When the notice from the city of Amherst hit David Moore’s desk, he wasn’t worried. His accountant assured him it was a simple misinterpretation of Ohio’s tax law. Based on that, Moore expected to walk across the street and put the confusion to rest with an explanation, a smile and a handshake.
Unfortunately, it didn’t turn out that way.
Even when city Law Director Alan Anderson filed a criminal charge against Crystal Mortgage Company Inc. last November, citing the company’s failure to pay income tax, Moore, the company’s CEO, still did not believe a court date would be necessary and waived his right to a speedy trial. It is a move, in retrospect, he chalks up as his biggest mistake.
“We believed this would never go to trial,” he says. “We thought we just had to educate them a little bit, it’s just a misunderstanding.”
Eighteen months after that first letter arrived, Moore is still embroiled in what has turned out to be a bizarre legal battle spurred on by Anderson and city Treasurer Kathleen Litkovitz. The city’s dogged persistence in prosecuting one of its most well known and civic-minded local business owners has divided the sleepy city of Amherst.
Other local merchants are afraid to publicly take sides, while city council members, who periodically stop by to drink coffee with Moore, have no alternative but to follow the advice of the city’s lawyer. Meanwhile, Mayor John Higgins, who appointed Moore to the city’s planning and zoning board, has avoided public comment on the issue altogether.
Anderson and Litkovitz dropped the criminal charges at the end of August, but that hasn’t done much to lessen Moore’s anger or resolve the dispute.
What makes the feud so strange is that the city changed the focus of its investigation twice within 18 months, beginning in April 1998. At first, Litkovitz charged that Crystal Mortgage owed income tax on offices located outside of Amherst. A few months later, she questioned Moore’s personal income tax payments. Then Litkovitz launched an investigation of Crystal Mortgage’s employee withholding allowance for its Amherst office.
It is not uncommon for municipalities to collect taxes from businesses that generate income from offices outside the city. For example, the City of Lorain has a process outlined in its codified ordinances. “In Lorain, we give you credit for what you pay to another place,” explains Lorain city Treasurer Lori Maiorana. “But, if it is a lower tax than Lorain’s, you have to pay the difference.”
The problem with Amherst’s attempt to tax Crystal Mortgage Co.’s offices outside the city is the fact there is no local ordinance on the books allowing it to do so, according to Moore’s attorney John Rybarczyk. Rather than admit that error, he contends the city started looking for something, anything, to pin on Moore.
“I think if you boiled all this down to one simple line, it would be the city made a simple mistake,” he says. “When they were called on that mistake, they decided rather than admit to the mistake, they would exacerbate the problem.”
For months, Moore hoped that the situation could be quickly resolved. That was until Litkovitz decided last February to conduct audits of both Crystal Mortgage and Moore. Even after months of investigation, neither Litkovitz nor Anderson is ready to explain exactly what Moore might have done wrong.
But while the treasurer’s office poured over those tax records, there is one question it seems no one stopped to consider: What happens if he fights back?
On the walls of Crystal Mortgage’s Amherst headquarters hang dozens of presidential signatures, from Bill Clinton back to John Quincy Adams — the sixth U.S. President and the son of John Adams, an American revolutionary who had a bit of a tax problem himself.
Just down the hall, in a corner office that overlooks City Hall, David Moore is working on a revolution of his own.
It is 10 a.m. on a warm August day, and Moore’s office floor is stacked high with paperwork generated by his long battle with the city. Moore came to Amherst in 1996 with a wildly successful mortgage lending company — which finished at the top of the Weatherhead 100 list of fastest growing companies in Northeast Ohio in 1997 and 1998 — and $2 million, which he used to help revive the city’s ailing downtown. In addition to Crystal Mortgage, Moore opened two restaurants and a small antique shop.
But that storybook relationship with the city has soured during the past year. It is painfully evident by the newly vacated first floor of his Crystal Mortgage’s headquarters, and a row of 2×3-foot posters that hang side-by-side in its large plate glass window. The posters depict a man sitting in a stockade with his hands outstretched. At the top is a simple message in bold, five-inch tall letters: “Free Dave Moore.”
