CLARKSBURG - Business owners are suing after they had to allegedly pay an excessive and inequitable allocation of income taxes.
David B. Alvarez, Manuel Alvarez III, Vincent D'Annunzio and David D'Annunzio filed a lawsuit Nov. 20 in U.S. District Court for the Northern District of West Virginia against Michael Babik, James Jones and Nicholas Onderko, citing breach of fiduciary duty and negligent preparation of corporate tax returns.
According to the complaint, the plaintiffs and defendants engaged in series of acts, including a stock swap option in preparation of selling United Rentals Inc.
The plaintiffs state they relied on Babik to finalize all post-closing items with United Rentals Inc. to ensure that tax returns were filed accurately and timely.
Babik knew the plaintiffs believed they would owe income tax on 40 percent of the taxable income from the United Rentals Inc. sale, but Babik learned the plaintiffs would instead be allocated approximately 68 percent of the taxable income and intentionally withheld the information, according to the complaint.
The complaint states the defendants paid the plaintiffs a total of $2,600,000 for additional shares, but those shares had a value in excess of $13,000,000. After learning of their tax windfall, the defendants refused to cooperate with the plaintiffs to seek an equitable solution, the suit says.
In addition, the plaintiffs state they have paid more than $75,000 for interest, penalties, tax preparation and accountants’ fees due to Babik’s negligent preparation of corporate tax returns.
The plaintiffs are seeking a judgment compelling the defendants to disgorge the $11,740,256 the plaintiffs paid income tax on for the benefit of defendants, punitive damages, pre-judgement interest, fees and costs. They are being represented in the case by Brian A. Glasser and Isaac R. Forman of Bailey & Glasser LLP.
On Nov. 25, Judge Irene Keeley disqualified herself from hearing the case. It was reassigned to John Preston Bailey.
United States District Court for the Northern District of West Virginia Case No. 1:13-cv-252