Posted 4/7/2014 12:00 am
Updated 7 months ago
In a cautionary tale for other non-owner executives, a federal judge has ruled that Ralph Bradbury, former president of the defunct Continental Express of Little Rock, is responsible for an unpaid $750,000 payroll tax bill.
Bradbury maintained that the tax bill should have gone to the owners of the trucking company, Ed and Bonnie Harvey, and their financial adviser, Marvin Jones. He said they were the ones who controlled the company during the fiscal quarter that ended Sept. 30, 2008, when the taxes were owed.
The IRS withheld some of Bradbury’s tax refund, and he sued the government in 2011 to get the money back and have the debt thrown out.
U.S. District Judge D. Price Marshall Jr. ruled against Bradbury on March 24 and said he was responsible for paying the taxes.
“He also acted willfully as a matter of law in failing to pay” the payroll taxes, Marshall wrote in his 21-page summary judgment order, which means the judge decided the case before it even went to trial. A hearing is set for April 25 to determine exactly how much Bradbury owes the IRS.
Bradbury’s attorney, Randy Coleman of Little Rock, said last week that he will probably appeal the decision to the 8th U.S. Circuit Court of Appeals.
He also will push forward with the 2011 lawsuit Bradbury filed in Pulaski County Circuit Court against the Harveys, which had been put on hold while the federal IRS case against Bradbury was pending.
Coleman also said Bradbury’s case should serve as a warning to other company executives.
“Everybody out there in the community that’s a corporate officer that doesn’t have any ownership ought to sit up and pay attention to what’s happened to Ralph in this case,” he said. “Ralph didn’t even own a pencil in the company. The ownership can leave you in a really desperate situation.”
Coleman said that, according to the IRS’s rules, Bradbury should have quit and walked out the door of Continental to avoid being legally responsible for the taxes.
“And Ralph might have done that except for the fact that the Harveys kept telling him that we’re going to take care of him and never did,” Coleman said.
Bradbury also said he wasn’t happy with the way the ruling was reached.
“I had spent three years of awaiting it and a substantial portion of my net worth fighting and developing my case, and to have it decided in a summary judgment order was disappointing,” he said.
Coleman said he doesn’t know why the IRS didn’t target the Harveys to collect the tax money. The IRS doesn’t have to disclose that information, he said.
The attorney for the IRS, Erin Lindgren of Washington, D.C., didn’t return a call for comment.
The IRS said Bradbury was responsible for making sure the payroll tax withholdings were paid to the government. Bradbury, though, maintained that Bonnie Harvey repeatedly promised in 2008 to recapitalize the company but never did. And Bradbury said that Jones, the Harveys’ consultant, told him the taxes would be paid.
In November 2008, Jones and Bonnie Harvey told Bradbury that they had found a buyer for Continental. The Celadon Group Inc. of Indianapolis bought the trucking company’s assets for $24.1 million but didn’t assume any of the company’s debts. The sale closed on Dec. 4, 2008.
Bradbury lobbied to have the taxes paid, but they weren’t.
The Harveys “knew the payroll taxes were owed,” Coleman said last week. “They reached the decision to sell the company out from under [Bradbury] and apply the sales proceeds and the remaining assets of the company like they wanted to apply them irrespective of what Ralph’s wishes were.”
The IRS argued that Bradbury’s surrounding circumstances were immaterial: “because Bradbury was a responsible person during the third quarter; and because he knew other bills were being paid then, but the withholdings were not.”
Coleman said that Bonnie Harvey testified in her deposition that she loved Bradbury like a son.
“If Bonnie Harvey loved him like a son, I can’t figure out why in the world she would leave him holding the bag,” Coleman said.
Ed Harvey is in frail health, and Bonnie Harvey couldn’t be reached for comment. She is the mother of Jill Pryor, ex-wife of U.S. Sen. Mark Pryor, D-Ark.
Ralph Bradbury’s daughter, Rachel Bradbury, is a publisher for Arkansas Business Publishing Group, the parent company of Arkansas Business.