Agbaniyaka v. Department of the Treasury ( 2012 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
__________________________
BENJAMIN AGBANIYAKA,
Petitioner,
v.
DEPARTMENT OF THE TREASURY,
Respondent.
__________________________
2011-3211
__________________________
Petition for review of the Merit Systems Protection Board
in Case No. CB7121100015-R-1.
___________________________
Decided: June 19, 2012
___________________________
BENJAMIN AGBANIYAKA, Valley Stream, New York, pro
se.
K. ELIZABETH WITWER, Trial Attorney, Commercial Liti-
gation Branch, Civil Division, United States Department of
Justice, of Washington, DC, for respondent. With her on the
brief were TONY WEST, Assistant Attorney General, JEANNE
E. DAVIDSON, Director, and REGINALD T. BLADES, JR., Assis-
tant Director.
AGBANIYAKA v. TREASURY 2
__________________________
Before NEWMAN, CLEVENGER, and LINN, Circuit Judges.
Per Curiam.
Mr. Agbaniyaka appeals from the final decision of the
Merit Systems Protection Board (“MSPB” or “Board”) in
which the Board upheld the decision of the arbitrator to
affirm the removal of Mr. Agbaniyaka from his position as a
Revenue Agent with the Department of the Treasury’s
Internal Revenue Service (“IRS” or “Agency”) because he
willfully understated his Federal tax liability for tax years
2001 through 2004. See Agbaniyaka v. Dep’t of Treasury,
115 M.S.P.R. 130 (2010); Agbaniyaka v. Dep’t of Treasury,
MSPB Docket No. CB-7121-10-0015-R-1 (June 17, 2011)
(decision on request for reconsideration). Finding no re-
versible error, we affirm.
BACKGROUND
Mr. Agbaniyaka was employed as a Revenue Agent with
the IRS beginning in 1986 through his termination in 2008.
He received excellent performance evaluations, and several
promotions. While employed at the IRS he obtained a
Master’s Degree in Taxation from Long Island University.
Between 1988 and 2006, Mr. Agbaniyaka also engaged in
the outside activity of selling African arts, crafts and deco-
rative items at trade shows, festivals and street fairs. Sales
from the venture never resulted in a profit, and each tax
year he reported an operating loss for a business activity on
Schedule C of his Federal tax returns, resulting in a reduc-
tion to his Federal tax liability.
In 2004, Mr. Agbaniyaka’s 2001 Federal tax return was
selected for a tax audit by the IRS. After reviewing his files,
the agency found that Mr. Agbaniyaka did not maintain
3 AGBANIYAKA v. TREASURY
adequate business records establishing that he was engaged
in a business activity for which he was entitled to deduct
business expenses. The agency subsequently expanded the
audit to include tax years 2002, 2003, and 2004, and found
similar issues on Mr. Agbaniyaka’s Federal tax returns for
those years. At the completion of the audit, the agency
determined that Mr. Agbaniyaka’s Federal tax returns were
deficient in tax years 2001, 2002, 2003 and 2004 because he
was not entitled to the deductions claimed on Schedule C of
his returns. Mr. Agbaniyaka appealed to the Tax Court,
which upheld the IRS’s determination that he was not
entitled to claim the net loss for the tax years 2001 through
2004 because he was not carrying on a business within the
meaning of 26 U.S.C. §162(a). See Agbaniyaka v. Commis-
sioner, 2007 WL 2848153 (U.S. Tax Ct. Oct. 2, 2007).
After the Tax Court decision, the IRS notified Mr. Ag-
baniyaka that the agency was removing him from employ-
ment for violating Section 1203(b)(9) of the IRS
Restructuring and Reform Act of 1998 (“RRA” or “the Act”),
tit. I, §1203, Pub. L. No. 105-206 (codified at 26 U.S.C.
§7804 note). The Act mandates termination of any IRS
employee found to have willfully understated his federal tax
liability, unless such understatement is due to reasonable
cause and not willful neglect. The agency determined that
Mr. Agbaniyaka had willfully understated his tax obligation
for the four-year period and, in the alternative, found that
he had violated the agency’s code of ethics. The case was
referred to the IRS Commissioner for a determination of
whether the penalty would be mitigated. Under section
1203(c)(1) of the Act, only the Commissioner of the IRS has
authority to take “a personnel action other than termina-
tion” against an employee who has violated section
1203(b)(9). Moreover, section 1203(c)(3) specifies that any
determination that the Commissioner makes “may not be
appealed in any administrative or judicial proceeding.” See
AGBANIYAKA v. TREASURY 4
also James v. Tablerion, 363 F.3d 1352, 1359 (Fed. Cir.