An “awareness campaign” is how Moore likes to describe his attempts to educate the community about the legal hassles he has faced. The posters downstairs are part of it. So are the bumper stickers he had printed that read “Vote A.B.A. ’99: Anybody but Anderson” and a string of commercials on local cable disputing public statements made by the city law director. The spots started running 150 times a week in mid-August and will continue through the November election, when voters will decide whether to return Anderson to office.
Other business owners may have just paid the fairly small tax bill — $7,500, for alleged outstanding employee withholding taxes, according to information Anderson filed with the court — all the while muttering under their breath the old maxim about not being able to fight City Hall. Moore isn’t wired that way. Then again, he isn’t your garden-variety entrepreneur. He occasionally slips the word “dude” into casual conversation, is known for tooling around town in a Humvee and has a penchant for collecting Hollywood memorabilia.
Moore says he originally just planned to fight the tax bill, not take on the people behind his legal woes.
“But when I saw that letter saying they wanted to audit (me) and they still wouldn’t admit to their mistake, I started getting mad,” he says. “And then they turned it up even more.”
So last spring, Rybarczyk filed a civil lawsuit in Lorain County Common Pleas Court on behalf of Crystal Mortgage and Moore. The suit asks the city to admit to its mistake, provide written assurance no other business will be treated the same way and to pay an unspecified amount of damages for sullying the company’s — and Moore’s — good name.
Meanwhile, Moore isn’t sitting still and waiting for the courts to decide the dispute. He’s moving Crystal Mortgage out of Amherst, an action that ensures the city will lose thousands of dollars each year in taxes. Although Moore sold Crystal Mortgage last January to Pennsylvania-based Conti Mortgage, he remains the company’s CEO and had little problem convincing his new business associates a move was necessary.
In July, he transplanted his 22-person sales staff to Elyria, and plans for the rest of the company to follow by the end of the year.
“I started looking for a place after I filed the civil charge,” he says. “Because I was more concerned about what could happen to my sales force had they maintained a work environment here. I was afraid that they could audit every employee, so I thought, Why should I pay payroll tax and city tax and all these other taxes to a community that obviously doesn’t want Crystal Mortgage downtown?”
Fighting City Hall, though, doesn’t come cheap. Moore has already spent $100,000 on legal counsel and expects that figure to be far higher by the time the matter is finally settled. He hopes to recoup all of that money throu
gh his civil suit.
Some may think his battle is doing Crystal Mortgage more harm than good, given the comparatively meager amount of money the city wants him to pay. Moore disagrees. “Principle,” he says with a sly smile, “is very expensive.”
Moore was one of eight business owners hit with a criminal charge of failure to pay income tax late last year, and the only one that has not sent a check to City Hall to clear up the matter. However, getting the city’s two principal players, Anderson and Litkovitz, to explain the case is difficult.
Calls to Liktovitz’s office were not returned, while one of her employees said she is not commenting on the Crystal Mortgage situation.
Anderson, on the other hand, was a little less reluctant.
“We asked them for backup information in order to verify what they put on the (tax) return,” he explains. “They ignored our request and never responded to the city treasurer’s office. Then I wrote a letter asking for that information as the law director. They ignored our request, so that necessitated getting their attention. So we did.”
The failure to pay income tax charge was dropped because Crystal Mortgage has now cooperated with the city’s request and provided the information to back up the company’s tax return, says Anderson. But that charge could soon be replaced with a different one if, after city auditors finish their assessment of Moore’s information, the company ends up owing money and still refuses to pay.
And that’s the real question still hanging in the air after 18 months: Does Crystal Mortgage actually owe the city any money? Neither Anderson nor Litkovitz is ready to answer that just yet.
“It’s really out of my hands,” Anderson says. “It would be in the hands of the city treasurer’s office, and their accountants are pouring over the returns. They are still doing the audit, now that they’ve got the information.”
As far as Moore’s one-man campaign to oust him from office, Anderson doesn’t have much to say: “Well, I guess that’s his right. I have no feelings one way or the other.”
Even though the initial criminal charges have been dropped, Moore vows he will continue to do battle against the city officials that have dragged both him and the company through the mud. Litkovitz is up for re-election in November 2000. When that election rolls around, Moore says he will once again hit the campaign trail.
“They can’t bury us,” he says. “This thing cannot be buried. I’ve brought this to such a public awareness that people on the street are saying, Why is the city running these people out of town?”
Jim Vickers ([email protected]) is an associate editor at SBN.
