United States America v. Simmons et al

Filing 58

ORDER granting 57 Motion for sanctions upon finding of contempt. Signed by District Judge Terrence G. Berg. (DPer)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
UNITED STATES OF AMERICA,
Plaintiff,

2:22-CV-11916-TGB-KGA
HON. TERRENCE G. BERG

vs.
ORDER GRANTING
PLAINTIFF UNITED STATES
OF AMERICA’S REQUEST
FOR SANCTIONS UPON
FINDING OF CONTEMPT
(ECF NO. 57)

HERMAN E. SIMMONS,
RICHMOND SIMMONS, and
PROFILE INCOME TAX CO.,
Defendants.

On January 13, 2025, the Court held a hearing on Plaintiff United
States of America’s motion for an order to show cause why Defendant
Richmond Simmons should not be held in contempt for failing to comply
with the Stipulated Order and Judgment of Permanent Injunction
entered on July 17, 2023 at ECF No. 43. Following oral argument, the
Court entered a Bench Order granting the United States’ motion and
finding Defendant Richmond Simmons in contempt for failing to comply
with the Permanent Injunction and Judgment. 1/13/2025 Text Only
Order Bench Order. The Court further ordered Mr. Simmons to respond
and produce records requested by the United States and directed the
United States to supplement its request for sanctions. Id.
Now before the Court is the United States’ Supplemental Request
for Entry of Order Imposing Sanctions. ECF No. 57. Defendant Richmond
Simmons has not responded or otherwise opposed this request. The Court

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concludes further oral argument will not aid in the resolution of this
matter. Accordingly, the Court will resolve the present motion without
oral argument. See E.D. Mich. L.R. 7.1(f)(2). For the reasons that follow,
the Court GRANTS the Government’s request for sanctions.
I.

BACKGROUND

A. Factual and Procedural Background
Until the Court’s injunction ordered them to cease operations,
Defendants Richmond Simmons (“Mr. Simmons”), Herman E. Simmons
(“Herman Simmons”), and Profile Income Tax Co. were federal tax return
preparers who primarily serviced customers in the Detroit area and filed
an average of 2,142 individual federal income tax returns per year. The
United States brought this action on August 16, 2022, to enjoin
Defendants from engaging in the business of preparing federal tax
returns. ECF No. 1. The Complaint alleged that since at least 2014,
Defendants had prepared false and fraudulent federal tax returns on
behalf of customers to reduce customers’ tax liabilities and obtain tax
refunds to which the customers were not entitled. Id. ¶ 9. The
Government pled examples of numerous schemes employed by
Defendants, including but not limited to: filing Schedules A with false or
inflated itemized deductions based on medical and dental expenses,
charitable contributions, or payment of unspecified “other taxes;” filing
Schedules C with false or inflated business-related expense deductions

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corresponding to phony businesses; and reporting incorrect filing
statuses. Id. ¶¶ 14–16.
On January 20, 2023, the Court granted the United States’ Motion
for a Temporary Restraining Order (“TRO”), enjoining Defendants from:
1. Preparing or assisting in the preparation or filing of federal
tax returns, amended returns, and other federal tax
documents and forms for anyone other than themselves;
2. Advising, counseling, or instructing anyone about the
preparation of a federal tax return;
3. Owning, managing, controlling, working for, or
volunteering for an entity that is in the business of
preparing federal tax returns or other federal tax
documents or forms for other persons;
4. Providing office space, equipment, or services for, or in any
other way facilitating, the work of any person or entity that
is in the business of preparing or filing federal tax returns
or other federal tax documents or forms for others or
representing persons before the IRS;
5. Advertising tax return preparation services through any
medium, including print, online, and social media;
6. Maintaining, assigning, transferring, holding, using, or
obtaining a Preparer Tax Identification Number (PTIN) or
an Electronic Filing Identification Number (EFIN);
7. Representing any person in connection with any matter
before the IRS;

