Please see my more recent summary on this story, “Will California Gamble in Las Vegas?”
This should never happen to anyone, and the taxpayers of California will pay for the damage caused by a rogue FTB employee.
From various sources:
$146.88 Million and Counting
Back in October 1991 Gilbert Hyatt moved from California to Nevada. California’s Franchise Tax Board didn’t think he did, so they commenced a residency audit. California determined that Mr. Hyatt didn’t establish residency in Nevada until April 1992. Normally, six months wouldn’t be a big deal; however, Mr. Hyatt had invented a microprocessor and received a substantial amount of income during that time period. California assessed $49 million in taxes.
Mr. Hyatt fought the judgment through administrative appeals. He also wasn’t happy about the methods the FTB used to investigate him. Mr. Hyatt filed a lawsuit against the FTB in Nevada, alleging
…that [FTB] directed “numerous and continuous contacts … at Nevada” and committed several torts during the course of the audit, including invasion of privacy, outrageous conduct, abuse of process, fraud, and negligent misrepresentation.
The FTB fought the case, arguing that they were immune from being sued. (As an aside, had the actions that Mr. Hyatt alleged took place in California, the FTB would be immune.) The case went all the way to the US Supreme Court; the Court ruled unanimously that the FTB could be sued in Nevada. The case was remanded back to the Nevada District Court for trial.
The first phase of the trial ended last week, and the FTB suffered a ringing rebuke. According to Bill Leonard’s Leonard Letter, Mr. Hyatt prevailed on every claim and was awarded $137 million in damages plus $1.08 million in legal fees. The jury is now looking at potential punitive damages which could easily be another $400 million or so.
What did the FTB do? From the Leonard Letter:
Tax agents rummaged through his trash without warrants, visited business partners and doctors, and shared his Social Security Number and other personal information with the media. This is outrageous behavior and I call on the FTB to rein in their agents. What really galled me is the FTB testified in open court that this level of harassment was only a typical audit. If true, then the stormtroopers are alive and well at the FTB.
I have little to add to what Mr. Leonard stated. And he should know; Bill Leonard is an elected member of California’s Board of Equalization. The BOE hears administrative appeals on FTB cases after an individual (or organization) exhausts appeals at the FTB.
What’s the cost to California? To date, the FTB has spent $8.8 million fighting Mr. Hyatt. Add the $138.88 million that is now owed to Mr. Hyatt and the total is $146.08 million. If we add another $250 million for punitive damages the total is nearly $400 million. And while Mr. Leonard is hopeful that the FTB won’t appeal the case, I am almost 100% certain that the FTB will appeal. Thus, unless the FTB gets lucky in Nevada this case could easily cost California taxpayers over half a billion dollars.
Welcome to the Bronze Golden State….
Related Posts (on one page):
2. $396.08 Million…and the Meter Is Still Running
3. $146.88 Million and Counting
4. The Gilbert Hyatt Case Inches Forward
Posted by Russ on Monday August 11, 2008 at 5:26pm. 0 Comments 0 Trackbacks
Courts:
Judge Rejects FTB Requests for New Trial and Reduced Award in Gil Hyatt Case
Nevada District Court Judge Jessie Walsh on January 29 rejected a motion by the Franchise Tax Board for a new trial in Hyatt v. FTB, and also rejected the FTB’s motion asking her to reduce a Las Vegas jury’s award of more than $388 million to inventor Gil Hyatt.
Rejecting the motion for a new trial based on alleged judicial errors, Judge Walsh said, “FTB essentially relies on previously unsuccessful arguments.”
Completing the day’s good news for Mr. Hyatt, the judge ruled that the FTB must post a bond in order to keep Mr. Hyatt from executing his judgment against the state while the FTB appeals the case to the Nevada Supreme Court, as the tax agency plans to do. In Nevada, there is no appellate court before the Supreme Court, and thus the court cannot refuse to hear cases.
“After 11 years of litigation, justice is served,” Mr. Hyatt said after the hearing.
During Thursday morning’s session, Judge Walsh also appointed a special master to go over attorney costs submitted by Mr. Hyatt’s legal team for reimbursement by the FTB. Mr. Hyatt is seeking $3.2 million for legal costs, but the FTB says he should get nothing due to a late filing, or a maximum of $53,000 if the court allows the late filing but knocks out all the charges the tax agency views as improper.
Good! Serves the FTB right! Good job Mr. Hyatt!
My personal bank account in Florida was levied on Dec 24th, 2012 by the Ca Franchise Tax Board for almost $3000 for what they claim was state tax owed in 1992. The tax was not owed because of a large income loss that year and for the two years prior. The IRS audited the loss and allowed it. When it came to the FTB, they decided to violate the California code (they circumvent the laws of California…..their own statutes…….how can they get away with this?) and disallow it, despite the IRS ruling on the loss. It was a true and terrible loss for us.
