THE PROGRESSIVE VOICE
OF REFORM
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| 1 1 IN THE SUPERIOR COURT
FOR THE DISTRICT OF COLUMBIA
2 CIVIL DIVISION 3 ----------------------------x
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4 DAVID BUSCH, et al., :
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5 Plaintiffs, :
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6 v. : C.A. No.: 135895
: Cal. 6 - J. van Kann
7 NORML, et al., :
: Volume III
8 Defendants. :
:
9 ----------------------------x10 Washington, D.C. 11 Thursday, October 5, 1995 12 Continued deposition of 13 NICOLE TORRENCE 14 a witness, called for continued examination by 15 counsel for Plaintiffs, pursuant to notice and 16 agreement of counsel, beginning at approximately 17 10:45 a.m., at the Law Offices of Miles & 18 Stockbridge, 1450 G Street, N.W., Washington, 19 D.C., before Shari R. Broussard, a notary public 20 in and for the District of Columbia, when were 21 present on behalf of the respective parties: 22 2 1 APPEARANCES: 2 On behalf of Plaintiffs: 3 CARLOS M. SANDOVAL, ESQUIRE
Grossman & Sandoval, P.L.C.
4 1401 Chain Bridge Road, Suite 300
McLean, Virginia 22101
5 (703) 448-81006 On behalf of Internal Revenue Service: 7 CHALMERS POSTON JR., ESQUIRE
Assistant District Counsel
8 Fourth Floor, District Counsel
4620 Wisconsin Avenue, N.W.
9 Washington, D.C. 20016
(202) 634-5407
10
ALSO PRESENT:
11
David Busch
12
* * * * *
1314 15 16 17 18 19 20 21 22 3 1 C O N T E N T S 2 EXAMINATION BY: PAGE 3 Counsel for Plaintiffs 5 4 TORRENCE DEPOSITION EXHIBITS: 5 No. 6 - Transcripts 1989 4 6 No. 7 - Transcripts 1990 4 7 No. 8 - Transcripts 1991 4 8 No. 9 - Transcripts 1992 4 9 No. 10 - Transcripts 1993 4 10 No. 11 - Transcripts 1994 4 11 No. 12A - Copy of check to NORML 37
from Busch
12
No. 12B - Backside of Ex. No. 12A 37
13
No. 12C - Letter from bank
14 identifying Ex. 12A & B 5015 * * * * * 16 17 18 19 20 21 22 4 1 (Torrence Deposition Exhibit Nos. 6 2 through 11 were marked for 3 identification.) 4 P R O C E E D I N G S 5 Whereupon, 6 NICOLE TORRENCE 7 was called for continued examination and, having 8 been previously duly sworn, was examined and 9 testified further as follows: 10 MR. SANDOVAL: My name is Carlos 11 Sandoval. I'm appearing on behalf of the 12 Plaintiffs, Busch, et al., in the case Busch v. 13 NORML in the Superior Court of the District of 14 Columbia. 15 We are here for the third installment of 16 the deposition of Nicole Torrence, an IRS 17 official, and she has been probably sworn in. 18 Appearing on her behalf is -- ? 19 MR. POSTON: Chalmers Poston, of 20 District Counsel, Washington, D.C. 21 MR. SANDOVAL: It is now approximately a 22 quarter to 11:00 a.m. Exhibits have been marked 5 1 and the deposition is about to begin. 2 One note for the record -- part of the 3 file of documents that were going to be marked for 4 today and entered today has not been delivered to 5 Nicole Torrence yet. 6 We have agreed to continue the 7 deposition and continue it on October 20th at 8 10:00 a.m. for the entry of those documents into 9 the record and for additional testimony. And we 10 will have testimony here today. 11 CONTINUED EXAMINATION BY COUNSEL FOR 12 PLAINTIFFS 13 BY MR. SANDOVAL: 14 Q I'm handing you, Ms. Torrence, what has 15 been marked as Plaintiff's Exhibit No. 6 for 16 identification. 17 Can you tell me what that document is? 18 A A transcript of NORML's accounts for the 19 tax year 1989. 20 Q I will hand you Plaintiff's Exhibit No. 21 7. Would you tell me what that is? 22 A The transcript for 1990. 6 1 Q Plaintiff's Exhibit No. 8? 2 A Transcripts of accounts for 1991. 3 Q And Plaintiff's Exhibit No. 9? 4 A The same -- transcripts for '92. 5 Q Plaintiff's Exhibit No. 10? 6 A Transcripts for '93. 7 Q And Plaintiff's Exhibit No. 11? 8 A Transcripts for '94. 