United States of America v. Goldsmith, No. 3:2020cv00087 - Document 27 (S.D. Cal. 2021)

Court Description: ORDER Granting 19 Plaintiff's Motion for Summary Judgment. Signed by Judge Roger T. Benitez on 05/25/2021. (mme)

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United States of America v. Goldsmith Doc. 27 Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.314 Page 1 of 73 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 UNITED STATES OF AMERICA, Plaintiff, 12 13 v. 14 ROBERT GOLDSMITH, Defendant. 15 16 I. 17 ) ) ) ) ) ) ) Case No.: 3:20-cv-00087-BEN-KSC ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [ECF Nos. 19, 20, 21, 24] INTRODUCTION Plaintiff, the United States of America (“Plaintiff” or the “Government”), with the 18 authorization of the Secretary of the Treasury, see 31 U.S.C. § 3711(g)(4)(C), and at the 19 direction of the Attorney General of the United States, brings this action to collect from the 20 Defendant, Robert Goldsmith (“Defendant” or “Mr. Goldsmith”), an outstanding civil 21 penalty pursuant to 31 U.S.C. § 5321(a)(5) for failure to timely file Reports of Foreign 22 Bank and Financial Accounts (“FBARs”) for the 2008, 2009, and 2010 calendar years. 23 First Amended Complaint, ECF No. 1 (“FAC”) at 11; Motion, ECF No. 19-1 (“Mot.”) at 24 4:1-3. Before the Court is the Government’s Motion for Summary Judgment (the 25 26 27 1 Unless otherwise indicated, all page number references are to the ECF generated 28 page number contained in the header of each ECF-filed document. -13:20-cv-00087-BEN-KSC Dockets.Justia.com Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.315 Page 2 of 73 1 “Motion”). ECF No. 19. The Motion was submitted on the papers without oral argument 2 pursuant to Civil Local Rule 7.1(d)(1) and Rule 78(b) of the Federal Rules of Civil 3 Procedure. ECF No. 22. After considering the papers submitted, supporting 4 documentation, and applicable law, the Court finds no genuine issue of material fact exists 5 as to whether Mr. Goldsmith willfully failed to file his FBARs, and as such, GRANTS the 6 Government’s Motion. 7 II. BACKGROUND 8 A. 9 Mr. Goldsmith is a United States (“U.S.”) citizen, who currently resides in San Statement of Facts2 10 Diego, California. FAC at 2, ¶ 4. Sometime prior to 1982, Mr. Goldsmith’s father opened a bank account at Basler 11 12 Kantonalbank, a Swiss cantonal bank (“Basler”). FAC at 3, ¶ 9; see also Ans. at 2, ¶ 9. 13 When Mr. Goldsmith’s father died in 1982, Mr. Goldsmith’s mother inherited that account. 14 FAC at 3, ¶ 9; see also Ans. at 2, ¶ 9; Mot. at 6:3-6 (citing Deposition Transcript of Robert 15 Goldsmith3 at 34:2-6, 104:25-105:8). Sometime while his mother still had control of the 16 17 18 19 20 21 22 23 24 25 26 27 28 2 The majority of the facts set forth are taken from the operative complaint, see FAC, and were admitted in Mr. Goldsmith’s Answer, ECF No. 7 (“Ans.”), or the facts provided in Plaintiff’s Motion, see ECF No. 19-1, which Mr. Goldsmith did not dispute in his opposition, see ECF No. 20. For purposes of ruling on Plaintiff’s motion for summary judgment, the Court liberally construes all allegations in favor of the non-moving party. S.R. Nehad v. Browder, 929 F.3d 1125, 1132 (9th Cir. 2019), cert. denied sub nom. Browder v. Nehad, 141 S. Ct. 235 (2020) (noting that courts review “the facts in the light most favorable to the nonmoving party and draw all inferences in that party’s favor”). 3 A moving party must file and serve “copies of all documentary evidence which the movant intends to submit in support of the motion, or other request for ruling by the Court.” S.D. Cal. Civ. R. 7.1 (f)(2)(a). Here, the Government relied on Mr. Goldsmith’s deposition transcript in support of its Motion, and Mr. Goldsmith relied on the same transcript in support of his opposition, but to the Court’s knowledge, both parties failed to file and serve the transcript. However, the Court accepts the Government’s factual assertions, which rely on the transcript and deposition testimony for support to the extent Mr. Goldsmith failed to dispute the factual assertion in his opposition. See, e.g., Pac. Dawn LLC v. Pritzker, 831 F.3d 1166, 1178 n.7 (9th Cir. 2016) (noting that “the plaintiffs did not raise that argument to the district court in their . . . opposition to the defendants’ motion for -23:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.316 Page 3 of 73 1 account and prior to 1989, Mr. Goldsmith was added as a signatory to the account at Basler. 2 FAC at 3, ¶ 10; see also Ans. at 2, ¶ 10. 3 From 1989 through 2012, Mr. Goldsmith used Howard Zipser, CPA (“Mr. Zipser”), 4 as his accountant and tax preparer. See FAC at 4, ¶ 14; Ans. at 3, ¶ 14; Mot. at 6:19-20. 5 Each year, Mr. Zipser relied on information provided by Mr. Goldsmith and his wife to 6 prepare their Form 1040. FAC at 4, ¶ 15; Ans. at 3, ¶ 15. After Mr. Goldsmith started 7 using Mr. Zipser, but also in 1989, Mr. Goldsmith’s mother died, and Mr. Goldsmith 8 inherited the funds at Basler, so Defendant traveled to Switzerland to meet with a Basler 9 representative. FAC at 3, ¶ 11; see also Exhibit 13 to Petrila Suppl. Decl., November 13, 10 2020 Deposition Transcript of Robert Goldsmith, ECF No. 26-1 (“R. Goldsmith Dep.”) at 11 344:2-6, 104:25-105:8). Mr. Goldsmith transferred the funds he inherited in this account 12 to a new numbered Swiss bank account5 ending in 8171 at Basler (the “Account”), which 13 contained hundreds of thousands of dollars for decades, including during the three years at 14 issue here: 2008, 2009, and 2010. Mot. at 4:6-9, 5:27-28, 6:3-6; see also R. Goldsmith 15 Dep. at 34:2-6, 104:25-105:8); FAC at 3, ¶ 12; Ans. at 3, ¶ 12. 16 Even though Mr. Goldsmith had been working with Mr. Zipser when he inherited 17 the Account, Mr. Goldsmith did not disclose the Account’s existence to Mr. Zipser until 18 19 summary judgment, so the argument was waived.”); see also S.D. Cal. Civ. R. 7.1(f)(3)(c) 20 (providing that failure to oppose the granting of a motion or other request for ruling may 21 constitute consent to granting the motion). Further, subsequent to the Court taking this matter under submission, the Government submitted a declaration with the deposition 22 transcripts. See Declaration of James J. Patrila, ECF No. 26 (“Petrila Suppl. Decl.”). 23 However, some of the portions of the deposition transcripts cited were still not provided to the Court, in which case, the Court references the Government’s motion instead rather than 24 directly referring to the transcript. 4 When referencing any deposition transcripts in this Order, the Court refers to the 25 page number on the deposition transcript rather than the page number in the ECF generated 26 header. 5 With a numbered account, a number rather than a name identifies the account, which 27 conceals the account holder’s identity. United States v. Rum, No. 19-14464, --- F.3d ---, 28 2021 WL 1589153, at *7, n.4 (11th Cir. Apr. 23, 2021). -33:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.317 Page 4 of 73 1 July 1, 2011. See Mot. at 6:19-24; see also Declaration James J. Petrila in Support of 2 Plaintiff’s Motion for Summary Judgment, ECF No. 19-3, (“Petrila Decl.”), Exhibit 6 at 3 31. However, when his mother passed away, Mr. Goldsmith also inherited an interest in 4 commercial properties located within the U.S., informed Mr. Zipser of their existence, and 5 paid taxes on the income the properties generated accordingly. Mot. at 11:22-26 (citing R. 6 Goldsmith Dep. at 13:1-13, 16:23-17:1). Mr. Goldsmith testified that he did not inform 7 Mr. Zipser of the Swiss Account because “[i]t wasn’t an account”; rather, “[i]t was a fund.” 8 R. Goldsmith Tr. at 88:17-89:6. However, he also testified that he had other “non-bank 9 accounts,” which earned him income, like “distributions from Monterey Pass or income 10 earned from [his] Hawaii condo,” about which he informed Mr. Zipser. Id. 11 From 1989 until approximately 2012, Mr. Goldsmith owned the Account. Mot. at 12 4:6-9, 5:27-28; see also FAC at 3, ¶ 12; Ans. at 3, ¶ 12. As part of his management of the 13 Account, Mr. Goldsmith added his wife and son as signatories to the Account and met 14 annually with an account advisor from Basler in Switzerland. FAC at 3, ¶¶ 12-13; Ans. at 15 3, ¶ 12. In fact, during his deposition, Mr. Goldsmith testified that the only reason he went 16 to Switzerland was to visit Basler and withdraw cash from the Account. See R. Goldsmith 17 Dep. at 36:19-23, 37:8-12. During these annual in person meetings, Mr. Goldsmith made 18 cash withdrawals from the Account, which he used for various expenses, including 19 personal vacations in Europe. See FAC at 3, ¶ 13; Ans. at 3, ¶ 13. Mr. Goldsmith also 20 made decisions—or at least participated in such decisions—regarding how the money in 21 the Account was invested. See R. Goldsmith Dep. at 34:20-35:5, 54:6-14, 58:9-15. His 22 management included opening the Account, id. at 104:21-105:11, directing what kind of 23 investor profile Basler applied to the Account, id. at 92:6-13, “direct[ing] the people who 24 were running the funds,” id. at 92:14-18, and spending the money however he decided, 25 whether on charitable causes or hotels, car rentals, and meals for his travels in Europe, id. 26 at 47:21-25. Despite making determinations about how the money in the Account was 27 invested; deciding how to spend the money in the Account, including on travel expenses 28 and via disbursals of money in the Account to his son; and planning to leave the money in -43:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.318 Page 5 of 73 1 the Account to his children, Mr. Goldsmith testified that “it was my account in my name, 2 but it wasn’t my money.” See R. Goldsmith Dep. at 53:18-19; 54:6-11). 3 On August 29, 2000, Basler asked Mr. Goldsmith to sign a form, which referenced 4 “new US withholding tax and reporting obligations” and gave Mr. Goldsmith a choice 5 between disclosing his Account to the U.S. Internal Revenue Service (“IRS”) or divesting 6 all of his U.S. securities. See Exhibit 11 to Petrila Decl. at 61. This form, often referred to 7 as a Qualified Intermediary (“QI”) Form, was part of “the Qualified Intermediary 8 Program—a program which, until October 2008, allowed foreign banks to promise to 9 identify clients with U.S. Securities, and send the taxes due on those securities.” 6 Norman 10 v. United States, 138 Fed. Cl. 189, 194, n.7 (2018), aff’d, 942 F.3d 1111 (Fed. Cir. 2019) 11 (Norman I) (citing Rev. Proc. 2000-12, 2000-1 C.B. 387 (2000)). When presented with 12 the QI form, Mr. Goldsmith chose to divest the Account of all U.S. securities rather than 13 disclose the Account to the IRS. See id. at 61-68 (attaching multiple forms from 2000 to 14 2011 which Mr. Goldsmith signed, stating that he is “liable to US tax” and that the choice 15 between disclosure to the IRS and divestment is due to “new US withholding tax and 16 reporting regulations”)). On September 18, 2002, August 9, 2007, and August 5, 2009, 17 Mr. Goldsmith signed additional, similar QI forms confirming his choice to forego the 18 opportunity to hold U.S. securities so he could avoid disclosing the Account to the IRS. Id. 19 Since the 1980s, when Mr. Goldsmith hired Mr. Zipser, Mr. Zipser had been 20 providing Mr. Goldsmith and his wife with a financial questionnaire to assist with tax 21 planning and compliance. FAC at 4, ¶ 15; Ans. at 3, ¶ 15; Mot. at 7:4-8. Upon receiving 22 the questionnaire, Mr. Goldsmith and his wife collected financial information to answer it, 23 24 25 26 27 28 “The QI system requires foreign banks to enter into Qualified Intermediary Agreements with the IRS, to identify and document any customers who hold U.S. investments or have received U.S.-source income into their offshore accounts, and withhold income tax from payments of U.S.-source income received by foreigners.” Song, Jane G., The End of Secret Swiss Accounts?: The Impact of the U.S. Foreign Account Tax Compliance Act (FATCA) on Switzerland’s Status as a Haven for Offshore Accounts, 35 Nw. J. Int’l L. & Bus. 687, 697 (2015) (citing 55 26 U.S.C. §§ 1441–1443 (2013). 6 -53:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.319 Page 6 of 73 1 which they returned to Mr. Zipser. FAC at 4, ¶ 15; see also Ans. at 3, ¶ 15. This 2 questionnaire asked whether the individual had (1) “any foreign income . . . during the 3 year” or (2) “an interest in or a signature or other authority over a bank account, securities 4 account, or other financial account in a foreign country.” See Exhibit 7 to Petrila Decl at 5 35-36; see also Mot. at 7:4-8; FAC at 4, ¶ 16; Ans. at 3, ¶ 16. Although Mr. Goldsmith 6 testified at his deposition that he never personally completed the questionnaire, stating 7 instead, that his wife regularly completed it, R. Goldsmith Dep. at 83:19-84:3, he also 8 testified that “we would fill it in and take it to [Mr. Zipser],” R. Goldsmith Dep. at 59:209 60:3. Further, even though Mrs. Goldsmith testified that she would complete the 10 questionnaire, she also state that she would “discuss what was sent off [in the 11 questionnaire] with her husband,” who “took an active role in those discussions” as they 12 “used to gather the documents together and put them in a package.” M. Goldsmith Dep. at 13 62:17-63:21. Similarly, Mr. Zipser testified that he thought both Mr. Goldsmith and his 14 wife were involved in their tax preparation although “[Mrs. Goldsmith] was the primary 15 person preparing the records on an annual basis.” Zipser Dep. at 25:19-25. As of June 30, 2005, the Account had a value of CHF7 638,446.333. See Exhibit 4 16 17 to Petrila Decl. at 18. In subsequent years, including 2008 through 2010, the Account 18 continued to maintain a value exceeding $10,000.00.8 Mot. at 6:11-18; see also Exhibit 5 19 to Petrila Decl. at 25. Despite an Account balance exceeding $10,000.00, and thereby 20 requiring disclosure to the IRS, Mr. Goldsmith indicated in Mr. Zipser’s questionnaire for 21 2008, 2009, and 2010 that he had no foreign income for those years. See Exhibit 7 to 22 Petrila Decl. at 35-40. For one of those years,9 when asked whether Mr. Goldsmith had 23 7 CHF is the currency abbreviation for Switzerland’s currency, the Swiss franc. The 24 abbreviation “CHF” is derived from the Latin name of the country, “Confederation with the “F” standing for “franc.” 25 Helvetica,” 8 As is discussed below, U.S. citizens must file FBARs pertaining to any foreign 26 accounts exceeding $10,000.00 in the prior calendar year. 31 C.F.R. § 1010.306(c). 9 The Government attaches three questionnaires as Exhibit 7 to Mr. Petrila’s 27 Declaration in Support of the Motion but fails to indicate which questionnaires correspond 28 to which years. See Exhibit 7 to Petrila Decl. at 35-40. The first questionnaire references -63:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.320 Page 7 of 73 1 “an interest in or signature or other authority over a bank account, securities account, or 2 other financial account in a foreign country,” the returned questionnaire shows a response 3 of “no” despite Mr. Goldsmith’s ownership of the Account. Compare Exhibit 7 to Petrila 4 Decl. at 35-40 (showing Mr. Goldsmith answering “no” to the question regarding signature 5 authority over a foreign account) with Exhibit 11 to Petrila Decl. at 67 (signing a QI Form 6 related to the Account on August 5, 2009, which stated, “I, the custody account holder”). 7 As a result of failing to disclose the Swiss Account to Mr. Zipser, Mr. Goldsmith’s 8 individual tax returns for the years 2008, 2009, and 2010, which he signed under penalty 9 of perjury, also failed to disclose the Account. FAC at 4, ¶ 18, 5, ¶ 23, 6, ¶¶ 24-25; see 10 also Ans. at 3, ¶ 18 (admitting that his 2008, 2009, and 2010 tax returns did not disclose 11 the Account); Exhibit 6 to Petrila Decl. at 31; Exhibit 8 to Petrila Decl. at 35, 37, 39. For 12 example, Question 7a on Schedule B, Part III, covering “Interest and Ordinary Dividends,” 13 on IRS Form 1040, asks, “At any time during [the previous year], did you have an interest 14 in or a signature or other authority over a financial account in a foreign country, such as a 15 bank account, securities account, or other financial account?” Exhibit 8 to Petrila Decl. at 16 17 a relative dying on June 24, 2011, suggesting it relates to the 2010 tax year. See id. at 3518 36. The other two questionnaires contain nothing allowing the Court to infer to which 19 corresponding tax year they relate, and neither Mr. Petrila’s declaration nor the Government’s Motion clarifies this issue. Id. at 37-40. In fact, the Motion states that for 20 2008 and 2009, the response to the question regarding whether the individual had an 21 interest in a foreign account was “no,” and only for 2010 was the response “yes.” Mot. at 7:4-13 (citing Exhibit 7 to Petrila Decl. at 35, 38, 40). However, an examination of the 22 exhibits cited shows that two—rather than one—of the three questionnaires have a “yes” 23 response to the question about foreign income, while only one of the three questionnaires has a “no” response. See Exhibit 7 to Petrila Decl. at 35-36 (checking “yes” to indicate 24 signature authority over a foreign account in 2011 but “no” in response to whether he had 25 foreign income); 37-38 (checking “no” to both questions for an unknown year); 39-40 (checking “yes” for signature authority over a foreign account in 2011 but “no” to the 26 question regarding foreign income). That being said, the Court finds it reasonable to infer 27 the three questionnaires pertain to the years 2008, 2009, and 2010 (although it is unclear to which year each questionnaire corresponds). See Mot. at 7:8-13 (citing Exhibit 7 to Petrila 28 Decl. at 35-40). -73:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.321 Page 8 of 73 1 42-44. In 2008, 2009, and 2010, Mr. Goldsmith answered “no” in response to this question. 2 See id.; see also FAC at 6, ¶¶ 24-26; Ans. at 4, ¶¶ 24-26. Question 7a also directs the 3 taxpayer to “[s]ee page B-2 for exceptions and filing requirements,” see Exhibit 8 to Petrila 4 Decl., ECF No. 19-3 at 42-44, but Mr. Goldsmith testified that he did nothing to determine 5 whether the Account fell within any of the exceptions to the filing requirements, see R. 6 Goldsmith Dep. at 86:3-87:5. 7 During his deposition, Mr. Goldsmith’s explanation for failing to disclose the Swiss 8 Account to Mr. Zipser and the IRS was that “[i]t wasn’t an account,” rather, “[i]t was a 9 fund,” R. Goldsmith Dep. at 89:3-6. However, Mr. Goldsmith had other “non-bank 10 accounts,” which earned him income, like “the distributions from Monterey Pass or income 11 earned from [his] Hawaii condo, neither of [which] are banks,” which he disclosed to both 12 Mr. Zipser and the IRS. R. Goldsmith Dep. at 88:17-23. Mr. Goldsmith explained that 13 disclosed these “non-bank accounts” because he “informed him [Mr. Zipser] about 14 anything that [they] did here in the western hemisphere.” Id. However, in 2010, Mr. 15 Goldsmith opened an account in Italy at the Banco Popolare Di Intra. FAC at 5, ¶ 20; see 16 also Ans. at 3, ¶ 20. Mr. Goldsmith also informed Mr. Zipser about this Italian account 17 even though it was not in the Western Hemisphere. R. Goldsmith Dep. at 88:24-89:1. On 18 February 5, 2011, Mr. Goldsmith’s wife also sent Mr. Zipser a letter informing him of the 19 Italian account and asking whether any forms needed to be filled out in relation to that 20 account. FAC at 5, ¶ 20; see also Ans. at 3, ¶ 20; R. Goldsmith Dep. at 88:5-16. Even 21 though Mrs. Goldsmith informed Mr. Zipser about the Italian account, it did not trigger 22 IRS reporting requirements because this account had less than $10,000.00. Mot. at 7:8-13. 23 On August 5, 2009 and again on July 27, 2011, Defendant signed yet another QI 24 form regarding U.S. reporting requirements, which again, confirmed he was waiving the 25 right to hold U.S. securities. See Exhibit 11 to Petrila Decl. at 66, 68. This form stated, in 26 part, that Basler had an agreement with the IRS, which required it to deduct taxes for 27 qualifying transactions relating to U.S. securities. Id. It elaborated that although “it [was] 28 in particular unclear whether the QI Agreement in its future form is to apply generally to -83:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.322 Page 9 of 73 1 all US persons notwithstanding whether securities (including other than US securities) 2 and/or other assets of whatever nature (including simply account relationships) are held by 3 US persons with banks,” the IRS appeared “to be moving in the latter direction.” Id. 4 In addition to avoiding U.S. securities, Mr. Goldsmith also paid a regular fee to 5 Basler to institute a “hold mail” order, or in other words, for Basler not to send him any 6 mail in the U.S. Compare Exhibit 1210 to Petrila Decl. at 73 (indicating on May 23, 2015 7 and June 14, 2010, that “the mail can be destroyed”); Exhibit 10 to Petrila Decl. at 55-59 8 (attaching statements for a “retained mail fee” dated December 16, 2010 for 200.00 CHF, 9 December 16, 2011 for 245.00 CHF, March 30, 2012 for 95.00 CHF, May 4, 2012 for 10 31.67 CHF, and June 29, 2012 for 31.67 CHF) with R. Goldsmith Dep. at 94:15-21 11 (testifying that he could not recall giving Basler permission to destroy the held mail).11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The Government notes that Exhibits 9 and 10 are the “as produced Basler notes on Defendant’s accounts,” which are written in German. Mot. at 9:24-26. However, the Government has attached English translations along with a certificate of translation. Id. The Court finds that the certificates of translation sufficiently authenticate the documents, particularly given Mr. Goldsmith’s opposition does not dispute the accuracy of any of the translations or representations by the Government as to what the documents convey. See, e.g., FED. R. CIV. P. 56(c)(4) (providing that “[a]n affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated”); FED. R. EVID. 604 (“An interpreter must be qualified and must give an oath or affirmation to make a true translation.”); FED. R. EVID. 901(a) (“To satisfy the requirement of authenticating or identifying an item of evidence, the proponent must produce evidence sufficient to support a finding that the item is what the proponent claims it is.”); see also Jack v. Trans World Airlines, Inc., 854 F. Supp. 654, 659 (N.D. Cal. 1994) (“Witness testimony translated from a foreign language must be properly authenticated and any interpretation must be shown to be an accurate translation done by a competent translator.”) (citing FED. R. EVID. 604 and 901). 