Ohio AG files suit against two Toledo brothers operating Toledo Appliance Repair

Press release:

(TOLEDO, Ohio)—Ohio Attorney General Mike DeWine today announced a lawsuit against two brothers who operated Toledo Appliance Repair. Roger Sutherland and Shawn Wheeler, both of Toledo, are accused of performing shoddy work and misrepresenting their services. The Attorney General is seeking consumer restitution, an injunction to stop further violations, and civil penalties.

“These individuals came into consumers’ homes, made repairs without providing estimates, and then surprised consumers with the bill,” Attorney General DeWine said. “Because consumers filed complaints, we were able to detect a pattern of violations, and we encourage any other consumers who believe they were treated unfairly to contact our office.”

The brothers advertised on Craigslist and in the yellow pages, often using the names Toledo Appliance Repair, Toledo Appliance Guys, or Brothers Appliance.

About 15 consumers filed complaints against the business, reporting total losses of $5,844.50, including a $2,200 loss and a $1,300 loss. Consumers generally said that after the business repaired an appliance, the appliance quickly broke again, often within hours or days of the repair.

The business advertised a one-year warranty but Sutherland and Wheeler never returned to make the additional repairs. They also claimed to accept credit cards but once in a consumer’s home, they said they only accepted cash. Some consumers said they were expecting only an estimate but that the business quickly made the repair and handed the consumer a bill.

The Attorney General’s lawsuit charges the brothers with multiple violations of Ohio’s Consumer Sales Practices Act. Counts include shoddy work, misrepresentation, failure to inform consumers of their right to an estimate, and failure to deliver.

Attorney General DeWine encourages consumers to research a business before making any payments. Consumers can check for complaints on file with the Attorney General’s Office and the Better Business Bureau. They also should check with the Ohio Secretary of State to determine whether the business is properly registered.

Consumers who suspect an unfair or deceptive business practice should contact the Ohio Attorney General's Office at 800-282-0515 or www.OhioAttorneyGeneral.gov.

A copy of the lawsuit is available on the Ohio Attorney General's website.

Indiana, 15 school corporations sue IRS to block employer mandate

I received this press release via email:

FOR IMMEDIATE RELEASE
Tuesday, October 8, 2013

State and 15 schools sue IRS to block impact of employer mandate

Zoeller: IRS exceeded its authority, contravened law Congress passed

INDIANAPOLIS – The State of Indiana and 15 school corporations filed a lawsuit today against the Internal Revenue Service, challenging a new IRS regulation that imposes the costly “employer mandate” requirements of the Affordable Care Act onto state and local governments. The plaintiffs seek declaratory judgments and injunctions that would prevent the IRS from financially penalizing the State and its political subdivisions. They contend the Affordable Care Act or ACA as passed by Congress does not allow financial penalties in states that did not create their own health insurance exchanges; and that the financial penalties – which are based on the total number of employees – cannot be applied to government employers.

“This case is about the fundamental relationship between the State and federal government. We respect the United States Supreme Court’s ruling last year upholding the individual mandate to buy health insurance; but it did not address the recent IRS regulations extending the reach of the ACA’s employer mandate. We contend the ACA improperly regulates sovereign states and does not authorize the IRS to do what it is doing in treating the State as a taxable entity. We are raising this respectful challenge for the federal courts to decide these questions,” Indiana Attorney General Greg Zoeller said. As the lawyer for state government, Zoeller’s office filed the lawsuit today in U.S. District Court for the Southern District of Indiana.

