Opinion ID: 1088711
Heading Depth: 1
Heading Rank: 3

Heading: Punitive Aspect Is Misdirected

Text: The Court of Civil Appeals' opinion concludes: HealthSouth cannot be permitted to take advantage of its own wrong by receiving a refund based on its own inequitable conduct. 978 So.2d at 745. HealthSouth is not seeking to take advantage of its own wrong; rather, HealthSouth is asking to be placed in the position it would be in if the property had been reported and assessed properly. In so doing, HealthSouth is attempting to right the wrong done to its shareholders by its former officers or agents. Any effort to hold HealthSouth accountable for the fraud of its former officers should not overlook the fact that those who have suffered most as a result of HealthSouth's wrongdoing are its innocent stockholders. HealthSouth's former officers who were involved in the fraud have already, for the most part, borne the consequences of their actions. Penalizing HealthSouth further by retaining this tax would not be an act of reprimand, but a misplaced chastisement of the innocent shareholders, because withholding the tax refund would prevent the shareholders and creditors from using the tax refund to mitigate damages. As Boise says, After all, the direct cost of any penalty generally will be borne by shareholders in addition to the potential indirect costs associated with the penalty. Playing with Monopoly Money, 90 Minn. L.Rev. at 201. Retaining the excess tax does not deter future tax fraud, because those who perpetrated the fraud are not the persons who will suffer from the denial of the refund. It is true that shareholders assume the risks of their investments. However, the State should not magnify the shareholders' losses by refusing to refund illegal taxes on nonexistent property, especially when, as in this case, the fraud and misrepresentations were concealed from the shareholders.