United States of America v. Elsass et al

Filing 284

ORDER denying 281 Defendant's Motion to Quash. Signed by Magistrate Judge Norah McCann King on 4/26/17. (sem)(This document has been sent by regular mail to the party(ies) listed in the NEF that did not receive electronic notification.)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION

UNITED STATES OF AMERICA,
Plaintiff,
vs.

Civil Action 2:10-CV-336
Magistrate Judge King

TOBIAS H. ELSASS, et al.,
Defendants.

OPINION AND ORDER

This matter is before the Court on the motion filed pro se by defendant
Elsass to quash subpoenas issued by the Government toPark National Bank
and JPMorgan Chase Bank, NA. Motion to Quash Subpoenas, ECF No. 281 (“Motion
to Quash”). The Government opposes the Motion to Quash. United States’
Memorandum in Opposition to Defendant Tobias Elsass’ Motion to Quash
Subpoenas, ECF No. 283 (“Memo. in Opp.”). There has been no reply. Because
the Court concludes that the Motion to Quash can be resolved on the parties’
memoranda, the request for oral argument, see Motion to Quash, PagedID#
9919, is denied.
The United States of America brought this civil action for injunctive
and declaratory relief under 26 U.S.C. '' 7402, 7407 and 7408 against
defendants Tobias H. Elsass and entities that he founded and controlled,
including Fraud Recovery Group, Inc., in connection with defendants=
promotion of a theft loss tax scheme. On October 17, 2013, the Court enjoined
all defendants from serving as tax return preparers. Judgment, Doc. No.
240. Specifically, the Court enjoined defendants from, inter alia,

owning any interest in, operating, incorporating, establishing,
employment with, associating with, advising, and/or investing
in any entity, business, corporation, partnership, or
association involved in the business of promoting the
availability of or assisting or advising taxpayers with 26
U.S.C. § 165 theft-loss deductions and/or any tax matters. The
Defendants must immediately divest any ownership interest in
any such company or entity and/or cause such company or entity
to cease operations;
The Defendants are enjoined from employment with, associating
with, and advising, any person involved in the business of
promoting the availability of or assisting or advising taxpayers
with 26 U.S.C. § 165 theft-loss deductions and/or any tax
matters;. . .
Id. at PageID# 9184. The United States Court of Appeals for the Sixth Circuit
affirmed that judgment. United States v. Elsass, 769 F.3d 390 (6th Cir.
2014).
On February 1, 2017, the Government issued document subpoenas to
JPMorgan Chase Bank, NA, and Park National Bank, seeking the production
of financial records and other documents in connection with accounts held
in the name of, inter alia, defendant Elsass and Fraud Recovery Group,
Inc. Attachment 1 to Motion to Quash, PageID# 9923-9937; Exhibit A to Memo.
in Opp. Noting that his Chapter 7 bankruptcy proceedings remain pending,
see Suggestion of Bankruptcy, ECF No. 282, defendant Elsass argues that
the documents sought by the subpoenas “are clearly protected by” the
automatic stay provisions of the Bankruptcy Code, 11 U.S.C. § 362. Motion
to Quash, PagedID# 9920. Defendant Elsass asks that the subpoenas be quashed
and that the Government’s counsel be sanctioned. Id. at PageID# 9920.
It is true that 11 U.S.C. § 362(a) operates to stay the continuation
of many judicial proceedings against a debtor in bankruptcy. However,
“[t]he automatic stay provision ‘was intended to prevent interference with
a bankruptcy court’s orderly disposition of the property of the estate[;]

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it was not intended to preclude post-petition suits to enjoin unlawful
conduct.’” Dominic’s Restaurant of Dayton, Inc. v. Mantia, 683 F.3d 757,
760 (6th Cir. 2012)(quoting Larami Ltd. V. Yes! Entm’t Corp., 244 B.R. 56,
60 (D.N.J. 2000)). The statute expressly exempts from such stay
the commencement or continuation of an action or proceedings
by a governmental unit . . . to enforce such governmental unit’s
. . . police and regulatory power, including the enforcement
of a judgment other than a money judgment, obtained in an action
or proceedings by the governmental unit to enforce such
governmental unit’s . . . police or regulatory power. . . .
11 U.S.C. § 362(b)(4). Moreover, civil contempt proceedings for an alleged
violation of an injunction are likewise exempt from the statutory stay.
Dominic’s Restaurant of Dayton, Inc., 683 F.3d 757.
The Government asserts that, based on his bankruptcy filings, there
is reason to believe that defendant Elsass is acting in violation of this
Court’s injunction prohibiting him from “employment with, associating
with, and advising, any person involved in the business of promoting the
availability of or assisting or advising taxpayers with 26 U.S.C. § 165
theft-loss deductions and/or any tax matters.” Judgment, ECF No. 240,
PageID#

9184.

post-judgment

The Government therefore asks that the Court permit
discovery,

including

the

issuance

of

the

challenged

subpoenas, in order “to enforce the Injunction. . . .” Memo. in Opp., PageID#
9942.
This Court’s own review of defendant Elsass’ bankruptcy proceedings
would appear to confirm the Government’s concern. See In re Elsass,
2:16-bk-57091 (S.D. Ohio), Voluntary Petition for Individuals Filing for
Bankruptcy, ECF No. 1, p. 34 (indicating that the debtor is employed by
“Fraud

Recovery

Group,

Inc.”

to

perform

“Tax

work”).

Under

these

circumstances, the Court therefore concludes that the issuance of the

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subpoenas was proper in light of the Government’s legitimate efforts to
ensure compliance with this Court’s injunction in this case. See 11 U.S.C.
§ § 362(b)(4); Dominic’s Restaurant of Dayton, Inc., 683 F.3d 757.
Accordingly, the Motion to Quash, ECF No. 281, is DENIED.

April 26, 2017

s/Norah McCann King
Norah McCann King
United States Magistrate Judge

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