SECOND DIVISION
                                                                                AUGUST 1, 2000

1-99-2782

Wayne and Alan Young were president and vice-president,respectively, as well as the owners, of Power Lift, Inc. (PowerLift). The Illinois Department of Revenue (the Department)assessed a penalty against Wayne, Alan and another officer ofPower Lift for wilfully failing to pay the corporation'sobligations under the Retailers' Occupation Tax Act (ROT Act) (35ILCS 120/1 et seq. (West 1996)). They challenged their personalliability, and a hearing was held before an administrative lawjudge (ALJ). Wayne died and his estate was substituted for him. The ALJ recommended that the Department uphold the penalties, andthe Director accepted the recommendation.

Wayne's estate and Alan appealed to the circuit court underthe Administrative Review Law (735 ILCS 5/3-101 et seq. (West1996)). The circuit court issued a memorandum ruling in favor ofthe Department. Wayne's estate and Alan then appealed to thiscourt. They argue that the Department's finding that theirfailure to pay Power Lift's taxes was wilful was clearlyerroneous. The Department, for its part, argues that we do nothave jurisdiction to hear the appeal since the notice of appealfrom the circuit court decision was filed before the final order.

Wayne Young and his brother Alan organized Power Lift in the1970s. Power Lift was in the business of selling, renting andservicing lifting equipment and aerial work platforms. Wayne wasthe president and owned 80% of the stock. Alan was the vice-president and owned 20% of the stock. They and Richard Feltz,Power Lift's general manager, were the directors of thecorporation. Feltz was a childhood friend of Wayne's and had noformal training in financial matters. It was Feltz who oversawthe day-to-day operations of the company. In 1991, Power Lifthad 86 employees and assets of $5,950,000. Wayne drew a salaryof over $185,000 per year. Alan drew a salary of over $95,000per year. At that time Robert Hodgetts, a Certified PublicAccountant (CPA), was its comptroller. The building in whichPower Lift operated was owned by JWA Properties (JWA), apartnership owned by the Youngs and their father. Power Liftpaid JWA about $15,000 per month in rent.

In the course of its business, Power Lift collected taxmonies, which it would put into its bank account before sendingthem to the Department. This was the same bank account fromwhich it paid salaries and other corporate obligations. Approvalfrom Wayne, Alan or Feltz was required to draw a check on thisaccount.

According to the Youngs, Power Lift had a system in placefor paying taxes, which operated as follows. Mary O'Malley, anemployee at the Power Lift office, prepared the sales tax returnsfrom the company's books and records. Then she would sign thereturns as "preparer" and give them to Hodgetts. Hodgettschecked over the returns and, if they were correct, requestedapproval for a check to pay the tax due. After the check wasdrawn, Hodgetts gave the check and the return to Feltz, who wouldthen sign for the taxpayer and send them to the Department. Thepayment of the tax would be recorded in Power Lift's books.

In the early 1980s the Youngs had trouble with a separatecompany they ran. The company underpaid federal withholding taxand the Internal Revenue Service (IRS) sought to impose personalliability on the Youngs. Because of this experience, the Youngsinstituted a policy at Power Lift "to pay taxes first, insurancesecond, payroll third and then [its] vendors." Nevertheless,Power Lift filed each retailers occupational tax (ROT) returnbetween July 1990 and most of 1991 late.

In 1991, Power Lift was having grave financial problems. The books did not balance in 1990 or 1991. Power Lift was on acash-on-delivery basis with Nissan, its main supplier. A bankaccelerated Power Lift's repayment for a line of credit. Thecompany's bills were left unpaid for up to 120 days. Somevendors would only do business with Power Lift on a cash basis,and some refused to do any further business at all with thecompany. It incurred about $86,000 in unpaid federal withholdingtaxes which the Youngs paid personally. Power Lift faced amultimillion dollar tort liability from a fatal accidentinvolving one of its vehicles. The claim exceeded the limits ofthe company's insurance policy. It was widely known within thecompany that Power Lift was having cash flow problems.

Alan admitted that Power Lift's accounting was "screwed up." The comptrollers that the Youngs had hired had not been able toclear up the bookkeeping problems. According to the servicemanager, there was a "rotating door" for comptrollers. Althoughthe books were supposed to reflect payment of taxes, Hodgettsconceded that this did not always happen. When he joined PowerLift in 1990 the books "didn't balance to a lot of things." Heknew that the ledger system was "a mess." Accordingly he wouldonly ask Wayne or Feltz about an unreconciled check if it werefor a large amount. Power Lift had a practice of not mailing outchecks if there was not enough money in the account to honorthem. The Youngs or Feltz made the decision whether to hold acheck.

Alan had a "hands off" attitude toward the finances, sincehe was not "a financial guy," but he was generally aware of PowerLift's cash flow problems. Neither he nor Wayne personallyexamined the books. When they had questions about a financialmatter they generally asked Feltz. Feltz usually responded withan assurance that he had the situation in hand. The servicemanager stated that at one point he saw a stack of unpaid billsin a drawer in Feltz' desk, along with something that looked likea tax return.

In late September 1991, Wayne ordered Hodgetts to make aninvestigation of the state of Power Lift's finances and tally upthe assets and outstanding obligations. During the course ofthis investigation, Hodgetts found that the checks and returnsfor Power Lift's taxes from March 1991 to September 1991, alongwith checks to pay other Power Lift liabilities, had never beenmailed. The reported tax liability was $61,975.74. He retrievedthe checks from Feltz. Hodgetts corrected the books to reflectthe unpaid taxes. Wayne signed the late returns over Feltz'partially erased signature and filed them by December 1991.

Wayne called a meeting of the board on October 4, 1991, todiscuss the company's financial situation. At the meeting, theunpaid obligations were disclosed. The company had about $45,000in available funds. The Youngs decided to file forreorganization under chapter 11 of the Bankruptcy Code (11 U.S.C.