Las Villas Produce, Inc.

LAS VILLAS PRODUCE Las Villas Produce, Inc. and Carmelo P. Caldero, Individually and Produce, Fresh & Frozen Fruits & Vegetables, Fish, Butter, Eggs, Cheese, Poultry, Florists, Nursery, Landscape and Allied Employees, Drivers, Chauffeurs, Ware, housemen and Helpers Union, Chicago and Vi- cinity, Local 703, International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America. Case 13-CA-19903 8 May 1986 SECOND SUPPLEMENTAL DECISION AND ORDER By CHAIRMAN DOTSON AND MEMBERS JOHANSEN AND BABSON On 23 October 1984 the National Labor Rela- tions Board issued its Supplemental Decision and Order' in the above-entitled proceeding in which it ordered Respondent Las Villas Produce, Inc., Chi- cago, Illinois, its officers, agents, successors, and assigns, to pay its unit employees a total of $746,877.44 in net backpay and health and welfare and pension fund payments with interest computed in a manner consistent with Board policy. The Board Order was enforced by the Seventh Circuit by a default judgment entered 10 April 1985. A controversy having arisen over the personal liabil- ity of Carmelo P. Caldero, also known as Carmelo Caldero Padilla, for the sums owed by Las Villas Produce, Inc., the Regional Director issued a second backpay specification and notice of hearing alleging, inter alia, that Carmelo Caldero is and was the alter ego of Las Villas Produce, Inc., and that he is jointly and severally liable for the full amount of backpay and benefit fund payments owed. On 13 August 1985 Administrative Law Judge Walter H. Maloney Jr. issued the attached second supplemental decision. The General Counsel and the Respondent filed exceptions and supporting briefs, and the General Counsel filed an answering brief to the Respondent's exceptions. The National Labor Relations Board has delegat- ed its authority in this proceeding to a three- member panel. The Board has considered the decision and the record in light of the exceptions and briefs and has decided to affirm the judge' s rulings, findings, 2 and 1 272 NLRB 915 (1984) 2 The Respondent has excepted to some of the judge's credibility find- ings The Board's established policy is not to overrule an administrative law judge's credibility resolutions unless the clear preponderance of all the relevant evidence convinces us that they are incorrect Standard Dry Wall Products, 91 NLRB 544 (1950), enfd 188 F 2d 362 (3d Cir 1951) We have carefully examined the record and find no basis for reversing the findings 883 conclusions as further explained herein and to adopt the recommended Order. We agree with the judge that Respondent Car- melo P. Caldero, as an individual, is and has been the alter ego of the Respondent, Las Villas Produce, Inc. We need to clarify, however, the basis for this agreement. Contrary to the judge's analysis, the appropriate test for alter ego status is the same whether the alter ego issue arises in the original unfair labor practice proceeding or in sub- sequent backpay proceedings. The test includes a case-by-case examination both of the group of fac- tors reviewed by the judge as an initial "single em- ployer" test and of the factor of a sham or dis- guised continuance discussed by the judge as an ad- ditional element of proof necessary to impose liabil- ity on an individual corporate shareholder or offi- cer "at the supplementary stage of an unfair labor practice case." See, e.g., Watt Electric Co., 273 NLRB 655 (1984); Advance Electric, 268 NLRB 1001 (1984). The General Counsel may litigate an alter ego issue at any stage of Board proceedings under the above-mentioned test. Southeastern Envelope Co., 246 NLRB 423 (1979). The consequences of a Board finding of alter ego status are the same whenever the issue is adjudicated: joint and several liability for the alter ego entities. In contrast, the General Counsel may, without proving alter ego status, seek to impose limited liability on corporate officers or shareholders to the extent of specific corporate assets wrongfully distributed to them in avoidance of backpay liability. E.g., F & W Olds- mobile, 272 NLRB 1150 (1984). Although the General Counsel's original allega- tions here pertaining to Respondent Caldero in- volved only the theory of limited liability for spe- cific assets transferred to him by Respondent Las Villas, that theory was superseded by amended al- legations of Caldero's alter ego status. Consequent- ly, the judge's discussion of the precedent for im- posing limited liability was unnecessary. We never- theless find that the credible evidence fully recited in the judge's decision clearly proves Caldero's alter ego status under the appropriate test, and on that basis we will adopt the recommended Order imposing full backpay liability on him as an indi- vidual.3 In the last line of p 1, the judge inadvertently stated that $37,447 was found due to the pension fund That figure should be $39,447 3 