11 Although Mr. Goldsmith did not recall asking Basler to destroy the mail related to the Account, he also did not deny it. The apparent discrepancy on this issue appears to arise from the fact that Mr. Goldsmith readily admits he asked Basler to hold his mail, see, e.g., R. Goldsmith Dep. at 61:24-62:1 (testifying “Oh yeah, certainly” when asked whether he asked Basler not to send him any mail); see also id. at 64:1-65:4, he does not recall asking them to destroy his mail, see R. Goldsmith Dep. at 94:15-24. In fact, Mr. Goldsmith admitted in the Government’s Requests for Admission that he “instructed Basler 10 -93:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.323 Page 10 of 73 1 At some point, Basler informed Mr. Goldsmith that it planned to close the Account 2 even though Mr. Goldsmith “didn’t want to close it.” R. Goldsmith Dep. at 46:13-15. 3 Basler’s notes regarding the Account reflect that (1) on October 27, 2010, Basler explained 4 to Mr. Goldsmith that there were issues related to the reporting requirements in the Foreign 5 Account Tax Compliance Act (“FATCA”) and that as a result of that discussion, the 6 “clients will probably terminate the relationship in 2011”; (2) on July 28, 2011, Mr. 7 Goldsmith indicated he wished to terminate the Account within the next few months or 8 years and was annoyed that Basler set a monthly cash withdrawal limit of $10,000; and (3) 9 after the October 27, 2010 discussion regarding the FATCA, Defendant’s in-person 10 withdrawals accelerated in frequency. See Exhibit 12 to Petrila Decl., ECF No. 19-3 at 7311 75 (listing Mr. Goldsmith’s withdrawals); but see R. Goldsmith Dep. at 95:9-97:25, 98:112 8, 99:2-25 (denying his recollection of these discussions with Basler). Mr. Goldsmith 13 testified that when Basler said it was closing the Account, he “realized that maybe 14 something was wrong …. [and] [m]aybe we shouldn’t be doing something.” See R. 15 Goldsmith Dep. at 46:15-17. When Basler closed the Account, Mr. Goldsmith walked 16 away with $200,000.00, which he repatriated to the U.S. See id. at 45:24-46:1. 17 Although Mr. Goldsmith claims he did not believe he owned the Account, which is 18 why he did not inform Mr. Zipser about it when his mother died, he informed Mr. Zipser 19 about the other types of property he inherited, like the commercial properties. See Mot. at 20 11:21-26 (citing R. Goldsmith Dep. at 13:1-13, 16:23-17:1). When asked why he 21 Kantonalbank to retain banking correspondence regarding [his] Account at the bank instead 22 of sending it to [him] in the United States.” Exhibit 6 to Petrila Decl. at 32. Given Mr. 23 Goldsmith raises no reasons to disbelieve Basler’s notes, the Court assumes as true the Government’s representation that Mr. Goldsmith instigated a hold mail order, as is 24 reflected in Basler’s notes along with the statements from Basler for the retained mail fee. 25 Exhibit 10 to Petrila Decl. at 55-59. “When opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, 26 a court should not adopt that version of the facts for purposes of ruling on a motion for 27 summary judgment.” Scott v. Harris, 550 U.S. 372, 380 (2007). That being said, given only tax years 2008, 2009, and 2010 are at issue, the Court recognizes that four of the five 28 retained mail statements are post-2010 and have little, if any, probative value. -103:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.324 Page 11 of 73 1 considered himself the owner of the interest in commercial properties he inherited from his 2 mother, but not the money he inherited from his mother in the Account, Mr. Goldsmith 3 could only state that they were “different.” See R. Goldsmith Dep. at 56:24-57:18. Mr. 4 Goldsmith also owns an account with Morgan Stanley and cannot explain why the income 5 from Morgan Stanley, which he knew had to be reported to the IRS, would differ his 6 Account with Basler. See id. at 59:3-18. 7 In the spring of 2012, prior to closing the Account, Mr. Goldsmith received a letter 8 from Basler informing him and his wife of their U.S. tax reporting requirements. FAC at 9 6, ¶ 27; see also Ans. at 4, ¶ 27. Shortly thereafter, on April 25, 2012, Mr. Goldsmith 10 closed the Basler Account. FAC at 6, ¶ 28; see also Ans. at 4, ¶ 28. Following Mr. 11 Goldsmith’s closure of the Account, Mr. Goldsmith informed the IRS of the Account and 12 elected to participate in the IRS’s Offshore Voluntary Disclosure Initiative (“OVDI”). 13 Mot. at 15:17-23. The OVDI program offers taxpayers with unreported accounts immunity 14 from criminal prosecution and civil FBAR penalties in exchange for (1) full disclosure of 15 the taxpayer’s foreign account holdings; (2) payment of any tax deficiencies, penalties, and 16 interest; and (3) payment of a miscellaneous civil penalty that would be less than the 17 taxpayer’s potential exposure under a full tax and/or FBAR examination. Id. at 15:17-23. 18 However, Mr. Goldsmith eventually decided to withdraw from the OVDI program, 19 resulting in his case being referred to the IRS for a full tax examination and investigation 20 into his FBAR compliance. Id. at 15:23-25. 21 On March 11, 2015, February 9, 2016, February 10, 2017, and September 6, 2017, 22 Mr. Goldsmith consented to extend the statute of limitations for assessing the FBAR 23 penalty for calendar years 2008, 2009, and 2010 numerous times until the it was ultimately 24 extended to December 31, 2018. See Exhibit 1 to Petrila Decl. at 2-5. 25 On June 19, 2018, a delegate of the Secretary of the Treasury assessed civil penalties 26 against Mr. Goldsmith in the total amount of $273,846.00, due to his alleged willful failure 27 to timely file FBARs to disclose the Account to the IRS for the calendar years 2008, 2009 28 and 2010 as follows: -113:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.325 Page 12 of 73 Year 2008 2009 2010 TOTAL 1 2 3 4 Penalty Assessed $122,375.00 $82,082.00 $69,389.00 $273,846.00 5 See FAC at 9, ¶ 39; see also Ans. at 5, ¶ 39. 6 B. Procedural History 7 On January 13, 2020, the Government filed the original complaint, alleging one 8 claim for relief for a judgment for civil penalties pursuant to 31 U.S.C. § 5321(a)(5). ECF 9 No. 1. The following day, on January 14, 2020, the Government filed the Amended 10 Complaint. See FAC. That same day, January 14, 2020, Mr. Goldsmith signed a waiver 11 of service of summons. ECF No. 4. 12 On March 16, 2020, Mr. Goldsmith timely filed an Answer to the Amended 13 Complaint. See Ans. 14 On February 1, 2021, the Government filed the instant Motion for Summary 15 Judgment, seeking summary judgment that Mr. Goldsmith’s tax violations were willful. 16 See Mot. On February 22, 2021, Defendant opposed. Opposition, ECF No. 20 (“Oppo.”). 17 On March 8, 2021, the Government replied. Reply, ECF No. 21 (“Reply”). 18 The Final Pretrial Conference is scheduled for June 7, 2021. ECF No. 14. 19 III. LEGAL STANDARD 20 Where a moving party shows “there is no genuine dispute as to any material fact and 21 the movant is entitled to judgment as a matter of law,” the Court must grant summary 22 judgment. FED. R. CIV. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 23 (1986). A fact is material if it could affect the outcome of the case under governing law. 24 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute of material fact is 25 genuine if the evidence, viewed in light most favorable to the non-moving party, “is such 26 that a reasonable jury could return a verdict for the non-moving party.” Id. 27 If the moving party has the burden of proof at trial on an issue, like Plaintiff, that 28 party must affirmatively show that no reasonable jury could find other than in the moving -123:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.326 Page 13 of 73 1 party’s favor. Celotex, 477 U.S. at 331 (Brennan, J., dissenting). The moving party may 2 make this showing by identifying those portions of the pleadings, discovery, and affidavits 3 that demonstrate the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. 4 If a moving party carries its burden of showing the absence of evidence as to an essential 5 element of the opposing party’s case (e.g., a genuine issue of material fact), “the burden 6 then shifts to the non-moving party to designate specific facts demonstrating the existence 7 of genuine issues for trial.” In re Oracle Corp. Sec. Litig., 627 F.3d 376, 387 (9th Cir. 8 2010); see also Fed. Trade Comm’n v. Stefanchik, 559 F.3d 924, 927-28 (9th Cir. 2009). 9 “This burden is not a light one.” Oracle, 627 F.3d at 387. The party opposing the motion 10 for summary judgment “must show more than the mere existence of a scintilla of evidence” 11 by coming forward “with evidence from which a jury could reasonably render a verdict in 12 the non-moving party’s favor.” Id. The nonmoving party must go beyond the pleadings 13 and designate facts showing a genuine issue for trial. Bias v. Moynihan, 508 F.3d 1212, 14 1218 (9th Cir. 2007) (citing Celotex, 477 U.S. at 324). It can do this by citing to specific 15 parts of the materials in the record or by showing that the materials cited by the moving 16 party do not compel a judgment in the moving party’s favor. FED. R. CIV. P. 56(c). 17 In ruling on a motion for summary judgment, the substantive law governing a claim 18 determines whether a fact is material. Suever v. Connell, 579 F.3d 1047, 1056 (9th Cir. 19 2009). The court also draws inferences from the facts in the light most favorable to the 20 nonmoving party. Earl v. Nielsen Media Research, Inc., 658 F.3d 1108, 1112 (9th Cir. 21 2011); see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 22 (1986). However, the nonmoving party’s mere allegation that factual disputes exist 23 between the parties will not defeat an otherwise properly supported motion seeking 24 summary judgment. See FED. R. CIV. P. 56(c). Further, if the factual context makes the 25 nonmoving party’s claim as to the existence of a material issue of fact implausible, that 26 party must come forward with more persuasive evidence to support his claim than would 27 otherwise be necessary. Matsushita, 475 U.S. at 587. 28 In a motion for summary judgment involving assessments of tax penalties for willful -133:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.327 Page 14 of 73 1 violations, whether a taxpayer has willfully failed to comply with the taxpayer’s federal 2 reporting requirements to the IRS is question of fact. Rykoff v. United States, 40 F.3d 305, 3 307 (9th Cir. 1994). The Government must prove the willful failure by a preponderance 4 of the evidence. United States v. Bohanec, 263 F. Supp. 3d 881, 889 (C.D. Cal. 2016). 5 IV. DISCUSSION 6 The Bank Secrecy Act of 1970, also known as the Currency and Foreign 7 Transactions Reporting Act, 31 U.S.C. § 5311, et seq. (the “Act”), requires all U.S. citizens 8 to “keep records and file reports, when the resident, citizen, or person makes a transaction 9 or maintains a relation for any person with a foreign financial agency.” 31 U.S.C. § 10 5314(a). In part, Congress passed the Act to require certain reports and records that may 11 be useful in “prevent[ing] . . . money laundering and the financing of terrorism.” 31 U.S.C. 12 § 5311(2). 13 Under the Act’s implementing federal regulations, 31 C.F.R. § 1010.100, et seq., 14 every U.S. “person having a financial interest in, or signature authority over, a bank, 15 securities, or other financial account in a foreign country shall report such relationship to 16 the Commissioner of Internal Revenue for each year in which such relationship exists” as 17 well as “provide such information . . . in a reporting form prescribed under 31 U.S.C. 5314 18 to be filed by such persons.” 31 C.F.R. § 1010.350(a). “The form prescribed under section 19 5314 is the Report of Foreign Bank and Financial Accounts (TD-F 90-22.1), or any 20 successor form.” 31 C.F.R. § 1010.350(a). Covered persons must file such reports by June th 21 30 each year for foreign accounts containing at least $10,000.00 in the prior calendar 22 year. 31 C.F.R. § 1010.306(c). “Thus, § 1010.350 (and the FBAR form) describes what 23 information must be disclosed in the report prescribed by § 5314—the FBAR—while § 24 1010.306 imposes a deadline for when the FBAR must be filed.” United States v. Boyd, 25 991 F.3d 1077, 1082 (9th Cir. 2021). 26 The Secretary of the Treasury may impose a civil money penalty on any person who 27 fails to comply with the Act’s reporting requirements by violating, inter alia, 31 U.S.C. § 28 -143:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.328 Page 15 of 73 1 5314 (“Section 5314”) due to failing to file a FBAR.12 See 31 U.S.C. § 5321. Where a 2 taxpayer violates Section 5314, under the “reasonable cause exception,” no penalty is 3 imposed where the violation (1) was due to reasonable cause and (2) the amount of the 4 transaction or balance in the account at the time of the transaction was properly reported. 5 31 U.S.C. § 5321(a)(5)(B)(ii). Where a Section 5314 violation does not qualify for the 6 “reasonable cause exception, the penalty for non-willful violations of Section 5314 “shall 7 not exceed $10,000.” 31 U.S.C. § 5321(a)(5)(B). Where the individual violating Section 8 5314 does so willfully or willfully causes the violation, the reasonable cause exception 9 does not apply, and the maximum penalty is increased to the greater of either (1) 10 $100,000.00 or (2) 50 percent of the amount of (a) the transaction in the case of a violation 11 involving a transaction or (b) the balance in the account at the time of a violation involving 12 a failure to report the existence of an account. 31 U.S.C. § 5321(C)-(D). To fulfill the Act’s requirements during the years at issue, 2008, 2009 and 2010, Mr. 13 14 Goldsmith, as a citizen of the U.S. who owned foreign bank accounts exceeding 15 $10,000.00—namely, the Swiss Account—was required to file a FBAR. FAC at 3, ¶ 7; 16 see also Ans. at 2, ¶ 7. For the years at issue, his FBAR was due by June 30 “of each 17 calendar year with respect to foreign financial accounts exceeding $10,000 maintained 18 during the previous calendar year.” 31 C.F.R. § 1010.306(c); see also FAC at 3, ¶ 7; Ans. 19 at 2, ¶ 7. However, Mr. Goldsmith’s interest in the Account was not reported even though 20 from 2008 to 2010, Mr. Goldsmith (1) had a balance in the Account exceeding $10,000.00; 21 (2) made annual cash withdrawals of between $17,000 and $61,000 per year; (3) received 22 offshore interest and dividend income from the Account; and (4) received gross proceeds 23 12 The Ninth Circuit recently held that where a taxpayer files a FBAR late, but the 24 content of the FBAR is accurate, the taxpayer violates 31 C.F.R. § 1010.306, which th 25 requires taxpayers to file the FBAR by June 30 of each year, rather than 31 C.F.R. § 1010.350, which sets forth the requirements for the content of the FBAR. Boyd, 991 F.3d 26 at 1082. Such a violation for an untimely report constitutes a single violation even if the 27 FBAR applies to multiple accounts. Id. Although not clearly specified by the Government, in this case, the Government appears to pursue three penalties for Mr. Goldsmith’s failure 28 to file FBARs entirely. -153:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.329 Page 16 of 73 1 in excess of $225,000.00 from the sale of securities in the Account. FAC at 5-6, ¶ 23; see 2 also Ans. at 4, ¶ 23. 3 The Government argues that the Court should grant summary judgment in this case 4 because in order to recover the penalties it seeks, it only needs to prove four elements, three 5 of which are undisputed, and the fourth of which warrants judgment by the Court as a 6 matter of law based upon the evidence in this case. Mot. at 4:19-22, 14:13-17. Mr. 7 Goldsmith responds that the Court should deny summary judgment because the evidence 8 in this case, at a minimum, shows a genuine issue of fact exists as to whether his conduct 9 qualifies as willful. Oppo. at 10:17-24. He argues that (1) the Government’s willfulness 10 standard is flawed as it flies in the face of Congressional intent, which establishes three 11 penalty categories for FBAR violations, and (2) genuine issues of material fact exist 12 appropriate for determination by a jury because “the facts brought forward by the 13 Government are not viewed in a light most favorable to the nonmoving party and/or 14 misrepresent the facts gathered through discovery.” Id. at 2:5-11. However, other than the 15 two factual assertions addressed below, Mr. Goldsmith’s Opposition never actually 16 disputes the facts asserted by the Government in its Motion but rather argues that the facts, 17 if true, prevent the Court from finding Mr. Goldsmith liable. See generally id. 18 The only two alleged facts Mr. Goldsmith appears to dispute are that he (1) knew he 19 owned the Account and (2) managed the Account. For instance, in Norman v. United 20 States, 942 F.3d 1111, 1116-17 (Fed. Cir. 2019) (Norman II), the Federal Circuit affirmed 21 the lower court’s judgment finding the taxpayer’s failure to file a FBAR willful where she 22 denied that the money in the Swiss account was hers or that she had control over it, but the 23 evidence showed she (1) opened the account, (2) actively managed the account, and (3) 24 withdrew money from it. The Court finds that like the Norman II defendant, the evidence 25 in this case blatantly contradicts Mr. Goldsmith’s argument on these issues. First, Mr. 26 Goldsmith signed several QI forms that stated, “The undersigned custody account holder 27 declares that under US-taxation law he/she is the beneficial owner of the assets and income 28 therefrom to which this declaration refers.” Exhibit 11 to Petrila Decl., ECF No. 19-3 at -163:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.330 Page 17 of 73 1 63, 65. Second, like the taxpayer in Norman, Mr. Goldsmith (1) opened the Account, see 2 R. Goldsmith Dep. at 34:2-6, 104:21-105:11; (2) actively managed the Account by 3 directing Basler to maintain a growth strategy and “direct[ing] the people who were 4 running the fund,” see id. at 92:6-18; and (3) withdrew money to pay for rental cars, hotels, 5 and meals related to his European travels, see id. at 40:20-41:5, 47:21-25. Thus, these two 6 contested facts do not, in fact, create a genuine issue of fact. Compare Banks v. Hayward, 7 216 F.3d 1082 (9th Cir. 2000) (providing that “in evaluating a motion for summary 8 judgment, the court ‘may not make credibility determinations or weigh conflicting 9 evidence,’” and instead, must believe the non-movant’s evidence while drawing all 10 justifiable inferences in his favor) with Scott, 550 U.S. at 380 (holding that a court should 11 not adopt a version of the facts “blatantly contradicted by the record, so that no reasonable 12 jury could believe it”). Here, no reasonable jury could believe Mr. Goldsmith did not own 13 the Account in light of the evidence, including his own testimony, indicating otherwise. 