United States of America v. AmericanWay Management Corporation et al

Filing 32

ORDER MODIFYING THE PERMANENT INJUNCTION. Signed by District Judge James D. Peterson on 11/16/2017. (jef),(ps)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF WISCONSIN
UNITED STATES OF AMERICA,
Plaintiff,
V.

AMERICANW A Y MANAGEMENT
CORPORATION, and
JANIS NOW AK,
Defendants.

)
)
)
)
)
)
)
)
)
)
)
)

Case No . 3:16-cv-26

ORDER MODIFYING THE PERMANENT INJUNCTION
This matter has come before the Court upon the United States' Motion to Modify
Injunction and Scope of Receivership (hereinafter, the "Motion to Modify"). (Doc. 27.) On April
20, 2017, the Court held defendants American Way Management Corporation (hereinafter
"American Way") and Janis Nowak in civil contempt for disobeying the terms of Consent
Judgment and Stipulated Order of Permanent Injunction on February 5, 2016 (hereinafter, "the
Injunction"). (Doc. 18.) As a civil contempt sanction and pursuant to 26 U.S.C. § 7402(a), the
Court appointed a receiver to assume financial control of both American Way and the
community-based residential facilities (CBRFs) owned and operated by Nowak (collectively,
'the Businesses"). The Receiver was required to inform the Court of the Businesses' financial
viability, "including but not limited to the Businesses' ability to repay American Way' s existing
federal tax obligations and stay current on such obligations on a going-forward basis." (Doc. 19,

il 12.) The Receiver subsequently determined that the Businesses are not "financially viable. "
(Doc. 24, il 4.)
The Injunction required, inter alia, that American Way and Nowak: (1) withhold
employment taxes from American Way's employees' wages when such wages are paid;
1

(2) timely deposit its employment and unemployment taxes to the IRS; (3) timely file with the
IRS all of the corresponding tax returns (Forms 940 and 941); and (4) are prohibited from paying
AmericanWay ' s other creditors before timely paying its employment and unemployment tax
liabilities as they come due. (Doc. 6 at ,r,r 4(b),(c),(e),(f).)
Upon consideration of the Receiver's Report and the Motion to Modify, along with the
accompanying sworn declarations from Attorney Paula Ryan of the Wisconsin Department of
Health Services, and Internal Revenue Service Revenue Officer Michael Majewski, the Court
finds that since it entered the Injunction on February 5, 2016, the defendants have repeatedly
defied its terms. In particular, the defendants have committed the following violations:
(1) American Way has accrued additional employment tax liabilities exceeding $400,000;
(2) American Way has made only one employment tax deposit since May 9, 2016; and (3) Nowak
has prioritized herself over the United States by paying herself at least $58,846.16 from 2016
through the frrst quarter of 2017. The Court also finds that the Court's contempt finding on April
20, 2017, has not rendered the defendants ' compliance with the Injunction. Finally, as
determined by the Receiver, the Court finds that the Businesses operated by the defendants are
not financially viable and are thus incapable of repaying their existing federal tax liabilitieswhich exceed $2.4 million-or complying with their future federal tax obligations.
In light of these findings, it is hereby ORDERED that the United States' Motion to
Modify is GRANTED. Accordingly, pursuant to 26 U .S.C. § 7402(a) and the Court' s inherent
equitable authority, it is hereby ORDERED that the Consent Judgment and Stipulated Order of
Permanent Injunction entered in this case on February 6, 2016 (Doc. 6.) is modified as follows:
1. For purposes of this Modified Permanent Injunction, AmericanWay Management
Corporation, American Way of Randolph, LLC, AmericanWay of Portage, LLC, and

2

all community-based residential facilities (CBRFs) operated by American Way of
Randolph, LLC and American Way of Portage, LLC, which include two CBRFs in
Randolph, Wisconsin and three CBRFs in Portage, Wisconsin are collectively defined
as the "Businesses" .
2. Notwithstanding the terms of paragraph 4(g) of the Injunction, the Court expects that
Nowak and/or the Businesses, as applicable, will sell or otherwise transfer all
property related to the operations of the Businesses, including real estate owned by
the Businesses (the "Transfers"), and that they will do so no later than January 6,
2018 . As part of the closing on such Transfers, the Receiver shall review the terms of
the Transfers and consent in writing to the Transfers, if it is in her best business
judgment to do so with the goals of ending the operations of the Businesses in mind.
An email from the Receiver stating, "The Receiver consents to the sale or transfer of
- - - - - - from - - - - to - - - -" shall be sufficient for the consent to be "in