Member Babson agrees that Respondent Caldero should be held per- sonally liable for the entire backpay amounts involved herein In so doing, Member Babson particularly relies on the judge's findings that Caldero owned the Respondent corporation , made all of its decisions, intermingled personal and corporate assets, caused the corporation to be undercapitalized, and made use of corporate funds for personal needs In Continued 279 NLRB No. 120 884 DECISIONS OF NATIONAL LABOR RELATIONS BOARD ORDER The National Labor Relations Board adopts the recommended Order of the administrative law judge and orders that the Respondents, Las Villas Produce, Inc., its officers, agents, successors, and assigns, and Carmelo P. Caldero, a/k/a Carmelo Caldero Padilla, jointly and severally, shall take the action set forth in the Order. these circumstances , Member Babson concludes that Caldero is an alter ego of the Respondent corporation and, further , that piercing the corpo- rate veil is warranted See Riley Aeronautics Corp, 178 NLRB 495, 501 (1969); D & I Trucking, 237 NLRB 55, 64 (1978), Carpet City Mechanical Co, 244 NLRB 1031, 1034 (1979), G & M Lath & Plaster Co, 252 NLRB 969, 977 (1980) (McCaslin) SECOND SUPPLEMENTAL DECISION WALTER H. MALONEY JR., Administrative Law Judge. This is the third proceeding before the Board in the above-captioned case. On May 9, 1980, the above-cap- tioned Union filed an unfair labor practice charge against Las Villas Produce, Inc. (Las Villas), alleging that it had violated Section 8(a)(1) and (5) of the Act by failing and refusing to pay wages and benefits which were called for under the terms of its contract with the Union. After the issuance of complaint and a formal hearing, Administra- tive Law Judge Philip P. McLeod rendered a decision on March 31, 1982, finding the Respondent corporation guilty of violating Section 8(axl) and (5) of the Act and recommending that it be ordered to make whole its em- ployees for losses in wages and benefits which they suf- fered by reason of the violations found. His decision was upheld by the Board on May 4, 1982, in a pro forma order which was entered in the absence of exceptions. This order was then enforced by the United States Court of Appeals for the Seventh Circuit on August 18, 1982, by the summary entry of a judgment against Respondent Las Villas Produce, Inc. and "its officers, agents, succes- sors, and assigns." A supplementary proceeding then took place on a backpay specification which sought additional wages for a large number of employees who had been paid less than the contract rate by the Respondent. It also sought payments on behalf of several employees to the Team- sters health and welfare fund and the Teamsters pension fund. After a hearing before Administrative Law Judge Bruce C. Nasdor on October 11, 12, and 13, 1983, a sup- plementary decision was issued on July 27, 1984. That decision was upheld by the Board on October 23, 1984, 272 NLRB 915, which found a total liability on the part of Respondent Las Villas, of $746,877.44. Of that amount, a total of $668,992.44 was found due to 35 named employees for wages. Some $38,439 was found due to the health and welfare fund and $37,447 was found due to the pension fund for the benefit of 28 named employees. The backpay order was enforced by the Seventh Circuit by a default judgment which was en- tered on April 10, 1985.1 The aspect of this case litigated before me is in the nature of a proceeding in aid of exe- cution, in which the General Counsel is attempting to impose personal liability for sums owed by the Respond- ent corporation on Carmelo P. Caldero, sometimes known as Carmelo P. Caldero Padilla, the president, treasurer, sole stockholder,2 and chief operating officer of the corporation.3 In the second backpay specification and notice of hear- ing, dated October 12, 1984, the General Counsel origi- nally sought to impose backpay liability for corporate debts on Caldero only in the amount of certain payments made by the corporation to Caldero which are alleged in the pleading. These include a bonus to Caldero in the amount of $17,050 paid on December 15, 1982, a second bonus in the amount of $37,500 paid on October 10, 1983, and some unspecified payroll checks issued by the corporation to Caldero after December 3, 1983, the date when the corporation had ceased doing business. The evidence indicated that these checks included a $900 check issued on February 1, 1984, another check for $900.40 issued on March 1, 1984, and a check for $16,000 issued on December 12, 1984. The last named check was issued by the corporation after it had received a tax refund from the Internal Revenue Service. The money was used by Caldero to meet his personal income tax li- ability to IRS. Under the General Counsel's original theory of the case, Caldero's personal liability, if established, would be limited to the $72,350.40 which the corporation paid