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 7 of 67 8 5. In order to determine the profit and loss from the Wades’ rental business, Mr. Rondeau obtained all of the bank account records associated with all of the rental properties and input this information into a database. See Rondeau Depo., 13:14-21; 15:3 – 16:8. 6. Since complete bank account records were not available for the years 1993 through 1995, a discount factor was applied to the income and expense amounts reported for 1996 to determine the income and expenses for the years 1993, 1994, and 1995. See Rondeau Depo., 40:23 – 42:25; Declaration of Steven T. Roberts (“Roberts Decl.”), ¶ 5. 7. Once the database was complete, Mr. Rondeau prepared a summary of all of the categories in the database, e.g., income, expenses, asset purchases, payment of personal expenses. See Rondeau Depo., 24:1-16; 30:24 – 31:25 and Exhibit 101 thereto. 8. During the process of creating the database and the summaries of income, business expenses, and personal expenses, Mr. Rondeau and counsel for Janet Wade had consultations with IRS Revenue Agent Steven T. Roberts (RA Roberts) and a representative from the U.S. Attorneys’ Office to ensure that the process complied with the requirements of the Diversion Agreement. See Rondeau Depo., 26:1-24. 9. After Wade’s criminal trial was completed, Revenue AgentRoberts was assigned to perform an examination of Wade’s income tax liabilities for the years 1993 through 2004. For tax year 1993, Stanley L. Wade and Janet Wade had filed a federal income tax return as married filing jointly. See Roberts Decl., ¶ 3. The Wades failed to report any income from their apartment rental business on their 1993 federal income tax return. Id. For tax years 1994 through 2002, Stanley L. Wade filed a federal income tax return as married filing separately. Id., and Exhibits 30 – 37 attached thereto. Wade failed to report any of the income from his apartment rental business for the years 1993 through 2002 in these returns. Id. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 8 of 67 9 10. In performing the examination for the years 1993 through 2004, Revenue Agent Roberts relied on the work performed by Mr. Rondeau in determining the amount of income and expenses associated with Stanley and Janet Wades’ apartment rental business for the years 1993 through 2004. See Roberts Decl., ¶ 4. 11. Following the completion of the IRS examination for the years 1993 through 2004, Notices of Deficiency were issued to Mr. Wade for these years. See Roberts Decl., ¶ 4 and Exhibits 44, 52 and 53, attached thereto. 12. For tax year 1993, using Mr. Rondeau’s figures as a basis and then adjusting for any income and expenses Stanley Wade had previously reported on his 1993 federal income tax return with regard to a rental property identified as La Petite Academy, the IRS determined that Wade had received gross rental income in the amount of $2,165,025 and expenses in the amount of $910,942. See Roberts Decl., Exhibit 44. Because of the increased income, itemized deductions in the amount of $49,452 were disallowed and the standard deduction in the amount of $6,200 was allowed, and the additional exemptions in the amount of $9,400 were disallowed. Id. Finally, additional unreported interest income in the amount of $4,070 was added, and a net operating loss deduction in the amount of $11,341 was disallowed. Id. After the adjustments set forth above, the corrected tax liability for Mr. Wade’s 1993 tax year is $501,180. Id. Wade previously paid $411 in federal income tax for this year so the tax deficiency was determined to be $500,769. Id. In addition, it was determined that the deficiency was due to fraud so a fraud penalty pursuant to 26 U.S.C. § 6663 in the amount of $375,576.75 was included in the deficiency. Id. 13. On May 26, 2008, the IRS made an assessment against Stanley Wade in the amount of $500,769 for federal income taxes and in the amount of $375,576.75 for a fraud penalty for Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 9 of 67 10 his 1993 tax year. See Declaration of Jennifer Graham (“Graham Decl.”) (Dkt. #159), Exhibit 1, p. 3. The outstanding balance owed for StanleyWade’s 1993 federal income tax liabilities, including accrued penalties and interest computed to May 31, 2017, is $3,578,514.22. Id., Exhibit 5, p. 13. 14. For tax year 1994, using Mr. Rondeau’s figures as a basis and then adjusting for the amounts reported by Wade on his 1994 federal income tax return with regard to the La Petite Academy property, the IRS determined that Wade had gross rental income in the amount of $1,128,384 and expenses in the amount of $475,277. See Roberts Decl., Exhibit 52. In addition, Wade had unreported interest income of $24,977 and capital gain of $2,968. Id. Because of the increase in income, itemized deductions in the amount of $34,326 and exemptions in the amount of $2,450 were disallowed and a standard deduction in the amount of $3,175 was allowed. Id. After these adjustments, the correct tax liability for StanelyWade’s 1994 tax year is $277,918. Id. This deficiency was due to fraud so a fraud penalty pursuant to I.R.C. § 6663 in the amount of $208,438.50 was included in the deficiency. Id. 15. On June 23, 2008, the IRS made an assessment against Stanley Wade in the amount of $277,918 for federal income taxes and in the amount of $208,438.50 for a fraud penalty for his 1994 tax year. See Graham Decl., Exhibit 1, p. 7. The outstanding balance owed for StanleyWade’s 1994 federal income tax liabilities, including accrued penalties and interest computed to May 31, 2017, is $1,832,099.71. Id., Exhibit 5, p. 16. 16. For tax year 1995, using Mr. Rondeau’s figures as a basis and then adjusting for the amounts reported by Wade on his 1995 federal income tax return with regard to the La Petite Academy property, the IRS determined that Wade had gross rental income in the amount of $1,172,913 and expenses in the amount of $468,297. See Roberts Decl., Exhibit 52. In addition, Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 10 of 67 11 Wade had unreported interest income of $49,077 and capital gain of $6,197. Id. Because of the increase in income, itemized deductions in the amount of $57,625 and exemptions in the amount of $2,500 were disallowed and a standard deduction in the amount of $3,275 was allowed. Id. After these adjustments, the correct tax liability for Wade’s 1995 tax year is $303,473. Id. Wade previously paid $108 in federal income tax for this year so the deficiency was determined to be $303,365. Id. This deficiency was due to fraud so a fraud penalty pursuant to I.R.C. § 6663 in the amount of $227,523.75 was included in the deficiency. Id. 17. On June 23, 2008, the IRS made an assessment against Stanley Wade in the amount of $303,365 for federal income taxes and in the amount of $227,523.75 for a fraud penalty for his 1995 tax year. See Graham Decl., Exhibit 1, p. 11. The outstanding balance owed for StanelyWade’s 1995 federal income tax liabilities, including accrued penalties and interest computed to May 31, 2017, is $1,831,422.90. Id., Exhibit 5, p. 19. 18. For tax year 1996, using Mr. Rondeau’s figures as a basis and then adjusting for the amounts reported by Wade on his 1996 federal income tax return with regard to the La Petite Academy property, the IRS determined that Wade had gross rental income in the amount of $1,143,068 and expenses in the amount of $455,279. See Roberts Decl., Exhibit 52. In addition, Wade had unreported interest income of $92,942 and capital gain of $7,874. Id. Because of the increase in income, itemized deductions in the amount of $13,425 and exemptions in the amount of $2,550 were disallowed. Id. After these adjustments, the correct tax liability for Wade’s 1996 tax year is $306,115. Id. Wade previously paid $279 in federal income tax for this year so the deficiency was determined to be $303,836. Id. This deficiency was due to fraud so a fraud penalty pursuant to I.R.C. § 6663 in the amount of $229,377 was included in the deficiency. Id. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 11 of 67 12 19. On June 23, 2008, the IRS made an assessment against Stanley Wade in the amount of $303,836 for federal income taxes and in the amount of $229,377 for a fraud penalty for his 1996 tax year. See Graham Decl., Exhibit 1, p. 15. The outstanding balance owed for Stanley Wade’s 1996 federal income tax liabilities, including accrued penalties and interest computed to May 31, 2017, is $1,002,162.99. Id., Exhibit 5, p. 23.20. For tax years 1997, 1998, and 1999, shortly after reporting to prison as a result of his conviction in United States v. Stanley L. Wade, Case No. 2:04cr00141 TS, Stanley Wade filed amended returns with the IRS reporting an additional income tax in the amount of $225,940, $258,161, and $149,566, respectively. See Roberts Decl., ¶ 10, Exhibit 40. The amended returns did not show any detail, and in the explanation Wade stated that he was reporting the estimated tax determined in his criminal trial. Id. On May 22, 2006, the IRS assessed the reported tax liability on the 1997 Form 1040X (Amended Federal Income Tax Return) in the amount of $225,940. See Graham Decl, Exhibit 1, p. 20. On February 27, 2006, the IRS assessed the reported tax liability on the 1998 Form 1040 X in the amount of $258,161, and the reported tax liability on the 1999 Form 1040X in the amount of $149,566. Id., p. 28 and 33. 21. As set forth above, Mr. Wade failed to show any detail on his Forms 1040X in computing the reported tax liabilities. Therefore, in the examination of these years, using Mr. Rondeau’s figures for rental income, the IRS determined that Wade had overstated the rental expenses in arriving at the amount of tax set forth on the Forms 1040X. See Roberts Decl., ¶ 11, Allowing the rental expenses as determined by Mr. Rondeau resulted in an adjustment for rental expenses for the years 1997, 1998, and 1999. Id., Exhibit 52. Additional adjustments for capital gains for years 1997 and 1998 and for itemized deductions for years 1998 and 1999 were also made. Id. In addition to the income taxes reported by Wade as set forth in paragraph 19, above, Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 12 of 67 13 the IRS determined that additional income tax in the amounts of $100,838, $148,600, and $96,589 were due and owing for tax years 1997, 1998, and 1999, respectively. In addition, since the deficiencies were due to fraud, a fraud penalty for $245,083.50 for year 1997, $305,070.75 for year 1998, and $184,616.25 for tax year 1999, was included in the deficiency. Id. 22. On June 23, 2008, the IRS made an assessment against Stanley Wade in the amount of $100,838 for federal income taxes and in the amount of $245,083.50 for a fraud penalty for his 1997 tax year. See Graham Decl., Exhibit 1, p. 22. The outstanding balance owed for Stanley Wade’s 1997 federal income tax liabilities, including accrued penalties and interest computed to May 31, 2017, is $1,224,346.31. Id., Exhibit 5, p. 26. 23. On June 23, 2008, the IRS made an assessment against Stanley Wade in the amount of $148,600 for federal income taxes and in the amount of $305,070.75 for a fraud penalty for his 1998 tax year. See Graham Decl., Exhibit 1, p. 29. The outstanding balance owed for Stanley Wade’s 1998 federal income tax liabilities, including accrued penalties and interest computed to May 31, 2017, is $1,433,548.26. Id., Exhibit 5, p. 30. 24. On June 23, 2008, the IRS made an assessment against Stanley Wade in the amount of $96,589 for federal income taxes and in the amount of $184,616.25 for a fraud penalty for his 1999 tax year. See Graham Decl., Exhibit 1, p. 34. The outstanding balance owed for Stanley Wade’s 1999 federal income tax liabilities, including accrued interest computed to May 31, 2017, is $795,281.62. Id., Exhibit 5, p. 34. 25. For tax years 2000, 2001, and 2002, Wade also filed amended returns with the IRS after his conviction. Similar to the returns filed for 1997-1999, Wade failed to set forth any detail and simply reported an additional tax liability of $149,302 for year 2000, $149,307 for year 2001, and $$149,301 for year 2002. On February 27, 2006, the IRS assessed the reported Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 13 of 67 14 tax liabilities set forth on the Forms 1040X for the years 2000, 2001, and 2002 against Wade. See Graham Decl., Exhibit 1, p. 38, 44, and 49. 26. With regard to the IRS examination for tax years 2000, 2001, and 2002, again using the information provided by Accountant Rondeau, the IRS determined that Wade had overstated the rental expenses in arriving at the amount of tax set forth in the Forms 1040X. See Roberts Decl., ¶ 13. The IRS allowed rental expenses as was finally worked out with counsel for Janet Wade in the preparation of her amended tax returns for these years, which resulted in an adjustment for Wade’s allowed rental expenses for the years 2000, 2001, and 2002. Id., Exhibit 53. The IRS determined additional adjustments for capital gains, interest income, itemized deductions, and allowed Wade the standard deduction for the years 2000, 2001, and 2002. Id. Thus, in addition to the income taxes reported by Wade as set forth in paragraph 24, above, the IRS determined that additional income tax in the amount of $134,600, $144,564, and $133,021, were due and owing for the years 2000, 2001, and 2002, respectively. Id. In addition, since the deficiencies were due to fraud, a fraud penalty for $212,926 for year 2000, $220,399.50 for year 2001, and $211,742.25 for tax year 2002, was included in the deficiency. Id. 27. On March 10, 2008, the IRS made an assessment against Stanley Wade in the amount of $134,600 for federal income taxes and in the amount of $212,926.50 for a fraud penalty for his 2000 tax year. See Graham Decl., Exhibit 1, p. 40. The outstanding balance owed for Stanley Wade’s 2000 federal income tax liabilities, including accrued penalties and interest computed to May 31, 2017, is $861,908.28. Id., Exhibit 5, p. 37. 