United States of America v. Baker et al

Filing 130

Judge Richard G. Stearns: ORDER entered on distribution of Escrowed Funds. (Zierk, Marsha)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
CIVIL ACTION NO. 13-11078-RGS
UNITED STATES
v.
SCOTT G. BAKER and ROBYN BAKER
MEMORANDUM AND ORDER
ON THE DISTRIBUTION OF ESCROWED FUNDS
September 22, 2017
STEARNS, D.J.
This matter is before this court on a remand from the First Circuit
Court of Appeals for reconsideration of the division of escrowed funds as
between the plaintiff United States and claimant Robyn Baker. By way of
background, after a nonjury trial involving tax claims brought by the United
States against Scott Baker, Robyn Baker’s former husband, the court entered
extensive findings of fact, which for present purposes are not disputed. The
most immediately relevant of the findings led to the court’s determination
that the division of property agreed to by the Bakers upon the dissolution of
their marriage in 2008 was undertaken fraudulently to avoid Scott Baker’s
tax obligations to the United States. 1

1

See Memorandum and Order of

While certain facts in the narrative of the court’s findings appear to

August 17, 2015 (Dkt #86) at 35-38. After efforts at a mediated settlement
failed, the court entered a final judgment dividing the Bakers’ two remaining
and reachable assets of value, their family home in Hingham, Massachusetts,
and certain “Escrowed Funds” 2 equally between the United States and
Robyn Baker. In doing so, the court stated that its 50/50 equitable division
of the marital estate was consistent with “the common-law community
property system adopted by Massachusetts.” This statement was, of course,
a glaring error, as the Court of Appeals pointed out. See Baker, 852 F.3d at
103.

Massachusetts is not a community-property jurisdiction; rather, a

division of marital assets following a divorce in Massachusetts is governed
implicate Robyn Baker in some aspects of the fraudulent tax scheme, the
United States either failed to timely file or withdrew its claims against her.
Consequently, there is no judicial finding that she, in the words of the Court
of Appeals, was “guilty of fraud.” See United States v. Baker, 852 F.3d 97,
99 n.1 (1st Cir. 2017)
The Escrowed Funds consisted initially of an unanticipated
recoupment by a Bankruptcy Trustee of a portion of the monies ($356,808)
that the Bakers had lost as victims of a Ponzi-like tax shelter colloquially
known as “Son of BOSS.” The amount in escrow at last accounting had
grown to some $600,000 by virtue of a successful investment made by
Robyn Baker of a portion of the recouped funds. See generally, Dkt #115 at
4 n.3. The Escrowed Funds are the only remaining marital asset and are the
subject of the government’s renewed claim. The government is not
contesting the court’s 50/50 division of the Hingham property between it
and Robyn Baker. Additionally, the United States has waived any interest
in $84,000 disbursed by the Trustee that went directly to Robyn Baker, and
which she spent on legal fees.
2
2

by the multi-factored test set out in Mass. Gen. Laws ch. 208, § 34.3
[T]he court, after hearing the witnesses, if any, of each of the
parties, shall consider the length of the marriage, the conduct of
the parties during the marriage, the age, health, station,
occupation, amount and sources of income, vocational skills,
employability, estate, liabilities and needs of each of the parties,
the opportunity of each for future acquisition of capital assets
and income, and the amount and duration of alimony, if any,
awarded under sections 48 to 55, inclusive. In fixing the nature
and value of the property to be so assigned, the court shall also
consider the present and future needs of the dependent children
of the marriage. The court may also consider the contribution
of each of the parties in the acquisition, preservation or
appreciation in value of their respective estates and the
contribution of each of the parties as a homemaker to the family
unit.
In evaluating these fourteen mandatory and four discretionary factors,
the court, unless there are good reasons to do otherwise, looks to the
circumstances of the parties as of the date of the divorce proceeding. Fazio
v. Fazio, 91 Mass. App. Ct. 82, 90 (2017) (“Although ‘the marital estate is
typically determined as of the date of the divorce trial,’ . . . the trial judge has
the discretion to choose another date when warranted by the circumstances

The court’s finding that the Bakers entered into the Separation
Agreement in order to fraudulently transfer assets from Scott Baker to Robyn
Baker does not entail a finding that the divorce decree itself was invalid.
The government argues otherwise, contending that if the divorce was a sham,
Robyn Baker has no claim to any of the funds. See Gov’t Br. at 8. The Court
of Appeals explicitly adopted this court’s agnostic finding regarding the
divorce, Baker, 852 F.3d at 105, and this adoption is now the law of the case.
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3

and the relevant [section 34] factors . . . .”). Here, it would be nonsensical
to value the single remaining marital asset (the Escrowed Funds) as of any
date but today.

On the other hand, in applying the section 34 factors in

determining an equitable division of the Escrowed Funds, there is no reason
not to hew (mostly) to the “preferable” practice of looking to the date on
which the divorce became final. See Adams v. Adams, 459 Mass. 361, 379
n.14 (2011). That date is May of 2008.
At that point, the Bakers had been married for ten years. During the
marriage, Robyn Baker had worked principally as a homemaker and primary
caretaker for the Bakers’ two young children.
relatively young and in good health.