9 Q Let me direct your attention to the 10 first page of Plaintiff's Exhibit No. 11. Can you 11 explain what the account balance accrued interest 12 and accrued penalty amounts are on this document? 13 A Well, the account balance would be the 14 additions on the balance that were due on the 15 return, plus any penalties and interest, and then 16 the accruals are to 10/9/95, additional penalties 17 and interest. 18 Q And these are penalties and interest 19 accrued during 1994? 20 A Yes. 21 Q Plaintiff's Exhibit No. 11 is a multiple 22 page document. Can you explain what the other 7 1 pages in this document are and how they impact the 2 cover page of the document? 3 A It doesn't. The first page is the 4 transcript for the 941 first quarter '94; the 5 second page is the second quarter; third page, 6 third quarter; fourth page, fourth quarter; and 7 the last page would be the 990 that was filed for 8 tax year 1994. 9 Actually, there wasn't one filed. They 10 filed an extension for that particular -- 11 Q So for the time period ending December 12 1994, no 990 was filed? 13 A Yes. 14 Q If you would look now at Plaintiff's 15 Exhibit No. 10 and tell us if a 990 was filed for 16 that tax year. 17 A Yes. 18 Q A 990 was filed and there was still a 19 penalty assessed? 20 A No, there was no penalty assessed. 21 Q So nothing was due and owing for the tax 22 year 1993? 8 1 A No, nothing was owed on the 990 for 2 1993. 3 Q Can you tell us what was owed during 4 1993? 5 A There are several balances on the 941. 6 The first quarter of 1993, there's an outstanding 7 balance of $8,998.28; on the second quarter 941, 8 there's an outstanding balance of 16,513.31; the 9 third quarter -- again on the 941, there's a 10 balance of 24,145.95; and the third quarter, on 11 the 941 for 1993, there's a balance of 18,041.84. 12 Q Can you give us that same analysis for 13 Plaintiff's Exhibit No. 11? 14 A The 941 for period ending March 1994, 15 there's a balance of 18,249.45; the second quarter 16 on the 941, there's a balance of $4,019.90; the 17 third quarter is 1,448.86; the fourth quarter is 18 5,184.75. 19 Q Can you look at Plaintiff's Exhibit No. 20 9 and give us that same analysis? 21 A 941s for 1992 -- third quarter has been 22 full paid; the second quarter has been full paid; 9 1 the third quarter, there's a balance of $6,429.79; 2 and on the fourth quarter, 11,005.72. 3 And I would just like to say that, on 4 the 941s -- the first and second quarters that are 5 showing zero balances -- that's a zero balance to 6 date, and that does not mean that additional 7 accruals will not come in the future. 8 Q Additional accruals may come in the 9 future? 10 A Well, they could. 11 Q Ms. Torrence, can you tell us how these 12 balances affect the possibility of a 100 percent 13 trust fund penalty against the organization NORML, 14 the National Organization for the Reform of 15 Marijuana Laws? 16 A The 941 is a quarterly return that's 17 filed by employers showing wages and withholdings. 18 A trust fund recovery penalty is a 19 penalty assessed for nonpayment of the trust fund 20 portion of withholdings. The taxpayer holds in 21 trust the employees' and employers' portion, and 22 in the event that the employee's portion is not 10 1 paid over because it's held in trust, we will 2 assess a hundred percent penalty -- what's now 3 called a trust fund recovery penalty -- against 4 potentially responsible officers. 5 Q Given the exhibits that we just entered 6 into the record and that you just analyzed for us, 7 is there a possibility of a one hundred percent 8 trust fund penalty, now, against the National 9 Organization for the Reform of Marijuana Laws? 10 A Yes. 11 Q And can you tell us, approximately, what 12 that penalty would be? 13 A No, I could not. 14 Q With -- 15 A I'm not sure how many -- how many 16 additional periods were outstanding from when I 17 handled the case. I'm not even sure what periods 18 were included. 