28. On March 10, 2008, the IRS made an assessment against Stanley Wade in the amount of $144,564 for federal income taxes and in the amount of $220,399.50 for a fraud penalty for his 2001 tax year. See Graham Decl., Exhibit 1, p. 45. The outstanding balance Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 14 of 67 15 owed for Stanley Wade’s 2001 federal income tax liabilities, including accrued penalties and interest computed to May 31, 2017, is $827,330.90. Id., Exhibit 5, p. 41. 29. On March 10, 2008, the IRS made an assessment against Stanley Wade in the amount of $133,021 for federal income taxes and in the amount of $211,742.25 for a fraud penalty for his 2002 tax year. See Graham Decl., Exhibit 1, p. 50. The outstanding balance owed for Stanley Wade’s 2002 federal income tax liabilities, including accrued penalties and interest computed to May 31, 2017, is $728,685.02. Id., Exhibit 5, p. 44. 30. Stanley Wade had failed for file a federal income tax return for the years 2003 and 2004. Again, using the information provided by Accountant Rondeau, the IRS determined that Wade had gross rental income of $1,186,584 for year 2003, and $1,138,663 for year 2004. See Roberts Decl., ¶ 14, Exhibit 53. The IRS allowed rental expenses as was finally worked out with counsel for Janet Wade in the preparation of her amended tax returns for these years, which resulted in allowed rental expenses of $535,509 for year 2003, and $739,276 for year 2004. Id. Additionally, the IRS determined additional interest in the amount of $10,259 for 2003, and $6,499 for 2004 and additional dividends of $722 for 2003 and $514 for 2004. Id. The IRS allowed a capital loss of $1,500 for 2003 and 2004, and itemized deductions for $8,149 for $294,203 for 2004. The IRS determined an income tax deficiency in the amount of $215,911 for year 2003, and $119,717 for year 2004. Id. Additionally because the failure to file a return for these years was fraudulent, a penalty pursuant to 26 U.S.C.§ 6651(f) in the amount of $161,933.25 for year 2003 and $89,787.75 for year 2004, and a failure to pay estimated tax penalty pursuant to 26 U.S.C. § 6654 for $42.74 for year 2003, and for $3,475.02 for year 2004 was included in the deficiency. Id. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 15 of 67 16 31. On March 10, 2008, the IRS made an assessment against Stanley Wade in the amount of $215,911 for federal income taxes, $161,933.25 for a fraud penalty, $42.74 for a failure to pay estimated tax penalty, and $50,739.08 for a failure to pay penalty for his 2003 tax year. See Graham Decl., Exhibit 1, p. 55. The outstanding balance owed for Stanley Wade’s 2003 federal income tax liabilities, including accrued penalties and interest computed to May 31, 2017, is $762,632.27. Id., Exhibit 5, p. 47. 32. On March 10, 2008, the IRS made an assessment against Stanley Wade in the amount of $119,717 for federal income taxes, $89,787.75 for a fraud penalty, $3,475.02 for a failure to pay estimated tax penalty, and $20,950.47 for a failure to pay penalty for his 2004 tax year. See Graham Decl., Exhibit 1, p. 59. The outstanding balance owed for Stanley Wade’s 2004 federal income tax liabilities, including accrued penalties and interest computed to May 31, 2017, is $407,000.48. Id., Exhibit 5, p. 50. B. Fraud Penalty LEGAL ELEMENT: Section 6663 of the Code imposes a 75% penalty on any portion of an underpayment of taxes due to fraud. I.R.C. § 6663(a). LEGAL ELEMENT: Section 6651(f) of the Code imposes a 75% penalty on any portion of an underpayment of taxes due to fraudulent failure to file a return. I.R.C. § 6651(f). LEGAL ELEMENT: The United States bears the burden of proving fraud by clear and convincing evidence. I.R.C. § 7454(a); Heyen v. United States, 945 F.2d 359, 364-65 (10th Cir. 1991). LEGAL ELEMENT: Finding civil fraud requires proof that the taxpayer intended to conceal, mislead or otherwise evade the payment of a tax believed to be owing. Spies v. United Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 16 of 67 17 States, 317 U.S. 492, 499 (1943); Zell v. Commissioner, 763 F.2d 1139, 1142 – 43 (10th Cir. 1985). LEGAL ELEMENT: Courts may find as evidence of fraud “any conduct, the likely effect of which would be to mislead or to conceal.” Spies, 317 U.S. at 499; Zell, 763 F.2d at 1142 – 43. Fraud may be proved by circumstantial evidence and reasonable inferences drawn from facts. Stolzfus v. United States, 398 F.2d 1002, 1004 (3rd Cir. 1968). LEGAL ELEMENT: Courts have established numerous indicia of fraud, including: (1) concealment of assets; (2) concealment of ownership; (3) consistent and substantial understatement of income; (4) implausible or inconsistent explanations of behavior; (5) failure to file tax returns: (6) failure to cooperate with tax authorities; and (7) any conduct which is likely to mislead or conceal. Spies, 317 U.S. at 499; Estate of Trompeter v. Commissioner, 279 F.3d 767, 773 (9th Cir. 2002); Sala v. United States, 552 F.Supp.2d 1157; 1163 (D. Colo. 2007). LEGAL ELEMENT: A conviction for federal income tax evasion, either upon a plea of guilty or jury verdict of guilty, conclusively establishes fraud in a subsequent civil tax fraud proceeding through the application of the doctrine of collateral estoppel. Gray v. Commissioner, 708 F.2d 243, 246 (6th Cir. 1983). LEGAL ELEMENT: In addition to being bound to the elements of the crimes, convictions under statutes requiring deception, such as 18 U.S.C. § 371 (conspiracy to defraud the United States), are persuasive evidence of fraud. Plotkin v. Commissioner, 102 T.C.M. (CCH) 450 (T.C. 2011) aff'd, 498 F. App'x 954 (11th Cir. 2012); Morse v. Commissioner, T.C. Memo. 2003-332, aff’d 419 F.3d 829 (8th Cir. 2005); Mobley v. Commissioner, 65 T.C.M. (CCH) 1939 (T.C. 1993) aff'd by unpublished opinion, 33 F.3d 1382 (11th Cir. 1994); Parsons v. Commissioner, T.C. Memo. 2000-205. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 17 of 67 18 LEGAL ELEMENT: If the United States establishes that any portion of an unpaid tax is due to fraud, the entire underpayment is treated as fraudulent, unless the taxpayer can establish by a preponderance of the evidence that some portion of the unpaid tax is not due to fraud. I.R.C. § 6663(b). Undisputed Material Facts 33. On June 12, 1990, Stanley L. Wade was convicted of filing false and fraudulent federal income tax returns for tax years 1982 and 1983. Mr. Wade pled guilty to the charges against him. He admitted that during each of the years in question, he had failed to report at least $300,000 in gross receipts from the operation of several apartment buildings he owned in the Salt Lake City, Utah area. See United States v. Wade, 940 F.2d 1375 (10th Cir. 1991); Complaint and Answer, ¶ 49. 34. The apartment buildings and properties involved in the 1990 criminal case are some of the same apartment buildings and properties at issue in this case, described in more detail below. Id., ¶ 50. 35. On August 18, 1997, the United States Tax Court entered a decision upholding tax and penalty assessments against Wade for tax years 1982 – 1984, to include a fraud penalty for years 1982 and 1983. Wade v. Commissioner, T.C. Memo 1997-374, aff’d 185 F.3d 876 (10th Cir. 1999) (unpublished). 36. Beginning in 1992, while still on probation in connection with the conviction referenced above, Wade purported to transfer the ownership of several apartment buildings and properties, as well as several other parcels of property owned either solely or jointly with his wife to a series of so-called “Unincorporated Business Organizations” (hereinafter “UBO”). The Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 18 of 67 19 Wades also purported to transfer other assets to these entities, including certificates of deposit, securities, bank balances, and their personal residence. Complaint and Answer, ¶ 51. 37. Mr. Wade never registered any of the UBOs purportedly receiving the assets described above to do business in Utah. Id. ¶ 52. 38. Mr. Wade engaged in numerous transfers of the nineteen properties at issue in this case. Wade testified that after these transfers, he believed he owned nothing. Stanley Wade Depo. 58:4 – 24; 62:23 – 64:24. Those transfers are set out in detail below. THE FIRST PROPERTY 39. One parcel of real property that is the subject of this action is a parcel of land located at 2385 East 6895 South, Salt Lake City, Utah (“the first property”). A legal description of this property was filed as Exhibit A to the United States’ Complaint. Complaint and Answer, ¶ 75. 40. On May 21, 1976, a Warranty Deed was recorded with the Salt Lake County Recorder transferring title of the first property to Stanley L. Wade and Janet B. Wade. Id., ¶ 76. 41. On February 27, 1996, a Warranty Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the first property from Stanley L. Wade and Janet B. Wade to Cherry Hills UBO. This purported transfer was made for little or no consideration. Id., ¶ ¶ 79, 220. 42. On April 11, 1996, an identical copy of the Warranty Deed referenced in paragraph 76, above, was recorded with the Salt Lake County Recorder, again purporting to transfer title in the first property from Stanley L. Wade and Janet B. Wade to Cherry Hills UBO. This purported transfer was made without full and adequate consideration. Id., ¶ ¶ 80, 226. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 19 of 67 20 THE SECOND PROPERTY 43. One parcel of real property that is the subject of this action is a parcel of land located at 2210 East 3300 South, Salt Lake City, Utah (“the second property”). A legal description of this property was filed as Exhibit B to the United States’ Complaint. Complaint and Answer, ¶ 82. 44. On April 1, 1974, a Warranty Deed was recorded with the Salt Lake County Recorder transferring title in the second property to Stanley L. Wade. Id. ¶ 83. 45. Although the property was still titled solely in the name of Stanley L. Wade, on November 24, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the second property from Stanley L. Wade and Janet B. Wade to Cherry Hills Apartments, a Nevada Corporation. This purported transfer was made for little or no consideration. Id., ¶ ¶ 84, 226. 46. Cherry Hills Apartments was incorporated by Stanley L. Wade in 1992. Wade was listed as the registered agent of the corporation on the incorporation documents. The corporation’s status is listed as “permanently revoked” on the website of the Nevada Secretary of State. Id., ¶ 85. 47. On November 25, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the second property from Cherry Hills Apartments to Cherry Hills UBO. This purported transfer was made for little or no consideration. Id., ¶ ¶ 86, 226. 48. On February 4, 1993, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the second property from Cherry Hills Apartments to Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 20 of 67 21 Cherry Hills UBO. This purported transfer was made with little or no consideration. Id., ¶ ¶ 87, 226. 49. On March 26, 2001, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the second property from Cherry Hills UBO to Cherry Hills Apartments Business Trust. This purported transfer was made for little or no consideration. Id., ¶ ¶ 88, 226. 50. As of September 20, 2012, Stanley L. Wade was listed as a trustee for Cherry Hills Apartments Business Trust on the Utah Division of Corporations and Commercial Code website. Deposition of Stanley L. Wade (“Wade Depo.”) 73:12 – 80:5 (attached as Exhibit 3 to Lowe Decl.). 51. Mr. Wade was issued a K-1 from Cherry Hills Apartments business trust indicating that he received had a 50% ownership interest in that entity, and received income from it for each of the tax years 2006 - 2010, inclusive. Id. THE THIRD PROPERTY 52. One parcel of real property that is the subject of this action is a parcel of land also located at 2210 East 3300 South, Salt Lake City, Utah (“the third property”). A legal description of this property was filed as Exhibit C to the United States’ Complaint. Complaint and Answer, ¶ 90. 53. On April 1, 1974, a Warranty Deed was recorded with the Salt Lake County Recorder transferring title in the third property to Stanley L. Wade. Id., ¶ 91. 54. Although the property was still titled solely in the name of Stanley L. Wade, on November 24, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the third property from Stanley L. Wade and Janet B. Wade to Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 21 of 67 22 Cherry Hills Apartments, a Nevada Corporation. This purported transfer was made for little or no consideration. Id., ¶ ¶ 92, 226. 55. On November 25, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the third property from Cherry Hills to Cherry Hills UBO. This purported transfer was made for little or no consideration. Id., ¶ ¶ 93; 226. 