14 In reply, the Government argues that in his opposition, Mr. Goldsmith does not 15 dispute that he (1) personally visited Basler to withdraw money from the Account to cover 16 his travel expenses during annual European vacations; (2) ordered cash withdrawn from 17 the Account and hand-delivered to his son Michael, while Michael was in Switzerland; (3) 18 paid to have his mail for the Account held in Switzerland and not sent to the United States; 19 (4) knew the balance of the Account exceeded $10,000 during each of the years at issue; 20 and (5) failed to disclose the existence of the Account on his federal tax returns as required 21 by Schedule B to Form 1040 (which also directs taxpayers to the FBAR filing 22 requirements). Reply at 2:12-3:3; see also Oppo. 23 The Government also contends that Mr. Goldsmith does not dispute that he (1) knew 24 the Account existed; (2) controlled the overall investment strategy of the Account, 25 including by specifically directing Basler to divest any U.S. Securities held in the Account 26 to avoid U.S. reporting requirements; and (3) did not disclose the Account’s existence to 27 his accountant despite Mr. Zipser asking Mr. Goldsmith and his wife to fill out and then 28 discuss a form every year that specifically asked about foreign accounts. Reply at 2:12-173:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.331 Page 18 of 73 1 3:3. However, the Court finds that in his opposition, Mr. Goldsmith argued that (1) he “did 2 not actively manage the account and . . . always relied on the advice of the bank’s 3 representatives on what investment programs to follow,” Oppo. at 3:15-18 (citing R. 4 Goldsmith Dep. at 58:6-8), and (2) “Mrs. Goldsmith completed the annual questionnaire 5 on her own without her husband’s involvement,” id. at 2:18-24; see also FAC at 4, ¶¶ 166 17; Ans. at 3, ¶¶ 16-17; Exhibit 7 to Petrila Decl. at 35-40. Thus, Mr. Goldsmith’s 7 Opposition did, in fact, dispute two of the three above facts. However, the Court finds that 8 again, the record contradicts Mr. Goldsmith’s attempt to refute these facts. See, e.g., 9 Exhibit 5 to Petrila Decl. at 31 (admitting that he did not disclose the Account to Mr. Zipser 10 prior to July 1, 2011); Exhibit 11 to Petrila Decl. at 61-68 (describing Mr. Goldsmith as 11 the beneficial owner of the Account while also showing Mr. Goldsmith made decisions 12 about how the funds in the Account were invested). As such, the Court finds these three 13 additional facts undisputed as well. See Scott, 550 U.S. at 380. 14 Finally, the Government argues that “[w]ith no material facts in dispute, the 15 undisputed facts demonstrate that Defendant should have known there was a grave danger 16 that he was not complying with reporting requirements and that he was in a position to 17 easily find out whether that was the case.” Reply at 11:4-7. Because “[t]hat is the standard 18 that must be met for the imposition of a civil willfulness penalty under 31 U.S.C. § 19 5321(a)(5),” the Government contends the Court should enter judgment imposing penalties 20 in its favor. Id. at 11:7-9. 21 Where a non-moving party “fails to properly address another party’s assertion of fact 22 as required by Rule 56(c), the court may,” inter alia, (1) “consider the fact undisputed for 23 purposes of the motion” or (2) “grant summary judgment if the motion and supporting 24 materials—including the facts considered undisputed—show that the movant is entitled to 25 it.” FED. R. CIV. P. 56(e). As discussed below, the Court finds that first, Mr. Goldsmith 26 has failed to show any genuine issues of fact exist in this case. Second, those undisputed 27 facts show that as a matter of law, Mr. Goldsmith’s conduct qualifies as willful, thereby 28 warranting penalties under 31 U.S.C. § 5321(a)(5) (“Section 5321(a)(5)”). In arriving at -183:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.332 Page 19 of 73 1 this conclusion, the Court adopts the tests adopted by the Third, Fourth, and Eleventh 2 Circuits for whether a taxpayer’s conduct qualifies as willful. Mr. Goldsmith’s Opposition Fails to Raise a Genuine Issue of Fact 3 A. 4 In his opposition, Mr. Goldsmith argues that the Court cannot grant summary 5 judgment because construing the facts in the light most favorable to him, there are five 6 issues of genuine fact. See generally Oppo. The Government replies that Mr. Goldsmith’s 7 opposition illuminates why there are no disputed material facts in this case because even 8 though “Defendant claims that certain facts are in dispute, he does not dispute the what, 9 where, when or how of any of the relevant facts.” Reply at 3:13-16. Instead, Mr. 10 Goldsmith contends that his subjective belief regarding FBAR reporting requirements 11 creates genuine issues of fact. Id. at 3:16-18. However, “why” Defendant concealed the 12 Account is irrelevant to whether his concealment was reckless, and therefore, willful. Id. 13 at 3:18-21. For example, Mr. Goldsmith repeatedly explained that his recklessness in 14 failing to file FBARs should be excused because he did not believe he owned the Account; 15 however, as the Government points out, that “neither creates a material dispute nor 16 provides a defense against the evidence that Defendant’s conduct was ‘willful’ because 17 improper motive is unnecessary to establish willfulness.” Id. at 3:22-27. The Court, after 18 analyzing each of the facts Mr. Goldsmith argues he disputes, finds that he does not, in 19 fact, dispute any of the facts relied on by the Government to argue it is entitled to judgment 20 as a matter of law. 21 22 23 24 25 26 27 28 1. Mr. Goldsmith Fails to Show a Genuine Issue of Fact Exists as to Whether He Concealed the Swiss Account from his Tax Preparer The Government argues that Mr. Goldsmith concealed the Account from his tax preparer, Mr. Zipser, because he failed to correctly respond to the annual questionnaire’s foreign account question. Mot. at 6:24-7:13, 20:22-23. Mr. Goldsmith disputes “concealing” this fact for three reasons: First, Mr. Goldsmith contends that “all facts in the record demonstrate that Mrs. Goldsmith completed the annual questionnaire on her own without her husband’s involvement and organized all the documentation that would be -193:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.333 Page 20 of 73 1 provided to Mr. Zipser.” Oppo. at 2:18-24, 10:6-10 (citing M. Goldsmith Dep. 62:202 63:12). Second, Mr. Goldsmith also testified that his wife was the one who took care of 3 the questionnaire and he never did it. Id. at 2:24-3:3:2, 10:11-12 (citing R. Goldsmith Dep. 4 81:12-15). Third, Mr. Goldsmith argues he was unaware “that it was necessary to report 5 the funds held by Basler Kantonalbank until he read the newspaper article about it.” Oppo. 6 at 3:2-4 (citing Exhibit 5 to Mot., Defendant’s Responses to Plaintiff’s Interrogatories, ECF 7 No. 19-3 at 25:15-23). The Government replies that “[n]o matter who physically filled out 8 the questionnaires, the evidence is incontrovertible that Defendant did not tell Mr. Zipser 9 about the Account, when Mr. Zipser regularly put Defendant on notice of his obligation to 10 inform his accountant of his foreign bank accounts.” Reply at 10:16-22. The Government 11 also notes that even if Mrs. Goldsmith filled out the questionnaire, Mr. Goldsmith still 12 failed to inform Mr. Zipser about the Account when he “reviewed his actual income tax 13 return.” Id. at 10:24-11:2 (citing H. Zipser Dep. at 26:1-7; R. Goldsmith Dep. at 84:9-18). As to Mr. Goldsmith’s first and second arguments, even if Mrs. Goldsmith 14 15 completed the annual questionnaire, that questionnaire was sent to both parties and served 16 to ensure that the tax returns for both Mr. and Mrs. Goldsmith were correct. If he delegated 17 the duty to collect relevant documentation to his wife, that delegation does not negate the 18 fact that he failed to inform Mr. Zipser of the Account. See Price v. Comm’r, 887 F.2d 19 959, 965 (9th Cir. 1989). In fact, under the innocent spouse exception, a spouse signing an 20 inaccurate joint tax return may seek relief for the tax consequences of those inaccuracies 21 where he or she “did not know” or “had no reason to know” of the inaccuracy. 26 U.S.C. 22 § 6015(b).13 Where, on the other hand, a spouse knows virtually all of the facts pertaining 23 13 Although the text of the statute is clear, the legislative history confirms the purpose 24 of the statute: “Relief may be desirable, for example, where one spouse claims a phony 25 business deduction in order to avoid paying tax and the other spouse has no reason to know that the deductions are phony and may be unaware that there are untaxed profits from the 26 business which the other spouse has squandered.” Price, 887 F.2d at 964 (citing 27 Supplemental Report of Comm. on Ways & Means, H.R. Rep. 98-432 (Pt. 2), on Tax Reform Act of 1984, H.R. 4170, at 1502 (1984), 1984 U.S. Code Cong. & Admin. News 28 1143) (original emphasis). -203:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.334 Page 21 of 73 1 to the transaction underlying a tax inaccuracy, as was the case here, his or “her defense in 2 essence is premised solely on ignorance of law.” Price, 887 F.2d at 965. However, “[o]f 3 itself, ignorance of the attendant legal or tax consequences of an item which gives rise to a 4 deficiency is no defense for one seeking to obtain innocent spouse relief.” Price, 887 F.2d 5 at 965; see, e.g., Price v. Comm’r, 53 T.C.M. (CCH) 1414 (T.C. 1987) (denying a wife’s 6 attempt to seek protection under the innocent spouse exception where she “admitted that 7 she knew of the embezzled funds, but merely did not know that embezzled funds were 8 taxable”); Levin v. Comm’r, 53 T.C.M. (CCH) 6, 8-9 (T.C. 1987) (holding that a spouse 9 cannot claim innocent spouse protection “by simply turning a blind eye to—by preferring 10 not to know of—facts fully disclosed on a return, of such a large nature as would reasonably 11 put such spouse on notice that further inquiry would need to be made”). 12 In this case, to the extent Mr. Goldsmith’s argument attempts to argue protection 13 under the innocent spouse exception, this argument fails as a matter of law. Courts 14 considering whether a spouse has reason to know of an inaccuracy examine the following: 15 “(1) the spouse’s level of education; (2) the spouse’s involvement in the family’s business 16 and financial affairs; (3) the presence of expenditures that appear lavish or unusual when 17 compared to the family’s past levels of income, standard of living, and spending patterns; 18 and (4) the culpable spouse’s evasiveness and deceit concerning the couple’s finances.” 19 Pietromonaco v. Comm’r, 3 F.3d 1342, 1345 (9th Cir. 1993). Even assuming Mrs. 20 Goldsmith completed the questionnaire, Mr. Goldsmith cannot claim protection as an 21 innocent spouse. Even though neither party provides information regarding Mr. 22 Goldsmith’s education, the record indicates that first, Mr. Goldsmith maintained a high 23 level of involvement in the family’s financial affairs as evidenced by his (1) opening the 24 Account, (2) withdrawing funds for the family’s leisure and vacations, and (3) closing the 25 Account. See R. Goldsmith Dep. at 34:2-6, 40:20-41:5, 45:24-47:1, 47:21-25, 104:2526 105:8. Second, Mr. Goldsmith also participated in vacations throughout Europe and knew 27 of the family’s spending patterns. Id. at 47:21-25 (testifying “we would spend the money 28 while we were there [in Europe]” on “hotels, . . . car rentals, . . . meals”); but see id. at -213:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.335 Page 22 of 73 1 53:18-19, 54:6-11 (testifying “it was my account in my name, but it wasn’t my money”)). 2 Thus, Mr. Goldsmith should have known that even if he did not read the tax returns, the 3 amounts paid in taxes did not cover the income earned from the Swiss Account. 4 The fact that Mrs. Goldsmith completed the questionnaire does not create a genuine 5 issue of fact as to whether Mr. Goldsmith failed to inform Mr. Zipser of the Account. More 6 importantly, Mr. Goldsmith does not dispute the fact at hand (i.e., that he did not disclose 7 the Account to Mr. Zipser), only its consequences (i.e., whether he should be held 8 accountable for that failure). As to Mr. Goldsmith’s point regarding a lack of awareness 9 of his obligation to report the Swiss Account, this argument again, not only does not dispute 10 the fact that he did not inform his tax preparer of the Account but also fails to prevent a 11 finding of willfulness as a matter of law. Norman, 942 F.3d at 1116-17. 12 13 14 2. Mr. Goldsmith Fails to Show a Genuine Issue of Fact Exists as to Whether He Informed Mr. Zipser About the Italian Account The Government also argues that “[w]hen Defendant opened an Italian bank account 15 … he informed Mr. Zipser of that account and asked if it had to be reported.” Mot. at 8:116 2. Although neither party fleshes out the relevance of this fact, the inference to be made is 17 that by asking Mr. Zipser if he needed to report the Italian account, Mr. Goldsmith 18 suspected foreign accounts needed to be reported to the IRS. Mr. Goldsmith responds that 19 “[t]his again ignores that fact that Mrs. Goldsmith completed the annual questionnaire on 20 her own without her husband’s involvement and organized all the documentation that 21 would be provided to Mr. Zipser.” Oppo. at 4:10-13 (citing Exhibit 14 to Petrila Suppl. 22 Decl., November 3, 2020 Deposition Transcript of Maxine Goldsmith, ECF No. 26-2 (“M. 23 Goldsmith Dep.”) at 62:20-63:12; R. Goldsmith Dep. at 81:12-15). Mr. Goldsmith argues 24 that because his wife completed the questionnaire, “it is misleading to state that [he] was 25 the one to inform Mr. Zipser of the Italian Account or that he asked any questions about 26 whether or not it should be reported. Oppo. at 4:14-16. The argument he appears to be 27 making is that if Mrs. Goldsmith, rather than Mr. Goldsmith, disclosed the Italian Account, 28 knowledge of the obligation to report foreign accounts should not be imputed to Mr. -223:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.336 Page 23 of 73 1 Goldsmith. Not only is this argument belied by Mr. Goldsmith’s own testimony that he 2 did, in fact, tell Mr. Zipser about the Account, see R. Goldsmith Dep. at 88:5-11, 88:243 89:1, but it is also legally incorrect. Regardless of who completed Mr. Zipser’s 4 questionnaire, Mr. Goldsmith is charged with knowledge of any tax returns he signs under 5 penalty of perjury. See, e.g., Kimble v. United States, 991 F.3d 1238, 1242-43 (Fed. Cir. 6 2021) (Kimble II) (“[W]hether [the taxpayer] ever read her . . . tax return is of no import 7 because ‘[a] taxpayer who signs a tax return will not be heard to claim innocence for not 8 having actually read the return, as ... she is charged with constructive knowledge of its 9 contents.’”). Further, just because he delegated the duty to respond to Mr. Zipser’s 10 questionnaire to Mrs. Goldsmith does not negate the fact that Mr. Goldsmith did not, in 11 fact, inform Mr. Zipser of the Italian Account. Cf. Norman, 942 F.3d at 1116 (“Actions 12 can be willful even if taken on the advice of another.”). 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3. Mr. Goldsmith Fails to Show a Genuine Issue of Fact Exists as to Whether He Concealed Information from the Government The Government also argues that “Defendant’s concealment of the Account from Mr. Zipser was part and parcel of Defendant concealing the Account from the U.S. government.” Mot. at 7:14-15. In other words, the Government contends that Mr. Goldsmith concealed his Swiss Account from the IRS. In his opposition, Mr. Goldsmith disputes this fact for two reasons: First, he argues that “[i]n his responses to interrogatories[, he] answered that ‘he did not know that it was necessary to report the funds held by Basler Kantonalbank until he read the newspaper article about it.’” Oppo. at 3:7-10 (citing Exhibit 5 to Mot., Defendant’s Responses to Plaintiff’s Interrogatories, ECF No. 19-3 at 25:15-23). Second, he notes that in the same responses, he indicated that “the income derived from this account during the tax years at issue only amounted 0.22% of Mr. Goldsmith’s overall taxable income during these years.” Id. at 3:10-13 (citing Exhibit 5 to Mot., Defendant’s Responses to Plaintiff’s Interrogatories, ECF No. 19-3 at 26:5-10). Both of these points are arguments, not facts, and Mr. Goldsmith never disputes that he did not, in fact, inform the IRS of the Account. Rather, he appears to dispute the -233:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.337 Page 24 of 73 1 characterization of his failure to inform the IRS as “concealment.” However, whether his 2 failure to report the Account to the IRS qualifies as concealment is an issue of law, not fact. 3 Further, as previously noted, Mr. Goldsmith’s defense of ignorance of the law is not a 4 defense. Price, 887 F.2d at 965. Thus, Mr. Goldsmith has failed to show a genuine issue 5 of fact exists as to the fact that he did not inform the IRS of the Swiss Account. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4. Mr. Goldsmith Fails to Show a Genuine Issue of Fact Exists as to Whether He Controlled the Account The Government contends that Mr. Goldsmith “also made decisions regarding how the money in the Account was invested.” Mot. at 9:6-7. Mr. Goldsmith disputes this fact for two reasons: First, he argues that he testified at his deposition that he “did not actively manage the account and he always relied on the advice of the bank’s representatives on what investment programs to follow.” Oppo. at 3:15-18 (citing R. Goldsmith Dep. 58:68). Second, he points out that he also stated in his response to Interrogatory No. 9 that he (1) “left all decisions regarding the investments to Basler Kantonalbank because he had no interest in how it was managed” and (2) “the income derived from this account during the tax years at issue only amounted to 0.22% of Mr. Goldsmith’s overall taxable income.” Oppo. at 3:18-24 (citing Exhibit 5 to Mot., Defendant’s Responses to Plaintiff’s Interrogatories, ECF No. 19-3 at 26:5-9). Mr. Goldsmith’s arguments are unpersuasive. His deposition testimony indicates he participated in the making of decisions regarding the Account. Again, Mr. Goldsmith testified that he (1) directed the individuals at Basler, R. Goldsmith Dep. at 92:14-18; (2) decided whether to spend the funds in the Account on charitable causes or his family’s travels through Europe, id. at 47:21-48:12; and (3) directed Basler as to what type of investor profile to apply to his Account, id. at 92:6-13. He also testified that he recalled Basler suggesting investment in a Japanese railroad and Mr. Goldsmith “figured that as long as we made some money out of it, why not.” Id. at 58:9-15. The Ninth Circuit has reiterated that “[a] deposition is not a take home examination.” Hambleton Bros. Lumber Co. v. Balkin Enters., 397 F.3d 1217, 1225 (9th Cir. 2005). “Allowing a deponent to alter -243:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.338 Page 25 of 73 1 testimony through after-the-fact changes (potentially in consultation with [his] attorney) 2 would undermine these well-settled deposition rules, effectively permitting the substitution 3 of interrogatory answers for deposition testimony and permitting attorneys to alter the 4 deponent’s testimony.” ViaSat, Inc. v. Acacia Communs., Inc., No. 16cv463 BEN (JMA), 5 2018 U.S. Dist. LEXIS 25357, at *9-10 (S.D. Cal. Feb. 15, 2018). Thus, Mr. Goldsmith 6 cannot attempt to create an issue of fact by contradicting his own unfavorable deposition 7 testimony, given under oath, with his interrogatory responses that were prepared with the 8 assistance of counsel. See, e.g., Disc Golf Ass’n, Inc. v. Champion Discs, Inc., 158 F.3d 9 1002, 1008 (9th Cir. 1998) (“A party cannot create a triable issue of fact, and thus survive 10 summary judgment, merely by contradicting his or her own sworn deposition testimony 11 with a later declaration.”). Finally, Mr. Goldsmith fails to explain his argument that “the 12 income derived from this account during the tax years at issue only amounted to 0.22% of 13 Mr. Goldsmith’s overall taxable income.” Oppo. at 3:18-24. It is unclear whether he is 14 trying to argue he was not obligated to report his foreign accounts due to the percentage of 15 income they represented or whether the argument is that because the unreported income 16 was only approximately one-fiftieth of his income, it should be understandable that he 17 overlooked it. Either way, the argument is both unpersuasive and does not refute the fact 18 that Mr. Goldsmith had some control over the Account as evidenced by the fact that he had 19 the ability to close the Account. 20 Again, despite his arguments to the contrary, the Court finds that the record in this 21 case indicates Mr. Goldsmith both owned and controlled the Account. First, upon 22 inheriting the Account, he transferred them to a new Swiss, numbered bank account. See 23 Mot. at 4:6-9, 5:27-28, 6:3-6 (citing R. Goldsmith Dep. at 34:2-6, 104:25-105:8); see also 24 FAC at 3, ¶ 12 (pleading that Mr. Goldsmith “became the title holder to a Basler 25 Kantonalbank account containing the inherited funds and ending in number 8171” as well 26 as “owned and managed the Basler Account, and personally used and profited from the 27 funds in the Basler Account”) with Ans. at 3, ¶ 12 (admitting that he became the title holder 28 to the Account, owned the Account, personally used the Account, and profited from the -253:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.339 Page 26 of 73 1 Account but denying that he “managed the Basler Account”). Second, by signing the QI 2 forms, he also managed the Account by deciding whether it invested in U.S. securities or 3 not. See Exhibit 11 to Petrila Decl. at 61. Third, Mr. Goldsmith helped decide how the 4 funds in the Account were invested. R. Goldsmith Dep. at 58:9-15, 92:6-18. Fourth, on 5 April 25, 2012, Mr. Goldsmith closed the Basler Account, FAC at 6, ¶ 28; see also Ans. at 6 4, ¶ 28, which he could not have done if he did not manage, or at least own, the Account. 