Ohio Auditor Betty Montgomery re: Ohio Supreme Court Justices'  & Tax Fraud

September 10, 2005

Ms. Betty Montgomery - Auditor, State of Ohio

Re:    Continuing misconduct of Supreme Court Justices involving personal use of state cars/fuel

Dear Ms. Montgomery:

From 2003 to 2004 your office conducted an audit of Supreme Court Justices use of state cars and their failure to comply with IRS Publication15-B in reporting personal income on their annual W-2 forms and for underreporting said income. This letter is to inform you that this abhorrent (criminal) conduct continues as we speak just as it did from 1994 through 2003.  I am hereby requesting that you immediately embark on a "no-holds-barred" forensic audit of this ongoing scam. 

The facts contained in the summary I have prepared are not in dispute and are supported by public records provided to me by your office and/or the Ohio Supreme Court. The "summary" is available on my website at www.noethics.net for your review and copying. For purposes of this action, I incorporate the website summary as if fully rewritten herein.

As you’ll see from reviewing the summary, it is sadly clear that in 1993 Chief Justice Moyer set into motion a scheme that involved the following:

As you'll see from reviewing the attached summary, it is sadly clear that in 1993 Chief Justice Moyer set into motion the following scheme:

1. Authored a Resolution/Motion in 1993 that Moyer knew violated IRS Pub.15-B mandating that income earned from personal use of state cars/fuel not be disclosed on the justices' annual W-2.

2. Knowingly and intentionally "underreporting" personal use of state cars/fuel from 1994 to 2004 (aka, "tax fraud").

3. Unlawfully declaring in 1993 Resolution/Motion that IRS allowed justices' to declare income for personal use of state cars/fuel under the IRS Cents-Per-Mile Rule when Moyer knew the IRS Lease Value Rule applied due to value of cars.

4. Taking affirmative steps to "conceal" income earned from personal use of state cars/fuel from the taxpayers and refusing Public Record Requests from 2002 to 2005 to disclose the amount of income justices' earned from 1993 through 2003. 

5. Violating Ohio Public Record Laws by refusing to provide copies of June 1, 1993 letter from special counsel and attached May 21, 2003 "lengthy" memo received from special counsel on efficacy of justices' being provided with state-paid-for-cars/fuel.

It is indeed a sad commentary on the state of Ohio's Judiciary when the highest elected judicial officer puts in place a scheme to defraud the IRS, the State of Ohio and Cuyahoga, Lucas, Summit, Franklin and Crawford Counties as to taxable income.  This abhorrent conduct has been ongoing for thirteen (13) years and those responsible must be held accountable.

What is most disturbing is the fact that Moyer, et al. have refused to disclose the amount of income they received from the state for personal use of state cars from 1993 to 2003.  No public official has the right to "conceal" income they receive from the taxpayers.  I trust that you will immediately take whatever action is necessary to make sure that Ohio's hardworking and overtaxed citizens and voters are informed of the amounts if any they claimed to the IRS, State of Ohio and Franklin, Lucas, Cuyahoga, Summit and Crawford Counties.

At a time when the Governor and his staff members have been found guilty of multiple criminal violations, it would be frivolous to the nth degree and a slap across the face of every Ohio taxpayer and voter if this matter were given the proverbial "wink and a nod." 

A justice system that is presided over by those willing to engage in wholesale violations of criminal and ethics laws in order to unlawfully enrich themselves cannot be trusted.  This type of egregious misconduct demands that you take immediate remedial action regardless of the political affiliation of the miscreants involved.

As we speak, your office is conducting a forensic audit of the Tom Noe affair and other matters involving BWC.  Moreover, your office has consistently ordered thorough (forensic) audits involving public corruption after receipt of "anonymous tips."  The evidence in this matter is not in dispute!  The only thing to be resolved is whether or not you will comport yourself in accordance to the oath of office you took in assuring that those who treat Ohio's treasury as a "personal piggy bank" are made to answer to the bar of justice for so acting.

As you know, an audit by the IRS would disallow any tax write off if a "legitimate and detailed" log is not available.  I would assume your audit would demand the same requirement.  In addition, you know the Department of Treasury assumes that all attorneys can do taxes and therefore are under the obligation to report fraud.  There is no time limit for the IRS to go back when there is fraud involved such as there is in this case.