Joining the State as co-plaintiffs are 15 Indiana school corporations:

• • Metropolitan School District of Martinsville, Martinsville, Ind.
• • Perry Central Community Schools, Leopold, Ind.
• • Benton Community School Corporation, Fowler, Ind.
• • Community School Corporation of Eastern Hancock County, Charlottesville, Ind.
• • John Glenn School Corporation, Walkerton, Ind.
• • Monroe-Gregg School District, Monrovia, Ind.
• • Mooresville Consolidated School Corporation, Mooresville, Ind.
• • North Lawrence Community Schools, Bedford, Ind.
• • Northwestern Consolidated School District of Shelby County, Fairland, Ind.
• • Shelbyville Central Schools, Shelbyville, Ind.
• • Southwest Parke Community School Corporation, Montezuma, Ind.
• • Vincennes Community School Corporation, Vincennes, Ind.
• • Madison Consolidated Schools, Madison, Ind.
• • South Henry School Corporation, Straughn, Ind.
• • Southwestern Jefferson County Consolidated School Corporation, Hanover, Ind.

As political subdivisions of the State, school corporations are faced with reducing the hours of their part-time employees in order to avoid the financial penalties of the IRS regulation under the employer mandate.

“The costly and burdensome employer mandate the IRS wrongly applies to government employers such as our school corporation interferes with our ability to efficiently manage our workforce. We always strive to be good stewards of tax dollars in educating our community’s students, but our school corporation’s efforts are undermined by the IRS overstepping its bounds that Congress set. As public servants who revere the Constitution, we join with the State in asking the federal court to correct the IRS’s overreach,” said Assistant Superintendent Randy Taylor of MSD of Martinsville.

IRS contravenes specific instructions of Congress

As passed by Congress in 2010, the Affordable Care Act permits states to decide whether to operate their own health insurance exchanges or leave that task for the federal government. The unambiguous wording of the ACA says that citizens in a state with a state-run exchange can qualify for federally subsidized insurance; while citizens in states with a federally run exchange can use the exchange to shop for coverage, but will not qualify for federally subsidized insurance. Though some states have chosen to create their own state exchanges, seven states chose hybrid federal-state exchanges and 27 states including Indiana declined to create exchanges. Since Indiana declined, the ACA therefore required the federal government to operate an exchange useable by Indiana citizens; it opened October 1.

The IRS also administers the federal premium subsidies available to those citizens who use exchanges. In May, the IRS issued a regulation that goes beyond what Congress authorized, contrary to the specific language of the ACA statute. The IRS regulation offers federal insurance premium subsidies in all states, not just those the ACA specified. That regulation in turn has the effect of charging a future financial penalty against non-compliant employers in all states, even though the ACA that Congress passed authorizes the penalty to be collected only in states where a state-established exchange exists.

By exceeding the specific authority Congress granted it, the IRS is interfering with the State’s ability to manage its own employees and thwarting the State’s policy to avoid employer mandate penalties – and that in turn violates the Tenth Amendment, the ACA and the Administrative Procedure Act, the lawsuit alleges. The plaintiffs ask the federal court to issue an injunction blocking the IRS regulation and resulting penalties from being applied against the State and school corporations since that is contrary to the ACA. Also, the plaintiffs ask the federal court to issue a declaratory judgment finding the IRS regulation and associated tax reporting and certification requirements unconstitutional and void under the Tenth Amendment.

Ripple effect: Avoiding enormous financial penalties

Among the issues with the penalties faced by employers who don’t provide minimal essential health coverage: The employer mandate defines “full-time” as working 30 hours per week on average. That federal definition conflicts with state government’s longtime personnel policy that defines state employees as full time -- and eligible for insurance benefits -- if they work 37.5 hours per week or more. Full-time state employees already are eligible for health insurance but part-time state employees are not. A preliminary analysis found the State has fewer than 65 part-time employees who work an average of at least 30 hours per week but fewer than 37.5 hours who would be considered “full time” under the ACA.

Under the employer mandate, large employers who do not offer minimum essential coverage face penalties of $2,000 per employee for all full-time employees in the organization (after the first 30), even if just one employee obtains federally-subsidized insurance through the IRS regulation. For example, if a private company employing 1,000 people does not offer minimum essential coverage and some workers then obtain subsidized coverage through health-care exchanges, the IRS could impose penalties of $2,000 for 970 employees, or a total $1.94 million. For State government, with approximately 28,000 employees in the executive branch (not including the legislative and judicial branches), the potential penalty for non-compliance could be approximately $56 million or more. Although the U.S. Treasury Department issued a July 2 statement announcing its intention to postpone enforcement of the financial penalties until 2015, Zoeller said the lack of a formal legally binding document and the potentially draconian penalty amounts prompted the plaintiffs to seek relief from the court.

