United States of America v. Gbotcho

Filing 9

MEMORANDUM OPINION (c/m to Defendants 4/27/15). Signed by Judge Deborah K. Chasanow on 4/27/2015. (sat, Chambers)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
UNITED STATES OF AMERICA

:
:

v.

:

Civil Action No. DKC 15-0296

:
KOMI E. GBOTCHO
:
MEMORANDUM OPINION
Presently pending and ready for resolution in this tax case
are: (1) a motion for preliminary injunction filed by Plaintiff
United States of America (“the Government”) (ECF No. 2); and (2)
motion for default judgment filed by the Government seeking a
permanent injunction against Defendant (ECF No. 7).
now rules, no hearing being deemed necessary.
For

the

injunction

following
will

be

reasons,
denied

as

the

motion

moot.

The

The court

Local Rule 105.6.

for

a

motion

preliminary
for

default

judgment will be granted and a permanent injunction will be
entered.
I.

Background
The Government filed the instant complaint on February 3,

2015, seeking a permanent injunction pursuant to 26 U.S.C. §§
7407,

7408,

and

7402,

prohibiting

Defendant

Komi

E.

Gbotcho

(“Mr. Gbotcho” or “Defendant”) from preparing income tax returns

for others.

(ECF No. 1).

On the same day, the Government moved

for a preliminary injunction.

(ECF No. 2).

was effected on February 4, 2015.
failed

to

respond

within

the

Service of process

(ECF No. 4).
requisite

Government moved for entry of default.

When Defendant

time

period,

(ECF No. 5).

entered default on March 12, 2015 (ECF No. 6).

the

The clerk

The Government

filed the pending motion for default judgment on March 20, 2015.
(ECF No. 7).

To date, Defendant has taken no action in the

case.1
In accordance with Fed.R.Civ.P. 65, the court makes the
following findings of fact and conclusions of law.
A.

Findings of Fact

Taking the allegations in the complaint as true, the court
finds as follows.
preparation

Komi E. Gbotcho has operated a tax return

business

under

various

names,

Eplanet LLP, Eplanet Corp., and Eplanete Corp.
The

Internal

years

2010

Revenue

through

Service

2013,

(“IRS”)

Defendant

such

that

and/or

least 1,309 tax returns through his business(es).

1

Eplatet,

(ECF No. 1 ¶ 4).

estimates

prepared

as

for

tax

filed

at

(Id. ¶ 5).

The government attorney submitted a declaration indicating
that based on her investigation pursuant to the Servicemembers
Civil Relief Act (“SCRA”), Defendant is not in the military
service of the United States, nor has he been detailed to any
military service with any branch of the armed forces of the
United States. (See ECF Nos. 7-3 & 7-4).
2

The IRS investigated tax returns filed by Mr. Gbotcho and
his businesses from 2009 to 2013.

During the audit, “50 tax

returns were examined, and adjustments were made to 48 of those
tax

returns,

for

an

adjustment

rate

of

96%,

adjustment of $5,063 for each tax return.”

and

an

(Id. ¶ 7).

average
The IRS

assessed penalties against Defendant in the amount of $223,500
as a result of the audit.

(Id. ¶ 8).

The IRS opened a second

investigation of Defendant for tax year 2013, which is ongoing.
(Id. ¶ 9).
Mr. Gbotcho continually prepared and submitted tax returns
for

individuals

claiming

certain

personal

property

rental

deductions, business expense deductions, and home improvement
deductions.

With

respect

to

personal

property

rental

deductions, at least two customers for whom Mr. Gbotcho prepared
tax returns indicated during the IRS’s audit that they had no
rental property, yet Defendant claimed in their tax returns a
personal property deduction in the amount of $12,856.
12).

One customer stated that he only provided his Form W-2 to

Defendant for his tax return to be prepared.
told

(Id. ¶

the

examiner

that

he

had

been

The customer also

referred

to

Mr.

Gbotcho

because of his reputation for being able to get larger refunds
for his customers than other tax preparers.

(Id.).

In another

instance, Mr. Gbotcho prepared 2009 and 2010 tax returns for a
customer

claiming

personal

property
3

rental

deductions

in

the

amount of $24,723 and $28,748, respectively, but the customer
told the IRS that he had no rental property and did not know why
the deduction was claimed on his tax returns.