56. On February 4, 1993, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the third property from Cherry Hills Apartments to Cherry Hills UBO. This purported transfer was made for little or no consideration. Id., ¶ ¶ 94; 226 57. On March 26, 2001, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the third property from Cherry Hills UBO to Cherry Hills Apartments Business Trust. This purported transfer was made for little or no consideration. Id., ¶ ¶ 95, 226. THE FOURTH PROPERTY 58. One parcel of real property that is the subject of this action is a parcel of land located at 2220 East 3300 South, Salt Lake City, Utah (“the fourth property”). A legal description of this property was filed as Exhibit D to the United States’ Complaint. Complaint and Answer, ¶ 96. 59. On April 1, 1974, a Warranty Deed was recorded with the Salt Lake County Recorder transferring title in the fourth property to Stanley L. Wade. Id., ¶ 97. 60. Although the property was still titled solely in the name of Stanley L. Wade, on November 24, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the fourth property from Stanley L. Wade and Janet B. Wade to Cherry Hills Apartments, a Nevada Corporation. This purported transfer was made for little or no consideration. Id., ¶ 98, 226. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 22 of 67 23 61. On November 25, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the fourth property from Cherry Hills to Cherry Hills UBO. This purported transfer was made for little or no consideration. Id., ¶ ¶ 99, 226. 62. On February 4, 1993, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the fourth property from Cherry Hills Apartments to Cherry Hills UBO. This purported transfer was made for little or no consideration. Id., ¶ ¶ 100, 226. 63. On March 26, 2001, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the fourth property from Cherry Hills UBO to Cherry Hills Apartments Business Trust. This purported transfer was made for little or no consideration. Id., ¶ ¶ 101, 226. THE FIFTH PROPERTY 64. One parcel of real property that is the subject of this action is an apartment building located at 2210 East 3300 South, Salt Lake City, Utah (“the fifth property”). A legal description of this property was filed as Exhibit E to the United States’ Complaint. Complaint and Answer, ¶ 102. 65. On April 1, 1974, a Warranty Deed was recorded with the Salt Lake County Recorder transferring title in the fifth property to Stanley L. Wade. Id., ¶ 103. 66. Although the property was still titled solely in the name of Stanley L. Wade, on November 24, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the fifth property from Stanley L. Wade and Janet B. Wade to Cherry Hills Apartments, a Nevada Corporation. This purported transfer was made for little or no consideration. Id., ¶ ¶ 104, 226. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 23 of 67 24 67. On November 25, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the fifth property from Cherry Hills to Cherry Hills UBO. This purported transfer was made for little or no consideration. Id., ¶ ¶ 105, 226. 68. On February 4, 1993, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the fifth property from Cherry Hills Apartments to Cherry Hills UBO. This purported transfer was made for little or no consideration. Id., ¶ ¶ 106, 226. 69. On March 26, 2001, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the fifth property from Cherry Hills UBO to Cherry Hills Apartments Business Trust. This purported transfer was made for little or no consideration. Id., ¶ ¶ 107, 226. THE SIXTH PROPERTY 70. One parcel of real property that is the subject of this action is a parcel of land located at 2240 East 3300 South, Salt Lake City, Utah (“the sixth property”). A legal description of this property was filed as Exhibit F to the United States’ Complaint. Complaint and Answer, ¶ 108. 71. On April 1, 1974, a Warranty Deed was recorded with the Salt Lake County Recorder transferring title in the sixth property to Stanley L. Wade. Id., ¶ 109. 72. Although the property was still titled solely in the name of Stanley L. Wade, on November 24, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the sixth property from Stanley L. Wade and Janet B. Wade to Cherry Hills Apartments, a Nevada Corporation. This purported transfer was made for little or no consideration. Id., ¶ ¶ 110, 226. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 24 of 67 25 73. On November 25, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the sixth property from Cherry Hills to Cherry Hills UBO. This purported transfer was made for little or no consideration. Id., ¶ ¶ 111, 226. 74. On February 4, 1993, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the sixth property from Cherry Hills Apartments to Cherry Hills UBO. This purported transfer was made for little or no consideration. Id., ¶ ¶ 112, 226. 75. On March 26, 2001, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the sixth property from Cherry Hills UBO to Cherry Hills Apartments Business Trust. This purported transfer was made for little or no consideration. Id., ¶ ¶ 113, 226. THE SEVENTH PROPERTY 76. One parcel of real property that is the subject of this action is a parcel of land located at 2230 East 3300 South, Salt Lake City, Utah (“the seventh property”). A legal description of this property was filed as Exhibit G to the United States’ Complaint. Complaint and Answer, ¶ 114. 77. On April 1, 1974, a Warranty Deed was recorded with the Salt Lake County Recorder transferring title in the seventh property to Stanley L. Wade. Id., ¶ 115. 78. Although the property was still titled solely in the name of Stanley L. Wade, on November 24, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the seventh property from Stanley L. Wade and Janet B. Wade to Cherry Hills Apartments, a Nevada Corporation. This purported transfer was made for little or no consideration. Id., ¶ ¶ 116, 226. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 25 of 67 26 79. On November 25, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the seventh property from Cherry Hills to Cherry Hills UBO. This purported transfer was made for little or no consideration. Id., ¶ ¶ 117, 226. 80. On February 4, 1993, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the seventh property from Cherry Hills Apartments to Cherry Hills UBO. This purported transfer was made for little or no consideration. Id., ¶ ¶ 118, 226. 81. On March 26, 2001, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the seventh property from Cherry Hills UBO to Cherry Hills Apartments Business Trust. This purported transfer was made for little or no consideration. Id., ¶ ¶ 119, 226. THE EIGHTH PROPERTY 82. One parcel of real property that is the subject of this action is an apartment building located at 4370 South Highland Drive, Salt Lake City, Utah (“the eighth property”). A legal description of this property was filed as Exhibit H to the United States’ Complaint. Complaint and Answer, ¶ 120. 83. On August 4, 1972, a Warranty Deed was recorded with the Salt Lake County Recorder transferring title in the eighth property to Stanley L. Wade and Janet B. Wade. Id., ¶ 121. 84. Also on August 4, 1972, a Quit Claim Deed was recorded with the Salt Lake County Recorder transferring title in the eighth property to Stanley L. Wade and Janet B. Wade. Id., ¶ 122. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 26 of 67 27 85. On November 24, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the eighth property from Stanley L. Wade and Janet B. Wade to Delmonico Apartments, a Nevada Corporation. This purported transfer was made for little or no consideration. Id., ¶ ¶ 123, 232. 86. Delmonico Apartments was incorporated by Stanley L. Wade in 1992. Wade was listed as the registered agent of the corporation on the incorporation documents. The corporation’s status is listed as “permanently revoked” on the Nevada Secretary of State’s website. Id., ¶ 124. 87. On November 25, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the eighth property from Delmonico to Del Monico UBO. This purported transfer was made for little or no consideration. Id., ¶ ¶ 125, 232. 88. On February 4, 1993, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the eighth property from Delmonico Apartments to Del Monico UBO. This purported transfer was made for little or no consideration. Id., ¶ 127. 89. On March 26, 2001, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the eighth property from Del Monico UBO to Del Monico Apartments Business Trust. This purported transfer was made for little or no consideration. Id., ¶ ¶ 128, 232. 90. As of September 20, 2012, Stanley L. Wade was listed as a trustee for Del Monico Apartments Business Trust on the Utah Division of Corporations and Commercial Code website. Stanley Wade Depo, 80:25 – 81:19 and Exhibit 47. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 27 of 67 28 91. Mr. Wade was issued a K-1 from Del Monico Apartments business trust indicating that he received had a 50% ownership interest in that entity, and received income from it for each of the tax years 2006 - 2010, inclusive. Id. THE NINTH PROPERTY 92. One parcel of real property that is the subject of this action is an apartment building located at 826 East Hanover Place, Salt Lake City, Utah (“the ninth property”). A legal description of this property was filed as Exhibit I to the United States’ Complaint. Complaint and Answer, ¶ 130. 93. On April 4, 1972, a Warranty Deed was recorded with the Salt Lake County Recorder transferring title in the ninth property to Stanley L. Wade and Janet B. Wade. Id., ¶ 131. 94. On November 24, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the ninth property from Stanley L. Wade and Janet B. Wade to El Caliente Apartments, a Nevada Corporation. This purported transfer was made for little or no consideration. Id., ¶ ¶ 132, 228. 95. El Caliente Apartments was incorporated by Stanley L. Wade in 1992. Wade was listed as the registered agent of the corporation on the incorporation documents. The corporation’s status is listed as “permanently revoked” on the Nevada Secretary of State’s website. Id., ¶ 133. 96. On November 25, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the ninth property from El Caliente to El Caliente UBO. This purported transfer was made for little or no consideration. Id., ¶ ¶ 134, 228. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 28 of 67 29 97. On February 4, 1993, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the ninth property from El Caliente Apartments to El Caliente UBO. This purported transfer was made for little or no consideration. Id., ¶ ¶ 138, 228. 98. On March 26, 2001, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the ninth property from El Caliente UBO to El Caliente Apartments Business Trust. This purported transfer was made for little or no consideration. Id., ¶ ¶ 137, 228. 99. As of September 20, 2012, Stanley L. Wade was listed as a trustee for El Caliente Apartments Business Trust on the Utah Division of Corporations and Commercial Code website. Stanley Wade Depo 81:20 – 82:14 and Exhibit 48. 100. Mr. Wade was issued a K-1 from El Caliente Apartments business trust indicating that he received had a 50% ownership interest in that entity, and received income from it for each of the tax years 2006 - 2009, inclusive. Id. THE TENTH PROPERTY 101. One parcel of real property that is the subject of this action is an apartment building located at 2385 East 6895 South, Salt Lake City, Utah (“the tenth property”). A legal description of this property was filed as Exhibit J to the United States’ Complaint. Complaint and Answer, ¶ 139. 102. On December 19, 1979, a Quit Claim Deed was recorded with the Salt Lake County Recorder transferring title in the tenth property to Stanley L. Wade and Janet B. Wade. Id., ¶ 140. 103. On November 24, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the tenth property from Stanley Wade L. and Janet Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 29 of 67 30 B. Wade to Hill Rise Apartments, a Nevada Corporation. This purported transfer was made for little or no consideration. Id., ¶ ¶ 141, 234. 104. Hill Rise Apartments was incorporated by Stanley L. Wade in 1992. Wade was listed as the registered agent of the corporation on the incorporation documents. The corporation’s status is listed as “permanently revoked” on the Nevada Secretary of State’s website. Id., ¶ 142. 105. On November 25, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the tenth property from Hill Rise to Hill Rise UBO. This purported transfer was made for little or no consideration. Id., ¶ ¶ 143, 234. 106. On February 4, 1993, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the tenth property from Hill Rise Apartments to Hill Rise UBO. This purported transfer was made for little or no consideration. Id., ¶ ¶ 145, 234. 107. On March 26, 2001, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the tenth property from Hill Rise UBO to Hill Rise Apartments Business Trust. This purported transfer was made for little or no consideration. Id., ¶ ¶ 146, 234. 108. As of September 20, 2012, Stanley L. Wade was listed as a trustee for Hill Rise Apartments Business Trust on the Utah Division of Corporations and Commercial Code website. Stanley Wade Depo. 82:15 – 83:8 and Exhibit 49. 