javascript hit counter

Judge files tax fraud charges against ABQ attorney

Copyright © 2022 Albuquerque Journal

A federal bankruptcy judge wrote in a court order that prominent Albuquerque attorney Will Ferguson used shell companies to avoid paying state and federal taxes, including excise taxes on expensive cars for his personal collection.

Judge David Thuma of the US Bankruptcy Court District of New Mexico found that Ferguson improperly claimed sole ownership of Motiva Performance Engineering LLC and “allowed him to deduct all of his losses” on his tax returns, even though the company had three owners.

“Between 2016 and 2020, Ferguson withdrew $1,289,941 from his income for Motiva’s losses,” Thuma wrote in a 34-page statement. At the time, Ferguson owned 65% of Motiva, not 100%, Thuma wrote.

“At a marginal tax rate of 37%, the result is an improper federal income tax cut of $167,047, along with an analogous underpayment of state income taxes,” Thuma wrote. “Federal tax evasion is a serious matter.”

Ferguson is the owner and president of Will Ferguson & Associates, one of New Mexico’s largest personal injury law firms.

Ferguson responded that as the only investor in Motiva, he had legally taken all of Motiva’s losses by arrangement with the other owners of the limited liability company.

“They had no investment in the business,” Ferguson said in a phone interview. “So the operating losses in the years that the company had operating losses were reported on my tax return. The testimony was clear that this was the agreement.”

Thuma also found that “Ferguson used Motiva to avoid paying state excise taxes by claiming that Motiva owned cars that Ferguson wanted as part of his private collection.”

The collection included at least 23 cars with a combined purchase price of about $1.4 million, including a Rolls Royce Ghost, four Jaguars, two Ferraris and a 1936 Packard, the judge wrote.

Assuming an average excise tax of 3.5%, Ferguson avoided paying the state about $49,000, Thuma estimated.

The fact that Ferguson titled cars under the Motiva dealer license refutes his claim that the cars did not belong to Motiva, Thuma wrote.

“Ferguson is barred from telling this court that Motiva does not own the affected cars because he has previously represented to the New Mexico Taxation and Revenue Department that Motiva owns them,” Thuma wrote. “Ferguson made his bed when he avoided paying excise duties on the affected cars. Now he has to lie in it.”

Thuma entered the order Oct. 7 in Motiva’s Chapter 7 bankruptcy filing, following a six-day court hearing in August. He also ordered Ferguson to pay a $575,000 judgment for transferring Motiva’s assets to one of his other companies “without obtaining adequate compensation for Motiva.”

Ferguson filed a motion in October challenging Thuma’s findings and asking the judge to reconsider his opinion and sentence. A hearing is scheduled for December 2 to consider the application.

Motiva’s bankruptcy is a key issue as a 2nd Judicial District Court returned a six-figure verdict against Motiva.

Creig Butler sued Motiva in 2017, alleging that the company botched an upgrade of its 2009 Hummer H3. A jury returned a verdict against Motiva in October 2018, resulting in a $292,000 judgment against the company.

“The verdict caught Ferguson by surprise,” Thuma wrote, because Motiva held ownership of a number of luxury cars that were purchased with Ferguson’s money. “Ferguson acted quickly,” wrote Thuma. On Nov. 1, 2018, he transferred title to five cars with a total acquisition cost of $609,000 to Dealerbank Financial Services, but no money changed hands, he wrote.

Ferguson is listed in the corporate filings of the New Mexico Secretary of State as a director and chairman of Dealerbank.

When the company closed in 2018, “Motiva had few worthless assets,” Thuma wrote.

Butler foreclosed on Motiva’s bank account in December 2018 but received less than $3,000. Motiva filed for bankruptcy in November 2019.

Thuma found that Ferguson abusively used Motiva and other companies to prevent payments to Butler and other creditors.

“All creditor claims against Motiva should have been paid in full,” he wrote. “Instead, creditors found they had claims against an empty shell.”

Thuma also held Ferguson personally liable for paying Motiva’s creditors — an action described as “breaking the corporate veil.”

Thuma also noted that in May 2021, New Mexico Supreme Court justices barred Ferguson from practicing the bar for 90 days after finding that he had attempted to avoid paying the Butler judgment by selling intercompany assets , which belonged to him, relocated.

Ferguson claims Motiva, Dealerbank and other companies involved in the dispute are legitimate companies that paid creditors and had little or no debt.

“These deals, most of them, have been around for a decade or more and had nothing to do with creditors,” Ferguson said. “It’s a bizarre conclusion.”

Ferguson said that he and Butler are Motiva’s sole creditors, meaning Ferguson will receive a portion of any money he pays for Motiva’s debts.

Motiva was struggling because Albuquerque couldn’t support a company that offered expensive, custom car modifications, he said.

“Here in Albuquerque, there weren’t that many people who could afford to do that much work on a car,” he said.

The six-figure verdict in the Butler case, which Ferguson called “an incredible amount of money,” was the final blow that killed Motiva, he said.

“The company couldn’t even begin to address half of it,” Ferguson said of the ruling. “There was a garnishment that cleaned out her bank account. That was the end of Motiva.”

Ferguson said the core of Motiva’s business was selling cars on commission for owners. He denied that he transferred ownership of the cars to avoid paying the judgment.

Car collections are “transactional,” he said. “You buy them and you sell them. Sooner or later they will all be sold. There were only four or five cars that weren’t sold through the dealer.”

He also denied using Motiva’s dealer tag to avoid paying excise taxes on cars he bought for his own collection.

“The testimony was clear that we went through 40 or more cars and sold them through the Motiva sales process with the dealer license,” he said. “There were a couple of cars that I personally used.”

What happens when a judge accuses someone of tax fraud?

Albuquerque attorney Spencer Edelman, special counsel to Motiva’s US bankruptcy trustee, said he didn’t know if Ferguson would face legal ramifications as a result of Thuma’s ruling. Edelman also represented Butler in his lawsuit against Motiva.

“From a legal standpoint, I don’t know the answer,” Edelman said in a phone interview. “It’s not so good because it’s a judicial finding.”

Butler is unlikely to receive payment until Ferguson files his reconsideration request, he said.

Edelman said he was surprised Ferguson chose not to settle the bankruptcy case and instead took it to court.

“There was ample opportunity for Mr. Ferguson not to take this to court,” he said. “I’m just amazed that something like this had to happen. Mr. Ferguson avoided all of this a long time ago.”

Source