7 Thus, Mr. Goldsmith has failed to show a genuine issue of fact exists as to whether 8 he controlled the Account. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5. Mr. Goldsmith Fails to Show a Genuine Issue of Fact Exists as to Whether He Chose to Divest U.S. Securities The Government argues that “on August 29, 2000, Basler gave Defendant a choice between disclosing his account to the IRS and divesting all U.S. securities, and Defendant chose to divest the securities rather than disclose the Account to the IRS.” Mot. at 9:2210:16. It also notes that that “Defendant signed multiple forms describing Defendant as the beneficial owner of the account, a U.S. taxpayer, and referencing U.S. reporting obligations, but did nothing to investigate what tax and reporting obligations he was under.” Id. at 17:15-18. First, Mr. Goldsmith attempts to dispute this fact by arguing he testified at his deposition that he (1) “just signed the documents that they advised me to sign” and (2) only “skimmed” the documents he signed and was not even sure what he was signing. Oppo. at 3:28-4:7, 8:17-22 (citing R. Goldsmith Dep. 67:22-68:20). However, these points only address whether Mr. Goldsmith should be held liable for signing the forms but does not dispute the fact at issue: Mr. Goldsmith signed forms choosing to divest himself of U.S. securities rather than reporting the Account to the IRS. Thus, this fact is not in dispute. While Mr. Goldsmith disputes whether he should be charged with the knowledge of documents he signed, this issue is an issue of law, and as a matter of law, a party may not avoid the consequences of an agreement by claiming he or she did not read the entire agreement. See, e.g., Oregon-Pac. Forest Prod. Corp. v. Welsh Panel Co., 248 F. Supp. -263:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.340 Page 27 of 73 1 903, 908 (D. Or. 1965) (providing that “[i]t is no defense that a party, seeking to avoid the 2 contract, did not read it”); Conyer v. Hula Media Servs., LLC, 53 Cal. App. 5th 1189, 1197 3 (2020), review filed (Oct. 5, 2020) (noting that “[i]t has long been the rule in California 4 that a party is bound by a contract even if he did not read the contract before signing it”). 5 Second, Mr. Goldsmith also attempts to dispute this fact by arguing that he stated in 6 his response to Interrogatory No. 9 that he “left all decisions regarding the investments to 7 Basler Kantonalbank because he had no interest in how it was managed.” Oppo. at 8:228 24 (citing Exhibit 5 to Petrila Decl., Defendant’s Responses to Plaintiff’s Interrogatories, 9 ECF No. 19-3 at 26:5-9). Again, this argument does nothing to dispute that he did, in fact, 10 sign the QI forms divesting himself of U.S. securities. Further, like his previous argument, 11 this argument fails to provide a defense to Mr. Goldsmith. Delegating authority does not 12 alleviate a taxpayer of responsibility. See, e.g., Norman, 942 F.3d at 1116 (“Actions can 13 be willful even if taken on the advice of another.”); Jones v. United States, No. 14 SACV1900173JVSRAO, 2020 WL 4390390, at *7 (C.D. Cal. May 11, 2020) (noting that 15 “reliance by a lay person on an accountant or attorney ‘cannot function as a substitute for 16 compliance with an unambiguous statute.’”). 17 In sum, Mr. Goldsmith argues that “[l]ooking at these facts in the light most 18 favorable to Defendant, if he never understood, completely read what he was signing, or 19 made determinations on how the form was to be filled out, instead relying on the bank’s 20 representatives, he would not have been alerted to the fact that he needed to investigate 21 what tax and reporting obligations he was under.” Oppo. at 8:24-28. As stated, this 22 argument does not dispute the fact at hand; rather, it disputes whether he should be held 23 liable for his tax violations due to the fact at hand. However, the law is clear that he should 24 be held liable. 25 Having established that Mr. Goldsmith’s opposition does not, in fact, dispute any of 26 the facts in this case but rather merely disputes whether he may be held liable for those 27 facts as a matter of law, the Court finds this case appropriate for summary judgment as no 28 facts remain in dispute. Thus, the Court proceeds to analyze Mr. Goldsmith’s liability -273:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.341 Page 28 of 73 1 under the now-established undisputed facts of this case. 2 B. Liability 3 In order to find a taxpayer liable for a willful violation under Section 5321(a)(5), the 4 United States must prove, by a preponderance of the evidence, that the taxpayer (1) is a 5 U.S. citizen, resident alien, or entity created under United States law; (2) had an interest in, 6 or authority over a foreign financial account; (3) had a balance exceeding $10,000.00 at 7 some point during the reporting period in the foreign financial account; and (4) willfully 8 failed to disclose the account and file a FBAR. Jones, 2020 WL 4390390 at * 5 (citing 31 9 U.S.C. §§ 5314, 5321(a)(5)(A); 31 C.F.R. §§ 1010.350(a) and (b)). Consequently, the 10 Government argues that the Court should grant summary judgment that Mr. Goldsmith’s 11 failure to file his FBARs was willful under Section 5321 so long as it shows that Mr. 12 Goldsmith (1) was a “U.S. Person,” who (2) had an interest in or authority over the Swiss 13 Account, which (3) had an aggregate value of $10,000.00 or more, and (4) that he willfully 14 failed to file an FBAR Form for the accounts. Mot. at 14:6-11 (citing United States v. 15 Pomerantz, No. C16-0689-JLR, 2017 WL 2483213, at *5 (W.D. Wash. June 8, 2017)). 16 The Government points out that it has already established the first three elements: 17 First, the operative complaint pleads that Mr. Goldsmith was a U.S. citizen during the 18 pertinent time period, see FAC at 7, ¶ 29, and Mr. Goldsmith’s Answer admitted those 19 allegations, see Ans. at 4, ¶ 29. Second, Paragraph 30 of the Amended Complaint pleads 20 that “[d]uring the calendar years 2008, 2009 and 2010, Defendant had a financial interest, 21 within the meaning of 31 C.F.R. § 1010.350(e), over the Basler Account,” which was “a 22 bank account in a foreign country.” FAC at 7, ¶¶ 30-31. Mr. Goldsmith has admitted to 23 these allegations as well. See Ans. at 4, ¶¶ 30-31. Third, Defendant has also admitted that 24 “[d]uring each of the calendar years 2008, 2009 and 2010, the balance of the foreign 25 accounts in which defendant had a reportable interest exceeded $10,000.” FAC at 7, ¶ 32; 26 see also Ans. at 4, ¶ 32. In fact, Mr. Goldsmith confirmed the balances were in excess of 27 $275,000.00 during each relevant year. See Exhibit 5 to Petrila Decl., Defendant’s 28 Responses to Plaintiff’s Interrogatories, at 25:1-12. Thus, the Government has established -283:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.342 Page 29 of 73 1 that (1) Mr. Goldsmith is a U.S. Person, who (2) had an interest in or authority over foreign 2 bank accounts in the years 2008, 2009, and 2010, which (3) had an aggregate value of 3 $10,000.00 or more. Mot. at 14:13-17 (citing Ans. at ¶¶ 7, 23). 4 As to the fourth and final element, the Amended Complaint pleads that “Defendant 5 failed to timely file an FBAR with regard to the 2008, 2009 and 2010 calendar years as 6 required by 31 U.S.C. § 5314 and 31 C.F.R. § 1010.306(c).” FAC at 3, ¶ 7, 5-6, ¶ 23, 7, ¶ 7 33; see also Ans. at 2, ¶ 7, 4, ¶ 23. Mr. Goldsmith admits the failure to file these reports. 8 See also Ans. at 4, ¶ 33. Thus, the IRS assessed a civil penalty for those years. Mot. at 9 14:1-18. However, the Amended Complaint also alleges that “[t]he failure of Defendant 10 to timely file an FBAR with regard to the 2008, 2009 and 2010 calendar years was willful 11 within the meaning of 31 U.S.C. § 5321(a)(5).” FAC at 7, ¶ 34. Mr. Goldsmith, although 12 admitting to failing to file a FBAR, denies the willful nature of his failure. See, e.g., Ans. 13 at 4, ¶ 34 (pleading that “Defendant denies the allegations contained in Paragraph 34 of 14 Plaintiff’s Amended Complaint.”). As a result, the sole remaining issue in dispute in this 15 case is whether that failure qualifies as willful. 16 “Penalties for violations of 31 U.S.C. § 5314 and 31 C.F.R. § 1010.350 are provided 17 in 31 U.S.C. § 5321(a)(5).” United States v. Toth, No. 15-CV-13367-ADB, 2019 WL 18 7039627, at *6 (D. Mass. Dec. 20, 2019). If the Court finds Mr. Goldsmith’s Section 5314 19 violation willful, Section 5321(a)(5) provides for enhanced penalties. Id. (citing 31 U.S.C. 20 § 5321(a)(5)(C)). However, “Section 5321(a)(5) does not define how to assess whether an 21 individual acted willfully in his failure to comply with the reporting requirements imposed 22 by § 5314.” United States v. McBride, 908 F. Supp. 2d 1186, 1204 (D. Utah 2012). 23 “‘[W]illfully’ is a ‘word of many meanings whose construction is often dependent on the 24 context in which it appears.’” Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 57 (2007) 25 (quoting Bryan v. United States, 524 U.S. 184, 191 (1998)). 26 In the context of criminal penalties for willful violations of 31 U.S.C. § 5324’s 27 reporting requirements, see 31 U.S.C. § 5322, the Supreme Court has held that in order 28 “[t]o establish that a defendant ‘willfully violated’ the antistructuring law, the Government -293:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.343 Page 30 of 73 1 must prove that the defendant acted with knowledge that his conduct was unlawful,” see 2 Ratzlaf v. United States, 510 U.S. 135, 136-37 (1994). See also Safeco, 551 U.S. at 68, 3 n.18 (“Unlike civil recklessness, criminal recklessness also requires subjective knowledge 4 on the part of the offender.”). For example, in Ratzlaf, the Government sought criminal 5 penalties pursuant to 31 U.S.C. § 5322 for violations of 31 U.S.C. § 5313, which similar 6 to Section 5314, requires banks and financial institutions to file reports whenever involved 7 in a domestic cash transaction exceeding $10,000.00. 510 U.S. at 137. The Supreme Court 8 held that “willfulness” meant that “the defendant acted with knowledge that his conduct 9 was unlawful,” meaning he intentionally violated “a known legal duty.” Id. Thus, in the 10 criminal-FBAR context, a knowing violation requires actual knowledge of the FBAR 11 reporting requirement and a specific intent to commit the crime. Id. at 141. This is the 12 standard Mr. Goldsmith contends should apply in this case. See Oppo. at 7:4-21. 13 In this case, however, because the Government seeks penalties pursuant to 31 U.S.C. 14 § 5321(a)(5), which imposes civil (as opposed to criminal) penalties for willful violations 15 but does not define willfulness, “the applicable definition of willfulness is that which has 16 been used in other civil contexts, including civil tax collection matters and compliance with 17 reporting requirements.” McBride, 908 F. Supp. 2d at 1204. Neither the Supreme Court 18 nor the Ninth Circuit have set forth the requirements for establishing a willful violation of 19 the Act in the civil context. Oppo. at 5:24-26 (“On the issue of willfulness with respect to 20 FBAR violations in the civil context, there is no controlling case law from the Ninth Circuit 21 or the Southern District of California and therefore, this is an issue of first impression for 22 this Court.”); Reply at 6:14-20 (noting that “the Ninth Circuit has yet to apply the civil 23 willfulness standard in the FBAR context” but citing to three cases from the Central District 24 of California that had done so) (citing United States v. Zimmerman, No. 2:19-CV-491225 CAS-EX, 2020 WL 6065333 (C.D. Cal. Sept. 16, 2020); United States v. Bohanec, 263 F. 26 Supp. 3d 881 (C.D. Cal. 2016); Jones v. United States, No. CV1904950JVSRAOX, 2020 27 WL 2803353 (C.D. Cal. May 11, 2020)). Thus, this Court looks to Supreme Court cases 28 interpreting willfulness with respect to other civil statutes as well as other federal courts -303:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.344 Page 31 of 73 1 interpreting Section 5321. 2 In the analogous context of violations of the Fair Credit Reporting Act (“FCRA”), 3 the United States Supreme Court has held that reckless action violating the FCRA is 4 covered by this willful requirement. Safeco, 551 U.S. at 52, 57 (noting that “where 5 willfulness is a statutory condition of civil liability, we have generally taken it to cover not 6 only knowing violations of a standard, but reckless ones as well”); cf. United States v. 7 Illinois Central R. Co., 303 U.S. 239, 242-43 (1938) (“willfully” includes “conduct marked 8 by careless disregard whether or not one has the right to so act”) (citation omitted)); see 9 also Bedrosian v. United States et al., 912 F.3d 144, 152 (3d Cir. 2018) (holding that for 10 the purposes of civil FBAR penalties, willfulness incorporates recklessness). In doing so, 11 the Court noted that “[w]hile ‘the term recklessness is not self-defining,’ the common law 12 has generally understood it in the sphere of civil liability as conduct violating an objective 13 standard: action entailing ‘an unjustifiably high risk of harm that is either known or so 14 obvious that it should be known.’” Safeco, 551 U.S. at 68; see also Mot. at 13:9-26 15 (quoting Safeco). Thus, civil recklessness requires proof of something more than mere 16 negligence: “It is [the] high risk of harm, objectively assessed, that is the essence of 17 recklessness at common law.” Safeco, 551 U.S. at 69. “Therefore, ‘willfulness’ may be 18 satisfied by establishing the individual’s reckless disregard of a statutory duty, as opposed 19 to acts that are known to violate the statutory duty at issue.” McBride, 908 F. Supp. 2d at 20 1204 (citing Safeco, 551 U.S. at 57). “An improper motive or bad purpose is not necessary 21 to establish willfulness in the civil context.” Id.; see also Mot. at 14:16-19 (citing same). 22 While reckless conduct satisfies the willfulness standard, the Supreme Court also 23 recently held that willful blindness also meets the willfulness requirement in civil case. 24 Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. 754, 760-61, 766 (2011). In Global25 Tech, the Supreme Court held that induced patent infringement under 35 U.S.C. § 271(b) 26 “requires knowledge that the induced acts constitute patent infringement.” Id. Instead of 27 proving actual knowledge that the induced acts infringe, the Supreme Court held that 28 “willful blindness” could satisfy the knowledge requirement, where the defendant (1) -313:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.345 Page 32 of 73 1 subjectively believed there was a high probability that a fact exists and (2) takes deliberate 2 actions to avoid learning of that fact. Id. at 769. In doing so, the Court acknowledged that 3 where criminal statutes have required that a defendant acted willfully, courts have applied 4 “the doctrine of willful blindness [to] hold that defendants cannot escape the reach of these 5 statutes by deliberately shielding themselves from clear evidence of critical facts that are 6 strongly suggested by the circumstances.” Id. at 766. “Given the long history of willful 7 blindness and its wide acceptance in the Federal Judiciary,” the Court saw “no reason why 8 the doctrine should not apply in civil lawsuits for induced patent infringement under 35 9 U.S.C. § 271(b).” Id. at 768. 10 Although disjointed, the sum result of the relevant caselaw interpreting the 11 willfulness standard for FBAR-reporting violations is that a willful violation may be found 12 where the violation results from conduct qualifying as either (1) knowing and intentional 13 or (2) reckless, including due to willful blindness. United States v. DeMauro, 483 F. Supp. 14 3d 68, 82 (D.N.H. 2020). The Government bears the burden of proving willfulness under 15 either theory by a preponderance of the evidence. Bedrosian, 912 F.3d at 153. Willful 16 intent may be proven by circumstantial evidence and reasonable inferences drawn from the 17 facts given direct proof of the taxpayer’s intent is rarely available. Spies v. United 18 States, 317 U.S. 492, 499 (1943). Courts may infer willfulness from (1) “conduct meant 19 to conceal or mislead sources of income or other financial information” or (2) “a conscious 20 effort to avoid learning about reporting requirements.” United States v. Sturman, 951 F.2d 21 1466, 1476 (6th Cir. 1991) (citing Spies, 317 U.S. at 499; United States v. Bank of New 22 England, N.A., 821 F.2d 844, 855 (1st Cir.), cert. denied, 484 U.S. 943 (1987)); see also 23 Bohanec, 263 F. Supp. 3d at 890, n.2. Examples of conduct allowing an inference of 24 willfulness include keeping a duplicate set of books; making false entries, invoices, or 25 documents; destroying records or books; concealing assets or income; or “handling of 26 one’s affairs to avoid making the records usual in transactions of the kind.” Spies, 317 27 U.S. at 499 (1943); see also United States v. Williams, 489 Fed. App’x 655, 659 (4th Cir. 28 2012) (holding that where the defendant signed his tax return, “made a ‘conscious effort to -323:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.346 Page 33 of 73 1 avoid learning about reporting requirements,” and submitted “false answers on both the tax 2 organizer and his federal tax return,” his “conduct . . . was ‘meant to conceal or mislead 3 sources of income . . . ,’” constituting “willful blindness to the FBAR requirement”); see 4 also McBride, 908 F. Supp. 2d at 1204-05 (inferring willfulness from the taxpayer’s 5 signature on his tax returns indicating constructive knowledge of relevant tax statutes). 6 Mr. Goldsmith argues this Court should deny the Government’s Motion because “the 7 Ninth Circuit has held that the issue of whether a person has willfully failed to comply with 8 a tax reporting requirement is a question of fact.” Oppo. at 7:14-17. The Government 9 replies that even though willfulness is a question of fact, “courts have decided the question 10 on summary judgment where, as here, the undisputed facts showed that the civil willfulness 11 standard was satisfied.” Reply at 5:6-17 (citing, inter alia, Kimble II, 991 F.3d at 1241-42 12 (affirming the Court of Federal Claims’ decision granting summary judgment against the 13 defendant on the issue of willfulness because “based on the undisputed facts,” her “actions 14 constituted a ‘reckless disregard’ for the legal duty to disclose foreign bank accounts and . 15 . . was therefore ‘willful’ under § 5321(a)(5)”); United States v. Kelley-Hunter, 281 F. 16 Supp. 3d 121, 124 (D.D.C. 2017) (granting summary judgment and awarding civil penalties 17 for willful violations where there was no dispute that during the relevant time period, the 18 defendant was a U.S. citizen, had a clear interest in the foreign account, the balance of 19 which easily exceeded the $10,000.00 threshold, and did not disclose the account for the 20 relevant tax year)). 21 The Court finds that while a genuine issue of fact exists as to whether Mr. 22 Goldsmith’s violations were knowing, no genuine issue of fact exists as to whether his 23 conduct was reckless and willfully blind. Thus, as shown below, the Government has 24 proven that no genuine issue of fact exists as to whether Mr. Goldsmith’s conduct qualifies 25 as willful so as to warrant a penalty under 31 U.S.C. § 5321(a)(5). 26 27 28 1. A Genuine Issue of Fact Exists as to Whether Mr. Goldsmith Had Actual Knowledge of the FBAR Requirements Courts have held that “an intentional violation of a legal duty to report” a foreign -333:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.347 Page 34 of 73 1 account qualifies as “a ‘willful’ failure for purposes of the Bank Secrecy Act.” United 2 States v. Pomerantz, No. C16-689 MJP, 2017 WL 4418572, at *3 (W.D. Wash. Oct. 5, 3 2017); see also Lefcourt v. United States, 125 F.3d 79, 83 (2d Cir. 1997) (defining 4 “willfulness” in the context of a civil penalty for willfully failing to disclose required 5 information to the IRS as conduct that ‘requires only that a party act voluntarily in 6 withholding requested information, rather than accidentally or unconsciously’”); accord 7 Denbo v. United States, 988 F.2d 1029, 1034-35 (10th Cir. 1993) (defining “willful” 8 conduct as a “voluntary, conscious and intentional decision”). 