(Id. ¶ 14).

For

the 2013 tax year, Defendant claimed a personal property rental
deduction

in

the

amount

of

$9,850

returns selected for an audit.
As

for

Defendant

business

claimed

a

on

twelve

out

of

thirty

(Id. ¶ 15).

expense

deductions,

deduction

in

the

for

amount

one
of

customer,

$12,240

for

employee business expenses on the 2009 tax returns and $14,834
for 2010.

(Id. ¶ 17).

The customer indicated that she told Mr.

Gbotcho that she had to buy suits for work and drive to work,
and that he “grossly inflated the amounts of those expenses.”
(Id.).

On

another

customer’s

2010

tax

return,

Mr.

Gbotcho

claimed a deduction for employee business expenses in the amount
of $16,914, yet the customer stated during the audit that he had
no unreimbursed employee expenses and the deduction was claimed
for commuting expenses.

(Id. ¶ 18).

Mr. Gbotcho also claimed deductions for “home improvement”
expenses on his clients’ tax returns.

Specifically, on one

customer’s 2013 tax return, Mr. Gbotcho claimed a deduction in
the amount of $9,850 for home improvement; the customer said
that he spent that amount to renovate a bathroom in his home.
(Id.

¶

20).

In

another

instance,

Mr.

Gbotcho

claimed

a

deduction in the amount of $18,285 on a customer’s 2009 tax
4

return, and the customer told the IRS that the deduction was for
repairs that he made to his home, such as fixing stairs and
building a patio.
II.

(Id. ¶ 21).

Conclusions of Law
A.

Standard of Review on Default Judgment

Under Fed.R.Civ.P. 55(a), “[w]hen a party against whom a
judgment for affirmative relief is sought has failed to plead or
otherwise defend, and that failure is shown by affidavit or
otherwise,

the

clerk

must

enter

the

party's

default.”

A

defendant's default does not automatically entitle the plaintiff
to entry of a default judgment; rather, that decision is left to
the discretion of the court.
767 (5th Cir. 2001).
that

“cases

be

See Lewis v. Lynn, 236 F.3d 766,

The Fourth Circuit has a “strong policy”

decided

on

their

merits,”

Dow

v.

Jones,

232

F.Supp.2d 491, 494 (D.Md. 2002) (citing United States v. Shaffer
Equip.

Co.,

11

F.3d

450,

(4th

453

Cir.

1993)),

but

default

judgment may be appropriate where a party is unresponsive, see
S.E .C. v. Lawbaugh, 359 F.Supp.2d 418, 421 (D.Md. 2005) (citing
Jackson v. Beech, 636 F.2d 831, 836 (D.C.Cir. 1980)).
“Upon [entry of] default, the well-pled allegations in a
complaint

as

to

liability

are

taken

allegations as to damages are not.”
422.

as

true,

although

the

Lawbaugh, 359 F.Supp.2d at

Fed.R.Civ.P. 54(c) limits the type of judgment that may be

entered based on a party’s default: “A default judgment must not
5

differ in kind from . . . what is demanded in the pleadings.”
“[C]ourts have generally held that a default judgment cannot
award additional damages ... because the defendant could not
reasonably
amount.”

have

expected

that

his

damages

would

exceed

that

In re Genesys Data Technologies, Inc., 204 F.3d 124,

132 (4th Cir. 2000).

While the court may hold a hearing to

consider evidence as to the relief sought, it is not required to
do

so;

it

may

rely

instead

on

“detailed

affidavits

or

documentary evidence to determine the appropriate [damages].”
Adkins v. Teseo, 180 F.Supp.2d 15, 17 (D.D.C. 2001) (citing
United Artists Corp. v. Freeman, 605 F.2d 854, 857 (5th Cir.
1979)).
B.

Permanent Injunction

The Government seeks a permanent injunction pursuant to 26
U.S.C. §§ 7402, 7407, and 7408.

See, e.g., United States v.

