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United States v. Pieron

United States District Court, E.D. Michigan, Northern Division

October 23, 2019

UNITED STATES OF AMERICA, Plaintiff,
v.
JAMES D. PIERON, JR., Defendant.

          OPINION AND ORDER ADDRESSING TAX LOSS GUIDELINE

          THOMAS L. LUDINGTON UNITED STATES DISTRICT JUDGE.

         On July 18, 2018, an indictment was returned against Defendant James D. Pieron for tax evasion. ECF No. 1. On March 7, 2019, a jury found Defendant guilty of the offense. In April 2019, a status conference was conducted. The primary purpose for the conference was to address the Federal Sentencing Guideline issues that the parties anticipated would need to be resolved.

         Following the April status conference, the Government was directed to file a Tax Loss Assessment and Defendant was directed to file a response. ECF No. 59. The Government's tax loss assessment suggested that the income reported on the form 1040 filed by Defendant on his income tax return filed on January 16, 2012 for 2008 and 2009 is reasonably accurate. ECF No. 60 at PageID.1097. It concluded that the tax loss for 2008 was $2, 517, 958 and for 2009, $777, 320. Id. at PageID.1097-1098. On the other hand, Defendant concluded that he had no tax loss for 2008 and 2009 because Trevor Cook did not purchase his stock from Defendant, but from JDFX or alternatively, a new Swiss JDFX entity. ECF No. 65.

         Due to these contradictory factual assertions, the parties were directed to submit supplemental briefing. The Government's briefing explained that it had selected the July 16, 2012 returns for 2008 and 2009 because they are simply “more accurate than the initial returns prepared by Carol Nathan” because they more correctly correspond to the “available bank records.” ECF No. 112 at PageID.1791. The Government concluded that the JDFX stock sold by Defendant to Mr. Cook had no tax basis because the Government was “not aware of source documents reflecting any capital contribution that Pieron made to JDFX Holdings prior to the stock sales.” ECF No. 112 at PageID.1796.

         Defendant's supplemental briefing included documents corroborating in part his suggestion that the funds received from Cook were for a new JDFX entity. This included a “Share register” listing three JDFX shareholders: Market Shot LLC (Cook's company), Defendant, and Clive Diethelm. ECF No. 117-16. According to the register and accompanying share certificates, JDFX had 10, 000, 000 registered shares. On December 15, 2006, 2, 000, 000 shares were issued to Market Shot LLC, 1, 000, 000 shares were issued to Clive Diethelm, and 7, 000, 000 shares were issued to Defendant. Defendant contends that he “sold no shares to Cook and thus no actual capital asset was sold.” ECF No. 117 at PageID.2507. Defendant further claims that the “documents were recently obtained from Clive Diethelm…”, but provides no further explanation about their location since December 2006. Id.

         Defendant also included the Government's Exhibit 138 from trial. It consists of various bank transaction reports from 2006 to 2009 documenting the receipt of funds by JDFX . Defendant contended that pursuant to Exhibit 138, “it is legally impossible to characterize the $10, 000, 000 wire transfers in 2006 and 2007 as a capital gain to Pieron” because all the funds were received by JDFX and not Pieron. ECF No. 117 at PageID.2509. Defendant contended that Exhibit 138 demonstrates that Defendant never sold his personal shares to Cook. Instead, Cook purchased the shares directly from JDFX. He further argued that “Pieron did not receive $10, 000, 000 in 2008 and $5, 250, 000 in 2009 as indicated on the 2008 and 2009 tax returns.” Id. In subsequent briefing, Defendant claimed that “even if this Court found that Pieron had capital gains as a result of Cook's $15 million investment, only $5 million was invested in JDFX in 2008 and 2009.” ECF No. 124 at PageID.2824.

         Requiring further clarity, the Court directed the parties to file additional supplemental briefing. The parties' arguments remain the same in both sets of briefing and the Court has reached the following conclusions.

         I.

         Defendant's supplemental briefing characterizing his sale of JDFX stock as the sale of JDFX treasury stock or a JDFX Swiss affiliate is rejected as too much too late. This argument is making its debut now after years of contrary representations.

         A.

         Defendant's assertions are contradicted by his numerous filed returns, statements made by Defendant to the SEC, and statements made by Defendant's counsel during trial. Such conduct is not permissible under the doctrine of judicial estoppel. The Supreme Court has held

[W]here a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position…

New Hampshire v. Maine 532 U.S. 742, 749 (2001) (quoting Davis v. Wakelee, 156 U.S. 680, 689 (1895)). This is to “protect the integrity of the judicial process by prohibiting parties from deliberately changing positions according to the exigencies of the moment.” Id. (quotations omitted).

         Judicial estoppel may be avoided “when a party's prior position was based on inadvertence or mistake.” Id. (citations omitted). Defendant has not offered any evidence of good faith inadvertence or mistake concerning his understanding of the sale of the stock. Indeed, the jury was instructed that it was a complete defense to the charge to rely on an accountant or tax professional - the jury found no good faith defense. Defendant ...


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