2004) (“The Commissioner’s determination is final and not
subject to judicial review.”). The Commissioner did not
mitigate the penalty and the agency removed Mr. Agbani-
yaka from employment effective April 15, 2008.
Pursuant to the collective bargaining agreement be-
tween the agency and the National Treasury Employees
Union, the union requested arbitration of Mr. Agbaniyaka’s
termination. The arbitrator conducted hearings on June 16,
17, and 30, 2009, and July 1 and 14, 2009, in which both
sides presented live testimony and documentary evidence.
The arbitrator sustained the agency’s removal of Mr. Ag-
baniyaka. In the decision, the arbitrator made extensive
findings of fact and credibility determinations. S.A. 6 (“For
the taxable years 2001 through 2004, the Grievant had not
business records, sales receipts, or logs showing mileage.”);
S.A. 27 (“[H]e had not made a profit in any year since he
established his business in 1988.”); S.A. 28 (“The Grievant
had no sales in 2001 and only a small amount of sales
thereafter.”); S.A. 29 (“The Grievant was aware, when he
filed his tax returns for 2001-2004, that he had virtually no
substantiation for his claim that he actively engaged in his
business.”) (“The Grievant was not involved in his activities
with continuity and regularity, as required in the Schedule
C instructions.”). Based on these findings, the arbitrator
concluded:
Given the Grievant’s experience and expertise, he
was undoubtedly aware that he had to substantiate
his efforts to conduct a business in 2001 and be-
yond. Being an experienced and knowledgeable
Agency employee, he had to have been aware that
he could not substantiate his alleged business ac-
tivities. By claiming deductions on Schedule C, he
5 AGBANIYAKA v. TREASURY
knowingly and willfully submitted tax filing to
which he was not entitled.
S.A. 29. Mr. Agbaniyaka appealed the arbitrator’s decision
to the MSPB, requesting the Board to overturn the arbitra-
tor’s decision because the decision “was contrary to law and
regulation.” S.A. 55.
On October 29, 2010, the Board affirmed the arbitrator’s
decision, upholding Mr. Agbaniyaka’s termination. In its
decision, the Board found that “the arbitration decision
reflects that the arbitrator considered the evidence” and
that “the arbitrator appropriately placed the burden of
proving the charge on the agency.” S.A. 35. The Board
further determined that the arbitrator did not address Mr.
Agbaniyaka’s argument that the agency committed harmful
procedural error by (1) failing to conduct an investigation;
(2) conceding, in part, some of the specifications underlying
the charge of failure to properly file a personal federal
income tax return; (3) improperly shifting the burden of
proof; or (4) failing to mitigate the penalty. Because these
issues were not decided by the arbitrator, the Board consid-
ered in the first instance whether “the procedural error was
likely to have caused the agency to reach a conclusion
different from the one it would have reached in the absence
or cure of the error.” S.A. 37. The Board found that Mr.
Agbaniyaka
has not provided any evidence to support his allega-
tion that the agency failed to conduct a proper in-
vestigation, what specifications it allegedly
conceded (and if so, how such a concession affected
the decision to sustain the charge, if at all), how it
improperly shifted the burden of proof and/or how
its failure to mitigate the penalty was improper, nor
has he shown that the alleged procedural error(s)
AGBANIYAKA v. TREASURY 6
would have caused the agency to reach a different
conclusion than it would have reached in the ab-
sence or cure of the error(s).
S.A. 37. Further, the Board determined that Mr. Agbani-
yaka failed to introduce any evidence to support his argu-
ments that his termination was due to discrimination or
retaliation for his protected EEO activity. The Board thus
affirmed the arbitrator’s decision and upheld Mr. Agbani-
yaka’s termination.
Mr. Agbaniyaka submitted supplemental documents to
the Board and requested that it reopen and reconsider its
previous decision. The Board reopened its earlier decision
to consider Mr. Agbaniyaka’s argument that the agency
failed to prove that his actions were willful under section
1203(b)(9) of the RRA. The Board concluded:
We discern no error by the arbitrator in finding that
the appellant’s understatement of his tax liability
was willful in light of his expertise and years of ex-
perience as an agency employee and his knowledge
that he could not submit claims for deductions of
business expenses that he could not substantiate.
S.A. 77 (citing United States v. Pomponio, 429 U.S. 10, 11–
12 (1976)). In a Final Order dated June 17, 2011, the Board
reaffirmed the arbitrator’s decision.
Mr. Agbaniyaka timely appealed to this court. We have
jurisdiction pursuant to 5 U.S.C. §7703.
DISCUSSION
We must affirm the Board’s decision unless it was “(1)
arbitrary, capricious, an abuse of discretion, or otherwise
not in accordance with law; (2) obtained without procedures
7 AGBANIYAKA v. TREASURY
required by law, rule, or regulation having been followed; or
(3) unsupported by substantial evidence.” 5 U.S.C.