9 The Government argues that Mr. Goldsmith’s subjective belief that he did not own 10 the Account does not create a genuine issue of fact because the Court can still find a willful 11 violation regardless of his subjective belief. Mot. at 22:1-4. In fact, the Government points 12 out that the evidence of willfulness in this case surpasses evidence in other cases where the 13 court also found the defendant’s behavior willful. Id. at 22:4-18 (citing United States v. 14 Kalai, 696 Fed. App’x 228, 231 (9th Cir. 2017) (upholding a jury’s determination in the 15 criminal context that failure to file an FBAR was willful because the defendant knew the 16 foreign account held more than $10,000, had signatory authority over the account, and was 17 informed of at least one transfer of funds). Indeed, courts confronting evidence similar to 18 the evidence in this case have granted summary judgment on the issue of willfulness. See 19 Rum, 2019 WL 3943250, at *8 (granting summary judgment where taxpayer’s “pattern of 20 signing his tax returns without reviewing them, along with falsely answering ‘no’ to 21 question 7(a) suffices to support a finding of willfulness”); Horowitz, 978 F.3d at 384 22 (affirming summary judgment on evidence that the taxpayers set their account up as a 23 numbered account with “hold mail” service, kept a not insignificant amount of money in 24 the account, and as a result, were aware of it but failed to disclose it to their accountant, 25 resulting in them falsely answering question 7(a) under penalty of perjury). However, Mr. 26 Goldsmith argues that the position advocated by the Government would “water down the 27 willfulness standard by suggesting that the only way to avoid a willfulness penalty after 28 signing a tax return under penalties of perjury would be to argue that ‘he or she did not -343:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.348 Page 35 of 73 1 know about the foreign account.’” Oppo. at 8:7-10 (citing Mot. at 17:13). 2 In sum, Mr. Goldsmith argues that holding that a taxpayer liable for FBAR violations 3 regardless of subjective knowledge or intent “would render [the] different categories of 4 intent under section 5321 meaningless.” Oppo. at 8:6-7. Under the rule against surplusage, 5 courts must avoid interpreting statutes in a manner that would render a portion of the statute 6 superfluous or meaningless. See, e.g., Nat’l Ass’n of Mfrs. v. Dep’t of Def., 138 S. Ct. 617, 7 632 (2018) (“Absent clear evidence that Congress intended this surplusage, the Court 8 rejects an interpretation of the statute that would render an entire subparagraph 9 meaningless” as “the Court is ‘obliged to give effect, if possible, to every word Congress 10 used.’”); see also Jackson v. Kelly, 557 F.2d 735, 740 (10th Cir. 1977) (“We should not 11 and do not suppose that Congress intended to enact unnecessary statutes.”). Here Mr. 12 Goldsmith argues that the Government’s position would result in “only two possible 13 penalty outcomes[:] . . . either a significant willfulness penalty or no penalty at all under 14 the reasonable cause exception,” which “would ignore the presumed ‘non-willful’ penalty 15 assertion outlined in the statute.” Oppo. at 8:10-13. If the Court agrees that interpreting 16 willfulness to disregard subjective intent or knowledge renders the categories of intent 17 within Section 5321 (i.e., the differing penalties for non-willful violations, violations 18 falling under the reasonable cause exception, and willful violations) meaningless, the Court 19 must avoid that interpretation. However, the Government’s proposed interpretation does 20 not, in fact, make the categories of intent superfluous or create a strict liability standard as 21 Mr. Goldsmith contends. Rather, even if a taxpayer signed a federal income tax Form 1040 22 under penalty of perjury, the failure to file an FBAR could still be non-willful if “a taxpayer 23 did not know about, and had no reason to know about, [his or] her overseas account.” Jones, 24 2020 WL 2803353, at *6. 25 The Government replies that while in the criminal context, it would need to prove 26 that Mr. Goldsmith knew his failure to report the foreign accounts was unlawful, “in the 27 civil context, the government does not need to prove knowledge that conduct was unlawful 28 to prove willfulness.” Reply at 3:4-9. It also notes that (1) Mr. Goldsmith “cites no -353:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.349 Page 36 of 73 1 authority for [his] positions, and the distinctions he draws fail to articulate why the civil 2 meaning of willfulness, as articulated by the Supreme Court, does not apply here,” id. at 3 6:2-4; (2) Mr. Goldsmith’s standard would mean “the issue of willfulness can never be 4 determined on a motion for summary judgment,” id. at 6:5-12; and (3) even if it cannot 5 prove actual knowledge, the undisputed facts viewed in the light most favorable to Mr. 6 Goldsmith still establish recklessness, meaning the Government proves willfulness 7 regardless of whether it proves actual knowledge or intent, id. at 3:9-12. 8 If courts required the Government to prove a knowing violation in order to recover 9 civil penalties, such penalties would rarely be recovered because taxpayers rarely admit 10 that to knowingly violating the law. See, e.g., United States v. Ott, 441 F. Supp. 3d 521, 11 529 (E.D. Mich. 2020) (“In the objective willfulness inquiry, a court may consider 12 ‘circumstantial evidence and reasonable inferences drawn from the facts because direct 13 proof of the taxpayer’s intent is rarely available.’”). Although Mr. Goldsmith claims he 14 did not believe he owned the Account, this does not prevent the Court from granting 15 summary judgment because the Court has already established this contention is refuted by 16 the record in this case. Further, courts in similar situations have found willfulness in the 17 face of a defendant’s denial of ownership of the foreign bank account. See, e.g., Norman, 18 942 F.3d at 1116 (affirming a decision finding a taxpayer’s Section 5314 violation willful 19 where she denied the money in the Swiss account was hers or that she had control over it, 20 but the evidence showed “[s]he opened the account in 1999, actively managed the account 21 for many years, and even withdrew money from the account in 2002”). Thus, the 22 Government argues that “Defendant’s explanation that he did not believe that he owned 23 the Account, and thus that the Court should excuse his failure to file FBARs or pay taxes 24 on the Account does not create a material issue of fact considering Defendant’s complete 25 control over the Account including use of the Account for his own personal benefit.” Mot. 26 at 22:25-23:5. 27 Both parties discuss the case of United States v. Pomerantz, No. C16-0689JLR in 28 the context of whether willfulness requires a taxpayer to know his or her actions violate -363:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.350 Page 37 of 73 1 the law. However, the Government cites one opinion in the case granting a motion to 2 dismiss failure to state a claim, see Mot. at 21 and Reply at 7 (citing United States v. 3 Pomerantz, No. C16-0689JLR, 2017 WL 2483213, at *6-7 (W.D. Wash. June 8, 2017) 4 (Pomerantz I)), while Mr. Goldsmith cites another opinion, denying a motion to dismiss 5 the subsequent amended complaint, Oppo. at 7 (citing United States v. Pomerantz, No. 6 C16-689 MJP, 2017 WL 4418572, at *7 (W.D. Wash. Oct. 5, 2017) (Pomerantz II). In 7 any event, neither Pomerantz I nor Pomerantz II warrant the Court finding subjective intent 8 is required for a willful violation. 9 The Pomerantz I court held that the Government’s allegations that the defendant’s 10 failure to timely file FBAR forms was willful, implying that the defendant had either 11 constructive or actual knowledge, were nothing more than “threadbare recitals of the 12 elements of a cause of action.” 2017 WL 2483213 at *6. Such allegations did “not 13 plausibly support the inference that Mr. Pomerantz knew of the reporting duty” because 14 the Government never alleged that he had ever filled out a Schedule B Form or even knew 15 of its contents and instructions regarding the FBAR reporting requirement. Id. at *6-7. 16 Thus, even though “[a]ctual knowledge of the duty to report may be inferred from a course 17 of conduct” or constructive knowledge, knowledge of the FBAR reporting requirement 18 could not be inferred from the defendant’s prior completion of Schedule B as the 19 Government had not alleged the defendant completed one in the past. Id. As a result, the 20 Government failed to sufficiently plead that any failure to report regarding the foreign 21 accounts was willful. Id. However, the Government amended its complaint, and in 22 Pomerantz II, 2017 WL 4418572 at *3, the district court held that “[t]he Government’s 23 amended complaint . . . [pled] sufficient factual content to allow the Court to draw the 24 reasonable inference that the defendant willfully failed to file FBAR Forms for the CIBC 25 Accounts.” 2017 WL 4418572 at *3. The amended complaint alleged the defendant failed 26 to timely file FBAR Forms, reporting his interest in foreign bank accounts for the 2001, 27 2002, and 2005 tax years. 2017 WL 4418572 at *3. The court concluded that the 28 Government’s allegation that the defendant signed tax returns in later years reporting the -373:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.351 Page 38 of 73 1 income from the foreign bank accounts when the income was less significant while failing 2 to report it in the years they had higher account balances supported an inference that the 3 defendant acted with knowledge that his conduct was unlawful. Id. 4 The Government cites to Pomerantz I for the proposition that “[a]ctual knowledge 5 of the duty to report may be inferred from a course of conduct that demonstrates a conscious 6 attempt to conceal the failure to report.” Mot. at 21:3-8 (citing Pomerantz I, 2017 WL 7 2483213, at *6). It argues that Mr. Goldsmith’s “purposeful attempts to conceal the Basler 8 account from his tax preparer and the IRS” qualify as a course of conduct evidencing Mr. 9 Goldsmith’s willfulness in failing to timely file required FBARs. Id. Mr. Goldsmith 10 responds by pointing out that the Pomerantz II court also stated that “a ‘willful’ failure for 11 purposes of the Bank Secrecy Act is ‘an intentional violation of a known legal duty to 12 report.’” Oppo. at 7:9-14 (citing Pomerantz II, 2017 WL 4418572 at *7). Thus, he 13 contends the Government must show he intentionally violated a known duty to report his 14 foreign accounts in order to be found liable for willful violations. See id. However, other 15 than a non-binding district court case from the Southern District of Florida and an IRS 16 chief counsel advisory opinion addressing the definition of “willful” in relation to civil 17 penalties for FBAR reporting violations, the case Pomerantz II cited for the proposition, 18 Ratzlaf, 510 U.S. at 154, n.5, is a criminal case addressing penalties under Section 5322 19 (covering criminal violations) rather than under Section 5321 (covering civil penalties). 20 See id. The Government replies that Mr. Goldsmith’s “attempt to distinguish Pomerantz 21 is unavailing.” Reply at 7:11. It points out that the Pomerantz I court recognized that 22 knowledge of a duty to report may be actual or constructive, while suggesting that if the 23 Government had alleged the defendant filed his tax returns under penalty of perjury, then 24 Schedule B would have put him under inquiry notice of his duty to file an FBAR. Reply 25 at 7:11-16 (citing Pomerantz I, 2017 WL 2483213 at *6). The Government also notes that 26 in Pomerantz II, “the later decision that Defendant cited to, the Court denied Pomerantz’s 27 motion to dismiss and approvingly cites United States v. McBride and Williams for the 28 proposition that signing tax returns under penalty of perjury puts the taxpayer on inquiry -383:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.352 Page 39 of 73 1 notice of the need to file an FBAR such that a willfulness penalty is appropriate.” Reply 2 at 7:16-21 (citing Pomerantz II, 2017 WL 4418572, at *3). 3 This Court finds that both Pomerantz I and Pomerantz II involved motions to dismiss 4 in which the sufficiency of the facts pled in the complaint were evaluated under the 5 Twombly/Iqbal standard, which evaluates whether the facts pled, if true, state a claim for 6 relief. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 7 U.S. 544, 570 (2007). Thus, Pomerantz is procedurally inapposite to this case, which 8 involves a motion for summary judgment evaluating whether the moving party is entitled 9 to judgment as a matter of law. See FED. R. CIV. P. 56. More importantly, Pomerantz does 10 not change this Court’s conclusion that the law does not require actual knowledge of the 11 FBAR reporting requirements or that one’s conduct violates those requirements in order 12 for a court to find a defendant liable for a willful violation for civil penalties under Section 13 5314. 14 As the Government correctly points out, Mr. Goldsmith “wants this Court to adopt 15 a test that requires the government to prove his subjective intent, but that is the criminal 16 standard for willfulness, not the civil standard applicable here.” Reply at 7:22-24. If 17 subjective intent represented the legal standard in civil cases, taxpayers could refrain from 18 reporting foreign income, and then, seek to avoid civil penalties by ignoring Section 5314 19 and subsequently claiming ignorance of the law. Id. at 7:24-26. Thus, while actual 20 knowledge may show a willful violation, it is not required. In this case, Mr. Goldsmith has 21 shown a genuine issue of fact exists as to whether he had actual (as opposed to constructive) 22 knowledge of the FBAR reporting requirements during the years at issue or intentionally 23 violated such requirements. Accordingly, the Court continues on to evaluate whether the 24 Government can show the absence of a genuine issue of fact as to whether Mr. Goldsmith’s 25 conduct rose to the level of recklessness, thereby qualifying as willful. 26 27 28 2. A Genuine Issue of Fact Does Not Exist as to Whether Mr. Goldsmith Recklessly Disregarded His FBAR Requirements A taxpayer “commits a reckless violation of the FBAR statute by engaging in -393:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.353 Page 40 of 73 1 conduct that violates an objective standard: action entailing an unjustifiably high risk of 2 harm that is either known or so obvious that it should be known.” Bedrosian, 912 F.3d at 3 153 (quoting Safeco, 551 U.S. at 68) (internal quotation marks omitted); see also Rum, 4 2021 WL 1589153, at *6 (holding as recently as April 23, 2021, that the Eleventh Circuit 5 would “join with every other circuit court that has interpreted this provision” in holding 6 “that willfulness in § 5321 includes reckless disregard of a known or obvious risk”). In 7 Bedrosian, the Third Circuit held that a taxpayer recklessly disregards his or her obligations 8 to report foreign accounts when the taxpayer “(1) clearly ought to have known that (2) 9 there was a grave risk that the filing requirement was not being met and if (3) he or she 10 was in a position to find out for certain very easily.” 912 F.3d at 153 (applying this standard 11 to a case involving FBAR violations pursuant to Section 5314); see also Mot. at 13:20-27 12 (citing Bedrosian’s three-pronged test); Oppo. at 6:11-16 (arguing Bedrosian’s three13 pronged test stems relies on Carrigan, which is inapposite14). Of the Circuit Courts of 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 14 In applying the three-pronged test to FBAR violations for civil penalties in Bedrosian, the court quoted United States v. Carrigan, 31 F.3d 130, 134 (3d Cir. 1994), which in turn, relied on United States v. Vespe, 868 F.2d 1328, 1335 (3d Cir. 1989). Both Carrigan and Vespe applied the standard to cases involving penalties assessed pursuant to 26 U.S.C. § 6672 (“Section 6672”) for the defendant’s failure to pay federal employment taxes. Mr. Goldsmith argues that payroll related penalties are “remarkably different” from FBAR penalties because the statute imposing such payroll penalties does not provide for any other penalties to be imposed based on differing levels of intent, like Section 5321. Oppo. at 6:16-25. Section 5321, on the other hand, “provides three (3) different penalties based upon the individual’s intent.” Id. at 6:25-26. Further, the Section 6672 penalty never exceeds the amount of the tax withheld whereas the Section 5321 penalty allows the IRS to assess a penalty unrelated to the actual unpaid tax. Id. at 6:26-7:3. The Government responds that Mr. Goldsmith cites no authority for his positions and fails to articulate why the civil standard for willfulness set forth by the Supreme Court would not apply to this case. Reply at 5:28-6:4. It points out that “in the analogous context of payroll tax penalties under § 6672 of the Internal Revenue Code (‘I.R.C.’), the Ninth Circuit regularly holds that a determination of willfulness is appropriate on summary judgment.” Id. at 5:17-23 (citing Phillips v. U.S. I.R.S., 73 F.3d 939, 942 (9th Cir. 1996) (“We have said that ‘reckless disregard’ of whether the taxes are being paid over, as distinguished from actual knowledge of whether they are being paid over, may suffice to establish willfulness.”)). -403:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.354 Page 41 of 73 1 Appeal, only the Third, Fourth, and Eleventh Circuit Court of Appeals have addressed civil 2 penalties under Section 5314 and applied this test to such violations. See Bedrosian, 912 3 F.3d at 152-53; United States v. Horowitz, 978 F.3d 80, 89 (4th Cir. 2020) (holding that 4 “as the Third Circuit has held, when imposing a civil penalty for an FBAR violation, 5 willfulness based on recklessness is established if the defendant” satisfies the three criteria 6 set forth in Bedrosian); Rum, 2021 WL 1589153, at *6 (“We join our sister circuits in 7 holding that the appropriate standard of willfulness to warrant the FBAR penalty is— 8 borrowing from Safeco—‘an objective standard’”) (citing Bedrosian, 912 F.3d at 153; 9 Horowitz, 978 F.3d at 89). District courts within the First, Fifth, Sixth, and Ninth Circuits 10 have also adopted the Bedrosian test in civil cases involving penalties for FBAR-reporting 11 violations. See DeMauro, 483 F. Supp. 3d at 82; Flume, 390 F. Supp. 3d at 854; Ott, 441 12 F. Supp. 3d at 528; United States v. Zimmerman, No. 2:19-CV-4912-CAS-EX, 2020 WL 13 6065333, at *4 (C.D. Cal. Sept. 16, 2020). The Ninth Circuit, although recently issuing an 14 opinion on non-willful Section 5314 violations, see Boyd, 991 F.3d at 1078, has not yet 15 addressed the standard for civil penalties for willful violations. The Federal Circuit has 16 held that willfulness encompasses recklessness but has not specifically adopted the three17 pronged test for recklessness. See, e.g., Norman II, 942 F.3d at 1115 (did not address three18 pronged test though). 19 The Government argues that the undisputed facts of the case evidence that 20 “Defendant acted recklessly as a matter of law” under the Bedrosian standard. Mot. at 21 15:2. As to the first and second prongs of Bedrosian, the Government contends that Mr. 22 Goldsmith should have known of the grave risk he was violating the law either because (1) 23 Question 7a on Schedule B of his federal tax return, which specifically asks about foreign 24 accounts, put him on notice of his need to report such accounts, or (2) the forms Basler 25 asked him to sign included provisions acknowledging his tax obligations. Id. at 15:2-7. It 26 also argues that in light of Mr. Goldsmith’s “actual efforts to determine what obligations 27 attached to an Italian account he opened,” Mr. Goldsmith was in a position to easily figure 28 out what, if any, filing obligations had had with respect to his Swiss Account, thereby -413:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.355 Page 42 of 73 1 meeting the third prong of Bedrosian. Id. at 15:8-11. 2 Mr. Goldsmith opposes adoption of the Bedrosian test, arguing that “the 3 Government’s position that the ‘careless or reckless disregard of the duty to file an [sic] 4 FBAR’ satisfies the requirement of the willful standard under Section 5321(a)(C)(5) is 5 deeply flawed and goes against Congressional intent because such a definition would 6 render subsection (B)(ii)—the imposition of nonwillful penalties—meaningless.” Oppo. 7 at 6:7-11. First, he argues that the adoption of the Government’s position would 8 “improperly alter the willfulness standard, under section 5321(a)(C)(5), to one of strict 9 liability” such that “any individual could be subject to the draconian willful FBAR 10 penalties for simply failing to correctly answer question 7(a) on Part III of Schedule B of 11 Form 1040.” Id. at 7:4-8. Second, Mr. Goldsmith argues that “the Ninth Circuit has held 12 that the issue of whether a person has willfully failed to comply with a tax reporting 13 requirement is a question of fact.” Oppo. at 7:14-17 (citing Rykoff v. United States, 40 F.3d 14 305, 307 (9th Cir. 1994); Williams, 489 Fed. App’x. at 658). Thus, he contends the Court 15 should not grant summary judgment because willfulness is an issue of fact, and willfulness 16 is the only issue that both parties dispute. Id. 17 The Government replies that “[t]here is more than enough evidence for the Court to 18 find that Defendant’s conduct was willful now, on summary judgment.” Reply at 6:21-23. 