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northrim bank


									                     ALASKA DEPARTMENT OF LABOR
                      AND WORKFORCE DEVELOPMENT
                     OFFICE OF THE COMMISSIONER
                            P.O. BOX 21149
                      JUNEAU, ALASKA 99802-1149

HARVEY FRANKEL                    )   GREG OCZKUS
  and                             )   LAW OFFICE
DAVID HENRY                       )
                      Petitioners )
Docket Nos.



Petitioners timely appealed separately issued November 17, 1999
Employment Security Tax (EST) notices of assessment. The notices
cite AS 23.20.205 and/or 23.20.265 in holding each Petitioner
liable to pay $23,529.00 in unemployment insurance taxes,
interest, and penalties due from Alcan Environmental (“Alcan”).
The liabilities arise from the first and second calendar quarters
of 1997.
EST imposed   the assessments against Petitioners after concluding
Petitioners   had, under AS 23.20.240(f), responsible person
duty-to-pay   responsibilities for unemployment insurance
liabilities   owed by Alcan.
Petitioners contend documents they have submitted before this
matter goes to hearing create a prima facie showing that Northrim
Bank (“Northrim”) is the responsible party incurring duty-to-pay
liabilities. Petitioners argue Northrim usurped their authority
with Alcan when Northrim executed a clause in a lending contract
that gave Northrim control of Alcan‟s accounts receivables.
Petitioners also argue Northrim‟s action negated responsible
person status that might have otherwise attached to Petitioners
for the two quarters in question.

On May 19, 2000, Petitioners filed a motion “to join Northrim
Bank as a necessary party or to order DOL to assess Northrim
Bank.” In a simultaneously filed memorandum, Petitioners argue
Rule 19 of Alaska Rules of Civil Procedure permits joining
Northrim as a party to minimize the threat of multiplicity of
actions and maximize potential for a meaningful decision.
Page 2

In a June 12, 2000 response, EST objects to Petitioners‟ motions.
EST argues it “is unaware of any legal authority in the
administrative process, which would require us to assess or
enjoin a party as a liable party.” EST cites the cumulative
remedies language of AS 23.20.245 in support of its opposition to
Petitioners‟ motions.

In an August 15, 2000 supplemental response, Petitioners continue
to assert their position. In an August 24, 2000 memorandum, EST
continues to refuse to assess Northrim Bank, unless ordered to do
so through the hearing process. EST reasserts that no legal
authority requires it to enjoin Northrim Bank as a third party.
The matter is still in the initial appeal stage to the
Department. The appeal addresses assessments that hold
Petitioners, not Northrim, obligated under AS 23.20.240(f) for
Alcan‟s liabilities. The appeal raises a novel issue of whether a
creditor‟s action to exercise a lien or collateral encumbrance
might invoke responsible person status upon the creditor and/or
its officers and employees. Therefore, the Department will not
resolve the Petitioners‟ appeal by issuing a summary judgment or
directed decision. The Department will not assess Northrim

The question remaining is whether the Department should join
Northrim to the hearing as a party subject to responsible person
findings, conclusion, and decision. To address this question, the
Department must look to the purpose of the Alaska Employment
Security Act (“AESA”).
“The AESA is a remedial statute with the primary purpose of
„ameliorat[ing] the negative effects that involuntary
unemployment has on both the unemployed individual and society as
a whole.‟ State v. Boucher, 581 P. 2d 660, 662 (Alaska 1978). The
Act specifically provides that its terms are to be liberally
construed toward accomplishment of its purposes.” Estes v.
D.O.L., Alaska Supreme Court. No. 2276, January 30, 1981.

The purposes of the ASEA include "the accumulation of reserves
for the payment of compensation to individuals with respect to
their unemployment." AS 23.20.005.

Purviance, Comm‟r Dec. 90H-TAX-031, March 13, 1992 notes the AESA
promotes the full collection of outstanding tax liabilities.
Purviance states:

     The Alaska Employment Security Act establishes a system
     designed to pay unemployment insurance benefits to those
     workers involuntarily unemployed. The benefits are paid from
     funds collected from both the employer and the employee. The
     funds withheld from the employee "are not simply a debt;
     they are part of the wages of the employee, held by the
     employer in trust for the government. 26 USC §7501. The
Page 3

     'trust fund taxes' are for the exclusive use of the
     government and are not to be used to pay the employer's
     business expenses, including salaries, or for any other
     purpose." (Cite omitted). Gephart v. U.S., 818 F.2d
     469, 472 (6th Cir. 1987). (Emphasis added). As such, the Act
     is to be strictly construed in favor of collection of the

Vermillion, Comm‟r Dec. 98-TAX-001, April 9, 1998 holds:
     AS 23.20.240 imposes joint and several liability on
     responsible persons conferring a co-debtor status to them
     for the company's tax liability.