19 Q Ms. Torrence, I'd like to direct your 20 attention to Plaintiff's Exhibit No. 1 and 21 Plaintiff's Exhibit No. 3. By looking at these 22 exhibits, can you give us an indication of what 11 1 the potential trust fund penalty against NORML -- 2 the National Organization for the Reform of 3 Marijuana Laws -- could be? And we can take some 4 time off the record so counsel could look at them 5 if you would like. 6 MR. POSTON: That's fine. 7 THE WITNESS: No, this is the 8 examination thing. 9 No, I'm sure we have the figures in the 10 case file. Again, I'm not sure how many periods I 11 included. Maybe throughout the second quarter of 12 '94, when I was working on it -- but without 13 running the computations, I could not give you a 14 figure. 15 BY MR. SANDOVAL: 16 Q What would you need to compute the 17 potential 100 percent trust fund penalty? 18 A Well, the returns. And normally, I just 19 input them on the system and it will just give me 20 the trust fund -- 21 Q Uh-huh. 22 A -- amount. 12 1 Q But you would need the returns? 2 A Right. Were there -- 3 Q Can you be a little more specific? 4 A -- outstanding periods. 5 Well, the wages and withholdings, the 6 taxes that were withheld, social security wages. 7 Q If, in fact, nothing was withheld, what 8 would the penalty be for the years reflected in 9 Plaintiff's Exhibit Nos. 9, 10, and 11? 10 A Well, there should have been 11 withholdings on every quarter. 12 Q But if there wasn't? If there weren't 13 any withholdings? 14 A There are withholdings. 15 Q And is that -- 16 A These are wage earners, so there are 17 withholdings. 18 Q Or there should be? There should be 19 withholdings? 20 A Right. 21 Q If the organization did not withhold, 22 then -- 13 1 A Well, that's it -- the organization did 2 withhold on the returns, but the money was never 3 paid over to us. 4 Q So they reported on a form. 5 Can you tell us which form did they 6 report to you that funds were actually withheld? 7 A The 941. 8 Q The 941, okay. And the monies have 9 never been paid over, is that correct? 10 A Well, some monies have been paid, some 11 of the trust fund portion has been paid, but, 12 again, I'm not sure how much. 13 Q Is there a way to determine, from 14 Plaintiff's Exhibit Nos. 9, 10, and 11, how much 15 of the portion has been paid? 16 A No. 17 Q And what document would -- 18 A You would need to look at the income -- 19 I mean, the 941 return that was filed so that you 20 will know how much income tax was withheld, how 21 much social security tax was paid, what was the 22 rate for that particular year. 14 1 So this return doesn't show anything 2 besides the tax that was due on the return. I 3 would need to know how many -- how many dollars in 4 wages were paid for that particular quarter. 5 Q Is there a corresponding record that the 6 Internal Revenue Service keeps that shows dollars 7 received? 8 A No. Dollars received? 9 Q Money received in on the 941. The 10 payments pursuant to the 941s filed. 11 A Payments are on the transcripts. 12 Q So, if we were to look at Plaintiff's 13 Exhibits 9, 10, and 11, we can look at payments. 14 Okay. And I take it that these payments are coded 15 number 650? 16 A Yes, or 670. 17 Q 650 or 670. What is that number? 18 A 650 would be a federal tax deposit that 19 was paid through the bank and the 670 would just 20 be a payment that was sent to us. 21 Q So Plaintiff's Exhibit Nos. 9, 10, and 22 11 do reflect some payments being made, am I 15 1 correct? 2 A Yes. 3 Q In these documents, are those payments 4 balanced out against what is due and owing -- in 5 any place in these documents? 6 A Yes, they're applied against the 7 liability. 8 Q Does this document show that there is a 9 remaining liability? 10 A Yes. On some of the quarters, yes. 11 Well, this particular one, yes, there are balances 12 due. 13 Q And what are those balances? 