109. Mr. Wade was issued a K-1 from Hill Rise Apartments business trust indicating that he received had a 50% ownership interest in that entity, and received income from it for each of the tax years 2006 - 2010, inclusive. Id. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 30 of 67 31 ELEVENTH PROPERTY 110. One parcel of real property that was the subject of this action is a parcel of land located at 9239 South 700 East, Salt Lake City, Utah (“the eleventh property”). A legal description of this property was filed as Exhibit K to the United States’ Complaint. Complaint and Answer, ¶ 148. 111. On April 6, 1995, a Warranty Deed was recorded with the Salt Lake County Recorder transferring title in the eleventh property to Stanley Wade. Id., ¶ 149. 112. On February 27, 1996, a Warranty Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the eleventh property from Stanley L. Wade to Hill Rise UBO. This purported transfer was made for little or no consideration. Id., ¶ 150. 113. On March 21, 2008, a Warranty Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the eleventh property from Hill Rise UBO, Stanley Wade, Trustee, to King Ranch Development LLC. This purported transfer was made for little or no consideration. Id., ¶ 151. 114. On October 20, 2008, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the eleventh property from King Ranch Development LLC to Hill Rise UBO. This purported transfer was made for little or consideration. Id., 152. 115. On September 16, 2016, the Court entered an Order: (a) requiring the United States to issue and record a certificate of discharge as to the tax liens encumbering the Eleventh Property; (b) holding that the United States’ federal tax liens attached to the net proceeds of the sale of the Eleventh Property until such time as defendant Janet Wade was able to complete an exchange under I.R.C. § 1031; and (c) restricting the use of the proceeds from the sale of the Eleventh Property solely to build six additional apartment buildings on the parcel described Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 31 of 67 32 herein as the Tenth Property. (Dkt. #110). The United States has fully complied with the terms of the Court’s Order. THE TWELFTH PROPERTY 116. One parcel of real property that is the subject of this action is a parcel of land located at 266 - 268 South West Court, Salt Lake City, Utah (“the twelfth property”). A legal description of this property was filed as Exhibit L to the United States’ Complaint. Complaint and Answer, ¶ 153. 117. On September 18, 1972, a Warranty Deed was recorded with the Salt Lake County Recorder transferring title in the twelfth property to Stanley Leo Wade and Janet B. Wade. Id., ¶ 154. 118. On December 6, 1994, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the twelfth property from Stanley L. Wade and Janet B. Wade to La Parisenne Apartments, a Nevada Corporation. This purported transfer was made for little or no consideration. Id., ¶ ¶ 155, 246. 119. La Parisenne Apartments was incorporated by Wade in 1992. Wade was listed as the registered agent of the corporation on the incorporation documents. The corporation’s status is listed as “permanently revoked” on the website of the Nevada Secretary of State. Id., ¶ 156. THE THIRTEENTH PROPERTY 120. One parcel of real property that is the subject of this action is an apartment building located at 261 S 800 E, Salt Lake City, Utah (“the thirteenth property”). A legal description of this property was filed as Exhibit M to the United States’ Complaint. Complaint and Answer, ¶ 157. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 32 of 67 33 121. On June 14, 1971, Warranty Deeds were recorded with the Salt Lake County Recorder transferring title in the thirteenth property to Stanley Leo Wade and Janet B. Wade. Id., ¶ 158. 122. On December 6, 1994, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the thirteenth property from Stanley L. Wade and Janet B. Wade to La Parisenne Apartments. This purported transfer was made for little or no consideration. Id., ¶ ¶ 159, 246. 123. On March 26, 2001, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the thirteenth property from La Parisenne Apartments to La Parisienne Apartments Business Trust. This purported transfer was made for little or no consideration. Id., ¶ ¶ 160, 246. 124. As of September 20, 2012, Stanley L. Wade was listed as a trustee for La Parisienne Apartments Business Trust on the Utah Division of Corporations and Commercial Code website. Stanley Wade Depo. 83:9 – 25 and Exhibit 50. 125. Mr. Wade was issued a K-1 from La Parisienne Apartments Business Trust indicating that he received had a 50% ownership interest in that entity, and received income from it for each of the tax years 2006 - 2010, inclusive. Id. THE FOURTEENTH PROPERTY 126. One parcel of real property that is the subject of this action is a parcel of land located at 266-268 South West Court, Salt Lake City, Utah (“the fourteenth property”). A legal description of this property was filed as Exhibit N to the United States’ Complaint. Complaint and Answer, ¶ 163. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 33 of 67 34 127. On May 10, 1972, a Warranty Deed was recorded with the Salt Lake County Recorder transferring title in the fourteenth property to Stanley L. Wade and Janet B. Wade. Id., ¶ 164. 128. On November 24, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the fourteenth property from Stanley L. Wade and Janet B. Wade to La Parisenne Apartments. This purported transfer was made for little or no consideration. Id., ¶ ¶ 165, 246. 129. On March 26, 2001, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the fourteenth property from La Parisenne Apartments to La Parisienne Apartments Business Trust. This purported transfer was made for little or no consideration. Id., ¶ 166. THE FIFTEENTH PROPERTY 130. One parcel of real property that is the subject of this action is an apartment building located at 47 South 800 East, Salt Lake City, Utah (“the fifteenth property”). A legal description of this property was filed as Exhibit O to the United States’ Complaint. Complaint and Answer, ¶ 167. 131. On April 4, 1972, a Warranty Deed was recorded with the Salt Lake County Recorder transferring title in the fifteenth property to Stanley L. Wade and Janet B. Wade. Id., ¶ 168. 132. On November 25, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the fifteenth property from Stanley L. Wade and Janet B. Wade to La Parisenne Apartments. This purported transfer was made for little or no consideration. Id., ¶ ¶ 169, 252. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 34 of 67 35 133. On March 26, 2001, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the fifteenth property from La Parisenne Apartments to La Parisienne Apartments Business Trust. This purported transfer was made for little or no consideration. Id., ¶ ¶ 170, 252. THE SIXTEENTH PROPERTY 134. One parcel of real property that is the subject of this action is an apartment building located at 623 South 600 East, Salt Lake City, Utah (“the sixteenth property”). A legal description of this property was filed as Exhibit P to the United States’ Complaint. Complaint and Answer, ¶ 171. 135. On April 18, 1969, a Warranty Deed was recorded with the Salt Lake County Recorder transferring title in the sixteenth property to Stanley Leo Wade. Id., ¶ 172. 136. Although the property was still titled solely in the name of Stanley L. Wade, on November 24, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the sixteenth property from Stanley L. Wade and Janet B. Wade to Sades Apartments, a Nevada Corporation. This purported transfer was made for little or no consideration. Id., ¶ ¶ 173, 258. 137. Sades Apartments was incorporated by Stanley L. Wade in 1992. Wade was listed as the registered agent of the corporation on the incorporation documents. The corporation’s status is listed as “permanently revoked” on the Nevada Secretary of State’s website. Id., ¶ 174. 138. The income from the sixteenth property is reported to the IRS by Palisades Business Trust. Lowe Decl., ¶ 5. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 35 of 67 36 139. As of September 20, 2012, Stanley L. Wade was listed as a trustee for Palisades Apartment Business Trust on the Utah Division of Corporations and Commercial Code website. Stanley Wade Depo. 84:1 – 17 and Exhibit 51. 140. Mr. Wade was issued a K-1 from Palisades Apartments Business Trust indicating that he received had a 50% ownership interest in that entity, and received income from it for each of the tax years 2006 - 2010, inclusive. Id. THE SEVENTEENTH PROPERTY 141. One parcel of real property that is the subject of this action is an apartment building located at 4884 - 4900 South Highland Circle, Salt Lake City, Utah (“the seventeenth property”). A legal description of this property was filed as Exhibit Q to the United States’ Complaint. Complaint and Answer, ¶ 175. 142. On April 25, 1973, a Warranty Deed was recorded with the Salt Lake County Recorder transferring title in the seventeenth property to Stanley Leo Wade and Janet B. Wade. Id., ¶ 176. 143. On November 24, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the seventeenth property from Stanley L. Wade and Janet B. Wade to Shangri-La Apartments, a Nevada Corporation. This purported transfer was made for little or no consideration. Id., ¶ ¶ 177, 264. 144. Shangri-La Apartments was incorporated by Stanley L. Wade in 1992. Wade was listed as the registered agent of the corporation on the incorporation documents. The corporation’s status is listed as “permanently revoked” on the Nevada Secretary of State’s website. Id., ¶ 178. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 36 of 67 37 145. On November 25, 1992, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the seventeenth property from Shangri-La to Shangri-La UBO. This purported transfer was made for little or no consideration. Id., ¶ ¶ 179, 264. 146. On February 3, 1993, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the seventeenth property from Shangri-La Apartments to Shangri-La UBO. This purported transfer was made for little or no consideration. Id., ¶ ¶ 181, 264. 147. On March 26, 2001, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the seventeenth property from Shangri-La UBO to Shangri La Apartments Business Trust. This purported transfer was made for little or no consideration. Id., ¶ ¶ 182, 264. 148. Income from the seventeenth property is reported to the IRS by Cottonwood Creek Business Trust. Lowe Decl. ¶ 6. 149. As of September 20, 2012, Stanley L. Wade was listed as a trustee for Cottonwood Creek Business Trust on the Utah Division of Corporations and Commercial Code website. Stanley Wade Depo. 80:6 – 24 and Exhibit 46 thereto. 150. Mr. Wade was issued a K-1 from Cottonwood Creek Business Trust indicating that he had a 50% ownership interest in that entity, and received income from it for each of the tax years 2006 – 2007 and 2009 – 2010, inclusive. Id. THE EIGHTEENTH PROPERTY 151. One parcel of real property that is the subject of this action is a single family home located at 1509 East 3350 South, Salt Lake City, Utah (“the eighteenth property”). A legal Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 37 of 67 38 description of this property was filed as Exhibit R to the United States’ Complaint. Complaint and Answer, Id., ¶ 183. 152. On May 21, 1993, a Quit Claim Deed was recorded with the Salt Lake County Recorder purporting to transfer title in the eighteenth property to Wade Sandy. Id., ¶ 184. 153. Wade Sandy is also known as the Wade Sandy Business Trust. The Wade Sandy Business Trust was registered with the Utah Division of Corporations and Commercial Code in 2001. Stanley L. Wade was listed as a trustee of the Wade Sandy Business Trust in the registration documents. Id., ¶ 185. 154. The purported transfer of the eighteenth property to Wade Sandy, a/k/a The Wade Sandy Business Trust, was made for little or no consideration. Id., ¶ 270. THE NINETEENTH PROPERTY 155. One parcel of real property that is the subject of this action is a single family home located at 2155 East Parleys Terrace, Salt Lake City, Utah (“the nineteenth property”). A legal description of this property was filed as Exhibit S to the United States’ Complaint. Complaint and Answer, Id., ¶ 186. 156. On July 18, 1973, a Warranty Deed was recorded with the Salt Lake County Recorder transferring title in the nineteenth property to Stanley L. Wade and Janet B. Wade. Id., ¶ 187. 157. On March 9, 1995, a mortgage was recorded purporting to grant an interest in the nineteenth property to Hill Rise UBO by Stanley L. Wade and Janet B. Wade. Stanley L. Wade and Janet B. Wade received nothing of value in exchange for purportedly granting this interest to Hill Rise UBO. No consideration was exchanged by either party in this purported mortgage transaction. Id., ¶ 188. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 38 of 67 39 Additional Undisputed Material Facts 158. After purporting to transfer his assets to the fictitious UBOs and defunct Nevada corporations, Wade reported only a trivial amount of income on federal income tax returns he filed for tax years 1993 through 2002, inclusive. See Roberts Decl., ¶ 3, Exhibits 29 – 37 thereto. 159. After purporting to transfer his assets to the fictitious UBOs and defunct Nevada corporations, Wade continued to perform the same functions in relation to the properties that he did prior to such transfers. Stanley Wade Depo. 13:24 – 17:10. 