Both of the Bakers are

While Scott Baker is not highly

educated, he is hardworking and a mostly successful businessman with his
own construction company. He also managed the couple’s finances. His
earnings enabled the Bakers to maintain an upper middle class life style with
a large home in a fashionable South Shore community, a summer beach
home in Scituate, and properties in New Hampshire. 4

Although Robyn

Massachusetts does not recognize the “discarded idea that the wage
earner is entitled to most if not all of the benefits of the paid work.” Adams
v. Adams, 459 Mass. at 391 (quoting deCastro v. deCastro, 415 Mass. 787,
794 (1993)).
4

4

Baker did not have an extensive work history outside of the home, after the
divorce, she launched a successful career as a medical recruiter and
profitably invested (prior to their being escrowed) the Funds in a home
design business that also provided gainful employment to Scott Baker. By
all evidence neither of the Bakers nor their children are in dire financial
straits.
While both of the Bakers exhibited character flaws and human failings
during the course of their marriage (and since), theirs was a nonabusive and
affectionate relationship, and by all accounts, they have been good parents
to their children. It is true that Scott Baker’s ill-considered stratagems for
tax avoidance were principally to blame for the parlous state of the Bakers’
finances leading to their divorce and their many legal entanglements. Of
equal significance, although the now-voided Separation Agreement left the
Hingham home to Robyn Baker (along with most of the couple’s physical
assets), it specifically eschewed any payment of alimony or child support
(and none has been forthcoming since). 5 On the other hand, Scott Baker
The Separation Agreement provided for joint physical and legal
custody of the two children who continued to live with Robyn Baker in the
Hingham home. There is no evidence that the Bakers did not fulfill their
joint obligation to support the children or that either bore a disproportionate
share of the expenses involved. The Separation Agreement specifically
acknowledged that the Hingham home was to be held in trust by Robyn
5
5

made roughly half of the monthly mortgage payments on the Hingham home
before it was sold.6 He also assumed responsibility for most of the Bakers’
liabilities, including those arising from his construction business and his
interest in a Planet Fitness franchise. 7
Disregarding the fraudulent division of the Bakers’ assets and
liabilities in 2008, the question posed is whether a Probate Judge, then
presiding over a contested divorce proceeding involving the Bakers, and
applying the section 34 factors, would have considered a 50/50 division of
the marital estate equitable or instead excessively favorable to Robyn Baker.
I think she would have found it fair, particularly given the absence of alimony
or child support, the realistic expectation that the bulk of future childrearing
duties would fall to Robyn Baker, her (then) uncertain employment
prospects, and her historical contributions to the family unit as a

Baker for the benefit of the children (although the home has since been sold
to satisfy in part Scott Baker’s tax liabilities – the $133,358 in net proceeds
were divided between the United States and Robyn Baker).
The government contends that Scott Baker made most of the
mortgage payments, but as the Court of Appeals noted, there was insufficient
credible evidence to support that contention (which was advanced as a part
of the government’s lien tracing theory). See Baker, 852 F.3d at 105.
6

The value of the Planet Fitness franchise was hotly disputed at trial,
although Scott Baker estimated its worth at $250,000.
6
7

homemaker. I find this case reasonably similar to Adams v. Adams when
viewed through the prism of the Bakers’ 2008 divorce. Adams involved a
contested divorce following a nine-year marriage. Because of the husband’s
successful career in an investment advisory firm, the couple enjoyed an
upper-class lifestyle with a summer home in Florida and a primary home in
Chestnut Hill.

The wife had dedicated herself during the marriage to

maintaining the household and serving as the primary caregiver for the
couple’s four children.

In approving the judgment of the Probate Court

dividing the marital estate equally between the divorcing spouses, the
Supreme Judicial Court observed that
[h]ere, the judge diligently made findings on each of the
mandatory factors enumerated in § 34, as required. . . . In
addition, the judge’s findings clearly stated the rationale for the
equal property division. The judge found that the wife’s
“prolonged absence from the workforce would hinder her
employability,” and more importantly, although this was a midlength marriage that could conceivably warrant less than equal
division of property, the wife would “continue to have child-care
and custodial parenting responsibilities of the four minor
children for several years into the future.” The judge also
exercised his discretion to weigh spousal contributions to the
marital enterprise, both financially and in homemaking, and
recited many of the wife’s significant contributions to child care,
maintenance of property, financial management, and ministerial
work, both during cohabitation and after separation.
Adams v. Adams, 459 Mass. at 391.
7

In addition to Robyn Baker’s contribution to the family unit as a
homemaker and mother, there is another discretionary factor under section
34 that supports the fairness of the court’s 50/50 division of the Escrow
Funds between Robyn Baker and the government (viz, Scott Baker). The
court may consider the contribution of a spouse to the appreciation of the
value of the marital estate. Here, the government has (ironically) inherited
a windfall as a result of Robyn Baker’s perspicacious decision to invest a
substantial portion of the funds recovered by the Trustee in a business where
it more than doubled in value.
ORDER
For the foregoing reasons, the court, after considering the section 34
factors, reaffirms its decision to divide the Escrowed Funds equally between
the government and Robyn Baker. The government, having waived a claim
to the $84,000 of the Escrowed Funds previously spent by Robyn Baker, the
division will be exact with no offset for the half-portion of the $88,000 due
Scott Baker.
SO ORDERED.
/s/ Richard G. Stearns
UNITED STATES DISTRICT JUDGE
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