§ 7703(c). “[T]he standard is not what the court would
decide in a de novo appraisal, but whether the administra-
tive determination is supported by substantial evidence on
the record as a whole.” Parker v. U.S. Postal Serv., 819 F.2d
1113, 1115 (Fed.Cir.1987). “Substantial evidence is ‘such
relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.’” McEntee v. Merit Sys.
Prot. Bd., 404 F.3d 1320, 1325 (Fed.Cir.2005) (quoting
Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938)). In
addition, a “presiding official's credibility determinations . . .
are virtually unreviewable.” Hambsch v. Dep't of Treasury,
796 F.2d 430, 436 (Fed.Cir.1986).
I
Mr. Agbaniyaka first argues that the arbitrator did not
apply the correct legal standard for willfulness and, as a
result, improperly affirmed his termination from the agency.
Pet’r Br. at 9. Section 1203(b)(9) of the RRA states that the
IRS must terminate an employee for “willful understate-
ment of federal tax liability, unless such understatement is
due to reasonable cause and not to willful neglect.” See 26
U.S.C. §7804 note (emphasis added). Mr. Agbaniyaka
asserts that a determination of “willfulness” under the
statute requires “both knowledge of a legal duty and specific
intent to act with bad purpose,” citing Boulware v. United
States, 552 U.S. 421 (2008), Cheek v. United States, 498 U.S.
192 (1991), Ratzlaf v. United States, 510 U.S. 135 (1994),
and Spies v. United States, 317 U.S. 492 (1943). Pet’r Br. 9,
12. Accordingly he argues that the arbitrator was “required
as a matter of law to find actual bad intent on Petitioner’s
part in order to affirm” his termination. Id. at 12. Mr.
Agbaniyaka asserts that neither the agency nor the arbitra-
AGBANIYAKA v. TREASURY 8
tor “could point to any facts to show that Petitioner acted
with bad intent when he filed his tax returns.” Id. at 10.
The Supreme Court has recognized that “the word ‘will-
fully’ in these statutes generally connotes a voluntary,
intentional violation of a known legal duty.” United States
v. Bishop, 412 U.S. 346, 360 (1973). The Court has rejected
the requirement that willfulness requires proof of “bad
faith” or “evil intent” beyond showing a specific intent to
violate the law. See Pomponio, 429 U.S. at 23–4. The Court
reaffirmed this established standard in Cheek, stating:
“Taken together, Bishop and Pomponio conclusively estab-
lish that the standard for the statutory willfulness require-
ment is the ‘voluntary, intentional violation of a known legal
duty.’” 498 U.S. at 201.
None of the cases cited by Mr. Agbaniyaka support the
conclusion that “willful understatement of tax liability”
requires a finding of bad intent. Contrary to petitioner’s
arguments, the Court in Ratzlaf did not require that the
Government prove that the defendant acted with “a specific
intent to act with bad purpose,” Pet’r Br. 9, but required
that the Government prove that the defendant acted with
knowledge that the financial restructuring the he was
undertaking was unlawful. Ratzlaf, 510 U.S. at 138. In this
case, the Government established, citing Mr. Agbaniyaka’s
master’s degree in tax law and extensive experience work-
ing as a Revenue Agent for the IRS, that he was aware of
the substantiation requirement. The arbitrator conse-
quently determined that Mr. Agbaniyaka “was undoubtedly
aware that he had to substantiate his efforts to conduct a
business in 2001 and beyond.” S.A. 29. The arbitrator’s
determination of Mr. Agbaniyaka’s knowledge of the tax
laws is consistent with the Court’s holding in Ratzlaf.
9 AGBANIYAKA v. TREASURY
Mr. Agbaniyaka further argues that, pursuant to Spies,
Boulware and Cheek, the Government must prove specific
intent, which he argues requires that the Government
“establish what was in Petitioner’s mind or the circum-
stances of his life at the time he prepared his tax returns.”
Pet’r Br. 13. But statutory willfulness only requires a
finding of a “voluntary, intentional violation of a known
legal duty.” Pomponio, 420 U.S. at 12; Cheek, 498 U.S. at
201; Bishop, 412 U.S. at 360. The Government has shown
that the law imposed upon Mr. Agbaniyaka a duty to prop-
erly file his taxes, that he knew of this duty, and that he
voluntarily and intentionally violated that duty. Cf. Cheek,
498 U.S. at 201 (“Willfulness . . . requires the Government
to prove that the law imposed a duty on the defendant, that
the defendant knew of this duty, and that he voluntarily
and intentionally violated that duty.”). Mr. Agbaniyaka
does not allege that his submissions were unintentional or
involuntary. Nor does he claim that he possessed substan-
tiation. Accordingly, Mr. Agbaniyaka has not shown that
the Government failed to prove willfulness, as determined
by the arbitrator.
