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United States v. Nassar

United States District Court, S.D. New York

November 10, 2014

UNITED STATES OF AMERICA, Plaintiff,
v.
ALBERT D. NASSAR, individually and as trustee of The Nassar Family Irrevocable Trust, THE NASSAR FAMILY IRREVOCABLE TRUST, as nominee for Albert D. Nassar, ALBERT C. NASSAR, ALYCE C. NASSAR, and JOHN DOES 1-10, Defendants.

OPINION AND ORDER

EDGARDO RAMOS, District Judge.

I. Background

The United States of America ("Plaintiff" or the "Government") brought the instant action to collect the tax liabilities of Albert D. Nassar ("Defendant") and enforce tax liens on an apartment owned by defendant the Nassar Family Irrevocable Trust ("the Trust"). Compl. ¶ 1, Doc. 1 ("Compl."). According to the Government, the apartment is subject to foreclosure on two independent grounds: (1) the Trust holds it as Defendant's nominee; and (2) the transfer of the apartment to the Trust was a fraudulent conveyance under New York law. Compl. ¶¶ 20, 34. Defendant moves to dismiss the Government's claims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure and seeks dismissal on the ground that the IRS released the lien against the Trust. Def.'s Mem. L. Support Mot. Dismiss, Doc. 15 ("Def.'s Mot. Dismiss"). For the reasons set forth below, Defendant's motion to dismiss is DENIED.

A. Factual Background[1]

Beginning in 2003, the Internal Revenue Service ("IRS") made assessments against Defendant for unpaid federal taxes and certain statutory additions with respect to tax years 2002 and 2009. Compl. ¶¶ 11-13, 17. As of October 25, 2013, Defendant's tax liability totaled $2, 524, 229.88. Id. at ¶ 11. According to the Complaint, the IRS has been unable to identify any assets held in Defendant's name. Id. at ¶ 31.

In July 2001, the Nassar Family Irrevocable Trust ("the Trust") was created with Defendant appointed as its trustee. Id. at ¶ 6. The Defendant, along with his two children and co-defendants (Albert C. and Alyce C. Nassar), are its designated beneficiaries. Id. The Trust grants Defendant "sole and absolute discretion to make distributions to the beneficiaries for their health, support, and maintenance." Id. It is claimed that Defendant has used the Trust's funds to cover his personal business expenses, "repeatedly transfer[ing] moneys between the Trust and various business entities he owns and/or controls." Id. at ¶ 30. Meanwhile, Defendant has allegedly failed to render even an annual accounting of disbursements and receipts as he is required to by the Trust agreement. Id.

On July 30, 2001, shortly after the Trust was created, Defendant purchased an apartment for $1, 337, 088 with a $725, 000 mortgage loan, both of which were secured in his name. Id. at ¶ 21. The current fair market value of the apartment purportedly exceeds $2 million. Id. at ¶ 31. Less than three months later, on October 15, 2001, Defendant transferred the apartment to the Trust for $10.00 in consideration.[2] Id. at ¶ 22. Nonetheless, the conveyance was not recorded until January 17, 2002. Id. The Government claims that Defendant "personally paid off the mortgage in full in March 2002." Id. Prior to this transfer, Defendant also purportedly quitclaimed multiple properties to an entity he owned and controlled. Id. at ¶ 25.

The transfer of the apartment to the newly-created Trust allegedly took place during a time at which Defendant was facing "significant financial liabilities." Id. at ¶¶ 23, 34. According to the Government, Defendant was aware that he faced civil and criminal liability in connection with a conspiracy to sell stolen drugs, which he later pleaded guilty to in addition to criminal contempt. Id. The Government also claims that, because Defendant and his wife had recently separated, he could foresee the need to pay substantial child support and alimony. Id. at ¶ 24. It is further alleged that Defendant anticipated incurring significant tax liabilities shortly thereafter. Id.

Although Defendant's children are also beneficiaries of the Trust, the Government contends that neither have ever resided in the apartment. Id. at ¶ 27. After Defendant's separation from their mother, the two children resided with her in Florida. Id. Albert C. Nassar is now enrolled at Syracuse University and Alyce C. Nassar attends graduate school in Florida. Id. Defendant, on the other hand, is alleged to have "continued to reside in, use, enjoy and control the Apartment as if it were his own" without ever paying rent to the Trust. Id. at ¶¶ 26, 28. Defendant pays for the maintenance, utility bills, property taxes, and homeowner's insurance for the apartment with funds held by what the Government claims is a shell company controlled and owned by Defendant. Id. at ¶ 29.

These alleged facts lead the Government to claim that "[t]he Trust holds only nominal title to the Apartment and serves as Mr. Nassar's nominee" and the transfer of the apartment should be set aside as fraudulent under New York Debtor and Creditor Law ("NYDCL") § 276. Id. at ¶¶ 20, 36.

B. Procedural Background

On August 17, 2007, the Internal Revenue Service ("IRS") filed a Notice of Federal Tax Lien ("NFTL") in New York County against Defendant for the tax liability he incurred during the 2002 tax year ("TY") under 26 U.S.C. § 6323(f)(1)(A), (f)(2) and N.Y. Lien Law § 240(1). Id. at ¶ 14; see also Pl.'s Opp. Motion Dismiss 5 n.2, Doc. 16.[3] A second lien was similarly filed on March 12, 2013 for the amount due for TY 2009. Id. Finally, on June 12, 2013, the IRS filed a lien against the Nassar Family Irrevocable Trust for both years. Id.

Defendant filed a separate wrongful levy action on August 14, 2013 against the United States and the IRS seeking a permanent injunction that would prevent the IRS from seizing his interest in the apartment and from retaining money seized from his bank accounts. Nassar Family Irrevocable Trust et al. v. Shulman et al., 13 Civ. 5680 (ER) (KNF), Doc. 1. This Court heard oral argument and denied the Defendant's preliminary injunction motion on October 23, 2013. Id., Doc. 23. The Government filed the present action on November 15, 2013, see Compl., and on March 5, ...


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