Preiss, No. 1:07CV00589, 2008 WL 2413895, at *4 (M.D.N.C. June
11,

2008)

(analyzing

request

for

permanent

injunction

under

Sections 7402 and 7408 separately “because each has different
language governing the grant of injunctive relief.”).
Some courts have held that because Sections 7407 and 7408
expressly
traditional
satisfied.

authorize

the

requirements

issuance
for

of

equitable

an

injunction,

relief

need

not

the
be

See, e.g., United States v. ITS Financial, LLC, 592

F.App’x 387, 400 (6th Cir. 2014) (“As we have previously held
6

regarding § 7408, because the statute expressly authorizes the
issuance

of

an

injunction,

the

traditional

requirements

for

equitable relief need not be satisfied.”) (citing United States
v. Gleason, 432 F.3d 678, 682 (6th Cir. 2005)); United States v.
Stover, 650 F.3d 1099, 1106 (8th Cir. 2011) (“‘When an injunction
is explicitly authorized by statute, proper discretion usually
requires its issuance if the prerequisites for the remedy have
been

demonstrated

legislative
permanent

and

purpose.’

injunctive

the
.

.

injunction
.

relief

need

fulfill

the

traditional

The

would

criteria

for

not

be

discussed.”)

United States v. White, 769 F.2d 511, 515 (8th

(citing

Cir. 1985));

United States v. Elsass, 978 F.Supp.2d 901, 939 (S.D.Ohio. 2013)
(“Finally,
sections

the

Court

discussed

notes
above

that

because

[Sections

each

7402,

of

the

7407,

and

I.R.C.
7408]

expressly authorize the issuance of injunctions, the traditional
requirements

for

equitable

relief

need

(internal quotation marks omitted)).

not

be

satisfied.”

In The Real Truth About

Obama, Inc. v. F.E.C., 607 F.3d 355 (4th Cir. 2010), the United
States Court of Appeals for the Fourth Circuit reissued Parts I
and II of its earlier opinion in the case, articulating the
standard for the issuance of a preliminary injunction.

The

earlier opinion adopted the standard articulated by the Supreme
Court

of

Defense

the

United

Council,

States

Inc.,

555

in
U.S.
7

Winter
7

v.

(2008),

Natural
for

Resources

granting

a

preliminary injunction.

See The Real Truth About Obama, Inc. v.

Federal Election Com’n, 575 F.3d 342, 345-46 (4th Cir. 2009).
Prior to The Real Truth About Obama, at least some courts within
the

Fourth

Circuit

dispensed

with

applying

the

traditional

guidelines for equitable relief in determining whether to grant
a permanent injunction pursuant to 26 U.S.C. §§ 7407 and 7408
because those statutes expressly authorize such relief.

See,

e.g., United States v. Kotmair et al., Civ. No. WMN-05-1297,
2006 WL 4846388, at *4 (D.Md. Nov. 29, 2006), aff’d, 234 F.App’x
65 (4th Cir. 2007); Abdo v. IRS, 234 F.Supp.2d 553, 564 (M.D.N.C.
2002)

(“An

traditional

injunction
equitable

may

issue

prerequisites

without
if

a

resort
statute

to

the

expressly

authorizes the injunction.”), aff’d, 63 F.App’x 163 (4th Cir.
2003).

The court need not decide, however, whether traditional

requirements

for

equitable

relief

must

be

satisfied

before

granting a permanent injunction under any of the three statutes
because, as will be seen, the Government has established the
equitable factors here.
1.

26 U.S.C. § 7407

The Government must establish three elements to obtain an
injunction pursuant to § 7407: (1) the defendant must be a tax
preparer; (2) the conduct alleged must fall within one of the
four categories proscribed by 26 U.S.C. § 7407(b)(1)(A)-(D); and
(3) the court must find that an injunction is appropriate to
8

prevent recurrence of the proscribed conduct.

The “prohibited

conduct” that the Government must demonstrate includes, inter
alia, conduct subject to penalty under 26 U.S.C. § 6694 or any
other

fraudulent

interferes
Revenue

with

laws.

or

deceptive

the

proper

See

26

conduct

which

administration

U.S.C.

§

of

substantially
the

7407(b)(1)(A),

Internal

(D).

