The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
Edward J. Brown ("Brown") has sued the United States to
recover taxes assessed and collected under Section 6672 of the
Internal Revenue Code of 1954, 26 U.S.C. § 6672.*fn1 In
response the United States filed a counterclaim against Brown
and Wayne D. Ross ("Ross") for civil penalty assessments under
Section 6672, and it now seeks summary judgment against
Brown.*fn2 For the reasons stated in this memorandum opinion
and order the United States' motion is granted in part and
denied in part.
From 1967 to 1972 Brown was president, a director and owner
of one-third of the voting stock of Marx Industrial
Maintenance, Inc. ("MIMI"). Ross became MIMI's comptroller in
late 1969 and a director in April 1970, serving in both
capacities until sometime in 1971.
In April 1970 MIMI paid over $90,000 in delinquent 1969
employee withholding and social security (FICA) taxes. MIMI
failed to make required payments of such taxes due for the
second and third quarters of 1970 and for all of 1972. MIMI
ceased business operations sometime in 1972, when all its
corporate assets were sold and the net proceeds used to pay
some of its delinquent federal withholding taxes.
In March 1978 the Internal Revenue Service ("IRS") assessed
Brown $188,836.89 ($151,038.59 for the two 1970 quarters, and
$37,798.30 for 1972) plus interest under Section 6672.*fn4
Contemporaneously IRS assessed Ross for the 1970 amount plus
In May 1980 Brown paid IRS $607.18, the withholding tax due
on his own wages from MIMI in 1972. In May 1980 Brown filed a
claim for refund of his $607.18 payment plus interest. In July
1980 the IRS disallowed Brown's claim, and in October 1980
Brown sued to recover his payment. In turn the United States
counterclaimed against Brown for $188,229.71 (the IRS
assessment less Brown's payment) and against Ross for
$151,038.59, in each case plus interest.*fn5 On May 18, 1982
Ross consented to entry of judgment against him in the full
amount sought by the United States.
Section 6672 is obviously strong medicine. It was "designed
to assure compliance
by the employer with its obligation to withhold and pay the
sums withheld, by subjecting the employer's officials
responsible for the employer's decisions regarding withholding
and payment to civil . . . penalties for the employer's
delinquency." Slodov v. United States, 436 U.S. 238, 247, 98
S.Ct. 1778, 1785, 56 L.Ed.2d 251 (1978). Imposition of personal
liability on corporate officials is meant to counter the
temptation to use the funds collected for corporate purposes.
Id. at 243, 98 S.Ct. at 1783. Amounts withheld from employees'
wages are, after all, taken from the employees' pockets to
satisfy their taxes due the United States. When the United
States automatically credits the employees' taxes with the
withheld amount, the delinquent employer has converted
Two avenues are potentially available for escape from
Section 6672. They stem from its use of the terms "person" and
First, Section 6671(b) provides a "person" subject to
penalties under Section 6672 is a corporate officer or
employee who "is under a duty to perform the act in respect of
which the violation occurs." In other words, only a person who
had the responsibility for collection and payment of the
withheld taxes is liable under Section 6672. Slodov, 436 U.S.
at 245, 98 S.Ct. at 1784; Feist v. United States, 607 F.2d 954,
957 (Ct.Cl. 1979).
Second, a finding a corporate official acted "willfully"
under Section 6672 requires a showing of personal fault.
Slodov, 436 U.S. at 254, 98 S.Ct. at 1788; Feist, 607 F.2d at
962. Our Court of Appeals has held "willful" conduct denotes
"intentional, knowing and voluntary acts" or "a reckless
disregard for obvious or known risks." Monday v. United States,
421 F.2d 1210, 1215 (7th Cir.), cert. denied, 400 U.S. 821, 91
S.Ct. 38, 27 L.Ed.2d 48 (1970); Garsky v. United States,
600 F.2d 86, 91 (7th Cir. 1979). Mere negligence is not sufficient
to constitute "willfulness." Feist, 607 F.2d at 961. But
at the same time the government need not show either (1) bad
motive — the specific intent to defraud it or deprive it of
revenue — or relatedly (2) the absence of reasonable cause or
a justifiable excuse. Monday, 421 F.2d at 1216.
In opposing the summary judgment motion, Brown is entitled
to all reasonable inferences in his favor from the facts of
record, United States v. Diebold, Inc., 369 U.S. 654, 655, 82
S.Ct. 993, 994, 8 L.Ed.2d 176 (1962), including facts contained
in the United States' submissions, see Thornton v. Evans,
692 F.2d 1064 at 1074 (7th Cir. 1982). Granting Brown all the
favorable inferences due, this Court finds there is no genuine
issue of fact material to Brown's ...