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8. Employing any person to work as a federal tax return
preparer other than to prepare or file the federal tax return
of one of the Defendants;
9. Referring any person to a tax preparation firm or a tax
return preparer, or otherwise suggesting that a person use
any particular tax preparation firm or tax return preparer;
10. Selling, providing access, or otherwise transferring to
any person some or all of the proprietary assets of the
Defendants generated by their tax return preparation
activities, including but not limited to customer lists; and
11. Engaging in any conduct subject to penalty under 26
U.S.C. §§ 6694, and 6695, or that substantially interferes
with the administration and enforcement of the internal
revenue laws.
ECF No. 11. That TRO was originally set to expire on February 3, 2023,
id., but was extended “until such time as the Court rules on the
Government’s motion for preliminary injunction.” ECF No. 14.
The Court held an evidentiary hearing by videoconference on the
Government’s motion for preliminary injunction on March 3, 2023, after
which the parties submitted supplemental briefing. ECF Nos. 23, 24.
On April 10, 2023, the Court granted the United States’ motion for
preliminary injunction, enjoining Defendants in the same eleven
categories as set forth in the TRO. ECF No. 28. The Court found that
“Defendants willfully engaged in fraudulent conduct to understate their
clients’ tax liability” and that “the evidence before the Court is sufficient
to show that their misconduct has caused considerable harm, was
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continuous, and is likely to continue through Defendant Richmond
Simmons.” Id.
The parties submitted a Consent to Permanent Injunction Against
Defendants on May 15, 2023, ECF No. 34, and the Court entered a
Stipulated Order and Judgment of Permanent Injunction against
Defendants on July 17, 2023. ECF No. 43. In addition to permanently
barring Defendants from directly or indirectly acting as a tax return
preparer or filing tax returns on behalf of others, the Injunction Order
also requires the Defendants to: (1) “prominently post a copy of this
Injunction (with dimensions of at least 12 by 24 inches) at all physical
locations where they conduct any type of business;” (2) “produce to
counsel for the United States, within 60 days of the Court’s order, a list
that identifies by name, social security number, address, email address,
and telephone number and tax period(s) all persons for whom Defendants
prepared federal tax returns, amended tax returns, or claims for refund
between January 1, 2021, and the date of the Court’s order;” and (3)
“contact by email, if an email address is known, or otherwise by U.S.
Mail, all persons for whom Defendants prepared federal tax returns,
amended tax returns, or claims for refund since January 1, 2021 … and
inform them of the permanent injunction entered against Defendants by
sending each of them a copy of the order of permanent injunction.” Id.
The Injunction Order also authorized the United States to take postjudgment discovery to monitor and ensure Defendants’ compliance. Id.
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On January 25, 2024, Herman and Richmond Simmons filed a
declaration, signed under penalty of perjury, affirming that they received
a copy of and complied with the Injunction Order. ECF No. 44.
Within just a few weeks of filing his certification, Richmond
Simmons violated the Injunction Order by preparing and filing federal
income tax returns for others, including returns that exhibited the same
fraudulent practices alleged in the United States’ Complaint. Mr.
Simmons also interfered with the Government’s efforts to monitor his
compliance by telling his customers not to speak to the government
agents.
The United States then filed a Motion for Richmond Simmons to
Show Cause why he should not be held in contempt of the Court’s
Stipulated Order and Judgment of Permanent Injunction. ECF No. 46.