The

Government contends that Defendant engaged in conduct covered by
26 U.S.C. § 6694.
return

Section 6694(a) imposes penalties on tax

preparers

who

prepare

a

return

understating

the

taxpayer’s liability due to an unreasonable position and the
preparer knew or reasonably should have known of the position.
By virtue of his default, the above factual allegations are
admitted.

See, e.g., Ryan v. Homecomings Fin. Network, 253 F.3d

778, 780 (4th Cir. 2001) (“The defendant, by his default, admits
the plaintiff’s well-pleaded allegations of fact[.]”).
upon

the

well-pled

factual

allegations,

Mr.

Gbotcho

Based
was

an

income tax preparer who engaged in conduct prohibited by Section
6694.2

Defendant prepared false tax returns claiming significant

personal property rental deductions even when his customers had
no

rental

Defendant
personal

property.
prepared
property

(ECF
a

tax

rental

No.

1

return
deduction

2

¶¶
for
in

11-15).
a

For

customer

the

amount

instance,

claiming
of

a

$9,850.

The Government also has submitted a declaration from Julie
Hersh, Revenue Agent with the IRS, substantiating the factual
allegations in the complaint. (See ECF No. 7-2).
9

During the IRS’s audit audit, the customer stated that she did
not

have

any

deduction

property

was

for

reflected

rent

on

her

and

was

tax

not

aware

return.

that

(Id.

the

¶

13).

Moreover, for the 2013 tax year, Defendant claimed a personal
property

rental

deduction

in

the

same

amount

-

twelve of the thirty returns selected for audit.

$9,850

–

on

(Id. ¶ 15).

As the Government argues, “[i]t is unrealistic to believe that
12 different customers incurred the same expenses in the same
tax year.”

(ECF No. 7-1, at 8).

The IRS’s audit further established that Defendant prepared
tax

returns

claiming

false

or

inflated

unreimbursed

employee

business expenses for non-deductible items such as multi-purpose
clothing and commuting expenses.
instance,

on

one

customer’s

(ECF No. 1 ¶¶ 16-18).

2009

tax

returns,

Mr.

For

Gbotcho

claimed a deduction for employee business expenses in the amount
of $12,240 and for the same customer, he claimed a deduction for
employee business expenses in the amount of $14,834 in 2010.
(Id. ¶ 17).

The customer indicated that she told Mr. Gbotcho

that she had to buy suits for work and drive to work.

She also

stated that Mr. Gbotcho grossly inflated the amounts that she
provided
Similarly,

to
on

him

to

another

deduct

as

customer’s

business
2010

tax

expenses.
return,

(Id.).
Defendant

purportedly claimed a deduction for employee business expenses
in the amount of $16,914, but the customer said that he had no
10

unreimbursed employee expenses and the deduction was claimed for
commuting

costs.

demonstrate

(Id.

that

significantly

Mr.

¶

18).

Gbotcho

understated

The

admitted

prepared

tax

tax

liability

allegations

returns

and

that

that

the

understatements were without substantial justification.
The Government also must show that a permanent injunction
is reasonably likely to prevent recurrence of the prohibited
conduct.

Courts “assess the totality of the circumstances” in

determining

whether

recurrence.

to

grant

Specifically,

an

courts

injunction
weigh

the

to

prevent

following

five

factors: (1) “the gravity of harm caused by the offense”; (2)
the extent of the defendant’s participation and . . . his degree
of

scienter”;

infraction
business

(3)

and

the

activities

“the

isolated

likelihood
might

or

that

again

recurrent
the

involve

nature

defendant’s
.

.

.

of

the

customary

him

in

such

transactions”; (4) “the defendant’s recognition of . . . his own
culpability”; and (5) “the sincerity of . . . his assurances
against

future

violations.”

Abdo,

234

F.Supp.2d

at

564

(internal quotation marks and citations omitted).
These factors weigh in favor of a permanent injunction.
the

Government

asserts,

Mr.

Gbotcho’s

customers

were

As

harmed

because they entrusted him to prepare accurate tax returns, but
the prepared returns substantially understated their actual tax
liabilities.

According to the complaint, “[m]any customers now
11

face

large

income

tax

sizeable

penalties

and

Gbotcho’s

conduct

deficiencies
interest.”

also

harms

and
(ECF

the

United

may
No.

be
1

States

liable

¶

for

22).

