BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 5901 Green Valley Circle, Room 207 Culver City, California REPORTER'S TRANSCRIPT MARCH 24, 2011 FINAL ACTIONS Reported by: Beverly D. Toms No. CSR 1662 1 1 2 P R E S E N T 3 4 For the Board Jerome E. Horton of Equalization: Chairman 5 Michelle Steel 6 Vice-Chairwoman 7 Betty T. Yee Member 8 George Runner 9 Member 10 Marcy Jo Mandel Appearing for John Chiang 11 State Controller (per Government Code 12 Section 7.9) 13 Diane Olson, Chief Board Proceedings Division 14 15 16 --oOo--- 17 18 19 20 21 22 23 24 25 26 27 28 2 1 ITEM 13a and 13b 2 Culver City, California 3 March 24, 2011 4 ---oOo--- 5 MR. HORTON: Ms. Olson. 6 MS. OLSON: Okay, our first item for those 7 matters that have been taken under submission is C13a, 8 Russell C. Robbins, Senior and C13b, Russell C. Robbins, 9 Junior. 10 MR. HORTON: Discussion and/or motion, Members? 11 MS. YEE: Mr. Chairman -- 12 MS. MANDEL: Can I have a -- 13 MS. YEE: Oh. 14 MS. MANDEL: Oh. Were you going to ask the 15 question? 16 MS. YEE: Actually, I was just going to report 17 back on -- I actually had my staff work with the Legal 18 Department to look up the bankruptcy for Mr. Robbins -- 19 I'm sorry, Mr. -- 20 MS. MANDEL: Robbins. 21 MS. YEE: -- Robinson -- Robbins, Senior. 22 MR. HORTON: Senior. 23 MS. YEE: Yes. 24 MR. HORTON: Yeah. 25 MS. YEE: And it appears -- I guess we'll hear 26 some -- the filing of the bankruptcy petition for his 27 personal bankruptcy was on November 20, 2008. Debtor 28 received Court order of discharge of debtor was on 3 1 March 5th of '09. And on the Schedule E for priority 2 claims -- the schedule of debts for priority claims the 3 Board was not listed as a priority creditor. And also 4 Schedule F of the unsecured non-priority claims the 5 Board was not listed there, as well. 6 MR. HORTON: Okay. 7 MS. YEE: And the notice of the Chapter 7 8 bankruptcy case sent to all creditors and the Board was 9 not listed -- and -- and the Board was not listed as a 10 recipient of this document. 11 MR. HORTON: Thank you, Member Yee. 12 MS. YEE: Okay. 13 MS. MANDEL: I have a question then for -- 14 MR. HORTON: Ms. Mandel. 15 MS. MANDEL: We sent them out with the penalty 16 form, so what did we get back? 17 MR. LEVINE: We have a request for relief more 18 specific on each of these. The Department is -- kind of 19 to paraphrase good with giving relief. We'd recommend 20 relief of the penalties. The finality penalty we 21 recommend having the standard provisions only -- relief 22 only if the tax is paid within 30 days. The others we 23 recommend relief without conditions. 24 MS. YEE: Okay. So, -- so, move the staff 25 recommendation, I guess as revised as Mr. Levine just 26 expressed. 27 MS. YEE: I'll second. 28 MR. HORTON: It's been moved and second to 4 1 sustain -- adopt the staff recommendations with an 2 adjustment for the penalty as reflected by Mr. Levine on 3 the record. 4 Objection, Members? 5 Without objection, such will be the order. 6 ---oOo--- 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5 1 ITEM C14a through C14d. 2 MR. HORTON: Ms. Olson, what's our next 3 (inaudible) matter? 4 MS. OLSON: The next -- next item is B14a, Marc 5 Laidler; B14b, Raul Beceril; B14c, Constantina Susie 6 Frial; B14d, James J. Brennan. 7 MR. HORTON: Thank you. 8 Members, is there a motion? 