14 A Okay. I think we went over this 15 already, but -- 16 Q Okay. 17 A -- for the first quarter on the 941, 18 1993, there's a balance due of 8,998.28; the 19 second quarter, 16,513.31; the third quarter, 20 24,145.95; the fourth quarter would be $18,041.84. 21 Q Given those amounts that are due and 22 owing according to Plaintiff's Exhibit No. 10 -- I 16 1 believe that is what you were looking at -- if you 2 were told that the association's bank accounts are 3 at zero right now, would those amounts form the 4 basis of a 100 percent trust fund penalty? 5 A Yes. If the organization is unable to 6 pay, then that's our next option, is to assess the 7 trust fund recovery penalty. 8 Q And, therefore, if we were to look at 9 Plaintiff's Exhibit Nos. 6 through 11 and look to 10 the section -- I believe you read it -- account 11 balance plus accruals, that is the amount that's 12 due and owing for that quarter? 13 A Yes, as of 10/9/95. 14 Q As of 10/9/95, that is the amount that 15 is due and owing for that quarter? 16 A Yes. 17 Q And if the association had no money to 18 pay the account balance plus the accruals, those 19 amounts combined would form the basis for the 100 20 percent trust fund penalty? 21 A No. 22 Q They would not form the basis. Do they 17 1 have anything to do with the trust fund penalty? 2 A Just the tax that was due. It's -- it's 3 just a formula that we use. I really use the 4 system all the time, but it's just from wages that 5 were paid out, the income tax withheld and Social 6 Security wages paid in. The trust fund recovery 7 penalty is a penalty, so we do not include 8 penalties and interest in this amount. 9 Q Let me ask it to you this way: if NORML 10 was not going to pay a single dime from today 11 forward -- nothing -- given these records and 12 given the amounts listed in the account balance 13 plus accruals section of each of these quarters, 14 would those amounts -- cumulated for the period of 15 time that you are examining the taxpayer, would 16 those amounts form the basis for the trust fund 17 penalty, or would they form the basis for some 18 other type of assessment? 19 A No. The trust fund recovery penalty for 20 -- I mean, the trust fund amount for any given 21 quarter is only one amount. It doesn't accrue. 22 The only thing that would accrue is if -- if we -- 18 1 excuse me -- if we assess the penalty, there would 2 be interest on those penalties, but if the third 3 quarter penalty is $300, it is $300. 4 If the employee's portion of FICA was 5 only $300, that's how much it was. It will never 6 go up. It can only go down if the taxpayer pays 7 money in. 8 Q But we're talking about the scenario 9 where the taxpayer is not going to pay any money. 10 A Okay. If no money is paid in, whatever 11 the penalty is it is. It never increases, again, 12 except for interest. And that's after the penalty 13 has been assessed. 14 Q Maybe I was a little confusing in my 15 question. I didn't want you to think that I was 16 asking whether or not it would accrue. 17 I'm trying to figure out, from these 18 documents, if there is a balance due and owing, 19 and payments are listed below, and no further 20 payments are going to be made -- when your people 21 look at this transcript for the purpose of 22 assessing a penalty, how do they know what penalty 19 1 to assess? They look at the account balance? 2 A Wages. 3 Q Oh, the wages. Okay. 4 A This is just a transcript of the 5 taxpayer's account. 6 Q Right. 7 A When we assess the trust fund recovery 8 penalty, we look at the wages. 9 Q That were paid out? 10 A Correct, and we look at the employee's 11 portion of FICA and the taxes that were withheld. 12 This is just saying what tax -- what the taxpayer 13 showed as tax on the return and any credits that 14 have been applied or any penalties or interest 15 that have been assessed. So this is just a 16 transcript. 17 Q Would the wages that were paid be 18 derived from code number 150 on the return? 