Mr.

because

“the

Internal Revenue Service must devote its limited resources to
investigating Gbotcho, identifying his customers, ascertaining
the customers’ correct tax liabilities, recovering any refunds
erroneously
liabilities

issued,
and

and

collecting

penalties.”

(Id.

¶

any
25);

additional
see,

e.g.,

tax

United

States v. Reliable Limousine Service, LLC, et al., No. 8:11-cv03383-JFM, 2012 WL 957620, at *3 (D.Md. Feb. 8, 2012) (“The
efficacy

of

the

federal

tax

system

relies

on

employers

voluntarily file correct tax returns and pay the taxes due.

to
The

Defendants’ failure to do so undermines this system and gives
them an unfair advantage over the competitors who comply with
the law.”).
The complaint explains the results of the IRS’s examination
of tax returns filed by Mr. Gbotcho through his business for tax
years

2009

and

2010.

“During

that

investigation

and

the

current, ongoing investigation, 50 tax returns were examined,
and adjustments were made to 48 of those tax returns, for an
adjustment rate of 96%.”

(Id. ¶ 7).

For tax years 2010 through

2013, Defendant, through his business Eplanet, filed 1,309 known
tax returns, of which “703 tax returns contained the personal
property rental deduction and/or questionable Schedule A items
12

[], such as the employee business expense and home improvement
expense.

Applying the adjustment rate of 96% and the average

adjustment

of

$5,063

[],

the

estimated

tax

harm

caused

by

Gbotcho for tax years 2010 through 2013 is approximately $3.4
million.”
Covington,

(ECF
No.

No.

1

¶

24);

see,

8:13-cv-1170-T-35TBM,

e.g.,
2014

United

WL

States

5139206,

at

v.
*4

(M.D.Fla. Sept. 17, 2014) (“The Court finds that Covington has
continually and repeatedly engaged in conduct proscribed by §
7407, that an injunction prohibiting such conduct would not be
sufficient to prevent Covington’s further interference with the
proper administration of the internal revenue laws, and thus the
Court

will

preparer.”);

enjoin
Abdo,

Covington
234

from

F.Supp.2d

at

acting
565

as

a

tax

(finding

return

significant

harm when the defendant filed over 200 tax returns, created at
least $243,000 in understated taxes, and causing the IRS to
spend valuable time investigating those tax returns); Preiss,
2008 WL 2413895, at *6 (“[T]he tax scheme caused significant
harm to the United States Treasury and the taxpaying public by
interfering

with

the

revenue laws. . . .

proper

administration

of

the

internal

Even if the United States could collect

these funds, it would likely incur substantial costs and burdens
in

investigating

and

collecting

filers.”).

13

the

refunds

from

individual

As

a

result

of

the

investigation,

the

IRS

assessed

penalties against Mr. Gbotcho in the amount of $223,500 under 26
U.S.C. § 6694(a) and (b) and 26 U.S.C. § 6695(f).

(Id. ¶ 8).

Ms. Hersh declares that as of March 20, 2015, the date of her
declaration, Mr. Gbotcho failed to pay the penalties assessed
against him and that as recently as December 2014, Mr. Gbotcho
disputed the penalties assessed against him.
13-14).

(ECF No. 7-2, ¶¶

The complaint indicates that the IRS has opened a new

investigation into Mr. Gbotcho’s tax practices based on a belief
that he continues to engage in conduct subject to penalty under
the tax laws.
Defendant’s

(ECF No. 1 ¶ 9).
conduct,

that

Considering the harm created by

the

IRS

has

already

assessed

substantial penalties against Mr. Gbotcho which he has refused
to

repay,

violate

and

tax

the

laws,

IRS’s
a

belief

permanent

that

Defendant

injunction

is

continues

to

appropriate

to

prevent recurrence.
Moreover,

the

Government

has

satisfied

the

equitable

factors to warrant the issuance of a permanent injunction.

The

Supreme Court of the United States has provided guidelines for
granting

permanent

injunctive

relief:

(1)

the

plaintiff

must

have “suffered an irreparable injury”; (2) “remedies available
at

law,

such

as

monetary

damages,

[must

be]

inadequate

to

compensate for that injury”; (3) “considering [the] balance of
hardships

between

plaintiff

and
14

defendant,

remedy

in

equity

[must be] warranted”; and (4) the court must ensure that the
“public

interest

would

not

be

disserved.”

eBay

Inc.

v.