9 Discussion, Members? 10 MS. YEE: Let me make a motion. I'm going to 11 move to redetermine. 12 MR. HORTON: It's been moved to redetermine by 13 Ms. Yee, second by -- 14 MS. MANDEL: Second. 15 MR. HORTON: -- Ms. Mandel. 16 Discussion, Members? 17 Hearing none, objection? Such will be the 18 order. 19 ---oOo--- 20 21 22 23 24 25 26 27 28 6 1 ITEM C16. 2 MS. OLSON: Our next item is C16, Nikyar 3 Hossein. 4 MR. HORTON: Discussion, Members? 5 Is there a motion? 6 MS. MANDEL: Move the staff recommendation. 7 MS. YEE: Second. 8 MR. HORTON: Motion by Ms. Mandel to adopt 9 staff recommendation, second by Mrs. Yee. 10 Discussion, Members? 11 Objection? 12 Hearing none, such will be the order. 13 ---oOo--- 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7 1 ITEMC17 2 MS. OLSON: Our next item is C17, Lisa Marie 3 Bagot. 4 MR. HORTON: Discussion, Members? 5 Is there a motion? 6 MR. RUNNER: This is -- this is the one that we 7 had that was the -- there was a -- that's -- this is the 8 one that we had the -- the -- that she had the letter 9 for -- for comprise -- I don't -- for compromise. 10 MR. LEVINE: Correct. 11 MR. RUNNER: And the confusion in regards to 12 how we were dealing with that or at least she was 13 confused as to how we were dealing with that, personal 14 versus corporate. 15 MR. LEVINE: Though actually she took the 16 proper approach for minimizing possible extra payments 17 by insisting on dealing for herself rather than the 18 corporation. 19 MR. RUNNER: Okay. 20 MR. HORTON: Further discussion, Members? 21 Is there a motion? 22 MS. YEE: Move the staff recommendation. 23 MR. HORTON: It's been moved to adopt staff 24 recommendation by Ms. Yee. Second by -- 25 MS. MANDEL: I'll second that and if she's been 26 kicked out of OIC because she was coming here, she 27 should be, I think, told that OIC is -- somehow -- 28 MR. LEVINE: That -- I don't think that -- that 8 1 they just accepted -- there could be a glitch but 2 we'll -- 3 MS. MANDEL: Well, based on the ACMS -- 4 MR. LEVINE: -- we'll pass along that -- 5 MS. MANDEL: -- you need to -- 6 MR. LEVINE: -- that the Board's done and they 7 should -- 8 MS. YEE: Yes. 9 MR. LEVINE: -- take a look to see if it -- 10 MS. MANDEL: Okay. 11 MR. LEVINE: -- it should move forward. 12 MR. HORTON: Okay. Second by Ms. Mandel, with 13 direction to staff. 14 Objection, Members? 15 MR. RUNNER: Object. 16 MR. HORTON: Been an objection. 17 Ms. Olson, please call the roll. 18 MS. OLSON: Mr. Horton. 19 MR. HORTON: Aye. 20 MS. OLSON: Ms. Steel. 21 MS. STEEL: No. 22 MS. OLSON: Mr. Runner. 23 MR. RUNNER: No. 24 MS. OLSON: Ms. Yee. 25 MS. YEE: Aye. 26 MS. OLSON: Ms. Mandel. 27 MS. MANDEL: Aye. 28 MS. OLSON: Motion carries. 9 1 ---oOo--- 2 ITEM C19 3 MS. OLSON: Our next item is C19, PYPK 4 Productions. This was a waived appearance. 5 MR. HORTON: Discussion, Members? 6 Hearing none, is there a motion? 7 MS. YEE: Move to redetermine. 8 MR. HORTON: It's been moved by Ms. Yee, second 9 by -- 10 MS. MANDEL: Second. 11 MR. HORTON: -- Ms. Mandel. 12 Discussion? 13 MS. STEEL: Not discussion -- 14 MR. HORTON: Objection. 15 MS. STEEL: -- what is this -- the compliance 16 inspection report? 17 MR. LEVINE: The Department -- I haven't 18 reviewed them but they did give me a short description. 