him in certain named transactions. The fact that corporate li- ability, as found by the Board, far exceeded this amount was immaterial. These allegations were, in short, an at- tempt to trace particular assets fraudulently conveyed and to utilize them in partial satisfaction of a corporate judgment. The General Counsel's theory justifying such an imposition of personal liability was that Caldero was and is an alter ego of a corporation which he personally controlled and operated, and that a certain limited amount of money should be available from his personal assets to satisfy corporate debts, because these sums rep- resented the amount of corporate assets which were si- phoned off by Caldero in an effort to defraud employee and union creditors. This contention is based on the theory that certain fraudulent transfers had taken place so that corporate assets in the form of cash should be traced to the hands of the recipient. Accordingly, Cal- dero's position with respect to personal liability would essentially be no different from that of any stranger to i The sums in question were also subject to interest on net backpay, as computed in Florida Steel Corp, 231 NLRB 651 (1977), and interest on fringe benefit fund payments computed according to Merryweother Optical Co., 240 NLRB 1213 (1979) 2 There is testimony in the record from Carmelo P Caldero that he owned 750 shares of stock in the corporation, while his brother, Jesus Caldero Padilla, owned 250 shares However, corporate income tax re- turns for several years which were introduced into evidence show that Carmelo P Caldero is the sole stockholder in Las Villas Produce, Inc, and that he purchased 1000 shares for a total capital contribution of $1000 Caldero's credibility in this third proceeding was no greater than it was in the two preceding hearings, so I will credit the information on this point which is contained in the tax returns 3 Certain errors in the transcript have been noted and corrected LAS VILLAS PRODUCE the corporation who might hold corporate assets fraudu- lently conveyed, because the limits of his liability would not exceed the amounts wrongfully transferred. On February 28, 1985, the General Counsel amended the second specification and, in so doing, radically al- tered the theory of her case. There is little merit in the Respondents' contention that this amendment, to which they consented, violated due process, inasmuch as an ex- tended recess took place following the end of the hear- ing on that day, during which time both Respondents, corporate and individual, had ample opportunity to pre- pare a defense. The hearing did not resume until May 8. According to the amended specification, Caldero should be held personally liable for the "total amounts of net backpay, health and welfare and pension fund pay- ments specified in the appendix to the Board's supple- mental decision and order " The underlying theory for this contention also presumes that Caldero was an alter ego of Las Villas Produce, Inc., but maintains that the corporate veil of this entity should be entirely pierced so that Caldero might stand personally responsible for all Board-imposed liabilities, without any limitation derived from the amount of specific payments which he received. The new theory seeks a true piercing of the corporate veil, not a mere tracing of specified assets. Under the facts of this case, the amendment to the General Coun- sel's second specification creates a difference of about $674,000 in potential personal responsibility. There is little doubt that Carmelo Caldero is the alter ego of Las Villas Produce, Inc. The test of alter ego status has been set forth many times by the Board and the courts. They are (1) interrelation of operations, (2) common management, (3) centralized control of labor re- lations, and (4) common ownership. NLRB v. Don Bur- gess, 596 F.2d 379 (9th Cir. 1979); Operating Engineers Local 627 v. NLRB, 518 F.2d 1040 (D.C. Cir. 1975), affd. on this issue sub nom. South Prairie Construction Co. v. Operating Engineers Local 627, 423 U.S. 800 (1976); Samuel Kosoff & Sons, Inc., 269 NLRB 424 (1984). Cal- dero is the sole owner of Las Villas, is its principal oper- ating chief, and formulates and executes all labor rela- tions policies. Accordingly, he meets the tests of an alter ego. However, it is not enough to establish, at the supple- mentary stage of an unfair labor practice case, that an in- dividual shareholder or officer is merely an alter ego in order to impose personal liability for corporate debts. A different rule might be followed if the individual in ques- tion had been charged and was personally a respondent during the trial of the unfair labor practice portion of the case. Campo Slacks, 266 NLRB 492 (1983); Workroom For Designers, 274 NLRB 840 (1985). In order to impose backpay liability on a corporate officer or shareholder at the present stage of this proceeding, it