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Biogenesis Church, Inc. v. United States

United States District Court, D. Massachusetts

November 13, 2017

BIOGENESIS CHURCH, INC., Plaintiff,
v.
UNITED STATES OF AMERICA, Defendant.

          MEMORANDUM AND ORDER

          Denise J. Casper, United States District Judge.

         I. Introduction

         Plaintiff Biogenesis Church, Inc. (“Biogenesis Church”) has filed this lawsuit against Defendant the United States of America (the “United States”) alleging a wrongful levy and seeking declaratory and injunctive relief, as well as damages under 26 U.S.C. § 7426(a)(1) and (b)(2). D. 1. The United States has moved for summary judgment on Count II of the complaint.[1] D. 22. For the reasons stated below, the Court ALLOWS the motion.

         II. Standard of Review

         The Court grants summary judgment where there is no genuine dispute as to any material fact and the undisputed facts demonstrate that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). “A fact is material if it carries with it the potential to affect the outcome of the suit under the applicable law.” Santiago-Ramos v. Centennial P.R. Wireless Corp., 217 F.3d 46, 52 (1st Cir. 2000) (quoting Sanchez v. Alvarado, 101 F.3d 223, 227 (1st Cir. 1996)). The movant bears the burden of demonstrating the absence of a genuine issue of material fact. Carmona v. Toledo, 215 F.3d 124, 132 (1st Cir. 2000); see Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the movant meets its burden, the non-moving party may not rest on the allegations or denials in her pleadings, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986), but “must, with respect to each issue on which she would bear the burden of proof at trial, demonstrate that a trier of fact could reasonably resolve that issue in her favor.” Borges ex rel. S.M.B.W. v. Serrano- Isern, 605 F.3d 1, 5 (1st Cir. 2010). “As a general rule, that requires the production of evidence that is ‘significant[ly] probative.'” Id. (quoting Anderson, 477 U.S. at 249) (alteration in original). The Court “view[s] the record in the light most favorable to the nonmovant, drawing reasonable inferences in his favor.” Noonan v. Staples, Inc., 556 F.3d 20, 25 (1st Cir. 2009).

         III. Factual Background

         The following facts are taken from the parties' Rule 56.1 statements and accompanying documents and are undisputed unless otherwise noted. Daniel H. George, Jr. (“George”) is a self-taught chemist who has created his own health supplements. D. 29, ¶ 1.[2] On April 3, 2003, George was indicted on four counts of tax evasion for tax years 1996-1999 and four counts of using a false social security number. D. 29, ¶ 3. George was found guilty on all four counts of tax evasion. D. 29, ¶ 4.

         A. The Biogenesis Foundation

         On May 14, 2003, George established the Biogenesis Foundation, Inc. (“Biogenesis Foundation”). D. 29, ¶ 8. George was the sole incorporator and, as of its 2016 annual report, was still listed as the president, treasurer, clerk, and director of the Biogenesis Foundation. D. 29, ¶¶ 8, 13. George was also the only person with signatory authority for the Biogenesis Foundation's checking account. D. 29, ¶ 15. George transferred $7.7 million[3] of his own money into a Biogenesis Foundation bank account, for which George received no consideration (the “2003 transfer”). D. 29, ¶¶ 9-10. After the 2003 transfer, George did not own any assets except for a house at 1 Warren Court, Rockport, Massachusetts (the “Warren Court property”), which in 2016 had a tax value of $281, 900 and social security disability payments he has received since 1976. D. 29, ¶ 11. The Biogenesis Foundation's address was the Warren Court property. D. 29, ¶ 14.

         George has control over Biogenesis Foundation's funds and responsibility for distributing them. D. 29, ¶ 40. While operating the Biogenesis Foundation, George paid his own legal fees out of funds held in its bank account. D. 29, ¶ 16. Between 2003 and 2008, Biogenesis Foundation spent $1, 504, 564 on George's legal fees. Id. In 2008, George also used funds from the Biogenesis Foundation account to pay for improvements to the Warren Court property, structured as a loan to George with a balance of $218, 205, as well as utility bills and property taxes. D. 29, ¶¶ 17-18.

         B. IRS Begins Civil Tax Assessment of George

         After George was released from prison in 2007, and while he was on supervised release in 2010, the United States alleged that George violated the terms of his supervised release due to a failure to pay the fine that was a part of his sentence and his continuing lack of cooperation with the IRS. D. 29, ¶¶ 19-20. On November 4, 2010, George's counsel stated at a supervised release revocation hearing that the IRS was reviewing George's tax records to issue an assessment. D. 29, ¶ 21. On October 10, 2012, the IRS issued a statutory notice of deficiency (the “Notice of Deficiency”) to George, informing him that the IRS had determined that he owed $2, 165, 892 for tax years 1995-2002, and $1, 624, 419 in tax penalties. D. 29, ¶ 23.

         C. The Biogenesis Church

         On June 20, 2012, George founded Biogenesis Church as the sole incorporator. D. 29, ¶ 25. George is Biogenesis Church's president and its business address is the Warren Court property. D. 29, ¶¶ 26-27. On October 11, 2012, George transferred $7, 559, 861.16 from Biogenesis Foundation's account to a new Biogenesis Church account, for which there was no consideration (the “2012 transfer”). D. 29, ¶¶ 28-29. Except for $10 remaining in its account, after the 2012 transfer, Biogenesis Foundation had no property and essentially ceased operations as Biogenesis Church took over, in George's own words, “the exact same work.” D. 29, ¶¶ 30-31. George has control over Biogenesis Church's funds and responsibility for distributing them. D. 29, ¶ 40. George is the only signatory for Biogenesis Church's bank account. D. 29, ¶ 38. George used funds from the Biogenesis Church account to make payments on behalf of the Biogenesis Foundation. D. 29, ¶ 32. Biogenesis Church, similarly to Biogenesis Foundation, paid utility bills for the Warren Court property owned by George and does not pay rent for using the house. D. 29, ¶¶ 41-43.

         D. IRS Issues Levy to ...


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