Mr. Agbaniyaka also argues that the arbitrator erred
because he “cited no case law or other precedent to show the
standard he used to determine the legal definition of will-
fulness.” Pet’r Br. at 12. The arbitrator did not explicitly
define willfulness in his decision; but Mr. Agbaniyaka has
not established that this resulted in harmful error. The
arbitrator made explicit factual findings regarding Mr.
Agbaniyaka’s actions sufficient to support a determination
of willfulness—i.e. a “voluntary, intentional violation of a
known legal duty.” Specifically, the arbitrator found that
the appellant “was well aware that not only does he have to
be entitled to claim items he deducts on his tax forms, but
he has to be able to substantiate the deductions,” S.A. 28,
and that “[he] was aware, when he filed his tax returns for
AGBANIYAKA v. TREASURY 10
2001-2004, that he had virtually no substantiation for his
claim that he actively engaged in his business,” S.A. 29. Mr.
Agbaniyaka has not identified how the arbitrator’s reason-
ing was inconsistent with the legal standard for willfulness;
we do not find that the arbitrator’s willfulness determina-
tion was harmful error.
The Board’s decision as to willfulness is affirmed.
II
Mr. Agbaniyaka also alleges that the agency and arbi-
trator committed several procedural errors amounting to
harmful error. Pet’r Br. at 15, 22. First, he argues that the
arbitrator “exceeded his authority” by relying on IRS publi-
cation 525 to find that “petitioner willfully violated the law.”
Pet’r Br. at 15. He argues that the arbitrator “looked for,
found and used IRS Publication 525, in addition to those tax
laws and regulations identified in the arbitration hearing to
independently determine whether Petitioner was conducting
a business.” Pet’r Br. at 16. The Government responds that
the arbitrator’s reference to IRS Publication 525 was a
typographic error and that the arbitrator intended to cite
IRS Publication 535, which was an agency hearing exhibit
and was submitted by the agency in support of its case. See
S.A. 21 (reference to “Publication 535” in the arbitrator’s
decision). Mr. Agbaniyaka does not respond to this explana-
tion; we find a typographic error plausible. 1 Moreover, the
arbitrator did not exclusively rely upon Publication 535, but
also considered the Tax Court decision, the agency’s audit,
and other evidence presented at the hearing to determine
that Mr. Agbaniyaka understated his tax liability for the
1 IRS Publication 535, entitled “Business Expenses:
For use in preparing 2002 returns,” “discusses common
business expenses and explains what is and is not deducti-
ble.” S.A. 80–84.
11 AGBANIYAKA v. TREASURY
years 2001 through 2004. We discern no reversible error in
the reference to “IRS Publication 525” in relation to the
arbitrator’s determination that Mr. Agbaniyaka incorrectly
reported his tax liability.
Lastly, Mr. Agbaniyaka asserts that the arbitrator
committed harmful error because he did not require the IRS
to prove each factual specification. Mr. Agbaniyaka asserts
that the specification states that he was charged with
improperly taking both Schedule A and Schedule C deduc-
tions, but the arbitrator only required the IRS to prove the
Schedule C deductions. The government responds that
“[t]he parties entered into a stipulation of fact before the
Tax Court wherein the parties agreed that Mr. Agbaniyaka
was entitled to his Schedule A charitable contributions. At
the arbitration hearing, the agency stipulated that the
Schedule A deductions referenced in the notice of proposed
removal were permissible and were no longer a basis to
support the removal.” Gov’t Br. at 25 n.8. Accordingly, the
Schedule A deductions that were listed in the initial notice
of proposed removal were removed from the Tax Court case
before the agency finalized Mr. Agbaniyaka’s termination.
Id.; Pet’r Br. at 25. See Burroughs v. Dep’t of Army, 918
F.2d 170, 172 (Fed. Cir. 1990) (“[W]here more than one
event or factual specification is set out to support a single
charge . . . , proof of one or more, but not all, of the support-
ing specifications is sufficient to sustain the charge.”). We
therefore affirm the Board’s determination that Mr. Ag-
baniyaka has not shown that the agency’s concession of the
Schedule A deductions resulted in harmful error.
The RRA mandates removal of an IRS employee who
willfully understated his federal tax liability. The govern-
ment met its burden of showing that Mr. Agbaniyaka will-
fully understated his tax liability by improperly listing
AGBANIYAKA v. TREASURY 12
unsubstantiated Schedule C deductions for years 2001
through 2004.
CONCLUSION
The arbitrator’s decision is AFFIRMED.
No costs.