19 MS. STEEL: What happened to the case? 20 MR. LEVINE: There was a dispute -- petitioner 21 denied that it had hot food before a certain time and 22 that shows that -- that the Department believes they 23 did. 24 And there was also sales of DVDs that they 25 claim they didn't start doing before a certain point and 26 the other document shows that. 27 MS. STEEL: Okay. 28 MR. HORTON: It's been moved and second. 10 1 Members, there's objection? 2 Hearing none, such will be the order. 3 ---oOo--- 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11 1 ITEM C20. 2 MS. OLSON: The next item is C20, Shady Kathem 3 Muhammad. 4 MR. HORTON: Discussion, Members? 5 Is there a motion? 6 MS. STEEL: Adopt the staff recommendations but 7 can we waive on negligence penalty, because this is a 8 first audit and I want that first audit can be 9 educational for the taxpayers. And hopefully that for 10 second audit he's not going to come back here. That's 11 what I hope. And that's my motion. 12 MR. RUNNER: Second. 13 MR. HORTON: Further discussion, Members? 14 MS. MANDEL: So $300,000 understatement, I 15 think, of -- 16 MS. YEE: Uh-huh. 17 MS. MANDEL: -- taxable measure. 18 MR. LEVINE: Yeah, 281 and change. 19 Well, that was the disputed measure. 20 MS. MANDEL: I'm sorry? 21 MR. LEVINE: The disputed measure was 281. So 22 the total was a little bit -- 300,000, a little bit 23 better. 24 MS. STEEL: Well, the thing was there's not 25 that many documents that this taxpayer can provide. So 26 even that was disputed but that was not what taxpayer 27 concurred, that amount. So -- 28 MS. MANDEL: Right, I was just looking at 12 1 the -- 2 MS. STEEL: If -- yeah. 3 MS. MANDEL: -- size of the understatement of 4 almost 33 percent of reported sales, and lack of 5 records. 6 MR. HORTON: Yeah, Members, my -- my concern 7 with this is that negligence varies and -- and it can go 8 from one end of the spectrum to the other. And when you 9 get closer to the fraud side, even though you're still 10 within the category of negligence, it's -- you've -- 11 you've gone just a little bit outside of our range to -- 12 from my perspective to consider it minor negligence. 13 If it was minor negligence -- but it -- 14 MS. STEEL: But it's a first audit. 15 MR. HORTON: Yeah, but there was some conscious 16 participation. I believe the testimony was that the 17 return was filed based on verbal information provided by 18 the taxpayer. And that that verbal information had no 19 base. It was completely arbitrary. 20 And the absence of the records, not negligent 21 in keeping records, making omission/ calculation errors, 22 no records of any significance. And even subsequent to 23 the -- to the -- to the audit an effort to reconstruct 24 the records in order to support your position so that 25 when you do come before this body you've exercised due 26 diligence in trying to reconstruct the records so that 27 you can at least present a set of records speaks to the 28 consciousness and the intent from -- and this is just my 13 1 own -- 2 MS. STEEL: You know what -- 3 MR. HORTON: -- assessment. 4 MS. STEEL: -- we can vote, but let me tell 5 you, try to run business without knowing anything and 6 it's -- it is very tough. Yes, amount is high but this 7 is the first and hopefully that we not going to just 8 close down all the businesses that when they don't have 9 any documents. I -- that's why I'm just asking for -- 10 we're talking about here $2,000 for negligence penalty, 11 that we have to be little more educational, so these 12 bus -- business people never get -- going to get caught 13 again. 