160. In early 1993, Wade and his wife contacted an attorney, David O. Black, and requested he provide an opinion as to the legality and tax consequences of the UBO scheme. Id, 26:14 – 28:7; Janet Wade Depo., 43:7 – 49:11 and Exhibit 2 thereto; Complaint and Answer, ¶ 57. 161. By memorandum dated May 27, 1993, Mr. Black advised the Wades that “there is no recognized organization” known as a UBO. In the memorandum, Mr. Black summarized his legal conclusions as follows: “[T]here is simply no exemption from reporting or taxation in general that applies to a UBO. It must be construed as some sort of taxable entity . . . . if the entity fails to report or pay taxes you will be responsible for failure to file individually or as a representative of the entity. The consequences of failure to file could be civil or criminal. I can tell you without doubt that schemes such as this cause the IRS to see red and thus prosecute the matters criminally” (emphasis in original). Stanley Wade Depo. 26:14 – 28:7; Janet Wade Depo., 43:7 – 49:11 and Exhibit 2 thereto; Complaint and Answer, ¶ 58. 162. Further, Mr. Wade’s nephew and employee, Adam Passey, approached an IRS Office of Chief Counsel attorney with extensive experience with the use of UBOs for tax avoidance concerning their legality. See United States v. Stanley Leo Wade, 203 Fed. Appx. 920, Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 39 of 67 40 926 (10th Cir. 2006). . He did this because he wanted to get Mr. Wade “not to do something which could have very well – probably was illegal.” Id. at 927. 163. Mr. Passey informed Wade that the IRS attorney advised him: “I’ve prosecuted and dealt with approximately 65 of these. Every single time they are used for income tax savings and that type of thing, they are always blown away. They never prevail. They are never successful.” Id. at 926. 164. On April 4, 2000, the United States filed a motion to enforce an IRS administrative summons directed to Wade in an attempt to obtain information concerning assets that might be used to pay the 1982 – 1984 income tax liabilities. See Case No. 2:00-cv-00291-DAK, Dkt. #1 (D. Utah). 165. The Court ordered Wade to comply with the summons described in paragraph 164, above. Id., Dkt. ##12, 13. 166. Wade refused to comply with the Court’s order to enforce the summons, resulting in his incarceration on two separate occasions. Id., Dkt. ##31, 34 – 36, 40. 167. Wade continued his refusal to produce documents to the IRS as ordered by the Court, even after his incarceration. However, after Janet Wade produced the requested documents, the Court ordered Wade’s release. Id., #45. 168. On May 30, Wade filed a Chapter 13 bankruptcy. See In re Stanley L. Wade, #01- 27903-GEC (Bankr. D. Utah). In connection with this bankruptcy, Wade filed a Schedule of Assets and Liabilities that failed to list millions of dollars in assets, including the apartment buildings at issue in this case, his residences, vehicles, boats, and bank and brokerage accounts. The case was dismissed upon the recommendation of the trustee on August 8, 2001. Id. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 40 of 67 41 169. On December 30, 2002, Mr. Wade filed a no asset bankruptcy under Chapter 7 of the Bankruptcy Code. See In re Stanley Wade, #02-41993 (Bankr. D. Utah 2002). On the schedules and documents submitted under oath in connection with this filing, Mr. Wade falsely stated that he had no management or ownership interest in any business, and that he had no real property or other assets. Id. 170. At the time of these submissions, Mr. Wade owned apartment complexes generating gross receipts in excess of $7 million and taxable income in excess of $1 million annually. United States v. Wade, 203 Fed. Appx. 920 (10th Cir. 2006). 171. Mr. Wade also failed to list the IRS as a creditor on his bankruptcy filings, despite the tax liabilities assessed as a result of his 1990 conviction and subsequent audits. In re Stanley Wade, #02-41993 (Bankr. D. Utah 2002) 172. Based on these intentional omissions and false statements, Mr. Wade received a discharge on April 11, 2003. Id. The case was closed on April 16, 2003. Id. 173. Mr. Wade has claimed that he was advised during this time period that he did not have to pay tax on any income from the assets held by the UBOs unless he took money from the UBO account. Stanley Wade Depo., 25:12 – 19. 174. During the years in question, Mr. Wade took millions of dollars from the UBO account to build three houses, but did not report this income. Id., 22:20 – 23:21. Further, Janet Wade agreed that the Wades’ personal expenses during these years totaled $4,424,561. See Rondeau Depo. 46:22 – 47:5 and Exhibit 101 thereto. 175. On March 10, 2004, Mr. Wade was indicted on one count of conspiracy to defraud the United States (18 U.S.C. § 371), based on his transfer of the apartment complexes into the UBOs. He was also indicted on three counts of tax evasion (I.R.C. § 7201) for knowingly and Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 41 of 67 42 willingly signing and submitting federal income tax returns for tax years 1997, 1998, 1999 falsely reporting that they had almost no income for those years. Wade was also indicted for tax evasion (I.R.C. § 7201) based on his use of the UBOs in an attempt to evade the payment of the income tax liabilities assessed against him and his wife for tax years 1982 – 1984, totaling more than $1,000,000. Finally, Wade was indicted on one count of bankruptcy fraud, and one count of making a false statement in a bankruptcy proceeding. UMF 1, above. 176. The indictment alleges that for the tax years 1997 – 1999, inclusive, Mr. Wade should have reported nearly $3.7 million in combined income from the operation of the apartment complexes. Instead, Mr. Wade filed tax returns indicating that his total income for the three years was less than $25,000. Id. 177. The indictment further alleged that between 1996 and 1999, inclusive, Mr. Wade used funds derived from the operation of the apartment buildings to fund over $1.5 million in personal expenses. Id. 178. The indictment further alleged that Mr. Wade falsely advised his accountant that he had no ownership interests in the apartment buildings. Id. 179. Finally, the indictment alleged that Mr. Wade falsely testified under oath that he had no assets during a bankruptcy proceeding. Id. 180. Attached as Exhibit 48 is a true and correct copy of a Judgment in a Criminal Trial in the matter of United States of America v. Wade, 2:04-cr-0141-TS. This document indicates that on June 23, 2005, Mr. Wade was found guilty of every count upon which he was indicted. C. Foreclosure Of The Federal Tax Lien Against the Subject Properties Legal Element: When a taxpayer fails to pay a tax liability after receiving notice of assessment and demand for payment, a lien for the unpaid taxes automatically arises in favor of Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 42 of 67 43 the United States on all property or rights to property belonging to the taxpayer, and continues until the liability is satisfied or the statute of limitations bars collection. I.R.C. §§ 6321, 6322; United States v. Cache Valley Bank, 866 F.2d 1242, 1244 (10th Cir. 1989). Legal Element: A federal tax lien is perfected upon assessment, and further action need not be taken. United States v. Vermont, 377 U.S. 351, 352 (1964). Legal Element: The lien attaches not only to property and rights to property belonging to the taxpayer at the time of assessment, but also to all property and rights to property the taxpayer thereafter acquires. See United States v. McDermott, 507 U.S. 447, 448 (1993). Undisputed Material Facts 181. The IRS has made valid assessments against Mr. Wade for tax years 1993 through 2004, inclusive. See UMF 1 – 32, above. 182. Mr. Wade possesses an interest in real property to which the tax liens arising from the assessments have attached. See UMF 1 - 191. 1. Fraudulent Transfer LEGAL ELEMENT: The Uniform Fraudulent Transfer Act, Utah Code Ann. § 25-6-1 et seq., establishes that a transfer of property is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made, “if the debtor made the transfer (a) with actual intent to hinder, delay, or defraud any creditor of the debtor; or (b) without receiving a reasonably equivalent value in exchange for the transfer; and the debtor . . . intended to incur, or Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 43 of 67 44 believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they became due”.3 Utah Code Ann. § 25-6-5. LEGAL ELEMENT: For purposed of the Utah Fraudulent Transfer Act, a “creditor” is a person that has a claim. Utah Code Ann. § 25-6-2(4). A “claim” is any right to payment, defined very broadly. Utah Code Ann. § 25-6-2(3). A “debtor” is a person liable on such a claim. Utah Code Ann. § 25-6-2(6). “Property” is anything that can be subject to ownership. Utah Code Ann. § 25-6-2(10). Finally, a “transfer” is every mode of disposing of or parting within interest in property. Utah Code Ann. § 25-6-2(12). LEGAL ELEMENT: For purposes of a fraudulent conveyance analysis, the United States becomes a creditor of a taxpayer when the taxpayer fails to pay his lawful federal income taxes due for any calendar period. Regardless of when federal taxes are actually assessed, taxes are considered due and owing, and constitute a liability, as of the date the tax return for the particular period is required to be filed. I.R.C. § 6151; United States v. Hickox, 356 F.2d 969 (5th Cir. 1966); Veigle v. United States, 888 F.Supp 1134, 1138 – 39 (M.D. Fla. 1995); United States v. Glascock, 631 F.Supp. 383, 396 – 97 (N. D. Ala. 1986); Short v. United States, 395 F.Supp. 1151, 1154 (E.D. Tex. 1975). LEGAL ELEMENT: Evidence of “actual intent” to hinder, delay or defraud a creditor includes, whether the transfer was to an insider, whether the debtor retained possession of the property, whether the transfer was disclosed or concealed, whether the transfer occurred shortly 3 The Utah Uniform Fraudulent Transfer Act was recently renamed, recodified and amended by the Utah Uniform Voidable Transactions Act. See 2017 Utah Laws Ch. 204 (S.B. 58) (March 21, 2017). However, because the conveyances at issue here took place while the Utah Fraudulent Transfer Act was still in effect, the previous statutory provisions still govern this case. Baldwin v. Burton, 850 P.2d 1188, 1192 n. 9 (Utah 1993). Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 44 of 67 45 after a substantial debt was incurred, whether the conveyance was made in anticipation of litigation, the transfer was of substantially all the debtor’s assets, the debtor was insolvent or became insolvent shortly after the transfer was made. Utah Code Ann. § 25-6-5(2); Dahnken, Inc. v. Wilmarth, 726 P.2d 420 (Utah 1986). These terms are all to be construed broadly, so as to reach all transactions designed by debtors to prevent the payment of the just claims of their creditors. Butler v. Wilkinson, 740 P.2d 1244 (Utah 1987). LEGAL ELEMENT: Utah Code Ann. § 25-6-3 defines insolvency as existing if “the sum of the debtor’s debts is great than all of the debtor’s assets at a fair valuation.” When determining the debtor’s assets, “property that has been transferred . . . with intent to hinder, delay, or defraud creditors or that has been transferred in a manner making the transfer voidable under this chapter” is not included. LEGAL ELEMENT: Fraudulent conveyances of land made to defeat taxes must be set aside. United States v. Christensen, 751 F.Supp. 1532 (D. Utah 1990). LEGAL ELEMENT. Utah Code Ann. § 25-6-6 provides that a transfer is voidable as to a creditor whose claim arose before the transfer was made if (a) the debtor made the transfer without receiving a reasonably equivalent value in exchange for the transfer; and (b) the debtor was insolvent at the time or became insolvent as a result of the transfer. LEGAL ELEMENT: Under Utah law, a creditor may obtain avoidance of the transfer to the extent necessary to satisfy the creditor’s claim. Utah Code Ann. § 25-6-8. LEGAL ELEMENT: The United States may bring an action to collect taxes within 10 years of assessment. I.R.C. § 6502(a), LEGAL ELEMENT: When the United States files an action to collect a tax on the basis of a state fraudulent conveyance statute, it is not subject to the state statutes of limitation or Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 45 of 67 46 extinguishment. United States v. Summerlin, 310 U.S. 414, 417 (1940); United States v. Holmes, 727 F.3d 1230, 1235 (10th Cir. 2013). Undisputed Material Facts 183. The United States hereby incorporates in their entirety UMF Nos. 39 – 180, above. 184. Mr. Wade and his wife and sons filed an affidavit filed by in a Utah State Court on March 4, 2005, while Mr. Wade was awaiting trial for his second tax evasion conviction. In that affidavit, Mr. Wade and his family members stated under oath “[w]e or certain trusts or business entities legally or equitably owned by us are the owners” of the apartment complexes at issue in this case and then purportedly titled in the name of the UBOs or other entities over which he exercised control. The affidavit also stated “[w]e acknowledge and agree that our family or business entities owned or controlled by our family are the legal and beneficial owners” of the apartment complexes at issue in this case. Janet Wade Depo., 100:11 – 105:5 and Exhibit 26 thereto. 