Trudeau Civil Case Document 885 Defendant Trudeau Reply Brief in Support of His Motion 05-12-15

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UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

FEDERAL TRADE COMMISSION, )

Plaintiff, )

)

v. ) Civil Action No. 03-C-3904

)

KEVIN TRUDEAU, ) Honorable Robert W. Gettleman

Defendant. )

DEFENDANT KEVIN TRUDEAUS REPLY BRIEF IN SUPPORT OF HIS MOTION TO COMPEL THE RECEIVER TO FILE TAX RETURNS

AND FILE A STATUS REPORT

The Receivers response brief is long on excuses and short on solutions. The

Receiver fails to offer a way forward to address a fundamental and unforeseen problem

that has arisen out of the Receivership That is, the Order commanded Trudeau to turn

over all of his assets and all of the assets of the Trudeau Entities. (D.E. 742.) As such,

the Receiver is in possession of all of Trudeaus assets and Trudeau has no funds to pay

his taxes or any other expenses.1 But even if Trudeau had the funds to pay taxes and other

expenses (he does not), he could not expend them because the Order further enjoins

Trudeau from transferring any funds to any party (including the IRS) (D.E. 742 at 5.)

Thus, if the Receiver does not pay Trudeaus taxes, Trudeau will be placed in a

trick box where he must either: (a) violate his legal obligation to pay taxes; or (b) violate

this courts Order enjoining him from making any asset transfers to the IRS. The

Receiver does not offer a solution to this conundrum and fails to refute the basic fact that

1 The Order was amended to prohibit Trudeau from receiving funds to pay for his

personal living expenses. (D.E. 760.)

Case: 1:03-cv-03904 Document #: 885 Filed: 05/12/15 Page 1 of 7 PageID #:16147


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the only way for Trudeau to remain in compliance with his legal duty to pay taxes and

this Courts order is for the Receiver to fulfill its legal obligation and pay Trudeaus

taxes.

I. THE RECEIVER MUST FILE TRUDEAUS TAX RETURNS

The Receiver does not dispute or distinguish the relevant legal authority setting

forth its obligation to file Trudeaus tax returns and pay taxes owed. See 29 U.S.C.

960(a); SEC v. Kirkland, 2008 WL 4491528, *6 (M.D. Fla. Sept. 30, 2008); 26 C.F.R.

1.6012-3(b)(5).2 Instead, the Receiver asserts that it is unable to file Trudeaus returns

because it claims Trudeau failed to turn over all of his assets. By now, however, this is

a tired and empty refrain from a Receiver who trumpeted its supposed prowess in tracing

assets and who for nearly two years has had complete access to Trudeaus records

(including those of his banks, accountants, advisors, lawyers, credit card companies). As

Trudeaus corporate attorney Marc Lane testified under oath, there simply were no

fraudulent transfers of assets and no assets were transferred abroad. D.E. 710-9, Exhibit

50 at 114:16-19, 119:15-17, 121:10-17, 123:24-124:2. By now, it is too late for the

Receiver to complain about its apparent inability to do its job. The bottom line is the

Receiver has failed to identify any specific Trudeau assets that have not been turned over

to the Receiver.3

2 The Receivers citation to 26 C.F.R. 1.6012-3(b)(5) is unavailing because the

Receivership Order at issue in this case places the Receiver in control of all of Trudeaus assets. Similarly, the Receivers citation to a private letter ruling is inappropriate and should be disregarded and stricken from the record. See Ex. D at 7 (citing 26 U.SC.

6110(k)(3) (noting that private letter rulings may not be cited or used as precedent) (emphasis added).

3 At the same time, the Receiver refuses to provide Trudeau with the results of its

forensic accounting which will make clear that Trudeau is not in fact concealing any

assets.



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Absent concrete evidence that any undisclosed assets exist, a vague and

unsubstantiated suspicion that something else might be out there, is not sufficient to

relive the Receiver of its legal duty to file tax returns.4 Id. The Receiver should file

Trudeaus returns and pay all taxes due without delay.

II. THE RECEIVER MUST FILE RETURNS ON BEHALF OF THE TRUDEAU ENTITIES

The Receiver offers flimsy excuses for its dereliction of duty to file tax returns

and pay taxes due on behalf of the Trudeau Entities. None have any merit. First, the

Receiver points to certain entities which it claims have either no accounting records or

very limited, dated records. 5 (D.E. 882-1 at 4-5.) However, the Receiver points to no

evidence that additional records for these entities exist, let alone that any such records are

somehow being withheld from the Receiver. Accordingly, the Receiver should file

returns based on the information that it has. A lack of perfect documentation is not a

valid reason not to pay taxes. The Receiver also states that it is unaware that any of these

entities listed in footnote four have any existing assets. (D.E. 882-1 at 5.) Thus, this may

be an easy case where the Receiver can simply file returns for these entities indicating

that they do not have any tax liability. The Receiver should do so immediately. See 26

U.S.C. 6012(b)(3); see also 26 C.F.R. 1.6012-3(b)(4).