is necessary to go further and to show that the officer or shareholder was the disguised continuance of the corporation, or that he dissipated corporate assets, or that he intermingled per- sonal and corporate affairs or took some other action in order to evade backpay liability. Riley Aeronautics Corp., 178 NLRB 495 (1969); Chef Nathan Sez Eat Here, Inc., 201 NLRB 343 (1973); Contris Packing Co, 268 NLRB 193 (1983). When such devious conduct has been estab- 885 lashed, derivative personal liability may be imposed in the course of the backpay case. Concrete Mfg. Co., 262 NLRB 727 (1982); F & W Oldsmobile, 272 NLRB 1150 (1984). Respondents are correct in arguing that these two decisions permitted the imposition of derivative personal liability only to the extent of the amounts of money wrongfully transferred by the corporation to its officers or principals. As such, they are authority merely for tracing assets in the hands of a wrongdoer . Although these decisions speak in terms of piercing the corporate veil, they disclose , on closer examination , little more than a gentle probing of the corporate veil, because the principals charged therein with corporate debts were not exposed to the full panoply of corporate liability, as they would be in a true piercing situation . Cera International Corp., 272 NLRB 1360 (1984), appears to be authority for the latter situation, although this fact is not entirely clear from that decision. However, there is ample general authority for imposi- tion of full corporate liability on shareholders to prevent fraud or injustice from being perpetrated on third parties by use of the corporate device. When the corporate entity is merely a facade and a shareholder utilizes the corporation merely as an instrumentality for the transac- tion of his own personal affairs, the corporate veil will be completely pierced and the shareholder or sharehold- ers will be held personally liable for all corporate debts. Fletcher's Cyclopedia of Corporations, sec. 41 .10, 41.30. As this authority points out (at sec. 44.1): If a corporation is organized and carries on a business without substantial capital in such a way that the corporation is likely to have insufficient assets to meet its debts, it is inequitable that stock- holders should set up such a flimsy corporation to escape personal liability. It will be ineffectual to exempt shareholders from corporate debts . Share- holders should put at risk capital reasonably ade- quate for its prospective liabilities . If capital is illu- sory or trifling compared to the business to be done, this is grounds for denying the separate entity privi- lege. Intermingling of assets and the siphoning off of corpo- rate funds by large payments from Las Villas to Caldero throughout the period of the unfair labor practice litiga- tion may properly be considered in determining whether the corporate veil should be pierced , either on a limited or complete basis, but examination may also be made into the capitalization of Las Villas to ascertain whether it was truly an independent entity or was merely a front for Caldero's personal enterprise. In other words, the present aspect of this case addresses the question of whether Caldero used a corporate shell to shield himself from financial liability for unfair labor practices which he personally committed in its name. Las Villas was in the wholesale grocery business at 83-85 South Water Market Street in Chicago . The build- ing from which it operated its business is part of a larger market area. Las Villas specialized in produce imported from Mexico, Puerto Rico, and Central America espe- cially to suit the tastes of the Hispanic community in 886 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Chicago. Most of its clientele were Spanish or Latin res- taurants and grocery stores. It is apparent from the record that Caldero was well known in his business com- munity and enjoyed an excellent relationship with many of his customers. His personal standing enabled him to borrow significant sums of money from friendly custom- ers without interest or fixed dates of repayment, without security, and without the necessity of evidencing these debts by any formal written documentation. Las Villas began as Caldero's personal proprietorship sometime early in the 1970s and was then incorporated under the laws of the State of Illinois . The best measure of the scope of the Las Villas business can be seen from the entries on its latest corporate tax returns. They show the following gross receipts for the last 3 full years of its operation: Fiscal Year Ending Gross Sales Taxable Income 9/30/81 $3,962,506 $ 49,042 9/30/82 3,704,168 16,230 9/30/83 2,986,613 (119,223) The corporation ceased functioning in December 1983 and no return has yet been prepared for the period in which it was closed out. Caldero's personal income tax returns show the following wages and salaries