Beginning in February 2024, the United States had engaged
investigators to monitor Mr. Simmons’ compliance with the Permanent
Injunction. Based on that investigation, the Government deposed seven
individuals who confirmed that Mr. Simmons had prepared their 2023
returns, and several stated that their returns contained false items
similar to those alleged in the Government’s Complaint in this case. In
those seven returns, Mr. Simmons made at least eight types of
fabrications, all of the same kind that led the Government to bring this
case, such as including a Schedule C for a fictitious business, a Schedule
C listing thousands of dollars of fake car and truck expenses, incorrect
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information concerning filing status, as well as false and inflated
charitable cash contributions, medical or dental expenses, and education
and childcare expenses. ECF No. 46, PageID.1682–84 (citing deposition
testimony).
In addition, several customers testified that Mr. Simmons sent
them text messages instructing them not to respond to any contacts by
the Government’s investigator. Four customers stated that they received
text messages from Mr. Simmons stating: “Please don’t answer any calls
from an 815 area code. Call me if you have any questions.” Id.
PageID.1680–81 (citing deposition testimony and noting that the 815
area code refers to the investigator’s phone number he used to contact
customers as part of the contempt investigation). Mr. Simmons claimed
in his June 12, 2024 deposition that the calls came from his father,
Herman Simmons, and from “the office cell phone,” not him. Simmons
Dep. 12, ECF No. 46-1, PageID.1696. The Government responds by
pointing out that the Defendants had represented, pre-injunction, that
Herman Simmons suffered from dementia, and also that it is unclear why
an enjoined tax business needed an office cell phone.
Mr. Simmons confirmed under oath at his deposition that he had
knowingly violated the Permanent Injunction by preparing 35 to 40 postinjunction tax returns using Turbo Tax, and charging customers $100
each, even though he knew the Court had prohibited him from doing so.
Simmons Dep. 8–10, 14, ECF No. 46-1, PageID.1693–95, 1698. The
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Government believes the number of returns prepared by Mr. Simmons
was much higher. In addition, none of the customers deposed stated that
they had received a copy of the Injunction Order from Mr. Simmons and
they did not see the copy of the Injunction Order posted at Mr. Simmons’
office, as was required by the Injunction Order. ECF No. 46,
PageID.1678–79 (citing deposition testimony, including that they were
unaware that Mr. Simmons was not allowed to prepare returns).
On January 13, 2025, the Court held a hearing on the United
States’ motion to show cause at which counsel for the United States and
Mr. Simmons personally appeared. At the hearing, Mr. Simmons
admitted that he has continued to file tax returns in direct violation of
the Permanent Injunction. 1/13/25 Transcript 6–7, ECF No. 55,
PageID.1788–89. The Court therefore found Mr. Simmons in contempt
for failing to comply with the Permanent Injunction and Judgment. Id.
at 10–11, PageID.1792–93. The Court further directed the United States
to supplement its request for sanctions after receiving certain additional
information from Mr. Simmons that was necessary to formulate the
requested remedy. Id.; 1/13/25 Text-Only Order, Bench Order.
In compliance with that Order, the United States filed the instant
Supplemental Request for Entry of Order Imposing Sanctions. ECF No.
57. The United States seeks an order requiring Mr. Simmons (1) to
disgorge $4,460 in fees that he received for preparing tax returns in
violation of the Injunction Order, and (2) to pay $17,502.09 to the
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Government to cover the Government’s expenses in investigating Mr.
Simmons’ noncompliance and bringing the United States’ motion for
contempt. Id. Mr. Simmons did not respond to this motion.
II.

