STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)

LEO J SCHILZ, Appellant

UNEMPLOYMENT INSURANCE CONTRIBUTION LIABILITY DECISION
Account No. 651213, Hearing No. S0100133MW


An administrative law judge (ALJ) for the Division of Unemployment Insurance of the Department of Workforce Development issued a decision in this matter. A timely petition for review was filed.

The commission has considered the petition and the positions of the parties, and it has reviewed the evidence submitted to the ALJ. Based on its review, the commission agrees with the decision of the ALJ, and it adopts the findings and conclusion in that decision as its own.

DECISION

The decision of the administrative law judge is affirmed. Accordingly, the appellant is personally liable for delinquent taxes of DSI and SDUSA, within the meaning of Wis. Stat. § 108.22(9), as those taxes accrued during the 1996 calendar year. This matter is remanded to the department for action consistent with this decision.

Dated and mailed December 10, 2001
specide . ssd : 105 : 8  ER 451

/s/ David B. Falstad, Chairman

/s/ James A. Rutkowski, Commissioner


MEMORANDUM OPINION

The commission has affirmed the appeal tribunal decision in this case, because it agrees with the administrative law judge's imposition of personal liability against the appellant. By operation of Wis. Stat. § 108.22(9), personal liability may be imposed under certain conditions. First, the individual the department seeks to impose liability upon, must be an officer holding at least 20 percent of the ownership interest in the corporation. Second, the individual must have control or supervision of or responsibility for making unemployment insurance contributions. Third, the individual must willfully fail to make such payments or insure that such payments are made. Fourth, before imposing personal liability the department must first institute "proper proceedings" against the corporation and the corporation must be unable to pay the taxes in question.

The commission believes the appellant's protestations of non-ownership are not credible. The reports in evidence indicate the contrary, and nothing in the record indicates that the reports are not what they purport to be. The appellant has not come close to establishing that the reports are false or otherwise inaccurate with regard to the ownership of the corporations in question. Apart from the documentary evidence, the appellant had told a Department of Workforce Development collections representative that he (the appellant) had sold certain corporate stock to another individual. All of this evidence, taken together, and particularly when coupled with the appellant's representations to vendors that he was an owner of the businesses in question, is sufficient to establish the ownership interest for purposes of the personal liability statute.

The commission also rejects the appellant's claim that he was not responsible for making the tax payments, the second criterion of personal liability. The appellant attempted to paint a picture in which McKerac had ultimate control over everyone else in the corporation. It remains the case, however, that the appellant signed payroll checks, which would include checks for federal payroll tax deposits, at the office of the outside accountant. In addition, the appellant did much of the banking for the corporation, and wrote most of the checks. McKerac was prohibited from signing checks for the corporation. One witness testified that the appellant's desk was "littered" with bills, that he saw the appellant with bills in his hands, being taken to the bookkeeper to have checks written, with the appellant then signing the checks in question. The bookkeeper also testified that she made out tax reports and checks and gave them to the appellant to sign. The appellant's defense in this matter is that he was signing the checks in question and giving them back to the bookkeeper, that he had no reason to believe they were not being paid. This is a different defense, though, from the other one the appellant asserts: that McKerac was responsible for everything. In addition, as the highest ranking individual in the corporation with check-writing authority, the appellant would not legally be able to simply sign the check and then forget about the matter. In other words, the appellant owed a fiduciary duty to the corporation to see that the tax payments were actually made; he failed in that duty and is liable therefor.

The next matter is relatively simple. It is whether the appellant willfully failed to make the necessary payments. He either knew or should have known that payments were not being made. At the same time, he was receiving a substantial salary himself, including bonuses, and was overseeing payments to employees and to vendors and creditors. This is all that is necessary to establish willful failure to make the payments in question. One must know they are due, and still not make them (while having the financial ability to do so).

The fourth requirement is that the department have taken proper collection proceedings against the corporations before attempting to impose personal liability. The appellant does not argue that the department did not make such attempts against SDUSA. He argues, disingenuously, that the department did not do so against DSI. Technically, this is true, but that was the doing of the corporation. McKerac instructed the bookkeeper to file DSI payroll information under the old account number for SDUSA. The corporation thus was responsible for the department's inability to have sought it out in the first instance. Again, the appellant had the ultimate authority, the authority of the purse, in dealing with McKerac and the creditors of the corporation.

For the above reasons, and for those stated in the appeal tribunal decisions, the commission fully agrees with the imposition of personal liability in these cases.

cc: 
Attorney Michael Gerard Goller
Attorney Peter W. Zeeh SDUSA, Inc.


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uploaded 2001/12/17