United States v. Patridge (PRA Decision)
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
DENNY R. PATRIDGE,
Defendant-Appellant.
DENNY R. PATRIDGE AND JUDY PATRIDGE,
Petitioners-Appellants,
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent-Appellee.
Release Date: NOVEMBER 14, 2007
Published by Tax AnalystsTM
IN THE
UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT
Appeal from the United States District Court
for the Central District of Illinois.
No. 04-20031-001 -- Michael P. McCuskey, Chief Judge.
Appeal from the United States Tax Court
No. 1551-06L -- Peter J. Panuthos, Judge.
ARGUED SEPTEMBER 5, 2007 -- DECIDED NOVEMBER 14, 2007
Before EASTERBROOK, Chief Judge, and WOOD and EVANS, Circuit Judges.
EASTERBROOK, Chief Judge. Denny Patridge, who owned an insurance agency, decided to make life hard for the revenooers by transferring his income to an offshore trust and then pretending that he had no income. The first trust in line, located in Antigua, transferred everything to a second trust, in Belize. The second trust transferred the money to a third trust (also in Belize), which "loaned" it back to Patridge, who conveniently never paid interest or repaid any of the "debt." When applying for credit, Patridge treated the proceeds from Trust #3 as income and claimed to have no debts. Trust #1 and Trust #2 filed tax returns, each claiming to have expenses exactly equal to its income. Trust #3 never filed a tax return. Patridge himself filed returns in some years, though not in others, and claimed to have negligible income. After an audit, the IRS concluded that Patridge's income was significant and that he owed $ 74,279 in taxes for 1996 and $ 49,836 for 1997. Penalties took the total to $ 130,736 (plus interest) for 1996 and $ 88,675 (plus interest) for 1997.
Patridge refused to cooperate with the audit and did not contest the deficiency determination and assessment until learning that a criminal investigation was under way -- and by then it was too late. But when the IRS tried to levy on his assets, Patridge demanded a hearing under 26 U.S.C. section 6330, which allows taxpayers to contest the time and manner of payment on a tax debt. Instead of presenting arguments about how and when the debt would be paid, however, Patridge tried to dispute his liability, a subject that Congress placed off limits to avoid a collateral attack on matters already resolved. 26 U.S.C. section 6330(c)(2)(B). Told that he could obtain review exclusively in the Tax Court, Patridge (represented by counsel) instead filed suit in the United States District Court for the Central District of Illinois. When, as was inevitable, that suit was dismissed for lack of jurisdiction, see Patridge v. Internal Revenue Service, No. 06-1155 (Nov. 13, 2006) (unpublished order), he turned at last to the Tax Court, where his action was doomed by section 6330(c)(2)(B).
Meanwhile Patridge had been indicted for tax evasion, money laundering, and wire fraud. Still represented by the same lawyer, he dragged out the jury trial for 13 days but was convicted. He has been sentenced to 60 months' imprisonment, fined $ 100,000, and ordered to pay his back taxes and accumulated penalties.
Patridge's brief in the criminal appeal presents 19 issues, all frivolous. Many are in the style of tax-protest arguments that we might expect from a layman representing himself but do not expect to see in a brief filed by a member of the bar.
[part of opinion omitted]
The last of the issues we address is Patridge's contention that the Paperwork Reduction Act of 1980, 44 U.S.C. sections 3501-21, forecloses his conviction. This contention is as weak as the other 18, but it has been raised in several recent appeals -- despite the fact that it was considered and rejected in Salberg v. United States, 969 F.2d 379 (7th Cir. 1992) -- so we take this occasion to hold that the 1995 amendments to the Act do not alter Salberg's conclusion.
Section 3507 provides that an agency needs the approval of the Office of Management and Budget to collect information, and section 3512(a)(1) adds that "no person shall be subject to any penalty for failing to comply with a collection of information that is subject to this subchapter" unless OMB's approval is evinced by a "valid control number" on the agency's demand for information. Per section 3507(g), OMB "may not approve a collection of information for a period in excess of 3 years." Patridge observes that the IRS's Form 1040 has displayed the same control number since 1981 and argues that it must therefore represent an approval lasting for more than 3 years. Moreover, he asserts that the IRS did not obtain a new approval between the 1995 amendments and the adoption of forms for tax years 1996 and 1997, so these forms must be (in counsel's words) "outlaw and bootleg." Finally, Patridge contends that all IRS forms are invalid because they do not tell taxpayers that the lack of a valid control number means that they need not supply any information.