LEGAL STANDARD

If the court finds a party in contempt, the court may sanction the
offending party. See Williamson v. Recovery Ltd. P’ship, 467 F. App’x 382,
396 (6th Cir. 2012) (recognizing that the “district court ha[s] broad
discretion to fashion an appropriate remedy” for civil contempt). In
determining what sanctions are appropriate, courts are guided by the
purposes of contempt: “(1) to coerce the defendant into compliance with
the court’s order; and (2) to compensate the movant for losses sustained.”
Dominic’s Rest. of Dayton, Inc. v. Mantia, No. 3:09-CV-131, 2009 WL
10679457, at *4 (S.D. Ohio May 14, 2009) (citing Gompers v. Buck’s Stove
& Range Co., 221 U.S. 418, 448–49 (1911)); see also TWM Mfg. Co. v.
Dura Corp., 722 F.2d 1261, 1273 (6th Cir. 1983) (“[Civil contempt’s]
primary purposes are to compel obedience to a court order and
compensate for injuries caused by noncompliance.”). When determining
whether to impose sanctions, the court must “use the ‘least possible
power adequate to the end proposed.’” Mantia, 2009 WL 10679457, at *4
(quoting Spallone v. United States, 493 U.S. 265, 276 (1990)).
Courts frequently use their broad powers to prevent wrongdoers
from enjoying the fruits of their misconduct. See United States v. Stinson,
239 F. Supp. 3d 1299, 1326 (M.D. Fla. 2017), aff’d, 729 F. App’x 891 (11th
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Cir. 2018); see also F.T.C. v. Leshin, 618 F.3d 1221, 1237 (11th Cir. 2010)
(stating that disgorgement is appropriate because the wrongdoer should
not be allowed to profit from his violations of an injunction order); United
States v. Ireland, No. 2:11-cv-14068, 2019 WL 3759533, at *2 (E.D. Mich.
July 24, 2019) (Friedman, J.). A court may also compensate a moving
party for the nonmovant’s contempt in the form of a fine payable to the
movant. Id. This fine “must of course be based upon evidence of
complainant’s actual loss,” and the complainant’s “right, as a civil
litigant, to the compensatory fine is dependent upon the outcome of the
basic controversy.” United States v. United Mine Workers of Am., 330 U.S.
258, 304 (1947). A court may also require the contemptuous party to pay
the complainant’s attorney’s fees and costs for bringing the motion. TWM
Mfg., 722 F.2d at 1273.
III. DISCUSSION
A. Disgorgement of Fees
The United States reports that Mr. Simmons provided to the
Government a customer list with the names of 45 customers and
CashApp payment records showing the fees he received for preparing tax
returns in violation of the Injunction Order during February, March, and
April 2024. Of the 45 customer names provided, 37 of those appear by
name in Mr. Simmons’ CashApp records, with most paying $100, and
others paying $240, to Mr. Simmons for tax services in February, March,
or April 2024, for a total of $4,460. The United States therefore requests
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that the Court order Mr. Simmons to disgorge $4,460 in those ill-gotten
fees.
“To be entitled to disgorgement, the Government need only produce
a reasonable approximation of the defendant’s ill-gotten gains.” Stinson,
729 F. App’x at 899. “Exactitude is not a requirement; so long as the
measure of disgorgement is reasonable, any risk of uncertainty should
fall on the wrongdoer.” Id. (punctuation modified). Once the Government
presents its estimate, as it has here, the burden shifts to Mr. Simmons to
show

that

the

Government’s

estimate

was

not

a

reasonable

approximation. See United States v. Mesadieu, 180 F. Supp. 3d 1113,
1120 (M.D. Fla. 2016). Mr. Simmons has not responded and thus has not
rebutted the Government’s proof. Moreover, the amount in question was
calculated using records provided by Mr. Simmons. The Court finds that
the United States has presented a reasonable determination of Mr.
Simmons’ ill-gotten gains and that disgorgement of those fees is
appropriate in this case. Mr. Simmons blatantly and intentionally
violated of the Court’s Permanent Injunction Order. From such
contemptuous conduct he must not be allowed to profit. See United States
v. Powell, No. 21-CV-10622, 2024 WL 1342678, at *15 (E.D. Mich. Mar.
29, 2024) (Goldsmith, J.) (ordering disgorgement of “all profits received
from fraudulently prepared returns”); United States v. Carter, No. 2:13cv-10742, 2022 WL 22851963, at *2 (E.D. Mich. Apr. 12, 2022) (Davis, J.)
(ordering tax preparers to disgorge fees associated with preparation of
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tax returns in violation of permanent injunction); Ireland, 2019 WL
3759533, at *2 (finding “[d]isgorgement is also appropriate because [the
defendant] should not be allowed to profit from her violations of the
Order.”); United States v. Edmond, No. 2:13-CV-02938, 2016 WL
1312155, at *5 (W.D. Tenn. Apr. 4, 2016) (finding tax return preparer in
civil contempt for violating an injunction and awarding disgorgement of
all fees collected for the preparation of returns as a civil contempt
remedy). As a sanction, the Court finds that requiring disgorgement is
the ‘least possible power adequate to the end proposed.’” Mantia, 2009
WL 10679457, at *4 (quoting Spallone, 493 U.S. at 276).
B. Costs and Expenses
The United States asserts that it has incurred at least $17,502.09
in costs expenses in investigating Mr. Simmons’ noncompliance with the
Permanent Injunction, bringing his violations to the Court’s attention,
and stopping Mr. Simmons’ contemptuous conduct. The Government
states that, beginning in February 2024, it engaged investigators with
the firm Madison Associates, Inc. to monitor Mr. Simmons’ compliance
with the Injunction, which included reviewing tax return information
compiled by the IRS and contacting a number of Mr. Simmons’ former
customers to ask them whether Mr. Simmons prepared their 2023 tax
returns in January or February 2024. The total cost of this investigation
was $10,853.82. See Decl. of Richard Raven, ECF No. 57-1.