     Establishing a management by consensus structure does not
     immunize corporate officers from application of
     AS 23.20.240. Consensus management is more likely to extend
     liability to additional persons rather than to eliminate
     individual responsibility for unpaid taxes. EST remains free
     to pursue liability collection against any one or more of
     the individuals having responsible person status with Intec.
     AS 23.20.245.
Noll, Consolidated Comm‟r Decs. 98-TAX-010/011/012,
September 24, 1999 and Gillas, Consolidated Comm‟r Decs.
98-TAX-013/014/015, December 3, 1999 confirmed Department policy
that holds EST has the discretion to choose against whom it will
pursue assessments under AS 23.20.240(f). Those decisions hold:

     EST may pursue recovery of duty-to-pay liabilities from one
     or more individuals without being excluded from concurrent
     or eventual pursuit of collection from others as long as no
     more than the total liable amount is collected cumulatively.
     AS 23.20.245.

The discretionary assessment policy identified in Vermillion,
Noll, and Gillas is consistent with the discretionary assessment
aspects of federal employment tax withholding provisions. Under
26 U.S.C. §66721, the question is not whether one is a “more
responsible person” or the “most responsible person,” but merely
whether one is a responsible person. Contentions that another
person is more responsible under §6672 are irrelevant and provide
no cause of action. Howard v. United States, U.S. Court of
Appeals, 5th Cir. No. 82-1461 (August 12, 1983); Ackerman v.
U.S.A., U.S. District Ct., Central Dist. of CA No. CV 82-5596-
WJR(Gx) (January 17, 1985).

The facts there are other responsible persons and/or that the
government failed to attempt to collect unpaid taxes from the
delinquent corporation or other responsible person do not relieve
another responsible person of personal liability for unpaid
taxes. Hornsby v. United States, 588 F.2d 952, 954 (5th Cir.
Page 4


To ensure full collection of tax liabilities in as efficient
manner as possible, Department policy has recognized EST‟s
discretion to pursue “any” responsible party to recover the
liabilities. The policy is consistent with federal policy in
similar matters.
Petitioners provide no statute nor precedent cites that support a
policy change consistent with the AESA mandate to accumulate
reserves to pay unemployment insurance benefits. Petitioners‟
motions to assess Northrim or add Northrim as a party will be
denied. EST retains the discretion to pursue any responsible
party for relevant unemployment insurance tax liabilities.
For the upcoming hearing, Petitioners retain the burden of
establishing they were not responsible persons for the quarters
in question. That burden includes citing legal authorities to
support the arguments they advance.

If Petitioners establish during the hearing that they are not
responsible persons, EST‟s right to issue discretionary
assessments would not limit the Department from directing EST to
review other parties for responsible person status.


Petitioners‟ motions to have the Department assess Northrim
directly or add Northrim as a party to the hearings are DENIED.
The issues to be heard remain whether Petitioners had authority,
knowledge, and/or duties that rendered them responsible parties
under AS 23.20.240(f) for the first and second calendar quarters
of 1997.
Dated and Mailed in Juneau, Alaska on October 25, 2000.
                         ALASKA DEPARTMENT OF LABOR

                         ED FLANAGAN

  NOTE: 26 U.S.C. §6672 includes a “willfulness” standard omitted
by the Alaska Legislature from AS 23.20.240(f). Willfulness has
been defined for federal purposes as a voluntary, conscious, and
intentional act to prefer other creditors over the United States
Page 5

thus creating or perpetuating an unpaid tax liability.
Klot v. United States, 602 F.2d 920, 923 (9th Cir. 1979);
Maggy,560 F.2d at 1375; Teel v. United States, 529 F.2d 903, 905.
However, “willfulness” is not relevant to assessments under
AS 23.20.240(f). Hartung v. Alaska Dept. of Labor, Super. Ct.
3AN-96-07907 CI (September 5, 1997).

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