14 But, you know, this is the first audit. Didn't 15 know what he was doing, hopefully. And at this point 16 that, you know, I am just giving -- if it was a second 17 audit and he -- he was caught this amount of money by 18 doing that, then it's different story. But at this 19 point that it was first and he didn't have any 20 documents. 21 If he -- you know, I wish he had documents but 22 a lot of people that naive and when they start they 23 don't know what they were doing. So, you know, we can 24 just vote as is, but I am not really hap -- I mean, I -- 25 I try to give little to taxpayers so they learn their 26 lessons. But they are paying their taxes just only for 27 that ten percent $2,000 we're talking about here. 28 MR. HORTON: Thank you. Further discussion, 14 1 Members? 2 Hearing none, Ms. Olson, please call the roll. 3 MS. OLSON: Mr. Horton. 4 MR. HORTON: No. 5 MS. OLSON: Ms. Steel. 6 MS. STEEL: Aye. 7 MS. OLSON: Mr. Runner. 8 MR. RUNNER: Aye. 9 MS. OLSON: Ms. Yee. 10 MS. YEE: No. 11 MS. OLSON: Ms. Mandel. 12 MS. MANDEL: No. 13 MS. OLSON: Motion fails. 14 MR. HORTON: Subsequent motion, Members. 15 MS. YEE: I'll move the staff recommendation 16 and direct staff to work with the petitioner about 17 either an installment payment option or the Offer In 18 Compromise program. 19 And I think this business was sold, right? 20 That he's no longer in this business? 21 MR. HORTON: Mr. Levine, I believe there's a 22 question. 23 MR. LEVINE: I -- I don't recall -- 24 MR. HORTON: Okay. 25 MR. LEVINE: -- if it was sold or not. 26 MS. YEE: I believe this was sold. 27 MR. HORTON: Madam Yee. It is. 28 MS. YEE: Yes. 15 1 MR. HORTON: I believe so, as well. 2 MS. YEE: So -- 3 MR. HORTON: So moved. Is there a second? 4 MS. MANDEL: Second. 5 MR. HORTON: Second by Ms. Mandel. 6 Without objection, Members? 7 MS. STEEL: Objection. 8 MR. HORTON: Ms. Olson, please call the roll. 9 MS. OLSON: Mr. Horton. 10 MR. HORTON: Aye. 11 MS. OLSON: Ms. Steel. 12 MS. STEEL: No. 13 MS. OLSON: Mr. Runner. 14 MR. RUNNER: Aye. 15 MS. OLSON: Ms. Yee. 16 MS. YEE: Aye. 17 MS. OLSON: Ms. Mandel. 18 MS. MANDEL: Aye. 19 MS. OLSON: Motion carries. 20 ---oOo--- 21 22 23 24 25 26 27 28 16 1 ITEM C21. 2 MS. OLSON: Our next item is C21, Francis Ramo 3 Newcomer. 4 MR. HORTON: Discussion, Members? 5 Hearing none, is -- strike that. 6 MS. MANDEL: This -- 7 MR. HORTON: Discussion. 8 MS. MANDEL: I thought this was the one we 9 asked staff to look at the deposits in -- 10 MS. YEE: Yeah. 11 MS. MANDEL: -- two accounts. 12 MR. HORTON: Mr. Levine. 13 MR. LEVINE: Staff -- staff did and they did 14 not find a correlation between withdrawals out of the 15 one account and deposits into the payroll account that 16 would indicate that the money came from one to the 17 other. 18 So they didn't find the correlation. 19 MR. HORTON: Mr. Runner. 20 MR. RUNNER: Just to clarify, they could not 21 find a -- a -- a number, an amount of money that 22 correlated between Account A that was -- that was a 23 check written on Account A that was then deposited in 24 Account B? There was no clear dollars that were equal 25 to say there -- there was a transfer there? 