MercExchange, L.L.C., 547 U.S. 388, 391 (2006).
First, the United States has suffered an irreparable injury
as a result of Defendant’s tax practices.

Defendant continually

prepared tax returns falsely claiming personal property rental
deductions and employee business expense deductions.

The well-

pleaded factual allegations establish that Defendant’s conduct
harms his customers because many customers now face large income
tax deficiencies and may be liable for sizeable penalties and
interest.

(ECF No. 1 ¶ 22).

The Government is also harmed

because for tax years 2010 through 2013, Mr. Gbotcho prepared
approximately 1,309 known tax returns, 703 of which contained
the

personal

property

rental

deduction

and/or

questionable

Schedule A items and resulted in his customers underreporting
and underpaying their correct tax liabilities.

(Id. ¶¶ 23-24).

The average adjustment rate for each tax return that needed
adjustment (based on the 2009 and 2010 audit) was $5,063.
No. 7-2 ¶ 12).

(ECF

As explained in the complaint, “[a]pplying the

adjustment rate of 96% and the average adjustment of $5,063
listed above, the estimated tax harm caused by Gbotcho for tax
years 2010 through 2013 is approximately $3.4 million.”
33);

see,

e.g.,

Preiss,

2008

WL

2413895,

at

*10

(Id. ¶
(“The

investigation of the scheme depleted the federal government’s
15

limited resources, impaired the efficient administration of the
internal revenue laws, and threatens to undermine the integrity
of taxpayers’ compliance with the nation’s tax laws.”).
Second, legal remedies are inadequate to compensate for the
injury.

As stated above, the IRS has already assessed penalties

against Defendant based on the 2009 and 2010 audit, which he has
disputed and has not repaid.

Moreover, the complaint avers that

Mr. Gbotcho continues to file false tax returns on behalf of
customers even after the audit and the IRS’s findings, and the
IRS has opened a new investigation.

Moreover, as the court

concluded in Preiss, 2008 WL 2413895, at *10, even if monetary
damages were a feasible alternative, “the United States would
incur substantial costs and burdens in the investigatory and
collection process.

Ultimately, the United States is unlikely

to collect the false refunds because of the number of filers,
lapse of time and socioeconomic status of the customers.”
Moreover,

the

Government’s favor.

balancing

of

hardships

weigh

in

the

As the Government argues, “[t]he Service

spends valuable resources contacting customers and conducting
examinations until the proper tax liabilities are determined.
Then, the Service must engage in an often-lengthy collection
process to recover the taxes owed.”
e.g.,

United

States

v.

Majette,

(ECF No. 7-1, at 13); see,
Civ.

No.

13-7238,

2014

WL

5846092, at *3 (D.N.J. Nov. 12, 2014) (“With the IRS’s limited
16

resources, it cannot audit or otherwise monitor all future tax
returns filed by Defendant, especially given the large volume of
returns

previously

prepared

by

Defendant.

In

light

of

Defendant’s demonstrated ability and willingness to commit tax
fraud on a large scale, any hardship to Defendant caused by the
injunction would be outweighed by the serious risk of harm faced
by Plaintiff in the absence of an injunction.”).

The final

factor, the public interest, also favors a permanent injunction.
As

the

Government

argues,

Defendant’s

tax

return

preparation

practices undermine the tax system and harm his customers, who
become

subject

to

(ECF No. 7-1, at 5).

additional

tax

assessments

and

penalties.

Accordingly, all equitable factors support

entry of a permanent injunction.
2.

26 U.S.C. § 7408

The Government also seeks an injunction pursuant to Section
7408.

Section 7408(a) of the Internal Revenue Code provides

that the United States may commence an action in a district
court to enjoin any person from engaging in conduct subject to
penalty under §§ 6700 and 6701.