185. On or about April 20, 2004, Wade purportedly signed a document entitled “Gift and Abandonment of all Rights to Janet Wade,” purporting to transfer all his interests in the apartments business trusts and all other business interests they had created. See Doc. 146-3. 186. The document described in paragraph 185, above, was never recorded with any governmental entity. Stanley Wade Depo. 57:25 – 64:3. 187. Stanley L. Wade received no consideration for the purported transfer of his business interest to Janet Wade described in paragraph 185, above. Id. 188. At the time of the purported gift of his business interests to his wife, the apartment complexes had a value in excess of $1 million. Id.; United States v. Stanley Leo Wade, 203 Fed. Appx. 920, 927 (10th Cir. 2006). Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 46 of 67 47 2. Nominee/Resulting Trust LEGAL ELEMENT: Under the Internal Revenue Code, the IRS may satisfy a tax deficiency by imposing a lien on any “property” or “rights to property” belonging to the taxpayer. I.R.C. § 6321; Drye v. United States, 528 U.S. 49, 55 (1999). LEGAL ELEMENT: Property held by a taxpayer’s nominee may be subjected to a federal tax lien or levy, because a “taxpayer cannot prevent tax liens from attaching to property by transferring title to the name of a straw party or nominee.” G.M. Leasing Corp. v. United States, 429 U.S. 338, 350-51 (1977). LEGAL ELEMENT: “The nominee theory focuses upon the taxpayer’s relationship to a particular piece of property. The ultimate inquiry is whether the taxpayer has engaged in a legal fiction by placing legal title to property in the hands of a third party while actually retaining some or all of the benefits of true ownership. Holman v. United States, 505 F.3d 1060, 1065 (10th Cir.2007); United States v. Reed, 168 F.Supp.2nd 1266 (D. Utah 2001) (J.Sam). LEGAL ELEMENT: In applying the nominee theory, Courts look first to state law “to determine what rights the taxpayer has in the property the Government seeks to reach.” Drye, 528 U.S. at 58; United States v. Tingey, 716 F.3d 1295, 1300 (10th Cir. 2013). LEGAL ELEMENT: Several factors are considered when determining whether a third party is holding property as a mere nominee of the taxpayer. Among those are: (1) whether inadequate or no consideration was paid by the nominee; (2) whether the property was placed in the nominee’s name in anticipation of a liability or lawsuit while the transferor remains in control of the property; (3) whether there is a close relationship between the transferor and the nominee; (4) whether they failed to record the conveyance; (5) whether the transferor retained Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 47 of 67 48 possession, and (6) whether the transferor continues to enjoy the benefits of the transferred property. Holman, 505 F.3d at 1065 n. 1; Reed, 168 F.Supp.2d at 1268 - 69 (citations omitted). LEGAL ELEMENT: Under Utah law, a party may hold legal title in trust for a beneficial owner. Parks v. Zions First National Bank, 673 P.2d 590, 598 (Utah 1983); see also McGavin v. Segal (In re McGavin), 189 F.3d 1215, 1217-19 (10th Cir. 1999) LEGAL ELEMENT: In determining whether a resulting trust is created by the actions of the parties, there must be a finding of an intent to retain a beneficial interest in the property at issue. Parks, 673 P.2d at 598. Undisputed Material Facts: 189. The United States hereby incorporates in their entirety UMF 1 – 188, above. 190. Pursuant to K-1s attached to tax returns filed for the years 2006 through 2010 by the Cherry Hills Business Trust, Crestwood Cove Apartments Business Trust, Delmonico Apartments Business Trust, Caliente Apartments Business Trust, Hillrise Apartments Business Trust, La Parisienne Apartments Business Trust and Palisades Business Trust, Stanley Wade had a 50 percent ownership interest in each of these entities, and he received 50 percent of the profits from these businesses. See Stanley Wade Depo. 73:1 - 79:25 and Exhibit 45 thereto; 80:6-24 and Exhibit 46 thereto; 81:1-15 and Exhibit 47 thereto; 81:20 - 82:10 and Exhibit 48 thereto; 82:15 - 83:5 and Exhibit 49 thereto; 83:9-22 and Exhibit 50 thereto; and 84:1-17 and Exhibit 51 thereto. 191. No consideration was exchanged in connection with the transfers described in UMF 39 – 154, above. D. Tax Liability Is Non-Dischargeable LEGAL ELEMENT: Section 523(a)(1)(C) of the Bankruptcy Code (Title 11 U.S.C.) provides, in relevant part: “(a) A discharge under section 727 . . . of this title does not discharge Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 48 of 67 49 an individual debtor from any debt (1) for a tax or a customs duty . . . (C) with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax. 11 U.S.C. § 523(a)(1)(C). See In re Mitchell, 633 F.3d 1319, 1326-1327 (11th Cir. 2011). LEGAL ELEMENT: There are two alternative tests for nondischargeability under Section 523(a)(1)(C). A creditor may prevail by establishing either (1) that the debtor made a fraudulent return or (2) that the debtor willfully attempted to evade or defeat the tax will result in nondischargeability of the tax liabilities. See Dalton v. IRS, 77 F.3d 1297, 1299-1300 (10th Cir. 1996); In re Mitchell, 633 F.3d at 1327. Undisputed Material Facts 192. For the period between 1993 and 2004, inclusive, Mr. Wade either failed to timely file income tax returns or filed returns reporting only a tiny fraction of his actual income. See UMF 1 – 38, above. 193. Beginning in 1992 and at various other times described in UMF 39 – 154, Mr. Wade fraudulently transferred nineteen parcels of real property in an attempt to hide the income he received from those properties and to defeat the collection of his tax liabilities. See UMF 39 – 154. 194. On December 30, 2002, Wade filed a no asset bankruptcy under Chapter 7 of the Bankruptcy Code. See In re Stanley Wade, #02-41993 (Bankr. D. Utah 2002). On the schedules and documents submitted under oath in connection with this filing, Wade falsely stated that he had no management or ownership interest in any business, and that he had no real property or other assets. Id. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 49 of 67 50 195. At the time of these submissions, Mr. Wade owned apartment complexes generating gross receipts in excess of $7 million and taxable income in excess of $1 million annually. United States v. Wade, 203 Fed. Appx. 920 (10th Cir. 2006). 196. Wade also failed to list the IRS as a creditor on his bankruptcy filings, despite the tax liabilities assessed as a result of his 1990 conviction and subsequent audits. In re Stanley Wade, #02-41993 (Bankr. D. Utah 2002) 197. Based on these intentional omissions and false statements, Wade received a discharge on April 11, 2003. Id. The case was closed on April 16, 2003. Id. IV. ARGUMENT A. Summary Judgment Standard Summary judgment is proper “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(c); accord Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-250 (1986); Nelson v. Geringer, 295 F.3d 1082, 1086 (10th Cir. 2002); Russillo v. Scarborough, 935 F.2d 1167, 1170 (10th Cir. 1991). The party moving for summary judgment has the initial burden of showing the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Viktus v. Beatrice Co., 11 F.3d 1535, 1539 (10th Cir. 1993). Once the movant’s burden is met by producing evidence which, if uncontroverted, would entitle the movant to judgment as a matter of law, the burden then shifts to the nonmoving party to demonstrate that there are genuine issues for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.574, 586-87 (1986); Viktus, 11 F.3d at 1539. An issue of material fact is genuine where a reasonable jury could return a Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 50 of 67 51 verdict for the party opposing summary judgment. Seymour v. Shawver & Sons, Inc., 111 F.3d 794, 797 (10th Cir. 1997). Conclusory allegations unsupported by specific factual data are insufficient to create a triable issue of fact so as to preclude summary judgment. See L & M Enters., Inc. v. BEI Sensors & Sys. Co., 231 F.3d 1284, 1287 (10th Cir. 2000); White v. York Int’l Corp., 45 F.3d 357, 360 (10th Cir. 1995). As demonstrated below, the undisputed facts of this case establish that, under this standard, the United States is entitled to summary judgment in this case. B. The Federal Tax Assessments Are Entitled to a Presumption of Correctness The United States brought this suit to reduce to judgment federal income tax assessments made against defendant Stanley Wade for the years 1993 through 2004. Tax assessments made by the IRS are presumed to be correct, and the taxpayer bears the burden of overcoming this presumption. See United States v. Fior D’Italia, Inc., 536 U.S. 238, 242–43 (2002); United States v. Janis, 428 U.S. 433, 440–41 (1976); Palmer v. IRS, 116 F.3d 1309, 1312 (9th Cir. 1997); Psaty v. United States, 442 F.2d 1154, 1159 (3d Cir. 1971). In an action to collect taxes from unreported income the Government generally establishes a prima facie case when it shows timely assessment of the taxes due supported by some evidence that the taxpayer received unreported income, at which point a presumption of correctness arises. See United States v. McMullin, 948 F.2d 1188 (10th Cir. 1991). This presumption will permit judgment in the Government’s favor unless the taxpayer produces substantial evidence overcoming it. Id. See also United States v. Brown, 348 F.3d 1200 (10th Cir. 2003) (taxpayer bears burden of establishing error in IRS’s determination of tax due). Forms 4340, Certificates of Assessments and Payments, generated under seal and signed by an authorized delegate of the Secretary of the Treasury, are the appropriate means of Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 51 of 67 52 establishing an assessment, and show that the federal tax liabilities were properly assessed against the defendant, that the notices and demand for payment were properly sent, and that the defendant is presumptively liable for the unpaid taxes, interest, penalties, and other statutory additions identified thereon. See March v. IRS, 335 F.3d 1186, 1188 (10th Cir. 2003); Long v. United States, 972 F.2d 1174, 1181 (10th Cir. 1993); Guthrie v. Sawyer, 970 F.2d 733, 737 (10th Cir. 1992) (Certificates on Form 4330 are presumptive proof of a valid assessment); Hansen v. United States, 7 F.3d 137, 138 (9th Cir. 1993). Attached to the Second Declaration of Jennifer Graham (Doc. 159) as Exhibit 1 are true and correct copies of IRS Forms 4340, Certificate of Assessments, Payments, and Other Specified Matters (“Forms 4340"), for the assessments against Stanley Wade for the 1993-2004. Statement of Elements and Undisputed Material Facts (hereinafter “UMF”), at ¶¶ 13, 15, 17, 19, 22-24, 27-29, 31, and 32. The Forms 4340 show that Stanley Wade is indebted to the United States for unpaid assessed balances of tax, penalties, and interest in the amounts set forth thereon.4 Additionally, the Notices of Deficiency and explanations of adjustments, attached as Exhibits 44, 52 and 53 to the Roberts Decl., provide an explanation of the basis for the assessments shown on the Forms 4340. UMF ¶ 11. In determining the correct tax liabilities for Wade, Revenue Agent Roberts relied on the work performed by Daniel Rondeau, an accountant employed by Janet Wade, in determining the amount of income and expenses associated with the 4 The Forms 4340 do not reflect accrued but unassessed statutory interest and penalties that continue to accrue for each of the years at issue, because those amounts change from day to day. The Graham Decl. establishes the amounts owed as of May 31, 2017. See Graham Decl. (Doc. 159), Exhibit 5. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 52 of 67 53 Wades’ apartment rental business for the years 1993 through 2004. UMF ¶ 4. Following the indictment in 2005, Janet Wade entered into an Agreement For Pretrial Diversion with regard to the indictment. UMF 2. Pursuant to the terms of the Diversion Agreement, Janet Wade agreed to prepare Amended Federal Income Tax Returns for the years 1993 through 2004. The amended returns were required to include half of the rental income from the apartment complexes rental property owned by the Wades which included Cherry Hills Apartments, Del Monico Apartments, El Caliente Apartments, Hillrise Apartments, La Parisienne Apartments, Palisades Apartments, Shangri-La Apartments, and La Petite Academy. UMF ¶ 3. In order to determine the profit and loss from the Wades’ rental business, Accountant Rondeau obtained all of the bank account records associated with all of the rental properties and input this information into a database. UMF ¶ 5. Once the database was complete, Mr. Rondeau prepared a summary of all of the categories in the database, e.g., income, expenses, asset purchases, payment of personal expenses. UMF ¶ 7. During the process of creating the database and the summaries of income, business expenses, and personal expenses, Mr. Rondeau and counsel for Mrs. Wade had consultations with Revenue Agent Roberts and a representative from the U.S. Attorneys’ Office to ensure that the process complied with the requirements of the Diversion Agreement. UMF ¶ 8. Janet Wade reported her half of the income and expenses from the Wades’ apartment rental business and as determined by the IRS the other half of the income and expenses are attributable to Stanley Wade. Thus, the assessments against Wade for the years 1993 through 2004, which include his share of the income and expenses for the apartment rental business as determined in the preparation of Janet Wade’s federal income tax returns, are entitled to a presumption of correctness. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 53 of 67 54 C. Stanley Wade is Liable for the Fraud Penalty Pursuant to 26 U.S.C. §§ 6663 and 6651(f), the IRS will assess a penalty if any part of an underpayment of tax required to be shown on a return is due to fraud and if the failure to file a return is fraudulent. The purpose of the fraud penalty is not punitive but to reimburse the United States for the heavy expense of investigation and the loss resulting from the taxpayer's fraud. Helvering v. Mitchell, 303 U.S. 391, 401 (1938); Traficant v. Commissioner, 884 F.2d 258, 264, (6th Cir. 1989). In order to establish the fraud penalty, the United States bears the burden of proving by clear and convincing evidence that Stanley Wade had a specific intent to evade taxes. If the United States establishes that any portion of Wade’s unpaid tax is due to fraud, the entire underpayment is treated as due to fraud. I.R.C. §6663(b). Wade would then have the burden of proof to show by a preponderance of the evidence that any portion of the tax underpayment is not due to fraud. Id. For tax years 1997, 1998 and 1999, Wade is collaterally estopped from contesting the civil fraud penalty based on his criminal convictions under I.R.C. § 7201. See, e.g., Gray v. Commissioner, 708 F.2d 243, 246 (6th Cir. 1983). Further, Wade’s conviction for conspiracy to defraud the government includes actions taken in relation to 1996. That conviction is persuasive evidence of fraud as to that tax year. Plotkin v. Commissioner, 102 T.C.M. (CCH) 450 (T.C. 2011) aff'd, 498 F. App'x 954 (11th Cir. 2012); Morse v. Commissioner, T.C. Memo. 2003-332, aff’d 419 F.3d 829 (8th Cir. 2005); Mobley v. Commissioner, 65 T.C.M. (CCH) 1939 (T.C. 1993) aff'd by unpublished opinion, 33 F.3d 1382 (11th Cir. 1994); Parsons v. Commissioner, T.C. Memo. 2000-205. Although Wade is not collaterally estopped from challenging the fraud penalty for tax years 1993 – 1996 and 2000 – 2004, as a practical matter he has no basis to make such a Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 54 of 67 55 challenge, because his conduct for these other years is exactly the same as for the years for which he was convicted. In each of these years, he filed federal income tax returns reporting a minimal amount of income, when it fact he was earning millions of dollars in each of these years through the operation of the apartment buildings and his investments. UMF ¶ ¶ 9 and 11. For 1993 – 1996 and 2000, Wade was using the UBO scheme to hide the income from those years, and to hide from the IRS assets that could have been used to satisfy his tax liabilities related to his first conviction, as well as his new tax liabilities accruing every year. In 2001, Wade purported to transfer thirteen of the properties at issue (the second, third, fourth, fifth, sixth, seventh, eighth, ninth, tenth, thirteenth, fourteenth, fifteenth and seventeenth) to so-called “apartment business trusts.” The other six properties remained titled either in the fraudulent UBOs (first and eleventh), defunct Nevada corporations (twelfth and sixteenth), other fake trusts (eighteenth), or encumbered by a false mortgage (nineteenth). Regardless of how these nineteen parcels were held, Wade did not report the income derived from the commercial properties. Id. Wade cannot argue that he was not aware that his conduct was fraudulent. Indeed, he was advised by his own attorney in 1993 that the use of such devices “caused the IRS to see red” and would likely lead to criminal prosecution. UMF ¶ 161. He was also provided information from his nephew, who became so concerned at Wade’s conduct he discussed the use of UBOs with an IRS attorney. UMF ¶ 162. As related to Wade by his nephew, the IRS attorney stated that these schemes never worked. UMF ¶ 163. Nevertheless, Wade continued his schemes designed with the specific intent of preventing the IRS from assessing or collecting tax liabilities against him. There are other badges of fraud demonstrated by the undisputed facts of this case. First, as demonstrated extensively above, Wade transferred eighteen commercial and personal parcels Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 55 of 67 56 of real property originally acquired in his own name to sham entities established for the purpose of hiding his assets and income from the IRS. These various transfers were all made for little or no consideration. UMF ¶¶ 39-157. Wade then filed tax returns for ten years that underreported his income by millions of dollars, and failed to file returns for the next two years (2003 and 2004). UMF 9 and 30. Wade also failed to cooperate with tax authorities. Wade refused to comply with an order from this Court to provide information concerning his assets to the IRS, despite being jailed for his refusal on two occasions. UMF ¶¶ 161-163. Such a failure to cooperate is a badge of fraudulent intent. Further, Wade has provided an implausible or inconsistent explanation of his behavior. Wade has claimed that he was advised during this time period that he did not have to pay tax on any income from the assets held by the UBOs unless he took money from the UBO account. However, Wade took millions of dollars from the account for personal expenses that was not reported as income on either his return or Janet’s return. UMF ¶¶ 1, 9 and Exhibits 29- 37, 171 and Exhibit 101. He also took millions from the UBO account to build three houses, but did not report this income. Id. The failure to abide by his own purported understanding of tax law is further evidence that his intent throughout this entire period was to defraud the United States. Finally, Wade engaged in other conduct likely to mislead or conceal. First, after the fraudulent transfer of the properties in 1992, Wade falsely informed his accountant that he no longer had an ownership interest in the property. UMF ¶ 175. Further, Wade filed two fraudulent bankruptcies. On May 30, Wade filed a Chapter 13 bankruptcy. See In re Stanley L. Wade, #01-27903-GEC (Bankr. D. Utah). In connection with this bankruptcy, Wade filed a Schedule of Assets and Liabilities that failed to list millions of dollars in assets, including the Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 56 of 67 57 apartment buildings at issue in this case, his residences, vehicles, boats, and bank and brokerage accounts. The case was dismissed upon the recommendation of the trustee on August 8, 2001. Id. Wade was convicted of two counts of bankruptcy fraud in connection with these filings. The second bankruptcy was a no-asset bankruptcy under Chapter 7 filed on December 30, 2002. See In re Stanley Wade, #02-41993 (Bankr. D. Utah 2002). On the schedules and documents submitted under oath in connection with this filing, Wade falsely stated that he had no management or ownership interest in any business, and that he had no real property or other assets. At the time of these submissions, Wade owned real estate with an estimated value of at least $25 million, titled in the names of the sham UBOs, corporations and/or business trusts under his direct control. See Motion to Compel Issuance of Cert. of Discharge (Doc. 74). Wade also failed to list the IRS as a creditor on his bankruptcy filings, despite the tax liabilities assessed as a result of his 1990 conviction and subsequent audits. Based on these intentional omissions and false statements, Wade received a discharge on April 11, 2003. The case was closed on April 16, 2003. Again, the filing of these false documents indicates that Wade possessed the intent to prevent the assessment and collection of taxes against him. In sum, StanleyWade knowingly filed false returns for the years 1993 through 2002 which did not report any of the income from the apartment rental business and he specifically failed to file returns for 2003 and 2004 to report his apartment rental income. Additionally, Wade to active steps to hide his ownership interest in the apartment rental business. Wade’s conduct during the years 1993 through 2004 was fraudulent and the IRS assessment of the fraud penalty should be upheld. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 57 of 67 58 D. Foreclosure of the Federal Tax Liens Against The Subject Properties When a taxpayer fails to pay a tax liability after receiving notice of assessment and demand for payment, a lien for the unpaid taxes automatically arises in favor of the United States on all property or rights to property belonging to the taxpayer, and continues until the liability is satisfied or the statute of limitations bars collection. I.R.C. §§ 6321, 6322; United States v. Cache Valley Bank, 866 F.2d 1242, 1244 (10th Cir. 1989). A federal tax lien is perfected upon assessment, and further action need not be taken. United States v. Vermont, 377 U.S. 351, 352 (1964). The lien attaches not only to property and rights to property belonging to the taxpayer at the time of assessment, but also to all property and rights to property the taxpayer thereafter acquires. See United States v. McDermott, 507 U.S. 447, 448 (1993). Once the federal tax lien has attached, any subsequent disposition of the property has absolutely no effect upon the vitality of the lien. As the Supreme Court stated in United States v. Bess, 357 U.S. 51, 57 (1958) “it is of the very nature and essence of a lien, that no matter into whose hands the property goes, it passes cum onere * * * .” See also Russell v. United States,551 F.3d 1174, 1179 (10th Cir. 2008); United States v. Cache Valley Bank, 866 F.2d 1242, 1245 (10th Cir. 1989), Hansen v. Black, 115 AFTR 2d 2015-1564 (D. Utah 2015). 1. The Transfers of the Subject Properties By Wade Were Fraudulent In this case, the evidence established that the tax liens attached to the real property because The United States, as a creditor of Wade, is entitled to have the various transfers described in paragraphs 39-157, above, set aside as fraudulent. Under the undisputed facts of this case, Wade made these transfers with the actual intent to hinder, delay, or defraud the United States. Further, the transfers were made without receiving a reasonably equivalent value in exchange, and the transfers made Wade legally insolvent. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 58 of 67 59 1992 Transfers In late 1992, Wade purported to transfer eighteen of the nineteen parties at issue here to UBOs, fraudulent Nevada corporations, or trusts. UMF ¶ ¶ 39-157. These transfers later formed the basis of Mr. Wade’s tax evasion convictions. UMF ¶ 1. The Court need look no further than this fact to determine that these transfers were fraudulent. However, even if this were not the case, the transfers were fraudulent under the Utah Uniform Transfer Act, Utah Code. Ann. § 25- 6-1 et. seq. Section 25-6-5(2) provides that a “transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation . . . with actual intent to hinder, delay, or defraud any creditor of the debtor.” Courts have inferred fraud from the presence of “certain indicia of fraud or badges of fraud.” See Tolle v. Fenley, 132 P.3d 63, 69 (Utah App. 2006) (citation omitted). These badges include “a debtor ‘(1) continuing in possession and evidencing the perquisites of property ownership after having formally conveyed all his interest in the property; (2) making a conveyance in anticipation of litigation, and (3) making a conveyance to a family member without receiving fair consideration.” Tolle, 132 P.3d at 69, citing Dahnken, Inc. v. Wilmarth, 726 P.2d 420, 423 (Utah 1986). First, there can be no dispute the United States was Wade’s creditor, based on its claims to taxes arising both before (1982 – 1984 tax fraud conviction) and after (tax years 1993 – 2004) the transfers. This is because for purposes of a fraudulent conveyance analysis, the United States becomes a creditor of a taxpayer when the taxpayer fails to pay his lawful federal income taxes due for any calendar period. Regardless of when federal taxes are actually assessed, taxes are considered due and owing, and constitute a liability, as of the date the tax return for the particular period is required to be filed. I.R.C. § 6151; United States v. Hickox, 356 F.2d 969 (5th Cir. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 59 of 67 60 1966); Veigle v. United States, 888 F.Supp 1134, 1138 – 39 (M.D. Fla. 1995); United States v. Glascock, 631 F.Supp. 383, 396 – 97 (N. D. Ala. 1986); Short v. United States, 395 F.Supp. 1151, 1154 (E.D. Tex. 1975). Further, the transfers evidence many of the traditional badges of fraud used by courts to judge the intent behind a transfer. First, the transfers were to an “insider,” entities established and controlled by Wade. Second, Wade retained possession of the property. As he testified during his deposition, nothing changed in his actual relationship to any of this property after the transfers. His duties and responsibilities (as well as those of his wife and sons), remained exactly the same. UMF ¶ 159. Next, the transfers occurred soon after his conviction for tax fraud related to underreporting the income from the rental properties by more than $1 million. UMF ¶ 33. Further, the transfer was of substantially all of Mr. Wade’s assets. UMF 38. Mr. Wade did not transfer only the apartment properties to the UBOs – he also transferred bank and brokerage accounts to these or similar entities. UMF ¶ 36. Finally, Mr. Wade became insolvent as a result of these transfers, because he no longer had the ability to pay the substantial tax debt that already existed based on his earlier conviction, and that would arise for subsequent years by his willful failure to correctly report his tax liabilities. An additional critical factor to consider here is that Wade was advised by his attorney that his actions would not legally relieve him of the duty to pay taxes on the rental income, and would subject him to criminal prosecution. UMF ¶ 158. Wade and his wife admitted under oath that these transfers were shams in Utah State Court on March 4, 2005, when they filed an affidavit while Wade was awaiting trial for his second tax evasion conviction. UMF ¶ 181. In that affidavit, Wade and his family members stated under oath “[w]e or certain trusts or business entities legally or equitably owned by us are Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 60 of 67 61 the owners” of the apartment complexes at issue in this case and then purportedly titled in the name of the UBOs or other entities over which he exercised control. Id. The affidavit also stated “[w]e acknowledge and agree that our family or business entities owned or controlled by our family are the legal and beneficial owners” of the apartment complexes at issue in this case. Id. 2001 Transfers The analysis for the 2001 transfers of some of the properties from the UBOs and Nevada corporations to a series of Apartment Business Trusts. Once again, these transfers were made without any consideration to an insider, and Wade failed to report the income from the operations of the apartments even though his attorney had advised him to do so. Wade failed to file a tax return for 2003 and 2004. UMF ¶ 30. After the transfers, Wade was insolvent in that he would not be able to pay the United States the tax liabilities which had accrued previously, and which he knew or should have known would continue to accrue for the years at issue in this case. In 1990 Wade was criminally convicted of failing to report all of his income for the apartment rentals for the years 1983 and 1984. UMF ¶ 1. Thus, Wade knew he would incur federal income tax liabilities for failure to report the apartment rental income. Further, Wade filed a second fraudulent bankruptcy in 2002, after the 2001 transfers. 2004 Transfer to Janet Wade Again, the analysis for the purported gift is nearly identical to the 1992 and 2001 transfers. No consideration was involved in the transfer, and the transfers rendered Wade legally insolvent. There are two additional factors that are found concerning this transfer. First, the purported document was never recorded. This is an additional badge of fraud. Finally, nearly a year after this transfer, Wade signed under oath a document acknowledging he maintained an ownership interest in the property. UMF 184. Finally even after these transfers, the Apartment Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 61 of 67 62 Business Trusts continued to issue Wade a K-1 reporting income, and Wade is listed as a 50% owner of the Apartment Business Trusts. UMF 189. Thus, the facts support that the transfers, discussed above, were fraudulent and the federal tax liens attached to the subject properties, should be foreclosed. 2. The UBOs and Business Trusts Hold Title to The Subject Properties As Wade’s Nominee, or in the Alternative, in a Resulting Trust For the Benefit of Wade It is well-settled that property held by a taxpayer’s nominee is subject to the collection of the taxpayer’s tax liability. See G.M. Leasing Corp. v. United States, 429 U.S. 338, 350–51 (1977); Holman v. United States, 505 F.3d 1060, 1065 (10th Cir. 2007); Scoville v. United States, 250 F.3d 1198, 1202–03 (8th Cir. 2001); Oxford Capital Corp. v. United States, 211 F.3d 280, 284 (5th Cir. 2000); LiButti, 107 F.3d at 120, 125; Shades Ridge Holding Co. v. United States, 888 F.2d 725, 728–29 (11th Cir. 1989). Property is held by a nominee when someone other than the taxpayer has legal title, but, in substance, the taxpayer enjoys the benefits of ownership. Oxford Capital, 211 F.3d at 284. A third party is the taxpayer’s nominee where “the taxpayer has engaged in a legal fiction by placing legal title to property in the hands of a third party while actually retaining some or all of the benefits of true ownership.” Holman, 505 F.3d at 1065. Nominee doctrine may be used to collect federal taxes where the nominee is an individual (Holman, 505 F.3d 1060; United States v. Reed, 168 F. Supp. 2d 1266, 1268–69 (D. Utah 2001)); a corporate entity (Shades Ridge Holding Co., 888 F.2d 725); or a trust (United States v. Marsh, 114 F. Supp. 2d 1036, 1043 (D. Haw. 2000)). Courts generally look to various factors to determine whether nominee liability exists, including whether (i) the taxpayer exercises dominion and control over the property while the property is in the nominee’s name; (ii) the nominee paid little or no consideration for the Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 62 of 67 63 property; (iii) the taxpayer placed the property in the nominee’s name in anticipation of a liability or lawsuit; (iv) a close relationship exists between the taxpayer and the nominee; (v) the taxpayer continues to enjoy the benefits of the property while it is in the nominee’s name; and (vi) the conveyance to the nominee is not recorded. See Holman, 505 F.3d at 1065 n.1; Reed, 168 F. Supp. 2d at 1268–69. See also Spotts v. United States, 429 F.3d 248, 253 n.2 (6th Cir. 2005). Perhaps the most significant factor is whether the taxpayer can control the assets at issue. See Shades Ridge Holding Co., 888 F.2d at 728; United States v. Novotny, 2001 WL 1673628, at *2 (D. Colo. 2001) (“The critical issue is who has substantial control over the property”) (citations omitted), aff’d, 71 F. App’x 792 (10th Cir. 2003). See also United States v. Miller Bros. Constr. Co., 505 F.2d 1031, 1036 (10th Cir. 1974) (a lien could be enforced against property where the taxpayer had directed that legal title be placed in a third party’s name, observing that “the fact taxpayer exerted dominion and control over the land from 1952 until his death in 1971 is indicative of ownership”). Utah’s case law indicates that a party may hold legal title in trust for a beneficial owner. Holman, 505 F.3d at 1068, citing Parks v. Zions First Nat’l Bank, 673 P.2d 590, 598-60 (Utah 1983 (discussing the doctrine of resulting trusts under Utah law); McGavin v. Segal, 189 F.3d 1215, 1217-19 (10th Cir. 1999) (discussing and applying the doctrine of resulting trusts under Utah law); Taylor v. Rupp, 133 F.3d 1336, 1341 (10th Cir. 1998) (same). In this case, all the defendants admitted that Cherry Hills UBO is the title holder for the First Property; Cherry Hills Apartments Business Trust is the title holder for the Second, Third, Fourth, Fifth, Sixth, Seventh, Properties; Delmonico Apartments Business Trust is the title holder for the Eighth Property; El Caliente Apartments Business Trust is the title holder for the Ninth Property; Hill Rise Apartments Business Trust is the title holder for the Tenth Property; Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 63 of 67 64 before the recent sale King Ranch Development LLC was the title holder for the Eleventh Property; La Parisenne Apartments is the title holder for the Twelfth Property; La Parisenne Apartments Business Trust is the title holder for the Thirteenth, Fourteenth, and Fifteenth Properties; Sades Apartments is the title holder for the Sixteenth Property; Shangri La Apartments Business Trust is the title holder for the Seventeenth Property; Wade Sandy is the title holder for the Eighteenth Property; and Hill Rise UBO is the title holder for the Nineteenth Property. See UMF, ¶¶ 39-157. As set forth above, Wade admitted that he transferred his interest in the Subject Properties to the current title holders without full and adequate consideration. UMF ¶ 191. Wade was the purchaser of all of the subject properties and he and Janet Wade transferred the subject properties to sham UBOs that Wade created and controlled, which later transferred the properties with the apartment rental complexes to the current title holders (the business trusts). UMF ¶ 39- 157. These transfers were to avoid reporting and paying the income tax on the income generated by the subject properties. See United States v. Wade, 203 Fed. Appx. 920, 923 (10th Cir. 2006). Wade continued to exercise dominion and control over the properties after the transfers as he continued to operate the apartment rental businesses after the transfers. UMF ¶ 159. The transfers occurred in anticipation of the assessment of a federal tax liability, having taken place during the tax years at issue, when Wade was failing to report the income from the apartment rental businesses. UMF ¶ 9. Finally, Wade continued as a 50 percent owner of the properties after the transfers to the business trusts and continued to receive distributions to him for half of the proceeds from the apartment rental business as demonstrated by the K-1s showing income to Wade. UMF ¶ 188. Therefore, the title holders to the Subject Properties hold title as nominees for Wade, or in the alternative, hold title in a resulting trust for the benefit of Wade. Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 64 of 67 65 E. Wade’s Income Tax Liabilities Are Exempted From the Bankruptcy Discharge On December 30, 2002, Mr. Wade filed a no asset bankruptcy under Chapter 7 of the Bankruptcy Code. See In re Stanley Wade, #02-41993 (Bankr. D. Utah 2002). UMF ¶ 191. Mr. Wade received a discharge in his bankruptcy case on April 11, 2003 and the case was closed on April 16, 2003. UMF ¶ 197. On the schedules and documents submitted under oath in connection with this filing, Wade falsely stated that he had no management or ownership interest in any business, and that he had no real property or other assets. UMF ¶ 195. At the time of these submissions, Wade owned apartment complexes generating gross receipts in excess of $7 million and taxable income in excess of $1 million annually. United States v. Wade, 203 Fed. Appx. 920 (10th Cir. 2006). Wade also failed to list the IRS as a creditor on his bankruptcy filings, despite the tax liabilities assessed as a result of his 1990 conviction and subsequent audits. In re Stanley Wade, #02-41993 (Bankr. D. Utah 2002). Pursuant to § 523(a)(1)(C) of the Bankruptcy Code, a discharge under § 727 of the bankruptcy code does not discharge a debtor from any debt with respect to which “the debtor made a fraudulent return.” See 11 U.S.C. § 523(a)(1)(c). See Dalton v. IRS, 77 F.3d 1297, 1299- 1300 (10th Cir. 1996); In re Mitchell, 633 F.3d 1319, 1326-1327 (11th Cir. 2011). For the period between 1993 and 2004, inclusive, Wade either failed to timely file income tax returns or filed returns reporting only a tiny fraction of his actual income. UMF 1 – 38. Additionally, beginning in 1992 and at various other times described in UMF 39 – 157, Wade fraudulently transferred nineteen parcels of real property in an attempt to hide the income he received from those properties and to defeat the collection of his tax liabilities. See UMF 39 – 157. Although Wade received a discharge in his bankruptcy, his federal tax liabilities for the years 1993 through 2002, Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 65 of 67 66 which are the prepetition years, are not discharged because pursuant to § 523(a)(1)(c), as Wade filed fraudulent returns for those years. See also supra., p. 53-57. The purpose of the Bankruptcy Code is to provide the honest, but unfortunate, debtor a fresh start. Dalton, 77 F.3d at 1300. As shown above, Wade is not an honest, but unfortunate, debtor for which the bankruptcy laws were enacted. Therefore, Wade’s liabilities for the years 1993 through 2002 are excepted from discharge. V. CONCLUSION For the foregoing reasons, the United States respectfully requests that summary judgment be entered in its favor; a judgment be entered in favor of the United States against Stanley L. Wade, in the amount of $15,284,932,96, plus interest continuing to accrue pursuant to 26 U.S.C. § 6622, for the federal income tax liabilities for the years 1993 through 2004; and foreclosure of the federal tax liens against the subject properties. Respectfully submitted this 16th day of June, 2017. DAVID A. HUBBERT Acting Assistant Attorney General Virginia Cronan Lowe VIRGINIA CRONAN LOWE RICK WATSON Trial Attorneys, Tax Division U.S. Department of Justice Of Counsel: JOHN W. HUBER (#7226) United States Attorney Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 66 of 67 67 CERTIFICATE OF SERVICE IT IS HEREBY CERTIFIED that service of the foregoing has been made this 16th day of June, 2017, via the Court’s CM/ECF system to: Kamron Keele Attorney for Stanley L. Wade, Janet Wade, and related entities Ronald C. Baker, Esq. (pro se) /s/ Virginia Cronan Lowe VIRGINIA CRONAN LOWE Trial Attorney, Tax Division United States Department of Justice Case 2:15-cv-00883-DS Document 162 Filed 06/16/17 Page 67 of 67