In addition, you are required to act on this information pursuant to your oath of office and oath as an Officer of the Court, which I trust you will do.  Also, I believe it behooves you to ask for the appointment of a special prosecutor and to request an investigation by BCI.

As one who espouses to be Ohio's next Governor, I cannot imagine that you would not immediately order that a "no-holds-barred" forensic audit be conducted as to the conduct set forth herein and in the attached summary.

In addition, I will shortly be forwarding to you (hopefully by late next week) irrefutable evidence of further abuses involving the Court.  Those matters are as follows:

1. Employing Special Counsel in contravention of Revised Code 109.30

2. Moyer's "Illegal" Christmas Gift for Justice Francis Sweeney

3. Questionable Fuel Consumption - Justice O'Connor

4. Justice O'Connor's Use of Car/Fuel for Teaching Position in Cleveland

5. Did Someone Other than Justice O'Connor Use her Fuel Card/Car on Oct. 24, 2004?

6. Auto Accidents involving Justices

7. Questionable Travel Expense Claims by Moyer, Steve Hollon and Marcia Mengel

8. Court Administrator Hollon's Questionable Travel Expenses

9. Highly Questionable Fuel Consumption

Upon receipt of this letter and summary, please respond at your earliest convenience as to what, if anything you intend to do and "when" you intend to do it.  As a service to all Ohioans, I will be publishing this letter and summary on my website at the same time I provide it to you.  In order to expedite receipt of your response, I would appreciate either an e-mail reply or one by fax at: 916-852-2573.

Sincerely,  The Watchdog

SUMMARY OF TAX FRAUD, GROSS MISFEASANCE AND NEGLECT OF DUTY INVOLVING SUPREME COURT JUSTICES, COURT ADMINISTRATOR, CLERK AND TAFT ADMINISTRATION

The following summary is intended to set forth irrefutable facts of tax fraud, abuse of state property/employees of members of the Court and the gross misfeasance of Chief Justice Moyer and the Taft Administration in failing to follow IRS Rules for properly reporting income the Justices and others earned from the personal use of state cars/fuel from 1993 to 2005.

The subject matters addressed below are as follows and all facts are supported by public records obtained from the Supreme Court and/or from your office in 2004.  You can click on to any of the subjects below with your browser.

1. Tax Fraud - Underreporting of Income and other IRS violations for 2004 by Justices

2. Tax Fraud - Court Administrator Stephen Hollon - Underreporting of Income

3. Tax Fraud - Clerk of Court Marcia Mengel - Underreporting of Income

4. What income did justices' earn from personal use of state cars/fuel from 1993 to 2003?

5. Feb. 7 2003 Memo to Chief Justice Moyer from Steve Hollon and Rhonda Perri

6. Legitimate and Detailed Mileage Logs

7. Justices' failing to provide receipts for fuel purchases

8. Chief Justice Moyer's Gross Misfeasance and Gross Neglect of Duty

9. Conclusion

No. 1 - Tax Fraud - Underreporting of Income and other IRS violations for 2004 by Justices

The following demonstrates that the conduct of underreporting income for personal use of state cars/fuel has continues unabated.  IRS Rules that require keeping "detailed mileage logs" was again violated in 2004 by the justices. 

The table below is a copy of what the Court provided to me on Aug. 25, 2005.  I added the "blue font" which denotes "personal use" and "red font" denoting "official use" claimed by the Justices.  In addition, the "blue font" under the column "Annual Taxable Fuel Benefit (Jan-Oct)" lists actual fuel purchases (court records) and the "red font" denotes percentage of fuel purchased for personal use. 

Ex. 1 - 2004 Taxable Fringe Benefits - Court Provided Vehicles & Fuel

The true taxable income based on IRS Pub. 15-B is as follows. 

The above data is consistent with what I previously submitted to you on Jan. 10, 2004.  On Feb. 17, Chuck Vollmer, Senior Audit Manager wrote to Jim Kennedy, Chief Auditor regarding such data and opined as follows at pages 1-2:

Allegations:  "Mr. Palmer cites the provisions of a 2002 Dept. of Administrative Services (DAS) memo in order to calculate the amount of taxable benefit from their personal use of Court-provided vehicles he feels the justices should have claimed as income during CY 2001 (presumably).  He then asserts that this income should have but did not appear on the justices' 2001 W-2 forms, and that the justices did not maintain logs detailing their personal vs. business use of state vehicles as they were required to do."