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Based on that investigation’s findings, the United States deposed
seven customers in Detroit, Michigan who confirmed that, in 2024, Mr.
Simmons had prepared their 2023 tax returns. The United States spent
$935 for process servers to serve the deposition subpoenas and prepare
affidavits of service, $2,888.35 for court reporting services for eight
depositions, and $1,037.51 in travel costs for the United States’ counsel
to travel to and conduct the depositions. See Decl. of Claire A. Shimberg,
ECF No. 57-2. The United States’ counsel further incurred travel costs to
attend the January 13, 2025 contempt hearing, totaling $1,787.41. See
Shimberg Decl., ECF No. 57-2. The United States therefore seeks costs
totaling $17,502.09 for investigating and litigating its contempt case
against Mr. Simmons.
Courts have noted that “[c]ompensation of the injured party in a
contempt proceeding ‘often consist[s] of reasonable costs (including
attorneys’ fees) incurred in bringing the civil contempt proceeding.”
American Consol. Indus., Inc. v. Blasingim, Nos. 1:19-cv-137, 5:17-cv2253, 2022 WL 17687491, at * 27 (N.D. Ohio Dec. 15, 2022) (quoting
Unitronics (1989) (R”G) Ltd. v. Gharb, 85 F. Supp. 3d 133, 142 (D.D.C.
2015)). “The remedial purposes of contempt suggest that a court may
award reasonable attorneys’ fees and costs as part of the losses the
injured party sustains as a result of the violation of the court order.” Id.;
Landmark Legal Found. v. EPA, 272 F. Supp. 2d 70, 86 (D.D.C. 2003);
see also United Mine Workers of Am., 330 U.S. at 303–04 (the purpose of
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civil contempt is “to coerce the defendant into compliance with the court’s
order, and to compensate the complainant for losses sustained”); United
States v. Bayshore Assocs., Inc., 934 F.2d 1391, 1400 (6th Cir. 1991)
(recognizing compensatory damages “payable to the complainant as
compensation for damages caused by the contemnor’s noncompliance”).
The Court finds that the United States has satisfactorily
demonstrated that it reasonably incurred the costs its seeks in
successfully

investigating

and

prosecuting

this

civil

contempt

proceeding. See United States v. Choice, No. 4:10-cv-14612, 2022 WL
4285724, at *2 (E.D. Mich. Aug. 2, 2022) (Goldsmith, J.) (awarding costs
and attorney fees associated with investigating and filing the motion for
civil contempt); Allegra Network LLC v. Bagnall, No. 11-11131, 2012 WL
1902839, at *2 (E.D. Mich. May 25, 2012) (Cleland, J.) (awarding costs in
a civil contempt proceeding for private investigator fees, expenses
incurred in serving subpoenas, and other documented administrative
costs). Accordingly, the Court will award the United States the costs and
expenses it seeks.
IV.

CONCLUSION

For the reasons stated above, IT IS HEREBY ORDERED that
sanctions shall be levied AGAINST Richmond Simmons and in favor of
the United States, payable to the United States in the amount of
$21,962.09, which represent disgorgement of $4,460 in fees that Mr.
Simmons received for preparing tax returns in violation of the Injunction
14

Order and $17,502.09 in the Government’s costs and expenses spent
investigating Mr. Simmons’ noncompliance and bringing the United
States’ motion for contempt.
IT IS SO ORDERED.
Dated: March 11, 2025

/s/Terrence G. Berg
HON. TERRENCE G. BERG
UNITED STATES DISTRICT JUDGE

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