19 A No. 20 Q Where is there an indication of what 21 wages were or weren't paid on behalf of the 22 taxpayer? 20 1 A In the transcripts? 2 Q Right. 3 A It's not. 4 Q How do you know that all of these 5 quarters aren't paid in full? 6 A Well, I'm looking at a balance, so I 7 know that the quarter is not paid in full. 8 However, the trust fund could be paid in full. 9 But to look at this transcript, I -- I wouldn't 10 know. 11 Q Explain the difference between the 12 balance in the exhibit and payment to the trust 13 fund. Wouldn't payment to the trust fund be 14 reflected in the balance? 15 A Not necessarily. I mean, just looking 16 at this particular period '89 third quarter -- I'm 17 sorry -- first quarter -- there's an account 18 balance of $600. 19 Now, there was an original tax on the 20 return of $2900. Payments come in and we apply 21 them to nontrust fund first, and then trust fund. 22 So the taxpayer has paid in -- it looks like in 21 1 excess of the $2900 -- so the trust fund may be 2 paid. It looks like this is -- 3 Q For that quarter? 4 A For this particular quarter, it looks 5 like the remaining balance is penalties and 6 interest. 7 Q You just mentioned something that I want 8 to talk to you about. You said that when payments 9 come in, you pay nontrust fund liabilities first 10 and then trust fund liabilities last? 11 A Correct. 12 Q Wouldn't it be fair to say that, if 13 there is a large balance for a particular quarter, 14 trust fund liabilities have not been paid? 15 A Not necessarily, because it depends on 16 what the tax -- I mean, the penalties were on that 17 particular quarter, but maybe. 18 We pay the nontrust fund, then trust 19 fund penalties and interest. So, as the payments 20 come in and the original tax that was due on the 21 return decreases, then the trust fund will 22 decrease. 22 1 Q So to your knowledge, by looking at 2 these exhibits with large account balances and 3 payments that do not reflect payment in full of 4 the liability for that quarter, is it fair for you 5 to say that, in all probability, the trust fund 6 has not been paid? 7 A Yes. 8 Q The failure to pay the trust fund, does 9 that give rise to a possibility of a 100 percent 10 trust fund penalty? 11 A Yes. 12 Q What additional documents, if any, do 13 you need to determine what that trust fund penalty 14 would be for any given quarter listed in these 15 exhibits? 16 A The return. 17 Q The return that the taxpayer filed? 18 A Yes. 19 Q The 941 return that they filed? 20 A Right. 21 Q If, in fact, you discover that they did 22 not file 941 returns for those periods, what would 23 1 the potential trust fund penalty be? 2 A If a return was not filed? 3 Q If they did not file the returns. 4 A If there's no return, there are no 5 assessments. 6 Q Oh, I'm sorry. So, somewhere in this 7 file, you have the 941 returns that were filed 8 which form the basis of these payments? 9 A Yes. 10 Q You don't have those today? 11 A No. 12 Q Are those in the file that is coming to 13 you? 14 A They should be, for the periods that 15 there were assessments -- 16 Q Okay. 17 A -- potential assessments. I'm sorry. 18 Q What will those 941 returns show? 19 A They will show the wages, the 20 withholdings, any credits that the taxpayer listed 21 as far as federal tax deposits that were paid in 22 for that particular quarter, and any balance due. 24 1 Q Isn't it true that the balance due from 2 the 941s that were filed will likely not be any 3 smaller than the balance due on these 4 transcripts -- 5 A Yes, yes. 6 Q -- seeing as how the 941s will tell you 7 what they've paid? You know, they wouldn't say -- 8 A Right, right. 9 Q They wouldn't say any less, right? They 10 wouldn't say any less? 11 A Well, actually, a lot of times it -- it 12 depends. You have some companies whose returns 13 are filed someplace else -- someone else prepares 14 them -- and they may show that credits were paid 15 in and they actually were not. 16 So we look at the taxes due on the 17 return. However, credits are only what -- we only 18 use the credits that we receive. 