Summary of findings:  "Since the Court is exempt from the DAS fleet management program described in ORC section 125.832, normally the provisions of a DAS memo such as the one Mr. Palmer cites would not apply to the Court.  However, we reviewed the IRS valuation methods summarized in the memo and used by Mr. Palmer to make his calculations and compared them to the provisions found in IRS Publication 15-B (Attachment D; relevant pages only).  We found that, irregardless of the source of Mr. Palmer's information, the IRS provisions discussed in the memo do indeed apply to the Court.  It appears the logic and methodology behind Mr. Palmer's calculations is correct, although we could not verify the specific figures he used in these calculations."  (Audit file No. 100-3[B])

It should be noted that the calculations for 2001 were made by me without the benefit of knowing the amount of income the justices' actually disclosed as income for personal use of state cars and fuel due to Moyer's illegal scheme to conceal it.  The same is true for 1993-2000 and 2002-2003.  However, due to Mr. Hollon's amazing admission in his Feb 7, 2003 memo to Moyer stating, "...you should be aware that reporting no or only minimal personal use of your assigned Court vehicle may not be accepted by those authorities without legitimate and detailed mileage logs."  Put simply, it is painfully clear that Moyer either reported "no or minimal personal use" from 1993 to 2003.

As to Mr. Palmer's allegations that the justices' W-2 forms should but do not disclose any taxable benefit from the personal use of state vehicles, he is correct."

At a tax rate of 25% of earned income, the Justices would have paid the following amounts for a "free ride" on the taxpayer's dime for 2004 and these amounts do not include costs for maintenance or accidents, which can run from $500 to $3,000 in one year per vehicle.

1. Moyer - Taxpayer cost = $10, 758 - Tommy pays $1,525.75 or $4.31 a day

2. Resnick - Taxpayer cost = $9,970 - Alice pays $1,564.45 or $4.28 a day

3. O'Donnell - Taxpayer cost = $9,436 - Terry pays $723.50 or $1.98 a day

4. Sweeney - Taxpayer cost = $9,980 - Francis pays $1,705.75 or $4.67 a day

5. O'Connor - Taxpayer cost = $8,956 - Maureen pays $1,569.25 or $4.30 a day

No. 2 - Tax Fraud - Court Administrator Stephen Hollon - Underreporting of Income

Beginning in 2000 and continuing through 2001, Moyer allowed Hollon to drive a 1997 Jeep Grand Cherokee Limited that cost  $30,852 and was originally purchased for Resnick.  Hollon's daily commute from Lebanon to the Court is 79 miles one way, which is of course taxable income.  Hollon's 200 to 2002 W-2 shows that he claimed the following income.  The real truth pursuant to IRS Pub 15-B is as follows:

A tax rate of 25% means Hollon paid $162 in federal taxes on the $648 he claimed for personal use.  $162 equates to 3% of the $5,338.13 the state paid for Hollon's fuel.  With fuel at $3 a gallon, wouldn't every Ohio taxpayer "just die" if they only had to pay 9 cents a gallon?  In fact, Hollon's out-of-pocket weekly commuting costs to drive 800 miles was less than $3.00 a week or 60 cents a day. 

No. 3 - Tax Fraud - Clerk of Court Marcia Mengel - Underreporting Income

Mengel lives in Westerville, which is 19.1 miles from the Court.  During the periods above she would have made 390 commutes (less 4 weeks for vacation) and at 17.0 (rated 15/19) miles driven 13,620 miles.  She purchased 785.95 gallons of fuel and at 17.0 drove 13,361, therefore commuting to work consumed 98% of the state fuel she used and the miles she drove.   Yet, she had the chutzpah to claim 6% in 2001!

No. 4 - What income did Justices' earn from personal use of cars from 1993 to 2003?

When I requested public records/information from the Court asking for income earned and paid for by Ohioans to the Justices' for personal use of state cars/fuel, the Court told me that no such records/information existed.  The same was and is true regarding repeated requests for copies of "mileage" logs differentiating personal vs. official use.

In steadfastly refusing to disclose that which the public has a right to know, it must be presumed that the Justices' knowingly reported "no or minimal personal use" to the IRS, State of Ohio and local tax authorities from 1993 to 2003 as stated in Court Administrator Steve Hollon's Feb. 7, 2003 memo to Moyer.  (See pg. 7 of Steve Hollon's 02-07-03 memo to Moyer - your audit file [A] 100.43).

