UNITED STATES OF AMERICA,
Plaintiff,
v.
IRWIN SCHIFF and CYNTHIA NEUN,
Defendants.
2:03-CV-0281-LDG-RJJ
ORDER
On February 21, 2008, the United States renewed its motion for summary judgment (#157) converting the preliminary injunction against defendants Irwin Schiff and Cynthia Neun (#63) into a permanent injunction (#224; Schiff’s opposition #240; Schiff’s uncontested issues of fact #241; Schiff’s supplement to opposition #245; Neun’s opposition #232; Neun’s errata to opposition #233; Neun’s supplement to opposition #234; Neun’s second supplement to opposition #246; reply # 244, Neun’s rejoinder to reply #247).
Summary judgment is appropriate only if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56c. In determining whether summary judgment is appropriate, we view the facts in the light most favorable to the nonmoving party and draw reasonable inferences in favor of that party. Scheuring v. Traylor Bros., Inc.,476 F.3d 781, 784 (9th Cir. 2007) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)). To defeat summary judgment, the opposing parties must make a showing sufficient to establish a genuine dispute of a material fact regarding the existence of the essential elements of [the] case that [they] must prove at trial.” Galen v. County of Los Angeles, 477 F.3d 652, 658 (9th Cir.2007) (citation omitted). On a motion for summary judgment, it is not the province of a district court judge to weigh the evidence. Anderson, 477 U.S. at 255 (“Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, whether [she or] he is ruling on a motion for summary judgment or for a directed verdict.”).
In its order granting a preliminary injunction (#63), the court enjoined Schiff and Neun from promoting an abusive tax program. United States v. Schiff, 269 F. Supp.2d 1262 (D. Nev. 2003). Among its conclusions, the court found that Schiff and Neun had violated 26 U.S.C. § 6701 “by preparing false tax returns and other tax-related documents for their customers,” and that Schiff and Neun knowingly, and as a matter of employment, participated directly in the sale and promotion of the scheme which “involved over 3,000 individuals and an estimated $56 million in attempted tax evasion.” Id. at 1271-72. The Ninth Circuit affirmed this court’s decision. United States v. Schiff, 379 F.3d 621 (9th Cir. 2004).1
The court has, on numerous occasions and at Schiff and Neun’s request, extended dispositive motion and briefing deadlines and discovery. The court also cautioned Schiff and Neun that the relevant issues of fact to be addressed in the case included:
[W]hether they organized and sold an arrangement that they claimed enabled customers to legally stop paying federal taxes; whether they assisted others in filing frivolous “zero income” tax returns, paying no income taxes, or stopping all taxes from being withheld from wages and other income sources; whether they prepared tax returns and related documents of customers in which they falsely claimed that the customers had no income and therefore no federal tax liability; and whether they assisted others to impede and obstruct the enforcement of the internal revenue laws by sending frivolous correspondence to the IRS and by filing frivolous lawsuits, petitions and hearing requests.
In their oppositions and papers, Schiff and Neun
have made no effort to rebut these, and other,
material facts. Instead, Schiff and Neun assert
legal arguments which were rejected by the court
in the preliminary injunction.
Neun argues that the court lacks subject matter
jurisdiction and should dismiss the United
States’ complaint. In its preliminary injunction
order, the court ruled that § 7408 of the
Internal Revenue Code authorized it to enjoin
any person “from further engaging in any conduct
subject to penalty” under §§ 6700 or 6701. 269
F. Supp.2d at 1265. The court also held that §
7407 authorized it to enjoin a tax preparer who
has engaged in conduct subject to penalty in
violation of §§ 6694 and 6695. Neun argues that
the court lacks jurisdiction because the United
States did not provide defendants with proper
notice that they were engaging in a fraudulent
scheme. No such notice is required by §§ 7407 or
7408, however. In any event, as the court
indicated in the preliminary injunction order,
the United States provided defendants with ample
notice of violation.
In his opposition to summary judgment, Schiff
persists in arguing that paying income taxes is
voluntary. The court has previously rejected
various angles of Schiff’s position, which stem
from “the conceptual infirmities, rejected time
and again by the courts, that there is no legal
obligation to pay income taxes.” 269 F. Supp.2d
at 1268-69. 2 Schiff’s latest arguments are more
of the same. Schiff criticizes the court’s
preliminary determinations that his programs
contain false or fraudulent claims, and
maintains that neither the government nor the
court have ever specifically identified anything
false or fraudulent in his materials. The
court’s preliminary injunction, however, went
into detail about the fraudulent and misleading
content of Schiff’s programs and materials. The
Ninth Circuit, throughout its opinion, also
makes specific reference to Schiff’s misleading
and fraudulent claims. 379 F.3d 626-630.
Schiff’s attempt to ground his legal theories on
certain discovery propounded to the United
States is likewise unavailing. During discovery,
the court ruled that “[w]hile Schiff is not
precluded from arguing to the court the validity
of the revenue laws, or the IRS’ actions based
on them, Schiff will not be allowed to debate
through discovery his tax-based theories or
positions.” (#159 and #183). Subsequently, the
court ruled that the United States had complied
with its discovery obligations, and that Schiff
had not legally justified the relevance or
materiality of his requests. Schiff has failed
to present a meritorious challenge to the
validity of the revenue laws or the United
States’ action based on them.
The United States has made a showing that, based
on the record in this case, no genuine issue of
material fact exists, and it is entitled to
judgment as a matter of law. Accordingly,
THE COURT HEREBY ORDERS that the United States’
motion for summary judgment of permanent
injunction against defendants Schiff and Neun
(#224) is GRANTED.
THE COURT FURTHER ORDERS that within thirty days
from the filing of this order, the United States
shall file a proposed judgment of permanent
injunction.3
DATED this _____ day of September, 2008.
______________________________
Lloyd D. George
United States District Judge
Read Irwin's Supplement in response to the above
by clicking here