19 It contends that while the Court could rely on the fact that Mr. Goldsmith filed a federal 20 income tax return under penalty of perjury, which “failed to disclose the existence of the 21 Account on Schedule B (or follow the instructions relating to FBAR filings listed in 22 Schedule B)” to find that Mr. Goldsmith had constructive notice of the FBAR 23 requirements, it “is not asking the Court to do so because there is so much other evidence 24 from which the Court can find willfulness.” Reply at 6:23-7:1. The Government points 25 out that the undisputed facts make clear that Mr. Goldsmith (1) had actual knowledge of 26 the existence of the Account; (2) regularly used the Account; (3) reviewed the performance 27 of the investments in the Account; (4) had actual knowledge that the balance of the Account 28 exceeded $10,000 during each year at issue; (5) regularly traveled to Switzerland to meet -423:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.356 Page 43 of 73 1 with representatives of Basler regarding the Account; (6) signed forms specifying he 2 wanted to change the investments held in the Account to avoid disclosure to U.S. 3 authorities; (7) paid money to have the bank hold mail regarding the Account in 4 Switzerland; and (8) failed to disclose the Account to his accountant who had asked him to 5 disclose his interest in foreign bank accounts in each of the years at issue. Id. at 7:1-10. 6 The Fourth, Eleventh, and Federal Circuit Court of Appeals have all affirmed a 7 district court’s decision to grant summary judgment by finding a taxpayer’s failure to report 8 foreign accounts in violation of Section 5314 willful where the taxpayer (1) answered “no” 9 to Question 7a, despite having foreign income while also failing to pursue knowledge of 10 further reporting requirements as suggested on Schedule B; (2) used a numbered account; 11 (3) asked the foreign bank where the foreign account was held to hold all mail related to 12 the foreign account; (4) concealed income or financial information related to the foreign 13 account from his or her tax preparer; and (5) signed federal tax return, which failed to 14 disclose a foreign account, without reviewing it for accuracy. See Rum, --- F.3d ---, 2021 15 WL 1589153, at *2, 6-7; Kimble II, 991 F.3d at 1241-43 (Fed. Cir. 2021); Horowitz, 978 16 F.3d at 81-82, 90. Like the defendants in Rum, Kimble, and Horowitz, Mr. Goldsmith also 17 (1) answered “no” to Question 7a, despite having foreign income while also failing to 18 pursue knowledge of further reporting requirements as suggested on Schedule B, see 19 Exhibit 8 to Petrila Decl. at 42-47 (attaching Mr. Goldsmith’s 2008, 2009, and 2010 federal 20 tax returns); (2) used a numbered account, Mot. at 6:3-6 (citing R. Goldsmith Dep. at 21 104:25-105:8); (3) asked Basler, where his foreign Account was held to hold all mail 22 related to the foreign Account, see Exhibit 5 to Petrila Decl. at 32; Exhibit 10 to Petrila 23 Decl. at 55-59; (4) concealed income or financial information related to the foreign 24 Account from his or her tax preparer, see Exhibit 5 to Petrila Decl. at 31; Exhibit 8 to Petrila 25 Decl. at 35-40; and (5) signed federal tax return, which failed to disclose a foreign account, 26 without reviewing it for accuracy, see Exhibit 8 to Petrila Decl. at 42-47. In addition to 27 the above, factors courts have also considered whether the taxpayer (1) knew domestic 28 income was taxable and knew the foreign account earned him or her income, Horowitz, -433:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.357 Page 44 of 73 1 978 F.3d at 82, 89, and (2) chose to divest U.S. securities rather than report the income to 2 the IRS, Rum, --- F.3d ---, 2021 WL 1589153, at *7 (“Rum declined to complete the W-9, 3 but instead directed UBS not to invest in U.S. securities.”). Likewise, in this case, Mr. 4 Goldsmith also knew he (1) owed (and in fact, paid) taxes on domestic income, see R. 5 Goldsmith Dep. at 59:3-7, and (2) earned income from the Account as demonstrated from 6 the Account balances in light of the amounts deposited and withdrawn, see Ans. at 3, ¶ 12; 7 see also R. Goldsmith Dep. at 58:4-15. 8 Although Mr. Goldsmith disavows managing the Account, or even knowing that he 9 owned it, the Court finds these statements not only contradicted by the record, see R. 10 Goldsmith Dep. at 58:9-15; see also Ans. at 3, ¶ 12, but also entirely uncredible. See, e.g., 11 Kimble II, 991 F.3d at 1241 (affirming summary judgment on the issue of willfulness even 12 though the defendant argued that (1) her spouse had previously prepared joint tax returns, 13 which did not report foreign income, and (2) “she was not an active manager of the account 14 because she followed the advice of her late husband”); see also id. at 1244 (“Whether a 15 party follows the advice of another is irrelevant to whether she manages an account, so the 16 IRS did not abuse its discretion in determining that Ms. Kimble actively managed the 17 account.”). 18 The Government argues that Mr. Goldsmith acted recklessly, in satisfaction of the 19 willful requirement for the penalties sought by the Government, for five principal reasons: 20 First, Mr. Goldsmith failed to disclose the Account to his tax preparer and accountant. Mot. 21 at 20:22-23. Second, Mr. Goldsmith admitted to filing his federal income tax returns for 22 the calendar years 2008, 2009 and 2010 under penalty of perjury. Id. at 16:1-2. Third, Mr. 23 Goldsmith signed multiple forms describing himself as the beneficial owner of the 24 Account, a U.S. taxpayer, and referencing U.S. reporting obligations; yet, he did nothing 25 to investigate what tax and reporting obligations he was under for that Account. Id. at 26 17:15-18. Fourth, Mr. Goldsmith knew the Account was generating income, had 27 appreciating assets, and benefited him but did not pay taxes on that income. Id. at 18:1328 15. Fifth, Mr. Goldsmith set up the Account as a “numbered” account, making it more -443:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.358 Page 45 of 73 1 difficult for the U.S. Government to connect him with the Account while also paying a 2 Basler a regular fee to “hold” all mail regarding the Account, so he would not receive mail 3 in the U.S. related to the Account. Id. at 20:8-9. 4 The Court finds that the first four facts demonstrate willfulness by evidencing that 5 Mr. Goldsmith was charged with constructive knowledge of his FBAR-reporting 6 obligations and reckless disregard thereof, while the fifth fact shows willful blindness. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 a. Mr. Goldsmith Recklessly Failed to Disclose the Account to his Tax Preparer Despite being Explicitly Asked About it As to Mr. Goldsmith’s failure to disclose the Account to Mr. Zipser in the questionnaire Mr. Zipser sent Mr. Goldsmith and his wife each year, Mot. at 20:22-23, the Court finds that this evidences willfulness given Mr. Zipser’s questionnaires put Mr. Goldsmith on notice that he likely needed to report income from foreign accounts. Further, Mr. Goldsmith’s failure to disclose much less even inquire about his obligations to disclose foreign income in 2008, 2009, and 2010, to Mr. Zipser, who Mr. Goldsmith had been working with since 1989, shows a conscious effort to avoid learning of his reporting requirements. See, e.g., Ott, 441 F. Supp. 3d at 530 (“The Defendant’s failure to discuss his foreign investments with his long-time accountant Weide, for example, indicates ‘a conscious effort to avoid learning about reporting requirements.’”). Even though Mr. Goldsmith used Mr. Zipser to prepare his tax returns for the entirety of the time he owned the Account, he never disclosed the existence of the Account to Mr. Zipser until July 1, 2011 despite the fact that each year, Mr. Zipser sent Mr. Goldsmith an annual questionnaire asking about foreign income. See Exhibit 6 to Petrila Decl. at 31; Exhibit 7 to Petril Decl. at 35-40. In fact, this questionnaire included multiple questions about foreign accounts that would have encompassed the Account. See id. Other courts have held that summary failures to disclose foreign accounts to tax preparers qualifies as recklessness and willfulness. See, e.g., McBride, 908 F. Supp. 2d at 1212 (“The fact that McBride did not discuss these significant financial strategies, involving millions of dollars, with his accountant for the tax year 2000 is significant evidence of willfulness or at least -453:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.359 Page 46 of 73 1 recklessness and willful blindness.”); United States v. Drape, 668 F.2d 22, 25 (1st Cir. 2 1982) (considering it “significant” in determining whether the taxpayer had acted willfully 3 in a criminal tax case that the taxpayer “never mentioned . . . he had invested in tax shelters” 4 to his accountant for the previous year). 5 For example, in United States v. Bohanec, 263 F. Supp. 3d 881, 883, 890 (C.D. Cal. 6 2016), the court, in its findings and facts and conclusions of law after a bench trial, found 7 that the defendants “were at least reckless, if not willfully blind, in their conduct with 8 respect to their Swiss UBS account and their reporting obligations regarding the 9 account.” In finding the defendants met the willful requirement for civil FBAR penalties, 10 the court relied on the fact that the defendants never (1) provided their bank with their 11 home address; (2) told anyone other than their children about the existence of the Swiss 12 bank account, including the tax preparers they hired to help them file tax returns; (3) “asked 13 a lawyer, accountant, or banker about requirements regarding the UBS account”; and (4) 14 “used a bookkeeper or kept any books once the UBS account was opened.” Id. Like the 15 Bohanec defendants, for Mr. Goldsmith to read the numerous QI related forms he signed 16 on at least five separate occasions without ever even inquiring with Mr. Zipser about 17 whether he needed to disclose the Account is at best, willfully blind, and at worst, reckless. 18 See also Mot. at 18:9-12. 19 The Government argues that (1) each time Mr. Goldsmith filled out that 20 questionnaire and failed to disclose the Account, “he acted to conceal the Basler account 21 and evade his reporting responsibilities,” (2) Mr. Goldsmith’s purposeful attempts to 22 conceal the Basler account from his tax preparer and the IRS are further evidence of his 23 willfulness, and (3) Bedrosian requires courts evaluating recklessness to evaluate whether 24 the taxpayer “was in a position to find out [about his or her reporting requirements] for 25 certain very easily.” Mot. at 21:1-11 (citing Bedrosian, 912 F.3d at 153). In this case, as 26 shown by Mr. Goldsmith and his wife inquiring as to any reporting obligations with respect 27 to their Italian bank account, Mr. Goldsmith easily could have disclosed a foreign account, 28 such as the Account at Basler, to his accountant and discover that he needed to file FBARs. -463:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.360 Page 47 of 73 1 Mot. at 21:15-18; see also United States v. Katwyk, No. CV 17-3314-GW(JCX), 2017 WL 2 6021420, at *4 (C.D. Cal. Oct. 23, 2017) (in granting a default judgment, the court noted 3 that the defendant “was clearly aware of FBAR reporting requirements as he had made 4 previous disclosures to the IRS regarding his other foreign bank accounts”). Further, the 5 fact that Mr. Goldsmith or his wife asked Mr. Zipser about whether they needed to report 6 the Italian account “speaks to the first t[w]o prongs of the Bedrosian test,” Mot. at 21:197 20, or whether Mr. Goldsmith “(1) clearly ought to have known that (2) there was a grave 8 risk that the filing requirement was not being met,” Bedrosian, 912 F.3d at 153. If Mr. 9 Goldsmith knew there was a risk that one foreign financial account (e.g., the Italian 10 account) triggered reporting obligations he also “clearly ought to have known” there was a 11 risk regarding another foreign account with significantly higher balances (i.e., the Swiss 12 Account). Mot. at 21:23-25. 13 Mr. Goldsmith’s opposition largely attempts to counter any arguments that he had 14 any knowledge—actual, constructive, or otherwise—of the reporting requirements because 15 his wife completed Mr. Zipser’s questionnaires. See generally Oppo. Mr. Goldsmith 16 predominantly argues in favor of an actual knowledge requirement in lieu of a recklessness 17 standard but spends little time addressing whether, if the Court applies a recklessness 18 standard, his conduct qualifies as reckless as a matter of law. The Government replies that 19 “[n]o matter who physically filled out the questionnaires, the evidence is incontrovertible 20 that Defendant did not tell Mr. Zipser about the Account, when Mr. Zipser regularly put 21 Defendant on notice of his obligation to inform his accountant of his foreign bank 22 accounts.” Reply at 10:16-22. It also notes that even if Mrs. Goldsmith filled out the 23 questionnaire, Mr. Goldsmith still failed to inform Mr. Zipser about the Account when he 24 “reviewed his actual income tax return.” Id. at 10:24-11:2 (citing R. Goldsmith Deposition 25 at 84:9-18; Exhibit 15 to Petrila Suppl. Decl., November 12, 2020 Deposition Transcript 26 of Howard Zipser, ECF No. 26-3 (“Zipser Dep.”) at 26:1-7). This Court already 27 established that even if Mrs. Goldsmith completed the questionnaire, Mr. Goldsmith 28 participated in the process. See R. Goldsmith Dep. at 59:20-60:3, 83:19-84:3. This last -473:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.361 Page 48 of 73 1 issue—whether by virtue of signing his tax returns, Mr. Goldsmith was charged with 2 knowledge of his reporting requirements—is the lynch pin of liability. Although the Court 3 finds that failing to disclose foreign accounts to a tax preparer evidences concealment, 4 which in turn, shows recklessness in satisfaction of the willfulness requirement, see Ott, 5 441 F. Supp. 3d at 530, it also recognizes that Mr. Goldsmith disputes completing the 6 questionnaire, Oppo. at 2:18-24. On summary judgment, the Court accepts this factual 7 proposition as true but finds that the remaining evidence in this case cannot be disputed 8 and overwhelmingly show recklessness. Matsushita, 475 U.S. at 587. 9 10 11 b. Mr. Goldsmith Recklessly Signed Tax Returns Under Penalty of Perjury Falsely Indicating He Had No Foreign Accounts As to Mr. Goldsmith’s tax returns, which asked about foreign income, and which he 12 signed under penalty of perjury, the Court finds the overwhelming authority holds that 13 signing such tax returns charged Mr. Goldsmith with constructive knowledge of his duty 14 to report foreign income. 15 reckless. 16 Consequently, any failure to report that income qualifies as All United States citizens are charged with knowledge of all federal statutes and 17 regulations. See, e.g., United States v. Great Am. Ins. Co. of New York, 738 F.3d 1320, 18 1331 (Fed. Cir. 2013) (“In general, publication in the Federal Register is legally sufficient 19 to provide notice to interested parties.”); 44 U.S.C. § 1507 (filing of a document with the 20 Office of Federal Register is sufficient to give notice of the contents of the document to a 21 person subject to or affected by it); accord Fed. Crop Ins. Corp. v. Merrill, 332 U.S. 380, 22 384-85 (1947); Jones v. United States, 121 F.3d 1327, 1330 (9th Cir. 1997). Thus, “[i]t is 23 well established that taxpayers are charged with the knowledge, awareness, and 24 responsibility for their tax returns, signed under penalties of perjury, and submitted to the 25 IRS.” McBride, 908 F. Supp. 2d at 1206. Question 7a on Schedule B, Part III, covering “Interest and Ordinary Dividends,” on 26 27 IRS Form 1040, asks, “At any time during [the previous year], did you have an interest in 28 or a signature or other authority over a financial account in a foreign country, such as a -483:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.362 Page 49 of 73 1 bank account, securities account, or other financial account?” Exhibit 8 to Petrila Decl. at 2 42-44; see also Mot. at 16:3-7. The parties do not dispute that Mr. Goldsmith’s individual 3 tax returns for the years 2008, 2009, and 2010, which he signed under penalty of perjury, 4 answered “no” in response to Question 7a. FAC at 4, ¶ 18, 5, ¶ 23, 6, ¶¶ 24-25; see also 5 Mot. at 7:14-20; Exhibit 8 to Petrila Decl. at 42 (checking “no” in response to question 7a, 6 for 2008), 43 (same for 2009), 44 (same for 2010); but see McBride, 908 F. Supp. 2d at 7 1208 (“The simple yes-or-no question of Schedule B makes it inconceivable that [a 8 taxpayer] could have misinterpreted this question.”). While Question 7a also directs 9 taxpayers to “[s]ee page B-2 for exceptions and filing requirements,” see Exhibit 8 to 10 Petrila Decl. at 42-44, Mr. Goldsmith testified he did nothing to determine whether the 11 Account fell within any of those exceptions. R. Goldsmith Dep. at 86:19-87:6. 12 The Government argues that Mr. Goldsmith’s false answers, given under penalty of 13 perjury, are evidence not only of “of an intent to conceal the Account from the IRS” but 14 also “of recklessness because question 7(a) directs the taxpayer to instructions covering the 15 filing requirements (including FBAR obligations) and exceptions to those requirements.” 16 Mot. at 16:7-13 (citing Exhibit 8 to Petrila Decl.). Indeed, “a taxpayer signing their returns 17 cannot escape the requirements of the law by failing to review their tax returns.” Kimble 18 II, 991 F.3d at 1242-43 (Fed. Cir. 2021); see also Price, 887 F.2d at 965 (analyzing the 19 innocent spouse provision under 26 U.S.C. § 6013(e), which was repealed and replaced 20 with 26 U.S.C. § 6015(b)); Greer v. Comm’r, 595 F.3d 338, 347 n.4 (6th Cir. 2010) (“A 21 taxpayer who signs a tax return will not be heard to claim innocence for not having actually 22 read the return, as he or she is charged with constructive knowledge of its contents.”); 23 accord United States v. Doherty, 233 F.3d 1275, 1282 n.10 (11th Cir. 2000); Park v. 24 Comm’r, 25 F.3d 1289, 1299 (5th Cir. 1994). While the Ninth Circuit has not considered 25 whether signing a tax return puts a taxpayer on notice as to whether he or she needs to file 26 a FBAR, at least one District Court within the Ninth Circuit has come to the same 27 conclusion as the Fourth Circuit. See, e.g., Bohanec, 263 F. Supp. 3d at 890 (holding that 28 “Defendants’ representations that they were unaware of or did not understand their -493:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.363 Page 50 of 73 1 obligations, and deferred entirely to Kluck, are not credible” because “Part III of Schedule 2 B of Defendants’ 1998 tax return put them on notice that they needed to file an FBAR”). 3 In fact, the majority of courts have found falsely answering question 7(a) on Part B 4 of Form 1040 under penalty of perjury to be prima facie evidence of willfulness. Mot. at 5 16:18-17:14. See Kimble v. United States, 141 Fed. Cl. 373, 386 (2018), aff’d, 991 F.3d 6 1238 (Fed. Cir. 2021) (Kimble I) (granting summary judgment where taxpayer’s false 7 answer to question 7(a) “evidence[s] conduct by Plaintiff, as a co-owner of the UBS 8 account that exhibited a ‘reckless disregard’ of the legal duty under federal tax law to report 9 foreign bank accounts to the IRS by filing a FBAR.”); Horowitz, 978 F.3d at 90 (affirming 10 summary judgment where, inter alia, the taxpayers falsely answered Question 7a); see also 11 Bedrosian v. United States, No. CV 15-5853, --- F. Supp. 3d ---, 2020 WL 7129303, at *5 12 (E.D. Pa. Dec. 4, 2020) (Bedrosian III) (finding on remand from the Third Circuit in 13 Bedrosian, which ordered the district court to evaluate the defendant’s recklessness using 14 an objective standard, that “Bedrosian knew or should have known the form he signed was 15 inaccurate” when he signed his Form 1040 under penalty of perjury). 16 Mr. Goldsmith argues that the Court should not consider his signing of his tax returns 17 as imputing constructive knowledge of his FBAR-reporting requirements. Oppo. at 7:4-8. 18 Only a minority of courts have adopted this position. For instance, in United States v. 19 Schwarzbaum, the Southern District Court of Florida disagreed with the proposition that 20 simply signing an incorrect tax return could suffice to find a willful violation: However, upon review, the Court agrees with the recent decision 21 in United States v. Flume, No. 5:16-CV-73, 2018 WL 4378161, 22 at *7 (S.D. Tex. Aug. 22, 2018), that the theory of constructive knowledge is unpersuasive in this instance. Imputing 23 constructive knowledge of filing requirements to a taxpayer 24 simply by virtue of having signed a tax return would render the distinction between a non-willful and willful violation in the 25 FBAR context meaningless. Because taxpayers are required to 26 sign their tax returns, a violation of the FBAR filing requirements could never be non-willful. Yet, the statute provides for non27 willful penalties. Applying the USA’s suggested reasoning 28 would lead to a draconian result and one that would preclude a -503:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.364 Page 51 of 73 1 2 3 consideration of other evidence presented. Accordingly, the USA cannot satisfy its burden of proof in this case on the issue of willfulness simply by relying on the fact that Schwarzbaum signed his tax returns or neglected to review them as thoroughly as he should have. 4 5 No. 18-CV-81147, 2020 WL 1316232, at *8 (S.D. Fla. Mar. 20, 2020), appeal 6 dismissed (Nov. 25, 2020). 