It is high time that these miscreants be made to publicly disclose the amounts of income they "actually" claimed to the IRS, State of Ohio and Franklin, Lucas, Cuyahoga, Summit and Crawford Counties for personal use of state cars and fuel from 1993 to 2003.  I trust that you will take any and all appropriate legal action to make sure the public is informed as to what they paid these folks, won't you?

No. 5 - Feb. 7 2003 Memo to Moyer from Steve Hollon and Rhonda Perri

It is undisputed that Moyer, et al. defrauded the IRS, State of Ohio and various counties by knowingly  "underreporting" income earned from personal use of state cars/fuel.  Steven Hollon and Rhonda Perri made the following statements at page 7 of their 2/3/2003 memo to Moyer:

"Thus, it is possible some tax regulating authorities could conclude we are to report the value of such use (personal) instead of the Justices for tax year 2002.  The other consideration is that this issue is now on the radar screen of at least one tax regulating authority (e.g., the City of Columbus), and possibly others.  As such, you should be aware that reporting no or only minimal personal use of your assigned Court vehicle may not be accepted by those authorities without legitimate and detailed mileage logs." (See audit file [A] 100.43 at page 7)

Hollon could not have made such a statement  to Moyer unless he knew that Moyer, et al. previously (1993-2002) "reported no or only minimal personal use" of a state car and fuel.  This is an astounding admission coming from the Court's Administrator and Chief Fiscal Officer.

Contrary to Moyer and O'Donnell's specious assertions regarding official duties that they are "required" to attend; none of the following meet that standard!  In fact, attendance at any of the below functions are purely "voluntary."  Put simply, no rule or statute exists mandating a justices' appearance at any of these events!  When I asked for public records from the Court setting forth the justices' "mandatory" attendance at any of the below events, I was advised no such document exists.  If one is "required" to attend and doesn't, what's the punishment for so acting?  Would it be removal from the bench or a suspension of one's license to practice law?

1. Attending political fundraisers

2. Attending retirement parties for judges

3. Attending funerals for political hacks and/or judges

4. Acting as Grand Marshall at a car race in Mansfield on a Saturday

5. Swearing-in ceremonies for political cronies  [any notary can so act]

6. Attending parties/luncheons to receive awards from private organizations and/or fraternal clubs

7. Attending Bar Association meetings or parties

8. Attending Lincoln Day Dinners

No. 6 - Legitimate and Detailed Mileage Logs

In their Feb. 7, 2003 memo to Moyer, Steve Hollon and Rhonda Perri said, "...taxing authorities may not accept reporting "no or only minimal personal use" of your assigned vehicle "without legitimate and detailed mileage logs."

I requested the justices' mileage logs for 2004, however, I was told that none exist other than one authored by Justice Stratton that is laughable at best.  It merely states mileage for each month for personal use in a two-column table and has attached another two-column table that has handwritten odometer readings that begin in Jan and "magically" end in May. 

It is appalling to discover that the Court Administrator and Chief Fiscal Officer for the Court actually accepted Stratton's so-called logs (copies available upon request) and then foisted said fabricated figures upon OBM for preparation of her 2004 W-2.  

On April 16, 2002, Rick Dove, Director of Legal & Legislation Services wrote to me and said, "With regard to mileage records for the justices vehicles, it is my understanding that we do not main separate mileage records for each of the fleet vehicles." (copy available upon request)  This is an astounding admission of Moyer engaging in gross misfeasance in office and neglect of duty.  As you discovered during your audit, the Court admitted it "never" maintained any mileage records for the justices cars from 1993 through 2004. 

As to the other justices it is painfully clear that none of them kept accurate and legitimate mileage logs detailing their official use of state cars and fuel.  Put simply, Moyer, et al. continue to "thumb their collective noses" at IRS Rules for proper reporting of personal income. 

