Determination Form - New York Division Of Tax Appeals (Page 2 of 5) in pdf

Our records indicate that you are/were an Officer/Responsible Person of:

GEOPHYSICAL AND ENVIRONMENTAL RESEARCH CORP.

3. Petitioner, who has an undergraduate degree in accounting and a graduate degree in business administration,

began work at Geophysical and Environmental Research Corp. ("GER") in 1995, after answering a newspaper

advertisement for the position of comptroller. GER was a small company which manufactured

spectroradiometers, instruments used to analyze reflective light for scientific purposes. However, after starting

the job, he executed an employment contract with GER which stated that his official title was that of Vice

President of Finance and Chief Financial Officer, reporting directly to the Chief Executive Officer, Mark J.

Westfield.

4. Pursuant to the employment agreement, petitioner's annual salary was $110,000.00 with the possibility of up

to a 30% bonus based on an annual review and the performances of the company and petitioner. In fact,

petitioner earned $114,000.00 in 1999 and $63,695.00 in 2001. Petitioner did not recall how much he earned

from GER in 2000, but thought it was approximately in the same range as in 1999 and 2001. In addition to the

salary and bonus, petitioner was eligible under the employment contract to participate in a stock option plan,

left undefined in the agreement. However, at some point in 1997, petitioner did receive stock in GER Holdings

Corporation ("Holdings"), the sole shareholder of GER, amounting to approximately a 10% share. GER was the

operating company.

5. Petitioner's duties at the company initially involved the day-to-day financial operations, including the

maintenance of the books and records. In addition, petitioner was responsible for the preparation of the balance

sheets, income statements and cash flow reports. He was also responsible for preparing executive reports for the

board of directors and chief executive officer.

6. During the period in issue, October 1, 2000 through September 30, 2001, petitioner prepared the sales and

use tax returns, withholding tax returns and jointly prepared the corporation tax returns with the company's

other comptroller, Matthew Alexander. With respect to the withholding tax returns, forms NYS-45, for each of

the four quarters in issue, petitioner not only prepared the returns but also signed the returns as the vice

president of finance of GER.

7. Petitioner was a member of the board of directors of Holdings during the period in issue but not of the board

of GER. The Holdings board had eight members during the period in issue and many of the other board

(2)

members were also members of the GER board. Holdings also had an executive committee

of its board of

directors, of which petitioner was not a member. That committee made financial decisions without the

participation of the full board of directors, but did so with knowledge of the taxes due as provided to it by

petitioner, who reported cash requirements to the full board and the executive committee regularly. In addition,

the executive committee and chief executive officer authorized the payment of salaries and other expenses but

not the payment of taxes. The issue of paying taxes never came before the board for a vote.

8. GER was primarily funded by customer contracts, investments and loans. Some loans came from a company

called Spacevest, which invested in companies involved with technology related to space. As a result of

Spacevest's investment, it garnered several positions on the board of directors of Holdings held by Mark

Westfield, Charles Wasaff and John Higgenbothem.

9. Despite knowledge of New York State tax liabilities, the board of Holdings, including petitioner, chose to

direct funds to other liabilities, including salaries and marketing expenses. The board's rationale for this

decision was that it believed marketing its new satellite system would substantially increase the value of the

corporation and ultimately enable it to meet all its obligations. In fact, the board was relying on the sale of a

satellite system to the country of Kuwait to produce revenues sufficient to turn the company around.

10. Petitioner had the authority to sign checks on behalf of GER. Those checks in excess of $5,000.00 had to be

approved by the board of directors and co-signed by another officer. Those checks below $5,000.00 needed

only the approval of the board of directors. In addition to petitioner, four other board members were authorized

to sign checks. In all instances, petitioner submitted a cash requirement report to the board and then waited to be

told which checks to pay. Although the board did not direct petitioner to pay the taxes underlying the notices in

Determination Form - New York Division Of Tax Appeals Page 2

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