7 More recently, however, in Jones, 2020 WL 4390390 at *6, the Central District of 8 California rejected the reasoning in Schwarzbaum and Flume, finding more “persuasive 9 the reasoning in Bohanec, Williams, Norman, and McBride that signing a tax return and 10 declaring under penalty of perjury to have examined the return and accompanying 11 schedules and statements, is evidence that the taxpayer was provided constructive 12 knowledge of the FBAR requirements.” On the one hand, the court disagreed with 13 Bohanec, finding that “signing a tax return on its own cannot automatically make the 14 taxpayer’s violation ‘wilfull’ as that would collapse the willfulness standard to strict 15 liability.” Id. at *9 (emphasis added). On the other hand, it found that the fact that a 16 defendant signs a “tax return under the declaration of perjury is prima facie evidence that 17 he knew the contents of the return and at a minimum the directions in line 7a of Schedule 18 B put him on constructive notice of the FBAR filing requirements.” Id. It reasoned that 19 “[s]uch a finding does not ignore the distinction drawn by Congress between a willful and 20 non-willful violation because ‘an FBAR violation would generally not be willful where a 21 taxpayer did not know about, and had no reason to know about, her overseas account.’” 22 Id. at *6 (citing Norman, 942 F.3d at 1115). “Thus, there exists ways in which a violation 23 would be non-willful.” Id. 24 This Court agrees with the Jones court and concludes that Mr. Goldsmith is incorrect 25 in his assertion that imputing constructive knowledge of FBAR-filing requirements to a 26 taxpayer by virtue of signing a tax return renders the distinction between willful and non27 willful penalties meaningless. For example, in Norman II, 942 F.3d at 1115-17, the Federal 28 Circuit affirmed the Court of Federal Claims decision finding a taxpayer’s failure to file a -513:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.365 Page 52 of 73 1 FBAR in violation of Section 5314 willful. The evidence showed that the taxpayer, Ms. 2 Norman, took various steps, “each of which had the effect of inhibiting disclosure of the 3 account to the IRS,” which included (1) opening “her foreign account as a ‘numbered 4 account’”; (2) “sign[ing] a document preventing UBS from investing in U.S. securities on 5 her behalf”; (3) withdrawing “money from the account, [which] her Swiss bank account 6 manager delivered . . . to her in cash,” (4) “sign[ing] her 2007 tax return under penalty of 7 perjury, [which] . . . falsely indicated that she had no interest in any foreign bank account,” 8 and (5) filing that tax return “after her accountant sent her a questionnaire that specifically 9 asked whether she had a foreign bank account.” Id. at 1116. Ms. Norman, like Mr. 10 Goldsmith also denied that the money in the Swiss account was hers or that she had control 11 over it. Id. However, the evidence showed that “[s]he opened the account in 1999, actively 12 managed the account for many years, and even withdrew money from the account in 2002.” 13 Id. Thus, “at the very least, Ms. Norman signed her 2007 tax return—which falsely 14 indicated that she owned no interest in any foreign bank account—knowing that she owned 15 a foreign bank account and controlled the assets within.” Id. The court also rejected her 16 argument “that she could not have willfully violated the FBAR requirement because she 17 did not read her 2007 tax return.” Id. Instead, it held that “[t]he fact that Ms. Norman did 18 not read her 2007 tax return supports that she acted recklessly toward the existence of 19 reporting requirements.” Id. at 1117. 20 Just like Ms. Norman, Mr. Goldsmith (1) opened his Account as a numbered 21 account; (2) signed a document directing Basler to divest him of all U.S. securities; (3) 22 withdrew money from the Account in cash; (4) signed his 2008, 2009, and 2010 tax returns, 23 which indicated he had no interest in foreign accounts, under penalty of perjury; (5) filed 24 the aforementioned tax returns after receiving a questionnaire from his accountant 25 specifically asking about whether he had a foreign account; and (6) currently denies owning 26 or controlling the Account. Mot. at 9:14-16 (citing R. Goldsmith Dep. at 53:18-19-54:627 11). However, in this case, Mr. Goldsmith testified that he reviewed the draft returns Mr. 28 Zipser sent him, including by “skimming through” Question 7a. See R. Goldsmith Dep. at -523:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.366 Page 53 of 73 1 84:16-18, 85:21-86:10. In fact, Mr. Goldsmith testified that he even recalled reading 2 Question 7a, stating that “we didn’t think it applied to the funds if we wrote no,” referring 3 to the exceptions on page B-2. Id. at 86:16-23. Thus, just like the Norman II court, this 4 Court finds that the fact that Mr. Goldsmith did not read his 2008, 2009, and 2010 tax 5 returns supports that he acted recklessly toward the existence of reporting requirements. 6 942 F.3d at 1117. This is, however, not the only evidence supporting a finding that Mr. 7 Goldsmith acted recklessly. 8 Knowledge can only be imputed where the taxpayer knew of the Account and failed 9 to disclose it (regardless of whether he or she knew or the reporting requirements). Here, 10 however, the evidence confirms Mr. Goldsmith knew about the Account. Mr. Goldsmith 11 also does not dispute that he signed his 2008, 2009, and 2010 federal income tax returns, 12 which failed to disclose the Account, under penalty of perjury. See Reply at 8:24-27 (citing 13 Oppo. at 8). However, the Government argues that even if the Court disregards Mr. 14 Goldsmith’s signing the federal tax returns as evidence of willfulness, the remaining 15 evidence in this case still warrants a finding of willfulness. See Reply at 8:26-9:5. The 16 Court agrees that it need not rely on Mr. Goldsmith’s signing incorrect tax returns alone as 17 further evidence supports the Court’s finding of willfulness. See, e.g., Rum, 2021 WL 18 1589153 at *6 (concluding that “we need not rely solely on Rum signing his returns” 19 because “Rum’s signature on his returns is but one among many facts that constitute 20 overwhelming evidence that Rum acted in a manner that at least rises to the level of the 21 recklessness standard described above”). c. Mr. Goldsmith’s Signing of Multiple Documents Provided from 22 Basler Discussing His U.S. Tax Obligations Imputed 23 Constructive Knowledge of those U.S. Tax Obligations 24 As to Mr. Goldsmith’s signing of multiple QI forms, each of these forms clearly 25 described Mr. Goldsmith as the beneficial owner of the Account, a U.S. taxpayer, and 26 referenced U.S. tax reporting obligations; yet, Mr. Goldsmith did nothing to investigate 27 what the tax obligations mentioned in the documents he signed were. Mot. at 17:15-18. 28 Instead, he chose to decline to hold U.S. securities in favor of allowing Basler to inform -533:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.367 Page 54 of 73 1 the IRS about his Account. “When, as here, a taxpayer is presented with what would appear 2 to be a fabulous opportunity to avoid tax obligations, he should recognize that he 3 proceeds at his own peril.” Crispin v. Comm’r, 708 F.3d 507, 520 (3d Cir. 2013); see also 4 Hansen v. Comm’r, 471 F.3d 1021, 1029 (9th Cir. 2006) (“Negligence is ‘strongly 5 indicated’ when ‘[a] taxpayer fails to make a reasonable attempt to ascertain the correctness 6 of a deduction, credit or exclusion on a return which would seem to a reasonable and 7 prudent person to be “too good to be true” under the circumstances.’”) (citing Treas. Reg. 8 § 1.6662–3(b)(1), (b)(1)(ii)). 9 In this case, Mr. Goldsmith instructed Basler to sell all of his U.S. securities at the 10 same time he signed Basler’s QI form. See Exhibit 11 to Petrila Decl. at 61-68. Under the 11 QI regime, banks that offer their clients the ability to invest in U.S. securities must register 12 with the IRS and undertake documentation, withholding, and reporting requirements in 13 relation to those investments. Id. at 17:20-23. However, even if Mr. Goldsmith did not 14 earn income with Basler from U.S. securities, he still had an obligation to report any foreign 15 income, like capital gains, he earned from his Swiss bank Account. See 26 U.S.C. §§ 1, 16 988(a)(1)(A). Rather than risk Basler reporting his Account to the IRS under the QI 17 regime, Mr. Goldsmith sold his U.S. securities. Mot. at 17:23-24. Mr. Goldsmith argues 18 that the Government ignores his testimony that he “just signed the documents that they 19 advised me to sign,” was unsure “what he was signing,” and only “skimmed” them. Oppo. 20 at 8:17-22 (citing R. Goldsmith Dep. 67:22-68:20). He argues that “[l]ooking at these facts 21 in the light most favorable to [him], if he never understood, completely read what he was 22 signing, or made determinations on how the form was to be filled out, instead relying on 23 the bank’s representatives, he would not have been alerted to the fact that he needed to 24 investigate what tax and reporting obligations he was under.” Id. at 8:24-28. However, 25 the law establishes that (1) failing to read a contract, like the QI forms, does not avoid its 26 consequences, Oregon-Pac, 248 F. Supp. at 908, and (2) even actions taken in reliance on 27 another, like Basler representatives, may be willful, see Norman, 942 F.3d at 1116. 28 In its reply, the Government points out that Mr. Goldsmith does not dispute that he -543:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.368 Page 55 of 73 1 signed the QI forms and did nothing to investigate his tax liability but argues he simply 2 may not have understood what he signed. Reply at 9:9-12 (citing Oppo. at 8). However, 3 Mr. Goldsmith “does not contend that he was legally or physically incapacitated at any 4 time when he read and signed these forms,” and the forms were in English, a language Mr. 5 Goldsmith speaks fluently. Id. at 9:12-15. Thus, there should be no reason he did not 6 understood the forms. Consequently, his arguments fail to raise a factual dispute because 7 “[t]he undisputed fact is that Defendant read and signed these forms, which put Defendant 8 on notice of his obligations to the U.S. government and IRS such that he easily could have 9 inquired of his accountant regarding those obligations even if he did not understand the 10 entirety of the form itself.” Id. at 9:15-20. Mr. Goldsmith had been working with Mr. 11 Zipser since 1989, or for approximately twenty years by 2009; yet, he never asked about 12 or disclosed the Account “even after being asked to sign forms stating in bold that he had 13 tax obligations.” Id. at 9:20-24. 14 Other courts confronted with this type of evidence found willfulness. For instance, 15 in Rum, 2021 WL 1589153 at *6-8, the Eleventh Circuit affirmed the district court’s 16 decision granting summary judgment in favor of the government and finding that “no 17 genuine issue of material fact existed as to his willfulness (i.e., recklessness).” Based on 18 the defendant’s conduct, it agreed “with the district court that there [were] no genuine 19 issues of material fact regarding Rum’s willfulness or recklessness” where, inter alia, in 20 2002, the defendant, like Mr. Goldsmith, “declined to complete the W-9, [and] instead 21 directed UBS not to invest in U.S. securities” after her UBS adviser explained that (1) 22 income from U.S. securities was required to be reported to the IRS, (2) Rum would have 23 to file a W-9 form, and (3) the bank would be required to withhold.” Id. at *7. 24 Additionally, “in 2004, on a visit to UBS in Switzerland, he signed a form expressly 25 declaring that: ‘In accordance with regulations applicable under US law relating to 26 withholding tax, I declare, as the holder of the above-mentioned account, that I am liable 27 to tax in the USA as a US person.” Id. At the time, the defendant’s account balance greatly 28 exceeded the reportable amount in 2007 and 2008. Id. at *2, 7-8. Similarly, in Norman I, -553:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.369 Page 56 of 73 1 138 Fed. Cl. at 194-95, the Court of Federal Claims, in its findings of fact and conclusions 2 of law after a bench trial, found that Ms. Norman willfully violated Section 5314 because 3 she “acted to conceal her income and financial information” and “either recklessly or 4 consciously avoided learning of her reporting requirements.” Similar to Mr. Goldsmith, 5 who claimed the money in the Account was not his, the Norman I defendant “claimed that 6 she did not know of any details of the account,” but the evidence clearly showed that she 7 (1) met annually with her Swiss banker, (2) executed a waiver of her right to invest in U.S. 8 securities, and (3) “[e]xecuted management agreements in 2004, 2005, and 2006 with 9 different choices of investment strategies.” Id. 10 Finally, in United States v. Toth, the district court concluded that the Government 11 had provided more than sufficient evidence to establish the defendant acted in a willfully 12 blind or reckless manner when she decided not to investigate her U.S. tax obligations for 13 her Swiss bank account or report the account to the IRS. 2019 WL 7039627 at *8. Like 14 Mr. Goldsmith, the Toth defendant checked “no” in response to Question 7a regarding 15 whether she had any foreign financial accounts but also testified she “didn’t know there 16 was a duty to report” her foreign bank accounts to the IRS. Id. at *7. The court noted that 17 her foreign bank sent her account statements, so she “would have been able to determine 18 that UBS was not, in fact, deducting funds from her account to pay U.S. taxes on her 19 behalf.” Id. Her failure to question her bank’s lack of deductions evidenced “her reckless 20 disregard for the risks of not investigating her tax obligations as to the Account. Id. at *8. 21 It also relied on the fact that when presented with a QI Agreement between the U.S. 22 government and her bank, she, like Mr. Goldsmith, declined to complete the W-9. Id. This 23 conduct showed that she “sought to keep the Account hidden from U.S. authorities by 24 refusing to complete a W-9 and by ensuring that the Account would not contain U.S. 25 securities, which would trigger UBS’s reporting requirements.” Id. The court concluded 26 that her “willfulness in failing to file a 2007 FBAR ‘[could] be inferred from [her] 27 conscious effort to avoid learning about reporting requirements.’” Id. at *8. It reasoned 28 that “[s]he took deliberate steps to maintain the secrecy of the Account, in spite of -563:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.370 Page 57 of 73 1 opportunities for disclosure, which evidences willful ‘conduct meant to conceal or mislead 2 sources of income.’” Id. 3 Here, it is undisputed that Mr. Goldsmith read and signed the forms in question. R. 4 Goldsmith Tr. at 65:1-73:9). The language on these forms put him on notice of the clear 5 risk that there was a grave danger he was not complying with his federal tax and reporting 6 obligations. Like the defendants in Rum, Norman I, and Toth, Mr. Goldsmith also declined 7 to complete a W-9 in favor of divesting himself of U.S. securities. Rum, 2021 WL 1589153 8 at *7-8; Norman I, 138 Fed. Cl. at 194-95; Toth, 2019 WL 7039627 at *7-8. First, Mr. Goldsmith signed a form entitled, “Declaration for those liable to US tax,” 9 10 on August 29, 2000, September 18, 2002, August 9, 2007, and August 5, 2009, which 11 stated, “With regard to US withholding tax and the holding of US securities or other 12 securities that are held via a US custodian bank, I, the custody account holder, declare that 13 I am liable to US tax.” Exhibit 11 to Petrila Decl., ECF No. 19-3 at 61, 62, 64, 67. This 14 language is almost identical to the language in the form in Rum, which the court found put 15 the defendant on notice of his U.S. tax obligations. 2021 WL 1589153 at *7. This form 16 shows Mr. Goldsmith knew or should have known he was liable for U.S. taxes, and because 17 it was provided to him by his Swiss bank, should have put him on notice that he owed taxes 18 related to any income from that foreign Account. These forms also stated,15 “I do not 19 authorize the bank to forward my name, but I authorize the bank to sell all my US 20 Investments held by the bank in accordance with my instructions during the course of 21 2000.” Id. Such forms evidence an intent to conceal the Account from the IRS. See 22 Norman I, 138 Fed. Cl. at 194-95. 23 Second, on September 18, 2002, August 9, 2007, and August 5, 2009, Mr. Goldsmith 24 signed another form entitled “Determining your status as ‘US-person’ or ‘non-US25 person,’” which asked, “Have you resided in the US this year and the last two years for 26 15 The language quoted is from the August 29, 2000 form. See Exhibit 11 to Petrila Decl. at 61. The language on the forms throughout the following years may have changed 28 slightly but more or less remained substantively the same. 27 -573:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.371 Page 58 of 73 1 longer than a total of 183 days?” to which Mr. Goldsmith responded, “yes” on each form. 2 Exhibit 11 to Petrila Decl. at 63, 65. These forms also (1) asked “[i]n which country are 3 you subject to taxation (D, CH, F etcs)?,” to which Mr. Goldsmith responded “USA”; (2) 4 advised that “[i]f you answered Yes to any of the questions, you must complete the 5 Declaration for US Persons”; and (3) stated, “The undersigned custody account holder 6 declares that under US-taxation law he/she is the beneficial owner of the assets and income 7 therefrom to which this declaration refers.” Id. On August 9, 2007, Mr. Goldsmith also 8 signed a form entitled, “Client Questionnaire,” which stated that “[a]ll information is 9 subject to Swiss banking secrecy” and “will not be forwarded to either Swiss or foreign 10 authorities.” Id. at 65. This form not only shows Mr. Goldsmith knew or should have 11 known of his U.S. tax obligations but also proves that he owned the Account—a fact Mr. 12 Goldsmith has attempted to dispute—and attempted to keep that Account concealed from 13 the IRS. 14 Finally, on August 5, 2009, Mr. Goldsmith also signed a form entitled, “US Person 15 Waiver – Declaration by US persons in connection with opening or maintaining a bank 16 account,” which stated that “[i]n 2001, . . . Basler . . . along with most other Swiss banks, 17 entered into a so-called Qualified Intermediary Agreement . . . with the US tax authorities 18 (Internal Revenue Service IRS).” Exhibit 11 to Petrila Decl. 3 at 66. It continues by 19 stating, “According to this QI Agreement, tax is deducted at source on, among other things, 20 interest receipts, dividends and proceeds of sale of US securities.” Id. The form Mr. 21 Goldsmith signed on July 27, 2011, entitled, “Waiver by Us Person (without Form W9) – 22 Declaration by US persons in connection with opening or maintaining a bank account,” 23 contained identical language. Id. at 68. All of these forms explicitly state that Mr. 24 Goldsmith would be liable for the maintenance or sale of U.S. securities, and Mr. 25 Goldsmith explicitly informed Basler not to acquire U.S. securities to avoid U.S. tax 26 liability. Thus, the Court acknowledges there is an argument to be made that these forms, 27 in fact, did not provide notice to Mr. Goldsmith of his tax liability related to the Swiss 28 Account, because they all suggested that he would only be held liable if he held U.S. -583:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.372 Page 59 of 73 1 securities, and he explicitly directed Basler to not hold U.S. securities. Yet, at the same 2 time, these forms put Mr. Goldsmith on notice of the potential for tax liability related to 3 the Swiss Account, which should have caused him to, at a minimum, inform Mr. Zipser of 4 the Account and inquire about potential tax liability. These forms also put Mr. Goldsmith’s 5 ownership and management of the Account beyond dispute because he signed numerous 6 forms as the “beneficial owner of the Account” and managed the Account by deciding 7 whether or not it invested in U.S. securities. 8 Like the defendants in Rum, Norman I, and Toth, who the courts found acted 9 willfully by signing QI related forms and electing to divest themselves of U.S. securities 10 rather than sign a W-9 and disclose the account to the IRS, see Rum, 2021 WL 1589153 at 11 *7-8; Norman I, 138 Fed. Cl. at 194-95; Toth, 2019 WL 7039627 at *7-8, Mr. Goldsmith 12 acted willfully by signing similar QI forms which provided him constructive notice of his 13 U.S. tax obligations related to the Account. 14 Thus, Mr. Goldsmith’s signing of multiple QI related forms provided by Basler on 15 at least five different occasions, all of which related to his Swiss Account and described 16 him as a U.S. taxpayer, put him on notice of potential tax liabilities related to the Account. 17 By failing to even inquire about such tax liabilities with his long-time accountant of 18 roughly twenty years, Mr. Goldsmith acted recklessly. d. Defendant Knew the Account Generated Income for Him and 19 Recklessly Failed to Disclose It 20 As to Mr. Goldsmith’s knowledge that the Account generated income, the Court 21 finds that Mr. Goldsmith did, in fact, know the Account generated income for him. See, 22 e.g., Ans. at 3, ¶ 12 (admitting that he profited from the Account but denying that he 23 “managed the Basler Account”). 