for the same general period of time. They are prepared on a cal- endar-year basis, so the entries thereon vary slightly from the deductions for salaries found in the Las Villas returns. Calendar Year Wages, Salary, etc. 1980 $100,406 1981 114,500 1982 100,000 1983 119,000 In short, Caldero's personal salary for calendar 1983 was the equivalent of what Las Villas reportedly lost during that year. During this year his salary increased as corpo- rate sales and profits declined.4 As noted above, the capitalization of this corporation was $1000. The principal asset utilized by the corpora- tion during its existence was the building (Stalls) in which it did business. This building was held in a land ° The record reflects that Caldero never bothered to include in his per- sonal tax returns income derived or expenses incurred in the operation of a shopping center which he owns in Bayamon , a section of San Juan, Puerto Rico This fact was brought to light on the second day of this proceeding When the hearing resumed in May, Respondent summoned as its witness a Chicago accountant and tax attorney, who had, during the recess, examined certain accountant's worksheets supplied by Cal- dero's San Juan accountant relating to Caldero's Puerto Rico enterprises Apparently Caldero's Chicago income and his Puerto Rico income had not previously been dovetailed for income tax purposes The witness ex- pressed the opinion that Caldero did not owe any additional Federal taxes as a result of his previous failure to integrate Chicago income with Puerto Rico income, and, indeed, he might even be entitled to a refund The record contains no explanation of why all Caldero's business activi- ties were not reflected on single-person returns, and I leave this inquiry to another branch of the Government trust, an interesting if not unique form of ownership au- thorized by Illinois law which permits the beneficial owner of real estate to shield his interest in property from disclosure by placing legal title in another person, often a bank or savings and loan association, although se- curing his interest through a privately held trust agree- ment which alone discloses the nature of his interest. It is the real estate equivalent of a numbered account in a Swiss bank. The beneficial interest in Las Villas' principal asset, the land and building at 83-85 South Water Market Street, was in the name of Carmelo P. Caldero personal- ly, not Las Villas.5 This agreement was executed in 1971. When asked about the fact that the land trust was in his name rather than in the name of Las Villas, Cal- dero merely testified that apparently his accountant had made a mistake. The accountant testified that the build- ing passed to the corporation in 1971 as a nontaxable transfer under section 351 of the Internal Revenue Code. However, title to the property, either legal or equitable, did not pass to the corporation and remained to the ben- eficial use of Caldero. As noted, infra, this property was later used by Caldero to secure both personal and corpo- rate loans taken out with two other lending institutions. The building in question was in fact depreciated in the Las Villas corporate tax returns. In November 1983, it was sold as part of the liquidation of the Las Villas busi- ness at a sale price of $200,000. Of this sum, some $61,735 was paid directly to the Oak Trust and Savings Bank or others in satisfaction of some of Caldero's per- sonal debts, although $118,298 was paid to Caldero per- sonally. Caldero contributed this latter sum to the corpo- ration in order to retire some of its indebtedness. Al- though this asset was utilized in the operation of the business and a portion of the proceeds of its sale was de- voted to corporate purposes, it could not properly be considered as a part of the Las Villas capitalization be- cause, during the operation of the business, the property was not at risk to satisfy corporate creditors. It was uti- lized in part for corporate creditors in 1983 only by virtue of a voluntary act on the part of Caldero during the liquidation of corporate assets. The only other tangi- ble assets of the corporation claimed in its tax returns were certain trucks, autos, and office equipment which were liquidated in 1983 to pay corporate debts. The total sale price of these assets was $21,871.6 The record does not disclose how these assets were acquired, so I pre- sume they were purchased by Las Villas out of current earnings. s This trust agreement with the First National Bank of West Chicago (now DuPage National Bank) is in evidence as R Exh 6 Las Villas terminated its business with more than $100,000 outstand- ing in accounts payable, most of which were owed to the Company by restaurants and small grocery stores Caldero suggested on the stand that, if the Board wished, it could collect some of these bills for him and use the money to pay the amounts owed by the corporation to employees