writing" . Any transfer made with the Receiver' s written consent expressly does not
violate the terms of the Injunction. This paragraph is being added at the request of
certain title companies and is intended to further the ability of Nowak or the
Businesses to transfer or sell the Businesses' assets, particularly the real estate.
3. If any of the Businesses remain operating under Nowak' s control after January 6,
2018 , or if any of the Businesses or Nowak employ any employees after January 6,
2018 , then the te1ms of this paragraph 3 will control. Nowak and all persons acting in
concert or participation with the Businesses shall fully cooperate with the Receiver to
ensure that the Businesses completely cease operating no later than May 6, 2018. The
Receiver shall take all actions reasonably necessary to ensure that all operations cease

3

by May 6, 2018, including involving the State of Wisconsin in an emergency plan to
transfer all residents to other facilities.
4. To protect the health, safety, welfare, well-being, and rights of the residents presently
living in the Businesses ' licensed CBRFs, Nowak and American Way shall ensure that
the Businesses fully comply with Wisconsin Statutes Chapter 50 and Wisconsin
Administrative Code Chapter DHS 83 in the operation of each CBRF until the last
resident has been moved from the facility or until a transfer of ownership, control,
and management occurs. Such compliance includes, but is not limited to, meeting the
requirements of the following sections: Wis. Stat. § 50.03(5m), (13) & (14) and Wis.
Admin. Code§§ DHS 83.10, 83 .11 , 83.13(2)(b), 83.31 , and 83.34(4) & (7), regarding
transfer of ownership, outstanding violations, resident removal, facility closure,
retention of resident records and accounting of resident funds .
5. Nowak shall provide a complete accounting of any money, property or other assets
belonging to the Businesses to the Receiver and counsel for the United States within
30 days of this order.
6. American Way and Nowak and those persons acting in concert or participation with
the Businesses shall provide the Receiver and counsel to the United States with
written notice at least 7 days prior to transferring, disbursing, or assigning any of
money, property or assets belonging to the Businesses.
7. Nowak, whether acting individually or doing business as any other entity, is hereby
permanently restrained and enjoined from owning, controlling or operating an
assisted living facility or a CBRF, until the earlier of: (1) Nowak:' s successful petition

4

for relief from the Modified Permanent Injunction as described in paragraph 7 below;
or (2) ten years.
a. This Modified Permanent Injunction does not preclude Nowak from
consulting for or serving as an employee or contractor of an assisted living
facility, CBRF, or other entity that provides management services to assisted
living facilities or CBRFs. However, in her role as consultant, employee or
contractor, Nowak shall be prohibited from having any control or authority
over the entity's financial accounts.
b. Further, in her role as consultant, employee or contractor, Nowak shall also be
prohibited from having any responsibility for accounting for and paying over
federal employment, unemployment, and corporate taxes of the entity, or for
filing Forms 940, Forms 941 , or federal corporate income tax returns on the
entity' s behalf.
8. Should Nowak seek relief from this Modified Permanent Injunction within the next
ten years, she may petition the Court for such relief by demonstrating that she is
capable and likely to own, control or operate an assisted living facility, CBRF, or any
other entity that provides management services to assisted living facilities or CBRFs
in a manner that does not interfere with the enforcement of the internal revenue laws.
Is it FURTHER ORDERED that the United States shall be permitted to issue discovery
requests during the term of this Modified Permanent Injunction to assure that the defendants and
the Businesses are complying with the terms thereof. The Court shall retain jurisdiction of this
action for the purposes of implementing and enforcing this injunction and entering all additional
decrees and orders necessary and appropriate for the public interest.

5

It is FURTHER ORDERED that the Clerk shall mail this Modified Permanent
Injunction to: (1) American Way Management Corporation, 621 Latton Lane, Portage, WI 53901 ;
and (2) Janis Nowak, 758 Waterview Drive, Round Lake Park, IL 60073.

It is so ordered this

/6 TN

day of Nvl/6tc'f)<?fZ_ , 2017.

~o.l)A__
JA~PETERSON
United States District Judge

6