26 MR. HUXSOLL: That's correct. 27 MR. RUNNER: Okay. 28 MS. STEEL: Further discussion, Members? 17 1 Hearing none, is there a motion? 2 MS. YEE: Move to adopt the staff 3 recommendation. 4 MR. HORTON: It's been moved by Ms. Yee to 5 adopt staff recommendation. Is there a second? 6 Second by Mr. -- 7 MS. MANDEL: I'll -- 8 MR. RUNNER: I'm not ready to say that. 9 MR. HORTON: Second -- 10 MR. RUNNER: I'm not quite there. 11 MR. HORTON: Is there a second? I -- I second. 12 MS. MANDEL: Okay. 13 MR. HORTON: I second it. Further discussion, 14 Members? 15 Is there objection? Hearing none, such will be 16 the order. 17 MR. HORTON: Next item. 18 MS. OLSON: Our next item is C22, John D. 19 Wright. 20 MS. YEE: Can -- can I also -- I'm sorry. I 21 meant to put the OIC -- 22 MS. MANDEL: Yeah. 23 MS. YEE: -- direction in there as well as part 24 of the motion. 25 MR. HORTON: I -- I think we're there. 26 MR. RUNNER: Are we at 22? 27 MR. HORTON: This is on -- 28 MS. YEE: On C21, the prior -- 18 1 MR. HORTON: -- item C21. 2 MS. YEE: -- item. 3 MR. HORTON: Mr. Levine, that -- that was your 4 understanding? 5 MR. LEVINE: Yes, I heard it. 6 MS. YEE: Offer In Compromise, okay. 7 MR. HORTON: Okay. 8 ---oOo--- 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 19 1 ITEM C22. 2 MR. HORTON: Next item, Ms. Olson. 3 MS. OLSON: C22, John D. Wright. 4 MR. RUNNER: Move to grant the petition. 5 MR. HORTON: It's been moved to grant the 6 petition by Mr. Runner. 7 MS. STEEL: Second. 8 MR. HORTON: Is there a second -- second by Ms. 9 Steel. 10 Discussion, Members? 11 Hearing none, objection? 12 MS. YEE: Objection. 13 MR. HORTON: Objection. 14 Ms. Olson, please call the roll. 15 MS. OLSON: Mr. Horton. 16 MR. HORTON: Horton no. 17 MS. OLSON: Ms. Steel. 18 MS. STEEL: Aye. 19 MS. OLSON: Mr. Runner. 20 MR. RUNNER: Aye. 21 MS. OLSON: Ms. Yee. 22 MS. YEE: No. 23 MS. OLSON: Ms. Mandel. 24 MS. MANDEL: No. 25 MS. OLSON: Motion fails. 26 MR. HORTON: Subsequent motion, Members? 27 MS. YEE: Move to adopt the staff 28 recommendation. 20 1 MR. HORTON: Moved by Ms. Yee to adopt staff 2 recommendation, second by Ms. Mandel. 3 Discussion, Members? 4 Objection? 5 MS. STEEL: Objection. 6 MR. HORTON: Ms. Olson, please call the roll. 7 MS. OLSON: Mr. Horton. 8 MR. HORTON: Horton aye. 9 MS. OLSON: Ms. Steel. 10 MS. STEEL: No. 11 MS. OLSON: Mr. Runner. 12 MR. RUNNER: No. 13 MS. OLSON: Ms. Yee 14 MS. YEE: Aye. 15 MS. OLSON: Ms. Mandel. 16 MS. MANDEL: Aye. 17 MS. OLSON: Motion carries. 18 That concludes our business for today. 19 Thank you. A special thank you to our entire 20 staff. Meeting of the Board of Equalization is hereby 21 adjourned. 22 ---oOo--- 23 24 25 26 27 28 21 1 REPORTER'S CERTIFICATE. 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, BEVERLY D. TOMS, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 March 24, 2011 I recorded verbatim, in shorthand, to the 10 best of my ability, the proceedings in the 11 above-entitled hearing; that I transcribed the shorthand 12 writing into typewriting; and that the preceding 21 13 pages constitute a complete and accurate transcription 14 of the shorthand writing. 15 16 Dated: April 1, 2011. 17 18 19 20 ____________________________ 21 BEVERLY D. TOMS 22 Hearing Reporter 23 24 25 26 27 28 22