and the union trust funds These payables can hardly be deemed capitali- zation, although a portion of them could conceivably be available to Cal- dero as initial working capital at some future time should he decide to go back into business, since many of them are owed by old customers who have personal ties to Caldero Neither Caldero nor Las Villas has filed for bankruptcy LAS VILLAS PRODUCE The sequence of events surrounding the termination of Las Villas and the liquidation of its assets is closely tied to the trial of earlier phases of this case. Both Caldero and Ada Collazo, his office manager, in-house account- ant, and common-law wife,7 testified that the reason Las Villas went out of business was that its regular customers stopped paying their bills when they learned that Las Villas was involved in litigation with its employees before the Board. Being deprived of this cash flow, the corporation was assertedly without funds to make pur- chases, so its credit-based operation was unable to func- tion. The unwillingness of corporate customers to pay their bills because of litigation which did not in fact con- cern them personally is a difficult explanation to accept, especially when it is uncorroborated by the testimony of any defaulting customer. These statements come close to an admission that the Respondent went out of business because it was involved in Board litigation which could result in large financial liability, and it preferred going out of business to paying employees and the Union what it owed them. Putting the onus for this decision on cus- tomers is a peculiar twist which is absurd on its face. One of the General Counsel's major contentions is that the corporate veil should be pierced because Caldero and Las Villas commingled funds and Caldero often met his personal expenses from corporate money. In this connec- tion it should be remembered that Caldero, being the sole stockholder and one of two corporate directors, had absolute and unqualified control over all activities of Las Villas. From time to time, he met with his brother, the other corporate officer, to discuss corporate business and to take formal corporate actions but, as C. Caldero testi- fied, his brother never voiced any objections to any com- pensation which C. Caldero derived from the business.' As noted above, the reason that Oak Savings and Trust and the Washington National Bank were able to insist on partial payment of loans from the proceeds of the sale of the building at 83-85 South Water Market was that the land trust on this building had been pledged to secure various loans made by these institutions to Cal- dero. One such loan from Oak Savings and Trust was made to Caldero to permit him to purchase two vacant lots at Western Avenue and North Avenue in Chicago, near a building which he owned. This purchase was wholly unrelated to corporate business. Caldero also bor- rowed $50,000 from the Washington National Bank. Some $40,000 of this loan went to Las Villas, presumably for corporate activities, but $10,000 of this loan was paid to Caldero personally so that he could purchase an auto- mobile for his son. The terms of the loan did not differ- entiate between corporate and personal uses of the money. It had one repayment schedule, both as to princi- pal and interest Interest on the entirety of the loan was paid by Las Villas from corporate funds, although a por- tion of the interest falling due was attributable to a per- 7 Caldero testified at the hearing that Collazo was his wife, although, in his personal tax returns, he described himself as "single ." Collazo was more candid in her testimony 9 Jesus Caldero Padilla was at one time an employee of Las Villas but, in later years, he spent little time at the Company and earned his liveli- hood from other pursuits 887 sonal use of the money advanced .9 A third loan repaid in part from the We of the building actually went to Las Villas for the corporate purpose of purchasing canned goods. In addition to these loans, Caldero borrowed $75,000 from the Oak Savings and Trust and secured it by a mortgage on a building in Chicago which he now owns in his own name. However, Oak Savings and Trust ap- parently had sufficient leverage that it was able to obtain a partial curtailment of this mortgage from the proceeds of sale of the South Water Market Street building, even though the Las Villas building had not been used as col- lateral in this instance. In addition to using corporate funds to repay private loans, Caldero was in the habit of taking large personal loans from the corporation and then converting them into bonuses, so that the repayment of the loans appeared on the books of Las Villas as merely an accounting transaction. Only on a few occasions were these loans actually repaid with cash. Although the account which itemized these loans is entitled "loans to officers," Cal- dero is the only officer to whom the