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Court Case Brief

United States Court of Federal Claims. DONALD R. and Joyce D. Schroelucke, Plaintiffs, v. UNITED STATES, Defendant, No. 09-772T. Sept. 21, 2011.

FACTS

Plaintiffs, Donald and Joyce Schroelucke, referred a complaint in the United States Court of Federal Claims claiming they were owed a task refund for unreturned losses for the years 1997-1999 in addition to 2002 tax years. Plaintiffs, husband and wife, filed a mutual federal income tax proceeds throughout all the years pertinent to the action. During those 4 years, the plaintiffs resided in Georgia, USA. The husband, plaintiff Donald Schroelucke used to work as VP of Operations at Long Distance Discount Services, Inc. at WorldCom, Inc. back in the 1989. The company he worked in is acquired by WorldCom.

On January 4, 1999, Mr. Schroelucke ended his employment career with WorldCom, when immediately his stock choices were vested in accordance to the regulations of the stock option accord. In addition, Mr. Schroelucke was required to practice his entire worker stock options.

On January 2, 1998, Mr. Schroelucke had mounted up 172,492 WorldCom stock options, where on February 12, 1999 he has exercised his entire on hand stock. Back then, the market value of his shares was 172,492, and the company's shares were $13,702,333.25, according to $79.4375 per share concluding worth on February 12, 1999. After a while, Mr. Schroelucke sold 75,374 of WorldCom shares he has obtained on stock options at $80.67 a share. Parts of the earnings were exploited, and the remaining part was deposited in his brokerage bank account, thus keeping full hold of his outstanding WorldCom stock holdings, until May 2002, with the privilege to sell or not sell under his full discretion.

Starting February 28, 1999, the market worth of Mr. Schroelucke's remaining stock had risen from $7,714,811.12 to $8,012,235.00.

On May 2002, Mr. Schroelucke sold 80,000 WorldCom shares for $175,189.37, where his tax basis was $4,302,498.70, ending in a net loss of $4,127,309.33. On May 24, 2002, Mr. Schroelucke sold 1,242 of WorldCom shares and was also stricken by a net loss of $66,796.29. Likewise, on September 12, 2002, he sold 47,516 of the firm's shares and made a net loss of $2,549,344,.72, hence a long-standing capital loss of $6,741,358 on their 2002 tax return as a result of the WorldCom stock split back in 1999.

Mr. Schroelucke has claimed that he was constantly informed that his stock was safe and will retain its value. A decline in the company's stock was caused by the fraud and faulty statements of account presented by former CEOs Bernard Ebbers and Scott Sullivan at the time they were in charge. The decline initiated from March of 2002 until July 1, 2002.

On April 11, 2003, the plaintiffs have filed their 2002 Form 1040 with the IRS, claiming the capital loss they were afflicted with. Donald and Joyce Schroelucke hailed and obtained the maximum, yearly, capital loss decrease of $3000.00, then on April 7, 2006, they also filed a 2002 Form 1040X which adjusted their original capital loss declaration of a theft loss claim under the provisions of 26 U.S.C. (2006), along with further claims for refund, all declined by the IRS on July 31, 2008.

On November 10, 2009, the plaintiffs filed a complaint, an amended complaint, then a second amended complaint, claiming that they were exposed to a theft by fraud under Georgia State law as regards to the WorldCom stock options. Under lack of genuine arguments of material fact, the defendant had the law on his side because there cannot be any deception or theft under the Georgia State law.

ISSUES

  1. Whether the plaintiffs are qualified for a theft loss on their federal return
  2. A crime is a breach of a ruling of this state, where there is a mutual operation of an omission to act and intention or criminal negligence. Criminal negligence is a failure to act, which shows a willful or reckless disregard for the safety of others.

ANALYSIS

  1. In the plaintiffs' case, a theft aspect could not be established because WorldCom did not illegally take any property from Mr. Schroelucke, and there is no proof of intention to deprive Mr. Schroelucke of his property in issue, as regards to WorldCom and its executives. Therefore there were no theft or illegal taking of any property belonging to Mr. Schroelucke.
  2. As for the omissions that the plaintiffs declared, and that deprived them of their property, there was also no evidence in the record, that the WorldCom directors had any goal with regard to Mr. Schroelucke to take his stock by depreciation or some further means. But conversely, the company sought to increase the value of the stock, counting Mr. Schroelucke's stock. No specific intent was found in the records as needed to confirm theft under Georgia State law. Theft under Georgia State law could never have occurred because the history does not comprise any proof of recognized faulty statements written to Mr. Schroelucke to deprive him of his property. Also, the decline of 2000-2002 in stock value cannot prove a theft by fraud, for WorldCom cannot attain the disparity in the value originating from the reduction in the value of the stock. Therefore, there is no theft of services, for there is no sheer evidence that WorldCom intentionally received services from Mr. Schroelucke with the aim of ignoring payments.