United States District Court, E.D. Michigan, Northern Division
OPINION AND ORDER ADDRESSING TAX LOSS
L. LUDINGTON UNITED STATES DISTRICT JUDGE.
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
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.
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
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.
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.
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.
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.
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).
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 ...