How any of this could block a conviction for tax evasion is a mystery. Patridge evaded taxes by shuffling his income among trusts in an attempt to conceal it from the IRS. That crime does not depend on the contents of any form. Evading one's taxes is illegal independent of the information one does or does not supply. Consider another example: the Clean Air Act requires businesses to curtail certain emissions using the best available technology, and to report on those emissions to the EPA. An error in the EPA's forms might spare the business any penalties for bad information but would not license it to emit pollution without limit. The Paperwork Reduction Act does not change any substantive obligation.
Anyway, as we held in Salberg, the obligation to file a tax return stems from 26 U.S.C. section 7203, not from any agency's demand. The Paperwork Reduction Act does not repeal section 7203. Repeal by implication depends on inconsistency that makes it impossible to comply with the newer law while still honoring the old one, see Branch v. Smith, 538 U.S. 254, 273 (2003); J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred International, Inc., 534 U.S. 124, 141-44 (2001), and there is no such inconsistency between section 7203 and the Paperwork Reduction Act. One reason for this is that section 7203 requires a "return" but does not define that word or require anyone to use Form 1040, or any "official" form at all. All that is required is a complete and candid report of income.
Finally, we have no doubt that the IRS has complied with the Paperwork Reduction Act. Form 1040 bears a control number from OMB, as do the other forms the IRS commonly distributes to taxpayers. That this number has been constant since 1981 does not imply that OMB has shirked its duty. Section 3507 requires periodic review, not a periodic change in control numbers. Patridge offers us no reason to think that the necessary review has not been conducted. The control number on Form 1040 appears on OMB's web site as a current, valid number; if this is wrong, it takes more than a lawyer's say-so to establish the proposition. That OMB didn't re-review Form 1040 between the 1995 and 1996 tax year is irrelevant; nothing in the 1995 amendments says that all existing approvals become invalid or that all forms must be resubmitted.
None of the remaining 16 arguments in the criminal appeal requires comment. 10,000 for his frvolous. Section 6330(c)(2)(B) says point blank that a request for a hearing on the details of collection does not require (or even permit) the IRS to reconsider the taxpayer's substantive obligations. Patridge could have cooperated with the audit but refused; he could have sought review of the assessment in the Tax Court but failed to do so. The current proceeding is nothing but obstructionism.
Jerold W. Barringer represented Patridge at trial, in the Tax Court, and during the three appeals to this court. He has performed below the standard of a pro se litigant; we have serious doubt about his fitness to practice law. The problem is not simply his inability to distinguish between plausible and preposterous arguments. It is his disdain for the norms of legal practice (19 issues indeed!) and the rules of procedure.
[portion of opinion omitted]
This court regularly fines lawyers who violate Circuit Rule 30 yet falsely certify compliance under Circuit Rule 30(d). E.g., United States v. White, 472 F.3d 458, 465-66 (7th Cir. 2006); United States v. Evans, 131 F.3d 1192 (7th Cir. 1997); In re Galvan, 92 F.3d 582 (7th Cir. 1996). We also regularly penalize unrepresented litigants who advance frivolous tax-protest-style arguments. E.g., Szopa v. United States, 453 F.3d 455, after reconsideration, 460 F.3d 884 (7th Cir. 2006) (setting $ 4,000 as the presumptive sanction for frivolous tax appeals, doubled for repeat offenders). Members of the bar must be held to standards at least as high as those of unrepresented litigants. Barringer is a recidivist; he ignored our 2006 decision reminding him that taxpayers cannot use a request for a collection hearing to contest their substantive liability. We therefore give Barringer 14 days to show cause why he should not be fined $ ivolous arguments and noncompliance with the Rules, and why he should not be suspended from practice until he demonstrates an ability to litigate an appeal competently and responsibly. See Fed. R. App. P. 38, 46(b), (c).
AFFIRMED; ORDER TO SHOW CAUSE ISSUED
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