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UNITED STATES v. VARIOUS DE FACTO JOINT VENTURES
September 30, 1996
UNITED STATES OF AMERICA, Plaintiff, against Various De Facto Joint Ventures or Partnerships Designated As (1) EAGLE/ DURSO/ METRO LANE/ et al.; (2) EAGLE/ DURSO/ JESSICO/ et al.; (3) EAGLE/DURSO/KAPCO/ et al.; Plus their Individual or Corporate Joint Venturers/Partners, Including (4) WILLIAM NAPPO; (5) VINCENT DURSO d/b/a V. Durso Co.; (6) DAVID SHUSTER; (7) IGOR POROTSKY; (8) ARIK SHLAI d/b/a MONTANA ENERGY; (9) ZAKHER SORIN a/k/a ZOKKER SORIA d/b/a KANT ENERGY; (10) TED COHEN; (11) METRO LAND INC.; and (12) JESSICO OIL INC., Defendants.
The opinion of the court was delivered by: PLATT
On December 1, 1995, defendants
moved this Court for an order pursuant to Federal Rule of Civil Procedure 12(c) for judgment on the pleadings. For the reasons set forth below, the motion is granted.
This novel action was brought by the government as a "first attempt to deal with the civil tax consequences of a gasoline 'daisy chain conspiracy' of the type which has been the subject of numerous criminal prosecutions in this and other districts." (Pl.'s Mem. at 1.) The government contends that in 1987 the defendants participated in one or more elaborate schemes designed to defraud the United States of the collection of federal excise taxes on gasoline sales pursuant to Section 4081 of the Internal Revenue Code. The government makes the following allegations in its Complaint:
P4. The schemes involved the exploitation of the gasoline excise provisions of the Internal Revenue Code . . . that exempt from taxation bulk sales of gasoline to certain types of entities . . . that were registered under I.R.C. § 4101, while imposing the tax on the first sale to an unregistered entity.
P5. The implementation of schemes involved multiple purported transfers of ownership of gasoline among a series of "throughputters" that stored gasoline within the fuel terminal leased an operated by [Eagle].
P7. Durso was designed to be the "burn company" in that it was understood by all involved in the scheme that, when the [IRS] eventually investigated the nonpayment of taxes due on gasoline the title to which purportedly passed through Durso at the Eagle terminal, all fingers would point to Durso as the only person or entity liable under the Internal Revenue Code and Regulations (and Durso would be without any substantial collectible assets).
P8. The schemes involved the use of two shell or fictitious corporations, Montana Energy [owned by Arik Schlai, who has defaulted] and Kant Energy [owned by Zakher Soren] . . . to which Durso, the burn company, would purportedly sell the gasoline as if such companies were also registered under I.R.C. § 4101 . . . .
P9. The schemes all involved additional purported sales within the terminal, to [Metro Lano], another shell or fictitious corporation. Ultimately, the gasoline was sold in Metro Lano's name to wholesalers and retailers in smaller quantities, whereupon invoices were created showing that the gasoline was sold with the tax included . . . [which] purportedly allowed the retailer or wholesaler to rely on a representation that the tax was imposed either on the seller in connection with that sale or on a sale by a supplier further up the distribution chain who was purportedly responsible for the tax.
P10. Regarding the portion of the . . . purchase price specified as covering the tax, part of it was distributed among the participants in the scheme while part was absorbed in the compression of the price differences at the various levels of sales (which had collateral benefits to the participants by increasing their sales volume due to more competitive pricing).
Against this factual backdrop, the government offers two theories upon which to impose liability on the defendants. First, the government argues that this Court may find the participating venturers or partners jointly and severally liable for the tax liabilities of the joint ventures or partnerships. Alternatively, the government contends that this Court may hold the defendants liable in tort under State law for conspiring to evade federal excise taxes. Even assuming ...
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