19 Q Right. So if their return says that 20 they paid more than you actually received, then 21 their balance is going to go up -- 22 A Yes. 25 1 Q -- not down? It won't go down from 2 looking at their returns? 3 A Right, unless subsequent payments are 4 made. 5 Q Right. Okay. So the only thing that 6 those returns will do is show that the accrual or 7 the penalties may go up. 8 In understanding the numbers on the 941 9 returns, what portion or what section of that 10 return do you look at to determine liability for a 11 trust fund penalty? 12 A The entire return and -- 13 Q The total balance? 14 A Wages, income taxes withheld, Social 15 Security wages, rates and credits. 16 Q So let me give you a hypothetical. If 17 NORML filed a 941 return, they paid federal tax 18 deposits in the amount of $5,000, you found that 19 their liability was $10,000, and they only paid 20 $5,000 -- okay? -- is it fair to say that their 21 trust fund penalty liability will be based on the 22 $5,000 that they did not pay, seeing as how you 26 1 credit the -- 2 A Right. 3 Q -- the 5,000 that they did pay to 4 nontrust fund liabilities first? 5 A Correct. 6 Q So if there is a portion of trust fund 7 liability, it will be the last thing that money is 8 credited to for that quarter, is that correct? 9 A We apply in the best interest of the 10 government. However, most of the time, the 11 taxpayer will have penalties and interest owing, 12 meaning the trust fund will be paid -- we'll pay 13 nontrust fund, then trust fund. 14 Then we go on to the penalties and 15 interest. So if a -- a taxpayer could have very 16 well paid off the trust fund and still have a 17 balance due. So the balance due does not always 18 reflect a trust fund. 19 Q So there are four parts to this. There 20 is the tax due or the deposit due, there is the 21 trust fund liability, and then there are penalties 22 and interest on top of the trust fund liability 27 1 and they are paid in that sequence -- first, the 2 federal official tax deposits due; second, trust 3 fund liability; third, penalties; and fourth, 4 interest. 5 Is that how it is credited? 6 A Well, withholding -- withholdings are 7 just the employee's portion and the employer's 8 portion. That's what FICA is. 9 So you have the employee's portion 10 that's withheld in trust. We pay the employer's 11 portion first, the employee's portion second, 12 so -- because first you said that there is a 13 deposit -- well, deposits -- deposits aren't made 14 unless there is a potential liability. So the 15 deposits would be applied after there's a 16 liability. 17 Q Now, if, in fact, someone was writing 18 checks from the operating account of NORML, for 19 instance, and they were writing checks to 20 themselves, and another person subsequently 21 submitted a 941 and included all of that money in 22 income with no withholdings and with no employer's 28 1 portion ever paid to the Internal Revenue Service, 2 how would that be reflected in a transcript such 3 as Exhibit No. 10? 4 A If a return had already been filed, is 5 that what you're saying? I don't understand. 6 Q Yes. Well, if they filed a return, 7 included portions paid to an individual, but did 8 not pay an employer's portion withheld, how would 9 that be reflected in Exhibit No. 10? 10 A As the tax that was assessed. 11 Q And it would come out in the line that 12 is called account balance plus accruals, and there 13 would be an account balance for that quarter? 14 A Yes. 15 Q And that account balance would be a 16 liability that was owed by the taxpayer -- by the 17 organization? 18 A Yes. 19 Q And that liability, if it should not be 20 paid, would form the basis of a potential trust 21 fund penalty? 