corporation ever lent money. In fiscal 1980, Caldero received a bonus of $31,625 by this procedure. In fiscal 1982 and 1983, he re- ceived $20,125 and $17,050, respectively, in bonuses through this form of loan "repayment." In October 1983, just before the backpay hearing before Judge Nasdor and as the corporation was in the process of winding up its affairs, Caldero received a bonus of $37,500, which "repaid" a loan of a similar amount which was made to him by Las Villas a few weeks earlier. Corporate accounting records indicate that, during the Company's fiscal year which ended September 30, 1981, Caldero received 16 loans from Las Villas, totaling $21,385.36. This sum was in addition to $54,596.48 in loans to Caldero which constituted the beginning balance on the corporate books for that fiscal year. The major repayment for those loans was simply a bookkeeping transaction which treated loans in the amount of $31,625 as salary for Caldero and wrote them off in that fashion. The use of corporate cash by Caldero for' personal ex- penses is well established in the record . Some examples of this practice are as follows: $1,500 spent for pay for repairs on a home in Ar- lington Heights, Illinois, owned and occupied by Caldero's former wife. $759.94 to Sportsmart to purchase an exercise bike for Caldero. Three payments in 1981, totalling $10,602, to Tropical Ranch Acres. Caldero's personal income tax return for 1981 also shows a deduction of $3,169 for interest on a loan relating to Tropical Ranch Acres. $31.50 paid to a pharmacy for medication for Caldero. 9 Caldero personally guaranteed the loan from the Washington Nation- al Bank and is now being sued personally by the bank to secure repay- ment, notwithstanding the fact that four-fifths of the money lent was de- voted to corporate purposes 888 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Two payments of $20 each as trust fees on prop- erties owned personally by Caldero on Madison Street in Chicago. As noted above, because of longstanding personal rela- tionships with many of his customers, Caldero was able to obtain long-term unsecured loans of substantial sums without interest or written documentation. As Las Villas was winding up its operation in the fall of 1983, Caldero or Collazo made substantial cash withdrawals from the Las Villas account to repay these loans. Some of the re- payments were in cash. Caldero testified that many of these loans were received in 1977 when a salesman for Las Villas absconded with about $13,000 in company funds, leaving the Company in a precarious cash flow condition. The fact that such an event required substan- tial personal loans illustrates a major flaw in the Re- spondent's business insurance program as well as the skimpy nature of its capitalization. When the South Water Market Street property was sold, the following loans were retired: Rafael Cruz of La Voz Hispania-$6,000 Antonio Castillo-$15,000 Oreste Herrera-$ 15,000 Nicholas Lombardi (Las Casa Del Pueblo)-$7,000 The Lombardi loan was made to Caldero in 1983. The others were made in 1976-1978. Other than the defalca- tion of a salesman some 8 years ago, the exact nature of this $43,000 in loans stands unexplained , and the fact their repayment took place from the sale of an asset car- ried on the corporate books (though retained in the bene- ficial ownership of Caldero) is, at best, highly suspect. After Las Villas went out of business in December 1983, Caldero continued to be paid from corporate assets. On February 1, 1984, he received a check for $900. The following month, he received a check for $900.40. This latter check was written ostensibly to reim- burse Caldero for expenses incurred in traveling about the Greater Chicago area to collect outstanding bills due to the corporation. No itemization was proffered to show just what these expenses might be, when the trips in question were taken, what destinations were visited, how much mileage was covered, or what specific expenses were incurred. Caldero's complaint during this period of time was that few if any creditors were paying him. Late in December 1984, when Las Villas received a tax refund of $22,000, the entire amount was paid to him as salary, and he used the net proceeds of this salary pay- ment to meet an outstanding bill from the IRS for per- sonal back taxes.1 ° It is clear from the above recitation of both corporate and personal transactions that the corporate veil of Las Villas should be entirely pierced and that Caldero should 10 In her original theory of the case, the General Counsel alleged as items warranting a piercing of the corporate veil only the net amounts, after taxes, of certain payments which Caldero received from Las Villas Actually the gross amounts should be used under this theory because an individual should not escape liability for corporate debts under the "trac- ing of assets" theory simply because some of the