4 If the receiver is concerned that it does not possess all of the necessary records, it can

add a disclaimer to this effect directly in the return as it has done in the other returns it

has filed. See D.E. 882-1 at 3-4; Ex. A.

5 These entities are: Custom Fulfillment; Direct Response Marketing; Natural Cures

Health Limited; Trudeau Training Team LLC; Natural Cures Holdings, Inc.; Natural

Cures.com Inc.; Shop America Marketing Group; Telephone Advisory Service LLC;

Self TV, Inc.; Alliance Real Estate Holdings, LLC; Direct Response Associates LLC; KT

Capital Corporation; Natural Cures Real Estate Holdings LLC; Pool Licensing LLC;

Shop America (USA) LLC; The Whistle Blower, Inc.; Trucom, LLC; Trudeau

Management Inc.; and TruStar Marketing Corporation.



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The Receiver next complains that certain overseas entities are merely empty

shells with no assets. For these entities with no assets, the Receiver again does not

explain why it cannot simply file a return indicating that the entity owes no taxes.

For the other overseas entities, the Receiver claims that Trudeau has failed to turn

over control of these entities. The Receiver fails to acknowledge, however, that these

entities are were not legally owned by Trudeau. And, if they somehow were legally

owned by Trudeau, the Receiver now owns them. To assist the Receiver and at the

request of the Receiver, Trudeau has sent direction letters asking these entities to turn

over funds and information to the Receiver. Indeed, Trudeau never refused to send any

letter of direction requested by the Receiver. If the Receiver believes additional direction

letters or other correspondence is necessary for the receiver to assume control of

additional assets and entities, Trudeau stands ready to execute them. But aside from

blaming Trudeau, the Receiver fails to indicate what steps it has taken to comply with

this Courts order to [t]ake exclusive custody, control and possession of all Assets and

Documents of, or in the possession, custody, or under the control of, Trudeau and the

Trudeau Entities. (D.E. 742 at 8 (emphasis added).) Other than requesting that Trudeau

send letters a handful of individuals, the Receiver apparently has taken no other steps to

assume control over the entities about which it now complains (it certainly has not filed

any reports indicating any actions it has taken in the past year). The Receiver cannot hide

behind its own lack of diligence as a reason for failing to file tax returns and pay taxes

due. The Receiver must file these returns as soon as possible. See 26 U.S.C.

6012(b)(3); see also 26 C.F.R. 1.6012-3(b)(4).



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III. THE RECEIVERS CONCERN THAT TRUDEAUS REQUEST IS PREMATURE IS BASELESS

The Receiver next states that Trudeaus request to pay taxes is premature

because the IRS has not launched enforcement proceedings against Trudeau. This

nonsensical argument ignores that Trudeau and the Trudeau Entities have a duty to file

annual tax returns regardless of whether the IRS initiates litigation. See 26 U.S.C.

6011(a), 6012(a), et seq., and 6072(a); see also Treas. Reg. 1.6011-1(a). This argument

also fails to acknowledge that the IRS has in fact filed a notice for overdue taxes for

TruStar Global Media Ltd, which the Receiver should be ordered to pay at once.

IV. THE RECEIVER SHOULD FILE A REPORT DETAILING THE

RESULTS OF ITS FORENSIC ACCOUNTING AS SOON AS IS

PRACTICABLE

As noted above, the Receiver continues to withhold from Trudeau and this Court

the results of its forensic accounting of Trudeaus assets even though it was completed

last summer. There can be no serious argument that Trudeau is not entitled to this

information that will show that Trudeau is not concealing any assets, that the

Receivership has been a failure, and that the Receiver has in fact harmed innocent

consumers and vendors by defaulting on pre-receiver financial obligations. Enough time

and money has been wasted on the Receivership. The Receiver should do its job: pay

the taxes due and file its final report.

V. CONCLUSION

WHEREFORE, Trudeau, respectfully requests that this Court order the Receiver

to: (1) file Trudeaus personal tax returns and pay any outstanding taxes due; (2) file

corporate tax returns on behalf of all of the Trudeau Entities identified in the

Receivership Order and pay any outstanding taxes due, including but not limited to taxes



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owed by Trustar; and (3) to immediately file a report informing the Court and Trudeau of

the results of its forensic accounting and any other activities it has engaged in since July

7, 2014.

Respectfully submitted,

By: /s/ Kimball Anderson

One of His Attorneys

Kimball Anderson

Thomas Kirsch

Andrew Sullivan

WINSTON & STRAWN

35 West Wacker Drive

Chicago, IL 60601

[email protected]

Attorneys for Defendant



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CERTIFICATE OF SERVICE

I, Kimball R. Anderson, an attorney for Defendant Kevin Trudeau, hereby certify

that on this, the 12th day of May, 2015, I caused the above-described document to be

filed on the CM/ECF system of the United States District Court for the Northern District

of Illinois, which constitutes service of the same.

/s/ Kimball Anderson

Kimball R. Anderson

WINSTON & STRAWN

35 West Wacker Drive

Chicago, IL 60601

[email protected]

Attorney for Defendant


Trudeau Civil Case Document 885 Defendant Trudeau Reply Brief in Support of His Motion 05-12-15

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