**************************** Claim No. 097-22-3457 A * * Ernst J. Meyer, * plaintiff-appellant * Appellant's Memorandum of Law and Fact * September 12, 1996 v. * * The Secretary of Health, * Education and Welfare * respondent * **************************** On August 20, 1997, notice was given of a hearing to be convened on September 17, 1996. 20 CFR 404.938 states in part: "The notice of hearing will contain a statement of the specific issues to be decided..." The notice received by me, however, contains the state- ment: "The general issue to be determined is whether the claimant's amount of benefits due for 1995 were properly computed." A general issue is not a specific issue; and the state- ment of a general issue does not enable the claimant to pre- dict the specific issues to be adjudicated and deprives him of his right to present evidence and argument to support his claim. In consequence of this omission I am handicapped in preparing the argument and the evidence potentially required by the Secretary. Nonetheless I believe it will facilitate the adjudica- tion of this controversy if at this time I state my objec- tions to certain allegations of fact, my objections to cer- tain conclusions of law, and my objections to the omission of certain documents from my Social Security file; I do so without waiving such rights as might accrue to me from the above cited procedural defect to present further arguments and to present additional evidence at a subsequent or at a continuation of the instant hearing. I offer to testify on all issues that the Judge might now wish to adjudicate, There are numerous documents which I believe might be rele- vant to the instant controversy. I intend therefore to bring a suitcase containing the following items: Appointment books from my practice for 1994, 1995, 1996, Receipt books for 1994, 1995, 1996, Telephone note pads for 1994, 1995 and 1996; Financial ledgers for 1994, 1995 and 1996. I believe that even a superficial perusal of these documents will demonstrate the extent of my wife's services -2- in my practice. I intend to bring tax returns for various years between 1968 to 1995 inclusive. I will ask my wife, Margaret Meyer, to appear as a witness should the Judge choose to question her. I wish however to reserve my right to appeal from any adverse ruling on the grounds that absent the required statement of the specific issues to be decided, my ability to prepare my case was fatally impaired. On March 14, 1995, I filed in support of my application for Social Security retirement benefits, a Memorandum "Regarding employment of Margaret Meyer." I believe the facts stated in that Memorandum accurately reflect the employment of Margaret Meyer during the entirety of the year 1995. Thereupon I received a letter, dated July 16, 1995, which I infer to have been authorized by the Secretary of Health Education and Welfare. The letter states in part: "In order for you to receive benefits you must established (sic) that you have reduced the amount of time you devote to be (sic) business as well as the nature of the services you perform." I believe the foregoing statement to be an error of law. I have been awarded retirement benefits. The benefits are required to be reduced proportionate to my earnings in excess of $11280. My benefits decrease as my income rises. In order that my benefits not to be reduced to nil, I must establish that the total of net self-employment earnings and wages received by me in 1995 is less than $44715.00. In order that benefits not be reduced at all, I must establish my earnings are less than $11280.01. Consequently the amount of time I devote to my practice and the nature of the services I render are irrelevant to my eligibility for retirement benefits. My eligibility is dependent exclusively on the total of my wages and net earnings from self- employment. The implicit assumption that the amount of time I devote to my practice is determinative of the earn- ings therefrom is clearly unrealistic. The relationship between time spent and earnings is a function of efficiency; but the efficienies of medical practices differ widely among practices and in a given practice over time. Similarly unrealistic is the assumption the nature of the services I perform is determinative of the earnings from such services. As a physician I am in many cases prohibited by law to make the "nature of the services I perform" contingent on the income I receive therefrom. The statement: "In order for you to receive benefits you must established (sic) that you have reduced the amount of time you devote to be (sic) business as well -3- as the nature of the services you perform." reflects, I believe, a misinterpretation of the law. The stated criteria are applicable to a claimant who pur- portedly retires from the management of a corporation to collect dividends or other non-wage remuneration. It is inapplicable to a self-employed sole proprietor whose claim to Social Security benefits derives not from a formal retirement from business, but whose business fails, and who may well work all the harder to maintain it. Under these circumstances it is not the diminution of his efforts, but the failure of his business to generate earnings for him which is determinative of his claim to Social Security Retirement benefits. Logically most significant of the error of the Secre- tary's statement is the conjunction of the two requirements by means of the phrase "as well as". This conjunction proves that the purpose of the Secretary