22 A Yes. 29 1 MR. SANDOVAL: Let's go off the record 2 for a second. 3 (Discussion off the record) 4 (Recess) 5 BY MR. SANDOVAL: 6 Q We're back on the record after having 7 taken a little break. What I have directed the 8 witness to do is to review the Exhibit Nos. 6 9 through 11, and to determine, from those exhibits, 10 the amounts due both by taxable year and in total. 11 And, Ms. Torrence, I would ask you: what 12 are your findings, with respect to the taxes or 13 the taxes, penalties, and assessments due to date 14 from 1989 to 1994? 15 A An outstanding balance of $144,674.02. 16 Q And how was that accrued and in what 17 years? 18 A This is for nonpayment of taxes on the 19 941, penalty assessments on the 990 dating back to 20 1989 through '94. 21 Q And penalties haven't been assessed for 22 every year, have they? 30 1 A No. 2 Q What -- 3 A Well -- 4 Q Go ahead. Go ahead and answer the 5 question. 6 A Some periods are paid up, but I'm not 7 sure if penalties were assessed. We could look 8 through those. I'm not sure. 9 Q What periods are paid up? 10 A On the 941, the second quarter of '91; 11 the fourth quarter of '91 and the third quarter of 12 '91 are fully paid. On the 941, the first quarter 13 of '92 and the second quarter of '92 are both 14 fully paid. 15 Q In your estimation, did the bulk of the 16 tax liability come from 1992 to date? 17 A Yes. 18 Q Can you tell us what those numbers were? 19 A For 1992, the outstanding liability is 20 $22,470.12. For 1993, it's 67,699.38. And '94, 21 28,902.96. 22 Q And have penalties been assessed yet for 31 1 '93 and '94? 2 A Yes, yes. Penalties and interest have 3 accrued on those figures. 4 Q Is it possible that additional 5 assessments will be made on the '93 and '94 6 amounts? 7 A Yes. 8 Q What could those assessments be? 9 A On the 990, for 1994, there could be a 10 possible late penalty assessment. On the 941, 11 there will be an additional failure to pay penalty 12 for each quarter that's outstanding. 13 Q And how many quarters are outstanding? 14 A Ten. 15 Q Ten quarters? 16 A Yes. 17 Q Can you tell -- 18 A Well, you said from '92 to '94, right? 19 Q Right. 20 A Ten. 21 Q Ten. And from '92 to '94, there are 22 only twelve quarters? 32 1 A Correct. 2 Q And ten of them will be assessed or may 3 be assessed failure to pay penalties? 4 A Yes. 5 Q What is the -- if you can tell us -- the 6 rate for the late penalty and the rate for the 7 failure to pay penalty? 8 A The delinquency penalty. Depending on 9 -- well, it depends on when the return was filed, 10 but it's like five percent of the taxes due. 11 Q And what about the failure to pay 12 penalty? 13 A Five percent. 14 Q Oh, I'm sorry. And the late penalties? 15 A Delinquency penalty, yes. 16 Q It's five percent as well? 17 A Yes. The delinquency penalty is only 18 assessed once and the failure to pay penalty is 19 assessed monthly. 20 Q So the failure to pay penalty is just a 21 continuing -- 22 A Penalty until it's paid off. 33 1 Q -- a continuing five percent penalty 2 until it's paid off? 3 MR. POSTON: There is a maximum for the 4 failure to pay after 50 months or something like 5 that, though, isn't there? 6 THE WITNESS: There's a maximum on the 7 delinquent fee penalty not to exceed 5 months. 8 MR. POSTON: Yes, 25 percent totals. 9 But doesn't the failure to pay have a maximum of 10 50 months? 11 THE WITNESS: 50? 12 MR. POSTON: 50 or something like that. 13 I think it's -- isn't it a half percent a month 14 for a maximum of 50 months? 15 THE WITNESS: Oh, I'm not sure of that. 16 MR. POSTON: I think it's in reference 17 to the code 665182. 18 BY MR. SANDOVAL: 19 Q In your review of the records, is it 20 fair to say that the bulk of the tax liability 21 occurred from 1992 to the present? 22 A Yes. 34 1 Q In your first installment of these 2 depositions, you mentioned that you went on-site 3 and interviewed a Mr. Allen St. Pierre and Mr. 4 Donnegal Pierce with respect to the taxes and 5 penalties due from the organization. 