We lost our business of 8 years, properties, and life savings as a result. Eventually our marriage was destroyed by it and my family’s lives have never been the same. Literally, everything we worked for and saved for years and years was lost in addition to our income. The FTB ignored all of the documents our California accountants sent them, including copies of the applicable California code the results of the IRS audit, the amended tax 540 return which accounted for the loss (it had to be filed later as the loss could not be fully determined in 1992 because of a lawsuit involving the loss) If someone out there knows a way to fight back against this rogue California agency that seizes money not owed to them, I am anxious to join the fight. If they are committing this injustice to others, surely there is a reason for a class action suit against the state of California. It feels something akin to being raped by a giant bully. I have sent them the same documents in the intervening years over again and again and they have just ignored them. I sent them again in December, 2012. There must be some able lawyers out there who could make the Franchise Tax Board pay for these injustices, big, big time with enough people wronged to justify a class action suit against them. Good luck, Mr. Hyatt. I hope you win huge. I just hate big bullies, especially corrupt government bodies like the FTB who ignore reason, justice, evidence, citizens rights, and the truth.
What a bunch of idiots! Is this why CA is Bankrupt? They are attacking someone I know who doesn’t even live in CA but holds a CA RE license and these sewer rats are hounding her for 4K on paper but when calling 8K on automate response. These slum peasants are simply taking from individuals with unwarranted attempts. We will see what happens. I am searching for a current Class Action Suit but if I cannot locate one base don our current location then I will simply being my own suit becase it is 100% obvious that these people attack the community. They even took money out of y contacts bank acct for no reason and didn’t put it back after they apologized for thie allegations yet sent another letter 1/5 months alter increasing fees owed etc.
Yes I hope the FTB ruins the state. they are complete garbage!! Plain to see. Where is someone saying how good they are for the state of CA? There is nothing!
I live in Oregon & just had my bank account emptied by Ca FTB including my Social Security check… for 2000 personal taxes. I moved back to OR in late May, 2000. I’d had a provisional Real Estate License (good for 1 year until more coursework is taken.) I never earned a dime in Real Estate. The tax they say I owe, is based upon what an average Real Estate Licensee earned in 2000: $45,000.
I don’t think I even filed in 2000 because I was suffering from a major spinal problem…but I don’t know for sure, because I have, of course, purged records up to 2003.
The first person I spoke with at CA FTB kept asking me: “how did you live?”: “how did you pay your bills?” then said,”you earned money under the table, didn’t you?”.
I have never received a single notice from CA FTB. It feels like I am living in a Soviet Bloc country.
The more I read online, the more frightened I become. What is this FTB all about?
I’ve worked and lived here my whole life , had a good job 100.000 plus clamed 00 rite? Well as soon as the chips change, or the tied changes the FTB will chew your feet off then work there way up your body. Very sad place here in California
Every year I get a notice from California’s Franchise Tax Board saying I owe them a couple thousand in taxes plus fees based on their estimate that working as a security guard I should have made 35 to 40k that year. Every year I have to send a reply reminding them that the information they are basing that figure off of is a guard card that expired 10 years ago.
A buddy of mine has it a bit rougher as he was in Iraq when they sent him the same notice I would get but because he didn’t receive it in the time allotted to respond, they are still trying to go after his account and collect despite that he has faxed them his past tax records as well as documents from the IRS showing that what they are claiming is false. To this day he has faxed and mailed them multiple copies of his paperwork as well as proof that his guard card has been expired for almost a decade , yet they still claim they have never received any of it.
You should both contact your CA Assemblyman. There is no reason for you to be abused in this way.
Nevada doesn’t like California, and the other way around. I know that an out of state person can never win in court against a native Nevadan. Nevada is a third world state with only a city of gambling and prostitution to raise revenue. Give me the Golden State any time over the corruption in Nevada, from the Governor on down to the building inspector.
I would argue that California has as much if not more corruption, especially given the public union influence in the Golden State.
NV has a growing mineral and mining industry. Gambling revenue is declining in importance. Tourism is growing. The NV side of Lake Tahoe is a gem of a location. The long-term outlook for NV points to a financially sustainable government.
Lastly, I will take NV roads over CA any day.
For seniors damaged by the CAFTB: if you are on Social Sec. and or retirement income, there is a law that protects that type of income. it is called “ERISA” Google it and send it with a letter to the CAFTB and let them know they are violating that law and to stop immediately. That is the only thing that I know those $#%#&#(#(&^ respect so far, but only when you call their attention to it. The woman head of CAFTB S. Stanislaus most get big percentages from her nasty collection practices, her bosses must love her, looks like she will be there till she dies….On May 2014 my car was totalled, my insurance company sent me the funds to replace it, when i deposited the chk in my account, Chase Bank placed a hold ($4,135) by CAFTB orders and send them my money. I called, i wrote numerous letters and hardship letters, letting them know that i have no other way of replacing my car, but they do not care and refuse to return my money. So now thanks to CAFTB and Chase Bank I am without a car for the first time in my life. I am still writing letters, may be some one will listen.I will send one tomorrow to the Tax Advocate,, CA Assemblyman and cc to Stanislaus.
I registered an LLC in California becuase I had an idea to start a business…
due to life circumstances, I never got the business started off the ground. Never made one cent and didn’t have one customer. I should not have to pay $800. I already paid the $70 to register the LLC. Now what to do? I’m broke. lost my job, cant pay and don’t want to pay. What if I refuse to pay? If i had the money or resources, I would like to file a lawsuit against the Franchise Tax Board. They must stop ripping people off.
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