in establishing these criteria is unrelated to the mandates of the Social Security Act, for if the Secretary's presumption that either criterion is an index of net self-employment income were correct, which income is the Secretary's only legitimate concern, then each criterion considered independent of the other would suffice to indicate potential eligibility for retirement insurance benefits. To the letter of July 15, 1995, I replied in a communi- cation dated July 31, 1955, in which I requested reconsider- ation of my claim. Subsequently, I received a Reconsidera- tion Determination dated October 24, 1995. The Reconsideration Determination, made by the author- ity of the Secretary of Health, Education and Welfare, pur- ports to rely among others, on section 404.705 of Regulation Number 4 of the Social Security Administration. Although I have been able to find no specific confirmation of my infer- ence, I assume the said regulation to be identical with, 20 CFR Ch III, Section 404.705. 20 CFR Ch III, Section 404.705 states in part: Failure to give requested evidence. Generally, you will be asked to give us by a certain date specific kinds of evidence or information to prove you are eligible for benefits. If we do not receive the evidence or information by that date, we may decide you are not eligible for benefits. To the best of my knowledge I was never asked "to give by a certain date specific evidence or information to prove" that I was eligible for benefits. I did, on February 18, 1996, as soon as I had completed it, mail to the Social -4- Security Administration a copy of my 1995 Federal Income tax return. This document, which indicates conclusively that my net self-employment income for 1995 was a loss of $1487.89, was returned to me without comment. Inasmuch as, when I reviewed my Social Security file on September 11, 1996 I was unable to find a copy, I infer that this income tax return was not accepted as evidence of my 1995 earnings. I will offer it once more. The Secretary's reliance on 20 CFR 404.1041 is mis- placed. That Section, which carries the title "Wages", may authorize the Secretary to allocate purported non-wage income received by one individual wage earner to that indi- vidual's wages. 20 CFR 404.1041 makes no reference to self- employment, and it most specifically does not authorize the Secretary to allocate the salary of an employee to the net unearned income of her employer, solely by virtue of the fact that the employer also happens to be the husband of the employee. The Secretary writes: "It is unrealistic to expect that he (the claimant) will practice all year and have no earnings. It is deter- mined that the salary which he pays to his wife is actually his earnings. This is especially true since his wife who is a Social Security recepient (sic) and just turned age 70, never received a salary before." I respectfully disagree. What is unrealistic is to assume that an ophthalmolo- gist should conduct a medical practice without any recep- tionist's or secretarial assistance whatsoever. That could occur only in a fantasy world. What is unrealistic is to consider that in the final decade of the Twentieth Century rights of women should be held in so low esteem, as to propose by implication that the receptionist's and secretarial services in issue might be required of the physician's wife without any remuneration. What is unrealistic is to suggest by implication that a Congress acutely sensitive to "family values" should have intended to impose conditions on retirement benefits that would penalize the marital relationship; that would give a pension break to a physician for firing his wife of forty- three years to obtain secretarial services from another woman, where his wife had served as his unpaid secretary for six years subsequent to having served as his paid secretary for twenty years. So far as Secretary's allegation about the claimant's practicing all year is concerned, there is no evidence in -5- the record that the claimant practices medicine all year, and the Memorandum of March 14, 1955 affirmatively states that he does not. Yet it is a matter of common knowledge that any viable medical practice requires a continuity of receptionist's and secretarial services, whereas the physi- cian's work is often intermittent. Ophthalmologists com- monly work at more than one office location, each of which is staffed by full time secretarial help. So far as Secretary's allegation about the claimant's practicing all year and having no earnings is concerned, It is a well-known fact not only that many new businesses never produce any net self-employment income for their propri- etors; but many once flourishing businesses fail and go under. Thus many self-employed individuals work without net self-employment income, and especially so if they derive non-economic benefits from their work, in my case these ben- efits include the satisfaction I obtain from being able to take care of patients, the satisfaction of being an authority in my field, and the satisfaction of a Harvard University teaching appointment which gives me access to its Law Library for legal research. The Secretary's statement that my wife had never received a salary before is contrary to fact. My wife received a salary from 1968 through 1987. In 1968 the amount of the salary was $8000. By 1984 it was $30000.00 per year and remained so until 1988. In that year, because of a Social Security tax newly imposed on her earnings, the salary payments were suspended, although