UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 01-10870
BEVERLY FREY
Plaintiff-Appellant,
v.
UNITED STATES OF AMERICA
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Texas
3:99-CV-831-D
March 19, 2002
Before ALDISERT*, DAVIS, and PARKER, Circuit Judges.
PER CURIAM:**
This case involves a $284,770 tax assessment under 20 U.S.C.
§ 6672 against Beverly Frey, a former corporate officer of
Pinpoint Communications. The IRS issued the assessment for
*
Circuit Judge of the Third Circuit Court of Appeals,
sitting by designation.
**
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.4.
failing to pay the employment taxes withheld from the wages of
Pinpoint employees. Frey paid $100 of the assessment and brought
suit against the United States for a refund of that $100. The
government filed a counterclaim for the unpaid balance of the
assessment. The district court granted summary judgment for the
government. Frey now appeals this decision.
Other minor issues are involved. However, our principal
task is to decide whether the district court erred in determining
that--as a taxpayer--Frey was a “responsible person” under §
6672.1
I.
Patrick Bromley was Pinpoint’s primary investor, CEO, and
Chairman of the Board. According to Frey, Bromley was the
dominant figure in the corporation, controlling all financial
matters. Only Bromley allegedly had the authority to decide
1
Title 20 U.S.C. § 6672 provides in relevant part:
(a) General Rule. Any person required to collect,
truthfully account for, and pay over any tax imposed by
this title who willfully fails to collect such tax, or
truthfully accounts for and pay over such tax, or
willfully attempts in any manner to evade or defeat any
such tax or the payment thereof, shall, in addition to
other penalties provided by law, be liable to a penalty
equal to the total amount of the tax evaded, or not
collected, or not accounted for and paid over.
(b) defines “person” to include “an officer or employee
of a corporation . . . who as such officer, employee or
member is under a duty to perform the act in respect of
which the violation occurs.”
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whether suppliers would be paid, when taxes would be paid, and
how much those tax payments would be.
During the third and fourth quarters of 1995, Pinpoint
failed to pay the government taxes it had withheld from its
employees’ wages during the third and fourth quarters of 1995,
totaling $284,870.31. By August 1996, Pinpoint had filed for
bankruptcy under Chapter Seven, and had begun to liquidate. The
overdue taxes, incidentally, remained unpaid.
On February 18, 1999, the IRS made a $284,780 assessment
against the taxpayer under § 6672 for the unpaid withholdings
during the third and fourth quarters of 1995. The IRS sent Frey
notice of the assessment and a demand for payment. The notice
and the demand was sent to Frey’s correct address, though it
misstated her social security number.1
Frey paid $100 of the assessment and brought this suit for a
refund. The government counterclaimed for the unpaid balance of
the assessment and also filed a third party complaint against
Bromley for his failure to pay the employment taxes pursuant to §
6672. Bromley and the government reached a settlement in the
1
We reject Frey’s argument that she did not receive proper
notice because the notice and demand letter she received
misstated her social security number. Code § 6303(a) requires
the notice to state the amount of the assessment and demand
payment. Here, the notice and demand letter was sent to both the
correct person and the correct address. Additionally, it
properly stated the amount of the assessment against Appellant
and demanded payment from her.
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amount of $158,000, to be paid by Bromley.2
Sections 6672 and 6671(b) impose personal liability for the
amount of the taxes due upon those officers and agents of the
employer who are “responsible” for failing to pay and who act
“willfully” in failing to pay. Whether an individual is a
“responsible person” is essentially a question for the fact-
finder. Barnett v. I.R.S., 988 F.2d 1449 (5th Cir. 1993).
The crux of the inquiry involves determining whether the
individual had the “effective power” or “actual authority or
ability” to pay the taxes. Id. We have heretofore set forth six
factors to be considered in determining whether a person has the
“effective power” to pay taxes. Logal v. U.S., 195 F.3d 229, 232
(5th Cir. 1999). Those six factors analyze whether the
individual: (1) is an officer or member of the board of
directors; (2) owns a substantial amount of stock in the company;
(3) manages the day-to-day operations of the business; (4) has
the authority to hire or fire employees; (5) makes decisions as
to the disbursement of funds and payment of creditors; and (6)
possesses the authority to sign company checks. Id.
In applying these factors we have held that all responsible
persons--not simply the most responsible person--are liable for
unpaid taxes. Morgan v. U.S., 937 F.2d 281, 284 (5th Cir. 1991).
2
There is no dispute that Frey will be entitled to a credit
for the amount collected from Bromley.
4
A person with a duty to pay taxes cannot absolve herself of
liability merely because a superior instructed her not to pay
taxes, or because the supervisor threatened to fire her if she
paid the taxes. Howard v. U.S., 711 F.2d 729, 734-735 (5th Cir.
1983); Gustin v. U.S., 876 F.2d 485, 491-492 (5th Cir. 1989);
Morgan, 937 F.2d at 284. A person will be held to be responsible
even if he does not have final authority to determine which bills
are paid, so long as he has “significant control over
disbursements.” Raba v. U.S., 977 F.2d 941 (5th Cir. 1992).
As Treasurer/Secretary, Frey was an officer of the
corporation. She managed the day-to-day accounting operations of
the business. This included dealing with independent auditors,
paying employment taxes, signing payroll checks, and preparing
financial statements for the Board of Directors. She
participated in the hiring decisions in the accounting
department. The evidence indicates that she had the authority to
authorize purchases for the accounting department up to $5,000.
In one case, Frey authorized the issuance of a several
hundred thousand dollar purchase order. Under precedent set
forth in Baba, Frey need not have had final authority to
determine which bills were paid, so long as she had significant
control over the disbursements. Frey had the authority to sign
checks up to $10,000 on her own, and the authority to sign checks
above that amount with a co-signer.
Distilled to its essence, Frey’s primary argument is that
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Bromley had more authority than she to insure that taxes were
paid; Bromley told her not to pay the delinquent taxes; and she
did not have final control over which creditors to pay.
To be sure, this case has given us a moment of pause. It is
uncontradicted that Bromley ordered Frey not to pay these taxes
and to instead pay creditors. Clearly, dictates of equity favor
her position. Nevertheless, we are faced with a litany of
controlling and unambiguous cases such as Morgan, Howard, Gustin
and Raba. These cases provide us with no wiggle room to allow
this question--whether Frey was a responsible person under §
6672--to be sent to a fact finder. On the basis of supporting
data filed with the summary judgment motion, we hold that she is
a responsible person under § 6672.
II.
We now address the question of whether Frey--a responsible
person--also acted willfully. Under § 6672, willfulness entails
a voluntary, conscious, and intentional act. It does not require
a bad motive or evil intent. A responsible person’s decision not
to pay withholding taxes does not cease to be willful because the
person is ordered by another not to pay. Morgan, 937 F.2d at
285-286; see also Howard, 711 F.2d at 736 (“A considered decision
not to fulfill one’s obligation to pay the taxes owed, evidenced
by payments made to other creditors in the knowledge that the
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taxes are due, is all that is required to establish
willfulness.”)
* * * * *
We conclude, therefore, that the district court did not err
in ruling in favor of the government.
We have considered all contentions presented by the parties
and conclude that no further discussion is necessary.
The judgment of the district court is affirmed.
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