Zoeller reiterated the IRS regulation potentially subjecting the State to financial penalties it would not otherwise face is contrary to the actual wording of the ACA. But to mitigate the risk of financial penalties due to the lack of a state exchange, the State Personnel Department recently notified agencies that the State’s definition of “part-time” employee is being reduced from less than 37.5 hours to less than 30 hours per week – below the threshold where either employer-sponsored coverage or federally-subsidized insurance would be triggered.

“It’s very unfortunate that by unconstitutionally interfering with our state personnel policy, the IRS has caused hardship not only to the State but to a number of our state employees who will see their hours reduced through no fault of their own, and it inflicts similar injuries on schools and local governments and their part-time employees,” Zoeller said. One issue in the lawsuit is whether the federal government through the IRS can treat the State government and its political subdivisions as taxable entities like private businesses. The plaintiffs contend it cannot.

School corporations who employ part-time workers – such as instructional aides for learning disabled students, substitute teachers, part-time coaches and extra-curricular staff or cafeteria workers – have already reduced the hours of non-benefit-eligible employees in order to avoid financial penalties, the Attorney General added.

Zoeller said it is up to federal policymakers in Congress, not the IRS, to decide whether to extend federal insurance premium subsidies into states that do not have state-run exchanges. He noted the focus of the lawsuit is not directly about whether private-sector workers should be able to purchase insurance at subsidized rates; that’s a decision for Congress. But State government should not be saddled with potentially huge financial penalties because the IRS promulgated a rule that Congress never approved, Zoeller said.

Attorney General defends sovereignty of state government

In May 2010, representing Indiana, Zoeller’s office joined the 26-state legal challenge to the constitutionality of newly-passed Affordable Care Act. The United States Supreme Court in June 2012 upheld the ACA’s individual mandate, as a tax. But the Court struck down a portion of the federal health care law that would have required states to dramatically expand Medicaid or forgo the program entirely. Zoeller noted U.S. Chief Justice John Roberts’ majority opinion striking down the mandatory Medicaid expansion opened the door to states bringing new legal challenges to other portions of the ACA.

“The fact that many citizens lack health insurance is an issue for policymakers, and my office takes no position regarding the congressional debate over funding the ACA. I never complain when private plaintiffs file lawsuits to challenge the state authority that my office defends; but now our role is reversed and Indiana has initiated this lawsuit asking the court whether the IRS has exceeded its federal taxing authority over state governments. This respectful challenge is an appropriate role for the Office of the Attorney General to vigorously assert the ability of the State and its political subdivisions to manage their workforces in our American system of federalism,” Zoeller said.

If other schools decide to join, the complaint can be amended later to include additional co-plaintiffs. The public school corporations are represented by Bose McKinney & Evans LLP.
The lawsuit, State of Indiana et al v. IRS et alis one of approximately 3,000 civil suits and 1,200 criminal appeals the Indiana Attorney General’s Office handles at any given time, and Zoeller noted his office’s participation in the case will not distract from its work on other cases representing the State. The AG’s Office’s solicitor general, Thomas M. Fisher, is overseeing the State’s legal representation in the multi-plaintiff lawsuit. Two similar challenges to the IRS regulation brought by other plaintiffs are pending in federal district courts in Oklahoma and Washington, D.C.

Named as defendants in the Indiana’s lawsuit are the Internal Revenue Service and Acting IRS Commissioner Daniel I. Werfel, the U.S. Department of the Treasury and Secretary of the Treasury Jacob Lew, and the U.S. Department of Health and Human Services and HHS Secretary Kathleen Sebelius. No court dates have been set yet.

NOTE: At this link is the complaint filed today in U.S. District Court in the lawsuit State of Indiana et al v. IRS et al. At this link is a financial circular issued by the State Personnel Department.