she continued to fulfill the same functions in the office as theretofore. In 1995, the wage payments were resumed at the level of 40000.00 per year. This increase of 33 percent over a 12 year period is equivalent to an annual adjustment for infla- tion of 2.41%, well under the inflation rate for those years. The Secretary writes: "It is determined that the salary which he pays to his wife is actually his earnings." I respectfully object: The Secretary's determination has no statutory basis. The Secretary is bound by 42 U.S. Code 411 which states in part: The term "net earnings from self-employment" means the gross income, as computed under Subtitle A of Title 26, derived by an individual from any trade or business carried on by such individual, less the deductions allowed under such subtitle which are attributable to such trade or business ... -6- In issue here is the deductability of the salary pay- ments the claimant makes to his wife. These payments with- stood IRS audit in 1970 and have not been challenged by the IRS over a series of more than twenty annual income tax returns. The approval by the these deductions by the Inter- nal Revenue Service is evidence prima facie that they are legally valid. Congress explicitly coupled the Social Secu- rity Act's definition of net earnings from self-employment to the definition of those words in the Internal Revnue Code. There is no power in the Secretary to rewrite the Social Security Act by imposing intrusive and unwarranted restrictions upon the economic relations of married individ- uals. As if to eliminate any possible uncertainty concerning this issue, the Code of Federal Regulation reiterates unam- biguously: "An individual's net earnings from self- employment is the excess of gross income over the allowable business deductions (allowed under the Internal Revenue Code). An individual's net loss from self-employment is the excess of business deduction (that are allowed under the Internal Revenue Code) over gross income..." 20 CFR 404.429(b)(4). There is no power in the Secretary to suspend the Code of Federal Regulation whenever she deems such sus- pension to be in the interests of the government. Additional regulations concerning net earnings from self-employment are given at 20 CFR 404.1080, 20 CFR 404.1081, 20 CFR 404.1096; These regulations would have provided Congress with ample opportunity to penalize a self-employed individual for the salaried employment of his wife, had it seen fit to do so. Finally, 20 USC 404.1015 lays down the regulations for ser- vices rendered by family members, again without imposing the penalties on marriage that the Secretary has seen fit to improvise. I freely admit that in 1988, I removed my wife from my payroll because of the adverse economic consequences imposed by Federal law on her employment. I freely admit that in 1995, I restored my wife to my payroll because the Social Security Act created favorable economic consequences of my so restoring her. Legions of tax attorneys and accountants make their living by giving clients similar advice on how to minimize tax liabilities and how to maximize entitlement benefits. Uncounted court decisions have recognized such rational economic behavior as a Constitutionally protected right. It is erosive of our system of Constitutional law to make the exercise of a Constitutional right the basis of adverse inferences concerning the legality of a course of action. My wife had the legal right from 1968 through 1988 and in 1995 to receive wages as an employee in my office, and -7- I had the right to employ her and to pay such wages. My wife had the legal right from 1987 through 1994 to work in my office as an unpaid volunteer, and I had the right to accept her work without paying a salary. The Secretary, however, does not have the legal right because what we did was eco- nomically advantageous to us and because we were married to each other, to stigmatize our actions with the badge of fraud. The Secretary's statement: "It is determined that the salary which he pays to his wife is actually his earnings," can have a legal basis only as an allegation of fraud. The burden of proving fraud is on the government, and the gov- ernment may not require the claimant to prove the truth of the statement: "I am not a crook." The sole basis of this implied allegation of fraud is the economic benefit which the claimant derives from his Constitutionally protected decision. In pursuing its interests in this controversy, the government has shown a noteworthy disinclination to face the facts. The Secretary has ignored the substance of the Claimant's March 14, 1995 memorandum; she has refused to accept the claimant's 1995 Internal Revenue tax return; she has neglected to interview the witnesses whose names she requested the claimant to provide; she has made no effort whatsoever to investigate the truthfulness of the facts alleged in support of the claim. The Secretary failed to challenge the Memorandum dated March 14, 1985, Regarding employment of Margaret Meyer. The Secretary failed even to mention this Memorandum, which is part of the file in this case. Her silence on the Memorandum should be construed as assent. Qui tacet consentire videtur. If the Memorandum is deemed to be admitted, then the Secretary's spurious legal objections, analyzed above, ought not stand in the way of the reversal of her decision without further proceedings. I urge that the Secretary's decision be summarily reversed. Respectfully submitted, Ernst J. Meyer