6 Did they indicate the responsibility of 7 any individual or individuals for nonpayment of 8 those taxes, the bulk of which accrued from 1992 9 to 1994? 10 A Yes, they -- not that they said that any 11 particular person was responsible. I decided who 12 was responsible from the interview with them. 13 Q And based on the interview, who did you 14 decide was responsible for the taxes and penalties 15 that have accrued from 1992 to 1994? 16 A Richard Cowan. 17 Q Have you attempted to contact Richard 18 Cowan to obtain payment of these funds? 19 A No. I attempted to contact Mr. Cowan 20 for an interview. He never showed for the 21 interview, so I went forward with the proposed 22 assessment. 35 1 Q When you say that he didn't show, did he 2 call and give any reason for his -- 3 A No. 4 Q -- nonappearance in the interview? 5 A No. 6 Q Was he told that the interview was to 7 determine the liability of the association and 8 himself for taxes and penalties? 9 A I really can't say whether or not he was 10 told. Again, I was dealing with Donnegal Pierce. 11 I informed him that I wanted to come in to 12 interview the responsible officers. A date and 13 time was set. 14 At that time, I was going to interview 15 Allen St. Pierre and Richard Cowan, and Allen St. 16 Pierre was the only one who showed up. 17 Q Donnegal Pierce did not show up? 18 A I interviewed Donnegal Pierce early 19 on -- 20 Q Okay. 21 A -- so I don't know. 22 Q And isn't it true that it was your 36 1 understanding from these meetings that the only 2 individuals with check-writing authority were 3 Richard Cowan and Allen St. Pierre? 4 A Yes. 5 Q At any time did Allen St. Pierre or 6 Donnegal Pierce deny that they had signature 7 authority? 8 A No, I don't think so. I'm not sure if 9 Donnegal had signature authority. I do think I 10 have a copy of the signature cards -- bank 11 signature cards -- so I think it was just Richard 12 Cowan and Allen St. Pierre. 13 Q Pursuant to your interviews and your 14 attempts to obtain payment for the sums that are 15 due and owing, is it your opinion that NORML 16 and/or Richard Cowan have a duty to inform you as 17 to when payment can be expected or the movement of 18 assets of the association? 19 A Yes. 20 Q Has anyone notified you that bank 21 accounts -- operating accounts of the 22 association -- are being moved? 37 1 A No. 2 MR. SANDOVAL: Can you mark this as our 3 next exhibit. 4 (Torrence Deposition Exhibit Nos. 5 12A and 12B were marked for 6 identification.) 7 BY MR. SANDOVAL: 8 Q Ms. Torrence, I am handing you what has 9 been marked Plaintiff's Exhibit Nos. 12A and 12B. 10 This is, as you can see, a check that was made 11 payable to NORML. 12 I would like you to take a look at the 13 reverse side -- which is 12B -- and if you can 14 look very closely -- I know it's faint -- look 15 very closely and tell us the bank that cashed this 16 check. 17 A First -- well, First American Bank. 18 Q And can you look on the side there and 19 tell us what you see? 20 A The date. 21 Q Do you see the letters "F-U-N-B"? 22 A B -- right, Virginia. 38 1 Q Are you aware that First Union National 2 Bank bought First American Bank? 3 A Probably, yes. I'm sure we have that 4 information. 5 Q Did Allen St. Pierre or Donnegal Pierce 6 inform you that they opened an account at a First 7 Union Bank? 8 A No, I don't recall really. Again, I 9 would not know what banks they were using without 10 looking at the case file. 11 Q Did they indicate to you that they were 12 going to make a payment on the amounts that were 13 due and owing? 14 A I think they were making voluntary 15 monthly payments, but I'm not sure of that. 16 Q Would those payments be reflected in the 17 transcripts marked Plaintiff's Exhibit Nos. 6 18 through 11? 19 A Yes, they would. 20 Q Would |