Defunct Perrysburg solar company sued by Ohio AG and state agencies

It's becoming fairly common these days, but another solar company that received taxpayer money is being sued. This time, it's Willard & Kelsey, a firm in Perrysburg, that is now defunct after not being able to cut it in the solar industry.

The Ohio attorney general filed suit on Sept. 6th alleging the company defaulted on $10 million in state loans.

Secretary of Labor Hilda Solis tours the Willard & Kelsey Solar Group factory in Perrysburg, Ohio, Feb. 8, 2011. (Official White House Photo by Samantha Appleton)

Here is the press release:

Attorney General DeWine, State Agencies Seek Recovery of More than $10 Million in State Loans to
Defunct Solar Company

(CINCINNATI)—Ohio Attorney General Mike DeWine, on behalf of the Ohio Development Services Agency and the Ohio Air Quality Development Authority (OAQDA), today filed two separate lawsuits against a defunct solar power company which defaulted on more than $10 million in state loans. The lawsuits against Willard & Kelsey Solar Group and its shareholders seek to recover loans made by the former Ohio Department of Development and the OAQDA.

A lawsuit was filed in Hamilton County Commercial court on behalf of OAQDA against Willard & Kelsey Solar Group, LLC, of Perrysburg; James M. Appold of Rossford; Michael J. Cicak of Perrysburg; James E. Heidner of Bowling Green; Gary T. Faykosh of Perrysburg; and other unknown defendants. The lawsuit alleges three counts of Breach of Contract, one count of Breach of Security Agreement, one count of Shareholder Liability, one count of Breach of Fiduciary Duty, one count of Civil Aiding and Abetting, and one count of Civil Conspiracy.

A separate lawsuit was also filed in Hamilton County Commercial Court on behalf of the Ohio Development Services Agency as successor to the Ohio Department of Development (ODOD). Defendants include Willard & Kelsey Solar Group, LLC; Appold; Cicak; Heidner; Faykosh; E-Z Pak of McComb; and other unknown defendants. The lawsuit alleges two counts of Breach of Contract, one count of Breach of Security Agreement, one count of Shareholder Liability, one count of Breach of Fiduciary Duty, two counts of Fraudulent and Unlawful Transfers, one count of Civil Aiding and Abetting, and one count of Civil Conspiracy.

Willard & Kelsey Solar Group was a startup company in Perrysburg that was founded to manufacture solar panel products. Willard & Kelsey was granted loans in 2009 with ODOD worth $5 million and in 2010 with OAQDA worth $5.1 million on a $10 million line of credit. The lawsuits allege that Willard & Kelsey sought these loans despite the fact they were severely undercapitalized. Additionally, the lawsuits allege that the operators of Willard & Kelsey engaged in several improper business practices, including transferring $1.8 million from Willard & Kelsey to two other companies operated by Appold, E-Z Pak and Consolidated Biscuit Company of McComb. Other alleged improper practices include failure to maintain distinct checking accounts for Willard & Kelsey separate from the shareholders, failure of Willard & Kelsey to obtain the necessary certifications to legally sell its products, and failure of the shareholders to transfer promised intellectual property and patents to Willard & Kelsey. Appold is also alleged to have given Willard & Kelsey a loan from his personal funds at an unconscionable interest rate.

The lawsuits seek to recover the uncollected debt owed on the loans plus 10% interest, currently valued at $6,395,205.47 for the ODOD loan and $5.1 million for the OAQDA loan. The lawsuits also seek to recover equipment used as collateral for the loans, as well as late charges, collections costs, attorneys’ fees, and any future damages. The OAQDA loan also contains a liquidated damages provision, where the state is due damages for each promised job not created, valued at twice the expected salary of each promised job; the OAQDA lawsuit asks that these liquidated damages be awarded for all 450 jobs promised but not created, valued at more than $20 million.

Copies of the ODOD and OAQDA lawsuits are available on the Ohio Attorney General’s website.

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