money he improperly received had to be paid to the Government in the form of withheld taxes on income stand personally responsible for all the backpay and trust fund liability assessed against the corporation in the pre- vious backpay proceeding. From its inception, Las Villas was a corporate shell which was utilized by Caldero merely as a facility for his personal undertakings after he decided to transform his business from an individual pro- prietorship into a corporation. The actual capitalization at risk from his investment was $1000 . From that invest- ment his corporation derived net taxable incomes in its last years of operation which approximated $50,000, or a net return to the corporation of 5000 percent on capital stock in 1 year from gross receipts approximating $4 mil- lion. Although such an achievement denotes astute man- agement, it also discloses gross undercapitalization and a withholding from potential corporate liability of a princi- pal asset, namely, the building in which the business op- erated. Funds were siphoned off, as needed , for Cal- dero's personal needs, whether those needs be improve- ments on a home, a car for his son, or just a minor item, such as medicine from a pharmacy. Personal loans were made to Caldero by old friends which were used for cor- porate purposes. Corporate funds were used to pay inter- est and principal on personal loans. Caldero borrowed money from the corporation and discharged the liability on corporate books by calling it salary. Even after the corporation ceased to exist, he paid himself a salary whenever funds became available, without any justifica- tion for the compensation . This was all accomplished by virtue of the fact that Caldero owned the corporation in its entirety and made every significant decision in its op- eration, ranging from finance to labor relations to the ul- timate decision as to whether it should continue to exist. In light of this intermingling, undercapitalization, and use of corporate funds for personal needs, the corporate form should not be available to defraud creditors, espe- cially those who worked for him and the trust funds which exist in order to protect those employees from the vicissitudes of sickness, injury, and old age. On these findings of fact and conclusions of law and on the entire record, I issue the following recommend- ed" ORDER The Respondents, Las Villas Produce, Inc., Chicago, Illinis, its officers, agents, successors, and assigns, and Carmelo P. Caldero, a/k/a Carmelo Caldero Padilla, jointly and severally, shall pay to its employees the amounts of net backpay, health and welfare fund, and pension fund payments specified in the Appendix to this Second Supplemental Order, with interest on the net backpay as computed in Florida Steel Corp., 231 NLRB 651 (1977), and interest on the health and welfare and pension fund payments according to Merryweather Opti- cal Co., 240 NLRB 1213, 1216 fn. 7 (1979), less withhold- ings for taxes and social security required by Federal and state laws. " If no exceptions are riled as provided by Sec 102 46 of the Board's Rules and Regulations, the findings, conclusions, and recommended Order shall, as provided in Sec 102.48 of the Rules , be adopted by the Board and all objections to them shall be deemed waived for all pur- poses LAS VILLAS PRODUCE APPENDIX Health and Welfare Fund Payments and Pension Fund Payments Health & Welfare Fund Payments Pension Fund Payments Louis Maldonado $ 294 $ 301 Gustavo Chavez 924 946 Antonio Diaz 84 86 Antonio Lozada 2,184 2,236 Juan A. Lozada 588 602 Felix Maysonet 553 567 Antonio Fernandez 1,442 1,478 Jose R Medina 2,665 2,730 Ramon Padilla 74 76 Rafael Reyes 874 896 Edwin Rodriguez 259 266 Efrain Roldan 3,141 3,219 Caledonio Santiago 481 494 Ismael Vasquez 3,775 3,870 Miguel A Velasquez 444 456 Wilfredo Velasquez 296 304 Francisco Cruz 32 33 Jose A. Garcia 596 614 Alvaro Garza 2,086 2,139 Unel Cintron 751 774 Gilberto Gomez 96 99 Rafael Maldonado 4,595 4,715 Ramon Rivera 781 804 Eulogio Rocha 1,190 1,225 Jacinto Roman 4,402 4,518 889 Net Backpay Payments Francisco Cruz $ 2,904.54 Jose A. Garcia 13,607.07 Alvaro Garza 35,668.23 Gilberto Gomez 2,171.59 Rafael Maldonado 69,496.81 Carmelo Marquez 34,088.09 Luis Rots 48,795.37 Ramon Rivera 18,327 84 Eulogio Rocha 22,153.56 Jacinto Roman 77,408 37 Alberto Diaz 753.61 Antonio Fernandez 27,468.58 Jose R. Medina 35,137.94 Ramon Padilla 4,43064 Marion Portillo 452 50 Rafael Reyes 18,917.49 Edwin Rodriguez 7,411.04 Efrain Roldan 55,821 99 Caledomo Santiago 12,736.71 Ismael Vasquez 46,128.16 Miguel A Valesquez 9,582.65 Wilfredo Velasquez 7,636 16 Carlos Velez 3,560.31 Gustavo Chavez 17,034.40 Antonio Diaz 2,305 74 Gregono Diaz 1,785 95 Ramon Fiallo 1,989 70 Antonio Lozada 22,053 32 Rafael Rivera 23,762.12 Juan A Lozada 12,052.96 Felix Maysonet 10,463.80 Jorge Razo 256.86 Uriel Cintron 13,808 88 Herman Correa 785.68 Louis Maldonado 8,051 78