No. 7 - Justices' failing to provide receipts for fuel purchases

"Supreme Court Fleet Fuel Card Control Procedures" (3-10-00) at paragraph 5 states:  "Drivers are REQUIRED to obtain a receipt for any and all purchases charged on the fleet fuel card."  A review of fuel records provided by the court prove the following violations:

1. Justice Moyer 44 receipts for 51 purchases

2. Justice Pheifer 30 receipts for 60 purchases in 2004

3. Justice Stratton 19 receipts for 22 purchases

4. Justice Resnick 26 receipts for 32 purchases

5. Justice Sweeney 24 receipts for 43 purchases

6. Justice O'Connor 42 receipts for 53 purchases (no records for Aug.)

7. Justice O'Donnell 15 receipts for 17 purchases (no records for May, Sept, Oct, Nov)

8. Justice O'Donnell 29 receipts for 54 purchases in 2003 (3 receipts for 24 purchases from June-Aug) 

9. Justice O'Donnell 10 receipts for 24 purchases from Jan to March 2005

Out of 95 purchases from May 2003 to March 2005, O'Donnell turned in 54 receipts.  Beginning two (2) years ago, I have repeatedly requested copies of O'Donnell's fuel receipts from June to August 2003, and on every occasion have been told they do not exist.  Moreover, I asked the court to identify the location of gas stations O'Donnell frequented based on the "Location Numbers" listed on the Court's fuel reports, however, the Court has refused to respond.

Of the 356 fuel purchases set forth above, the Justices failed on 121 occasions (33% of the time) to provide any receipt.  Without receipts, an auditor or a watchdog cannot conclude the specific location of a justice when fuel was purchased.  There is no dispute that the Court has the requested information, however, it continues to refuse to provide it.  Why?

No. 8 - Chief Justice Moyer's Gross Misfeasance and Gross Neglect of Duty

There is no dispute that Moyer is the Chief Executive responsible for the administration of the Court and it's finances and has been since 1987.  During his reign he has engaged in the following gross misfeasance in office and neglect of duty:

1. From 1993 to 2004 failed to put into place any rules regarding use of state cars/fuel by the justices

2. Instructed the Court Administrator and Chief Fiscal Officer to ignore IRS Pub. 15-B mandating that income derived from personal use of cars be disclosed on the Justices' annual W-2's

3. Falsely instructed the justices that they could lawfully report personal use of state cars/fuel under the "cents-per-mile" rule when he knew for a fact that the IRS required the Lease Value Method because of the value of said cars

4. Illegally employed "special counsel" in early 1993 knowing that only the Attorney General could so act (RC 109.30)

5. Instituted rules allowing for justices' to use state cars/fuel while engaged in partisan campaign activities

6. Personally underreported his income for personal use of state cars/fuel from 1993 to 2004 to the IRS, State of Ohio and Columbus in an amount that may well exceed $100,000 and acquiesced in the other justices doing the same

7. Failed to issue rules in accordance with IRS mandates that all justices and employees submit detailed travel logs differentiating personal verses official use of state cars/fuel

8. Advised Court employees to repeatedly violate Ohio Open Record Laws and/or to "deep-six" requested records that he knew would be damaging to him and the Court

9. Allowed justices to bill the state for accidents that took place while car was being used for personal purposes

10. Authorizing Steve Hollon's use of a state car for daily commutes of 159 miles at taxpayer expense

11. Authorizing justices to use state cars/fuel to attend funerals and retirement parties for friends/colleagues

12. Authorizing court employees to act as "man-servants" on state time to fuel/wash/park/retrieve cars or act as chauffeurs

13. Authorizing court employees to attend out-of-town retirements parties at state expense

14. Allowed retired visiting judges to bill for hours never worked and/or for travel expenses never incurred at an estimated cost to taxpayers from 1987 through 2004 in excess of $20 million

No. 9 - Conclusion

The evidence of corruption, gross misfeasance and neglect of duty involving Chief Justice Moyer's conduct over the past thirteen (13) years not only demands that a "forensic audit" be conducted by your office, it also requires you as an attorney and public official to immediately ask that a "special prosecutor" be appointed to investigate the crimes that were obviously committed by and/or with Moyer's blessing.

It would be difficult to imagine any scenario in the history of jurisprudence wherein a State Supreme Court Justice has engaged in the wholesale violations of criminal statutes, IRS Rules and Disciplinary Rules as is the case with Chief Justice Moyer. 

After presiding over a scheme to underreport income from personal use of state cars (aka, "tax fraud") for thirteen (13) years, it is high time that Mr. Thomas Moyer be prosecuted to the fullest extent of the law.  If the words "equal justice for all" really mean anything, then Moyer must be made to answer for his egregious misconduct.