A district court has authority

to grant such relief if it finds:
(1) That the person has engaged in any
conduct subject to penalty under section
6700 (relating to penalty for promoting
abusive tax shelters, etc.), section 6701
(relating
to
penalties
for
aiding
and
abetting understatement of tax liability),
section 6707 (relating to failure to furnish
17

information
regarding
reportable
transactions), or section 6708 (relating to
failure to maintain lists of advisees with
respect to reportable transactions), and
(2) That injunctive relief is appropriate to
prevent recurrence of such conduct.
See 26 U.S.C. § 7408(b).

The Government asserts that Defendant

engaged in conduct covered by 26 U.S.C. § 6701.

Section 6701

penalizes any person who aids or assists in the preparation of a
return, knows or has reason to believe that the return will be
used in connection with any material matter arising under the
internal revenue laws, and knows that such a return would result
in the understatement of tax liability of another person.

26

U.S.C. § 6701(a).
For the reasons explained above, the well-pled allegations
in

the

complaint

establish

that

Mr.

Gbotcho

acted

as

a

tax

preparer and he knew that the returns he prepared contained
false

information

and

understated

tax

liability.

The

well-

pleaded factual allegations further establish that an injunction
is appropriate to prevent recurrence of the same conduct for the
reasons stated above.

Finally, the equitable elements are also

satisfied.
3.
26
basis

26 U.S.C. § 7402
U.S.C.

for

a

§

7402

district

provides
court

to

an

additional

issue

“writs

or
and

alternative
orders

of

injunction . . . and such other orders and decrees as may be
18

necessary or appropriate for the enforcement of the internal
revenue laws.”

26 U.S.C. § 7402(a).

Injunctive relief under §

7402 is “in addition to and not exclusive of any and all other
remedies.”

Id.

“Section 7402(a) is not limited to enjoining

specific conduct proven to violate tax laws . . .

Courts have

invoked § 7402(a) to enter an injunction even where there was no
violation of the internal revenue laws.”

United States v. ITS

Financial, LLC, 592 F.App’x 387, 395 (6th Cir. 2014).

As noted

above, the Government has established that Mr. Gbotcho engaged
in conduct that violated Sections 7407 and 7408 of the Internal
Revenue Code.

Applying the traditional equitable factors also

supports the issuance of a permanent injunction for the reasons
explained.
4.

Scope of the Injunction

The

Government

seeks

a

permanent

injunction

against

Defendant Gbotcho under 26 U.S.C. §§ 7402, 7407, and 7408.

The

Government indicates that “[b]ecause a narrower injunction would
be

insufficient

to

prevent

Gbotcho’s

misconduct,

the

United

States [] seeks to prevent Gbotco and his business(es) from
preparing
before

tax

the

returns

Internal

for
Revenue

others,

from

Service,

representing

and

from

others

engaging

in

conduct subject to penalty under the Internal Revenue Code, or
other

conduct

that

substantially

interferes

with

the

proper

administration and enforcement of the internal revenue laws.”
19

(ECF No. 7-1, at 6).
Government

cites

Furthermore, in its proposed order, the

26

U.S.C.

§

7402(a)

as

authorizing

post-

judgment discovery to monitor Mr. Gbotcho’s compliance with the
terms of any permanent injunction entered against him.
7-5, at 8, Government’s proposed order).3

(ECF No.

Section 7402 does not

expressly authorize post-judgment discovery, however.

Section

7402 states that “[t]he district courts of the United States at
the instance of the United States shall have such jurisdiction
to

make

and

issue

in

civil

actions,

writs

and

orders

of

injunction . . . and such other orders and processes, and to
render

such

judgment

and

decrees

as

may

be

necessary

or

appropriate for the enforcement of the internal revenue laws.”
26 U.S.C. § 7402(a) (emphasis added).
explained

why

post-judgment

The Government has not

discovery

is

necessary

or

appropriate for the enforcement of tax laws, or provided any
other

authority

for

ordering

post-judgment

discovery.

Accordingly, the permanent injunction will be entered, but the
court will not order post-judgment discovery.
III. Conclusion
For the foregoing reasons, the motion for default judgment
filed

by

the

Government

will

3

be

granted

and

a

permanent

The complaint also requests that the court order postjudgment discovery. (ECF No. 1, at 11).
20

injunction will be entered against Defendant by separate order.
The motion for a preliminary injunction will be denied as moot.

/s/
DEBORAH K. CHASANOW
United States District Judge

21