CARL E OLSON, Appellant

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.

The decision of the administrative law judge is affirmed. Accordingly, Carl E. Olson is personally liable for the payment of delinquent unemployment contributions and related fees for the second and third quarters of 1998 and the first quarter of 1999 as stated in the determination. This case is remanded to a department deputy for action consistent with this decision.

Dated and mailed January 31, 2002
olsonca . ssd : 105 : 6  ER 451

/s/ David B. Falstad, Chairman

/s/ James A. Rutkowski, Commissioner

Wisconsin statute § 108.22(9) imposes personal liability upon an individual for a corporation's delinquent contributions, under certain conditions. The individual must have at least a 20 percent ownership interest, which can be direct or indirect. The individual must have control or supervision of or responsibility for making tax payments. The individual must willfully fail to make such payments and, finally, the department must have undertaken reasonable collection efforts against the corporation. In the present case, the appellant concedes all but the willfulness criterion, and argues generally that external circumstances (loss of business due to faulty raw product) caused the failure of the business and prevents a finding of willfulness on the appellant's part.

A leading case on the issue of willfulness is Monday v. United States, 421 F.2d 1210 (7th Cir. 1970). In that case, the issue was the liability of the president of the corporation for FICA taxes the corporation owed the federal government. The same standard of willfulness is present in this kind of proceeding, and the issue in the case was the correctness of the willfulness jury instruction. The instruction included language to the effect that mere negligence in exercising ordinary care, for example, would preclude a finding of willfulness. The government successfully challenged that language in the instruction, as well as other language indicating in effect that reasonable cause for preferring other creditors would also avoid a finding of willfulness. Instead, the proper standard is: ". . . intentional, knowing and voluntary acts." The court contrasted the notion of willfulness to accident and to bad motive. The court also stated that the notion of willfulness specifically excluded consideration of such "factors as the financial condition of the business or the demands of creditors." Monday, 421 F.2d at 1216. Thus, an act is wilful if it is voluntary, conscious, and intentional. Indeed, the 5th Circuit has even indicated that a taxpayer has a duty to ensure that taxes are paid before payments are made to other creditors, once the taxpayer is aware of the corporation's liability to the government. Mazo v. United States, 591 F.2d 1151, 1157 (1979).

Exhibit 4 is a summary of payments made by the corporation during the relevant time period. The payments exceed $600,000.00, and include more than $42,000.00 in payments from the corporation to the appellant, which the appellant characterized as repayments of loans he had made to the corporation during the time period in question. The payments also include just over $5,000.00 paid in rent to the appellant, who was leasing the building in which the corporation was housed, to the corporation. The record indicates as well that the appellant was making utility payments of approximately $3,000.00 per month, as well as thousands of dollars in payments to suppliers and for insurance premiums.

This easily is sufficient evidence to establish that the appellant was preferring other creditors to the government, and no more is necessary to establish willfulness under the statute. The only "quirk" in the case concerns the appellant's check for the second quarter 1998 taxes. It did not clear, when the appellant presented it, because the bank apparently had had enough of covering the appellant's overdrafts. The appellant asserts that he thought the bank would authorize an overdraft in that instance, and that that belief precludes a finding of willfulness. The commission disagrees. The record indicates no reasonable basis for the appellant's belief that the bank would authorize an overdraft for what would have to have been a significant-sized check.

For these reasons, and for those stated in the appeal tribunal decision, the commission has affirmed that decision.

cc: 
Green Bay Retreading Inc.
Attorney Steven Evan Gillis
Attorney Michael J. Mathis

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