United States v. Sergio Gardea - 05/10/2018

Tax preparer found not guilty on all 30 counts of preparing false tax returns following a 2 week jury trial today. Mr Gardea was represented by Miami criminal tax lawyer David M. Garvin.

IRS Sought to Recover Funds That Were Transferred U.S. v. ROCKY MOUNTAIN HOLDINGS, 2011 U.S. Dist. LEXIS 25276 (E.D.Pa 2011)


U.S. v. ROCKY MOUNTAIN HOLDINGS,  2011 U.S. Dist. LEXIS 25276  (E.D.Pa 2011)

    At issue in this action was whether Plaintiff United States could recover, pursuant to Pennsylvania's Uniform Fraudulent Transfer Act, more than $3 million in federal tax liability owed by Rocky Mountain Holdings, Inc. from  Dupont, as subsequent transferee of an allegedly fraudulent conveyance. Defendant Dupont, a pension  trust fund located in Delaware, holds and manages pension fund assets for the benefit of employees  of  E.I. du Pont de Nemours & Co. and Conoco, Inc. At the time of the transfers in question Dupont held an 88.99% limited partnership interest in a Delaware limited partnership known as the Dimeling, Schreiber & Park Reorganization Fund, L.P.

        An entity known as Dimeling, Schreiber & Park, L.P.  held the other 10.01% of the Fund as a limited partner, and also held a 1% interest in the Fund as a general partner.

       According to the facts on record, the Fund's purpose was, in part, to create wholly-owned subsidiaries to indirectly invest in and dispose of assets of companies that were making major  changes to their capital structure.

  Between March 1994 and October 2004, Defendant made nearly $57 million in capital contributions to the Fund in its capacity as limited partner.

    On August 30, 1994, the Fund formed RMH, a Delaware corporation, for the sole purpose of acquiring an air medical transport business known as Rocky Mountain Helicopter, Inc.,  RMH was to act as a "blocker" corporation to protect Dupont from unrelated taxable business income. Due to the large size of the acquisition, the Fund brought in American Manufacturing Corporation, Inc., a Delaware corporation, to finance 50% of the equity required to fund the acquisition.  For tax purposes,  RMH and AMC created Rocky Mountain Holdings, LLC ("RMH LLC"), a Delaware flow-through limited liability company, to acquire the Target Entity.

    On October 16, 2002 in Philadelphia, Pennsylvania, RMH and AMC sold their membership interest in the target company for $28 million, subject to post-closing adjustments. As a result of the sale, RMH received $15,157,403 in proceeds, representing 50% of the adjusted purchase price. On October 17, 2002, RMH transferred $14,860,895 of these proceeds to the Fund, RMH's only shareholder. that same day, the Fund wired 88.9% of the $14,860,895 (or $13,224,710.46) to the State Street Bank and Trust Company as Trustee of Defendant, and 11.01% (or $1,636,184.50) to DS&P.  Later that day, DS&P transferred its $1,636,184.50 to Defendant in partial repayment of a loan, which was secured by DS&P's interest in the Fund.

      After the remaining parties engaged in discovery, both filed Motions for Summary Judgment on June 30, 2010. The Court ruled on these motions and ruled:"cross-motions are no more than a claim by each side that it alone is entitled to summary judgment, and the making of such inherently contradictory claims does not constitute an agreement that if one is rejected the other is necessarily justified or that the losing party waives judicial consideration and determination whether genuine issues of material fact exist."  (quoting Rains v. Cascade Indus., Inc., 402 F.2d 241, 245 (3d Cir. 1968)).

    The Court  found cases from other districts, including Delaware, had held that no choice of law conflict exists where both states have adopted the same relevant  portions of the UFTA.  See, Zahn v. Yucaipa Capital Fund, 218 B.R. 656, 666 (Bankr. D.R.I. 1998) ("If there is no conflict between the two states' laws, then the Court need not engage in a choice-of law analysis. The California and Rhode Island versions of the UFTA are for all practical purposes identical.").
   
    Ultimately, the Court denied the parties' Cross-motions for Summary Judgment. The Court found that the previous consent judgment between Plaintiff,  the Fund,  and DS&P did  not conclusively establish that the initial transfer was fraudulent for the purposes of Plaintiff's action against Defendant Dupont as a subsequent transferee.

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