24 The record in this case shows that it is undisputed that Mr. Goldsmith knew (1) he 25 had tax obligations as a U.S. citizen as evidenced by the fact that he hired Mr. Zipser in the 26 first place; (2) he had to pay taxes on domestic income as evidenced by his work with Mr. 27 28 -593:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.373 Page 60 of 73 1 Zipser and filing of tax returns; 16 and (3) the Swiss Account generated income. SeeR. 2 Goldsmith Dep. at 58:4-59:7, 82:4-83:18. The undisputed facts also indicate Mr. 3 Goldsmith inherited both commercial property and the Swiss Account from his mother 4 after she died. Id. at 56:24-57:18. Even though the commercial properties were not a 5 typical account as they were held by a partnership, and he received income from the 6 distributions from the partnership, Mr. Goldsmith informed Mr. Zipser about the income 7 from the partnership/properties and paid taxes on such income accordingly. Id. at 88:7-23. 8 Mr. Goldsmith’s testimony fails to plausibly explain why he knew he would have to pay 9 taxes on the income from the commercial properties and Italian account but failed to inform 10 the IRS about the Swiss Account. Id.; see also Matsushita, 475 U.S. at 587. 11 In United States v. DeMauro, following a two-day bench trial, the court found in 12 favor of the Government on its willful FBAR-penalty claim. 483 F. Supp. 3d 68, 71. It 13 determined that while the defendant did not commit a knowing or conscious violation, her 14 conduct still qualified as willful because it was reckless and willfully blind. Id. at 71, 85. 15 In 2000, the same year she was finalizing her divorce, the DeMauro defendant, Annette 16 DeMauro, opened a numbered bank account with UBS AG, a Swiss bank. Id. at 72, n.12. 17 “While the United States correctly note[d] that DeMauro took steps to conceal her foreign 18 bank accounts and money transfers, she credibly testified that she did so in an attempt to 19 hide assets from her abusive ex-husband . . . and because she trusted the many professionals 20 around her to handle the finer details of her finances.” Id. at 71. Thus, “[t]he court [found] 21 16 During his deposition, Mr. Goldsmith testified that he informed Mr. Zipser of his 22 distributions from commercial properties, or in other words, income that was not “typical 23 bank income.” See R. Goldsmith Tr. at 88:17-89:5 (testifying “Yeah, we informed him about anything that we did here in the western hemisphere, of course,” when asked whether 24 informed Mr. Zipser about non-bank accounts, like “the distributions from Monterey Pass 25 or income earned from your Hawaii condo”). Yet, when asked why he did not inform Mr. Zipser about the Account in Switzerland, his response was, “It wasn’t an account. It was 26 a fund. It was not ours, you know. It’s completely separate.” R. Goldsmith Tr. at 89:5-6. 27 In light of the fact that the commercial properties, which he informed Mr. Zipser about, were also not “accounts,” this response appears to be an implausible and uncredible 28 explanation for his failure to inform Mr. Zipser about the Account. -603:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.374 Page 61 of 73 1 that the United States failed to prove by a preponderance of the evidence that DeMauro 2 knowingly violated § 5314” and proceeded to “assesses whether the United States has 3 proven by a preponderance of the evidence that DeMauro violated § 5314 recklessly.” Id. 4 As to recklessness or willful blindness, the Court held that the Government had 5 proven by a preponderance of the evidence that Ms. DeMuaro “acted with willful blindness 6 by taking ‘deliberate’ or ‘conscious effort to avoid learning about [FBAR] reporting 7 requirements.’” 483 F. Supp. 3d at 87. The evidence supporting this finding included “her 8 purported failure to seek advice from tax professionals or attorneys despite (1) her past 9 practice of relying on such professionals to handle her affairs, (2) her admission that she 10 knew her foreign accounts were accruing interest, (3) her payment of taxes on interest 11 earned from her domestic savings accounts, (4) her payment of taxes on residential assets 12 she acquired through her divorce decree, and (5) her representation to UBS that she had 13 sought unspecified tax advice for her account.” Id. at 87. Thus, even if she “did not 14 consciously avoid learning about the FBAR reporting requirement, she at the very least 15 should have surmised that there was a grave risk she was not meeting her tax-filing 16 obligations,” and such conduct “constitutes a willful civil violation.” Id. at 71. 17 The Government contends that like the DeMauro defendant, Mr. Goldsmith knew 18 that (1) the Account was generating income, (2) the investments in the Account were 19 appreciating, and (3) he, in fact, benefited from the Account’s appreciation in value but did 20 not pay taxes on that income. Mot. 18:13-15. The Government relies on DeMauro for the 21 proposition that knowledge of a foreign account generating income in the absence of 22 paying taxes on such income is evidence of willfulness. Mot. at 19:9-15 (citing DeMauro, 23 2020 WL 5757466, at *12–14). It argues that like the DeMauro defendant, who the court 24 found willfully blind for disclosing some but not all of her property—namely, her foreign 25 accounts, which she knew earned income—to the professionals handling her affairs after 26 her divorce, after Mr. Goldsmith’s mother died, Mr. Goldsmith disclosed certain property, 27 like his commercial properties, to Mr. Zipser but not his Swiss Account. Mot. at 19:15-19 28 (citing DeMauro, 2020 WL 5757466, at *13-14). In his opposition, Mr. Goldsmith argues -613:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.375 Page 62 of 73 1 DeMauro is inapposite as that case involved an opinion following a two-day bench trial 2 rather than a motion for summary judgment, and as such, the Government cannot rely on 3 DeMauro to show that knowledge of income proves willfulness on summary judgment. 4 Oppo. at 9:4-11. Thus, Mr. Goldsmith argues that “DeMauro supports [his] assertion that 5 the issue of willfulness is one of fact and must be determined at trial herein.” Id. at 9:116 13. In reply, the Government notes that once again, Mr. Goldmisth does not actually 7 dispute the fact at hand (i.e., whether he knew the Account generated income), just whether 8 that knowledge should warrant holding him liable. Reply at 9:28-10:2. While the Court 9 finds that DeMauro still proves insightful as to what evidence factors into a finding of 10 recklessness, the Government also relies on Horowitz, in which the Fourth Circuit affirmed 11 summary judgment in the Government’s favor for penalties for willful violations of Section 12 5314. Mot. at 19:25-20:4 (citing Horowitz, 978 F.3d at 89). It contends the Court should 13 disregard Mr. Goldsmith’s statements disavowing knowledge of his tax reporting 14 obligations and find his conduct willful like the Horowitz defendants. Id. 15 The Horowitz court held that even if the defendants lacked actual knowledge of the 16 reporting requirements, their reckless behavior “sufficed for a finding of willfulness.” 978 17 F.3d at 81-82. Thus, despite the defendants’ contentions regarding their subjective intent, 18 their failure to file FBARs was objectively unreasonable. Id. at 89. After adopting the 19 three-pronged test for recklessness from the Third Circuit in Bedrosian, the Fourth Circuit 20 affirmed the district court’s conclusion that the undisputed facts established that the 21 defendants’ failure to file the FBARs for 2007 and 2008 was objectively reckless. Id. at 22 89. The court reasoned that the evidence showed that the defendants (1) “knew that they 23 were holding a significant portion of their savings—nearly $2 million—in a foreign bank 24 account and earning interest income on that account,” (2) primarily established the Swiss 25 bank account because their Saudi bank did not pay interest, (3) “knew that the salary 26 income they earned in Saudi Arabi was reportable to the IRS,” (4) “recognized that interest 27 income was taxable income under American law, at least when earned in a domestic bank 28 account,” (5) had a numbered account with “hold mail” service, which “would and did -623:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.376 Page 63 of 73 1 assist U.S. clients in concealing assets and income from the IRS” by “eliminat[ing] the 2 paper trial associated with the undeclared assets and income they held,” (6) had “Swiss 3 bank accounts[, which] were by no means small or insignificant and thus susceptible to 4 being overlooked,” (7) “tended to that nest egg, traveling twice to Switzerland specifically 5 to look after it,” and (8) filed tax returns with the IRS, which they were sent to review and 6 sign under penalty of perjury by their accountant, in which they explicitly answered “no” 7 when asked whether they had a foreign bank account. Id. at 88-90. Thus, the defendants 8 clearly “recognized that interest income was taxable income under American law, at least 9 when earned in a domestic bank account” as “demonstrated by the fact that when [one of 10 the defendants] supplied the accountant with information for the preparation of the [their] 11 tax returns, he included interest income from domestic banks.” Id. at 89. “With this 12 compound knowledge—that interest income was taxable income and that foreign income 13 was taxable in the United States—the Horowitzes could hardly conclude reasonably that 14 the interest income from their Swiss accounts was not subject to taxes.” Id. “Taking all of 15 these circumstances together, the record indisputably establishe[d] not only that the 16 [defendants] ‘clearly ought to have known’ that they were failing to satisfy their obligation 17 to disclose their Swiss accounts, but also that they were in a ‘position to find out for certain 18 very easily.’” Id. at 90. 19 The Government argues that just as the Horowitz court rejected the defendants’ 20 claims that they did not know they had to file FBARs because of a conversation with a 21 friend in Saudi Arabia in the late 1980s, this Court should likewise reject Mr. Goldsmith’s 22 claims that he did not know he needed to report foreign accounts (1) until he read a 23 newspaper article and (2) due to his belief that he did not own the Account. Mot. at 20:124 7. Indeed, Mr. Goldsmith testified that the first time he learned about his duty to disclose 25 the Account was when he “read a newspaper report about the requirement to disclose 26 foreign accounts and that the IRS created a program for those with foreign accounts to 27 come forward,” Exhibit 5 to Petrila Decl., Mr. Goldsmith’s Responses to Interrogatories, 28 at 23. However, the Kimble II defendant had a strikingly similar story, testifying that “the -633:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.377 Page 64 of 73 1 first time she learned of her obligation to disclose her foreign bank accounts” was when 2 she “read an article in the New York Times reporting on the Treasury Department’s 3 investigation into UBS for abetting tax fraud with respect to its numbered accounts.” 4 Kimble II, 991 F.3d at 1241. Nonetheless, the Federal Circuit still affirmed summary 5 judgment in favor of the Government on willfulness. Id. 6 The Court agrees that Mr. Goldsmith never disputes (1) signing the QI forms, which 7 discussed the potential for U.S. tax obligations related to his Swiss Account, (2) failing to 8 seek Mr. Zipser’s advice as to whether he had any tax obligations related to the Swiss 9 Account after signing the QI forms, (3) earning interest on the Account, and (4) knowing, 10 as a U.S. citizen, he had tax obligations for at least domestic income. All of the 11 aforementioned facts support this Court finding Mr. Goldsmith’s conduct reckless and 12 willfully blind. See DeMauro, 483 F. Supp. 3d at 71; see also Horowitz, 978 F.3d at 89; 13 Rum, 2021 WL 1589153 at *7-8, n.4; see also Kimble I, 141 Fed. Cl. at 386. e. Mr. Goldsmith Recklessly Set the Account up in a Manner that 14 Made it More Difficult for the Government to Discover it and 15 Easier for Him to Avoid Knowledge of His U.S. Tax Obligations 16 As to the fact that Defendant set the Account up as a numbered account while also 17 paying an extra fee to Baser for a mail hold service, the Court finds these weigh in favor 18 of a finding of willful blindness and recklessness. See Horowitz, 978 F.3d at 88-89. 19 The Government contends that like the Horowitz defendants, who acted recklessly, 20 and therefore, willfully, Mr. Goldsmith also “set up his ‘numbered’ account and paid Basler 21 a regular fee to ‘hold’ all mail regarding the account.” Mot. at 20:8-9. Mr. Goldsmith 22 responds by arguing that there are significant factual differences between Horowitz and the 23 instant case. Oppo. at 9:18-19. Specifically, he argues that (1) “the Horowitzes never gave 24 UBS their address in the United States,” (2) maintained a foreign account that “was one of 25 the Horowitzes largest assets and was described as their retirement account,” and (3) 26 “closed their account with UBS in July 2008 due to investigations against UBS and moved 27 their account to another Swiss bank.” Id. at 9:19-23 (citing Horowitz, 978 F.3d at 83). He 28 -643:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.378 Page 65 of 73 1 points out that in this case, however, Mr. Goldsmith “testified that the reason he requested 2 that the bank not send him any mail was because it was generally all in German and he did 3 not understand German.” Id. at 9:23-25 (citing R. Goldsmith Dep. 2-14). As such, he 4 argues that looking at this evidence in the light most favorable to him, his reason for 5 holding the mail does not support the Government’s position of willfulness and creates a 6 genuine issue of material fact for a jury. Id. at 9:25-10:3. The Government responds that 7 Mr. Goldsmith’s opposition does not dispute that Mr. Goldsmith set up a numbered account 8 or paid a regular fee to Basler to hold all mail related to the Account. Reply at 10:3-7 9 (citing Oppo. at 9). It notes that even though Mr. Goldsmith attempts to distinguish 10 Horowitz, he “has not advanced any meaningful difference.” Id. at 10:7. Rather, 11 “Horowitz is directly on point here, as it is analogous to Defendant’s conduct in this action 12 where he claims that he did not think that any tax or reporting obligations attached to the 13 Account because he did not think that he ‘owned’ the Account.” Id. at 10:12-15. The 14 Court agrees that Mr. Goldsmith has failed to point out any meaningful difference between 15 his conduct and the conduct in Horowitz. More importantly, even if he had, numerous 16 courts have held similar conduct evidences recklessness, or at a minimum, willful 17 blindness. 18 With a numbered account, a number rather than a name identifies the account, which 19 conceals the account holder’s identity. See, e.g., Rum, 2021 WL 1589153 at *7, n.4 (noting 20 the defendant “opened his second account as a numbered account, thus continuing to 21 conceal his identity”). With a hold mail service, the customer of a bank pays the bank extra 22 money to hold all mail related to the account, so the customer never receives any mail 23 related to the account at his or her address associated with the account. See, e.g., United 24 States v. Zimmerman, No. 2:19-CV-4912-CAS-EX, 2020 WL 6065333, at *2 (C.D. Cal. 25 Sept. 16, 2020) (“The Zimmermans also placed a ‘stop mail’ hold on the account, which 26 prevented any mail regarding the account from being sent to them in the United States.”); 27 Bedrosian III, 2020 WL 7129303 at *4 (“Next the Court found that the foreign account 28 was set up with hold mail service, which the bank knew would and did assist U.S. clients -653:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.379 Page 66 of 73 1 in concealing assets and income from the IRS.”) (internal quotation omitted). Courts have 2 found that both maintaining a numbered account as well as requesting a “hold mail” service 3 from a foreign bank qualify as evidence of intent to conceal a foreign account from the 4 U.S. government. See, e.g., Zimmerman, 2020 WL 6065333, at *4 (“Relevant acts of 5 concealment include redirecting mail regarding the account away from the United States, 6 and using numbered instead of named accounts.”); see also Ott, 441 F. Supp. 3d at 531 7 (“Evidence of acts to conceal income and financial information, combined with the 8 defendant’s failure to pursue knowledge of further reporting requirements as suggested on 9 Schedule B, provide a sufficient basis to establish willfulness,” and such “acts of 10 concealment range in severity in the FBAR context, from creating ‘numbered’ bank 11 accounts to avoid detection, to creating shell corporations”) (internal citations omitted). 12 The Fourth Circuit, Federal Circuit, and Eleventh Circuit have all affirmed district 13 court’s decisions to grant summary judgment in favor of the Government where the 14 evidence included the fact that the defendant had set up a numbered account along with a 15 hold mail order. See, e.g., Rum, 2021 WL 1589153 at *7-8, n.4 (affirming the district 16 court’s decision to grant summary judgment in favor of the government where “the 17 evidence was overwhelming that Rum sought to hide his overseas accounts from the United 18 States government,” and included the fact that the defendant set up a numbered account, 19 paid an extra fee to avoid receiving statements, personally visited the bank in Switzerland 20 several times, and declined to complete a W-9, choosing instead, to direct the bank not to 21 invest in U.S. securities); Kimble I, 141 Fed. Cl. at 384 (granting the Government’s motion 22 for summary judgment where the plaintiff, inter alia, “maintained a numbered account and 23 instructed UBS not to send any account-related correspondence to the United States,” 24 which the court factored into its decision that her failure to report was voluntary); Horowitz, 25 978 F.3d at 83 (affirming summary judgment because the defendant’s numbered account 26 together with a “hold mail” service “allowed U.S. clients to eliminate the paper trail 27 associated with the undeclared assets”); Bedrosian III, 2020 WL 7129303 at *4 (noting 28 that after the defendant admitted to reading an article about the federal government tracing -663:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.380 Page 67 of 73 1 mail into the U.S., he paid a fee to place his Swiss bank accounts on a mail hold, which the 2 Government argued “the purpose of which was to prevent correspondence from the foreign 3 bank being tracked by the IRS”). Like the Rum, Kimble I, Horowitz, and Bedrosian III 4 courts, this Court also finds that Mr. Goldsmith’s decision to set up his account as a 5 numbered account while also paying Basler to hold his mail constituted at best willful 6 blindness, and at worst, acts of concealment in reckless disregard of his tax obligations. 7 See Rum, 2021 WL 1589153 at *7-8, n.4; Kimble I, 141 Fed. Cl. at 384; Horowitz, 978 8 F.3d at 83; Bedrosian III, 2020 WL 7129303 at *4. 9 In sum, Mr. Goldsmith’s claim that any of the material facts presented by the 10 Government are in dispute is incorrect. Rather, the undisputed facts in this case show that 11 Mr. Goldsmith acted willfully. While whether he acted with actual knowledge or a 12 subjective belief his conduct violated the law remains an issue of fact in dispute, this Court 13 agrees with the Third, Fourth, and Eleventh Circuit Court of Appeals that have adopted the 14 Bedrosian test and held that his subjective knowledge or intent is not required for this Court 15 to find willful conduct. See, Rum, 2021 WL 1589153, at *6 (joining the Third and Fourth 16 Circuits in adopting the Bedrosian test); see also Kimble I, 141 Fed. Cl. at 383-84 (holding 17 that a Section 5321(a)(5) violation qualifies as willful “where a taxpayer: (1) violates the 18 law ‘voluntarily rather than accidentally;’ (2) is ‘willfully blind’ to the legal duty to report; 19 or (3) engages in conduct that is in ‘reckless disregard’ of the legal duty to report.”). 20 Under the Bedrosian test, Mr. Goldsmith (1) clearly ought to have known that (2) 21 there was a grave risk that an accurate FBAR was not being filed and (3) he was in a 22 position to find out for certain very easily. 912 F.3d at 153; see also Reply at 11:4-7. 23 Because this reckless behavior evidences willfulness, the Court may impose penalties 24 pursuant to Section 5321(a)(5). 25 C. Damages 26 Having concluded that no genuine issue of fact exists as to whether Mr. Goldsmith 27 willfully violated Section 5314, assessment of a civil money penalty under Section 5321 is 28 appropriate. Norman I, 138 Fed. Cl. at 196. Section 5321(a)(5) allows the Government to -673:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.381 Page 68 of 73 1 recover penalties in the amount of fifty percent (50%) of the Account balance. See id.; see 2 also 31 U.S.C. § 5321(a)(5)(C). In its Motion, the Government seeks the following 3 amounts: 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Penalty for PreAccount Late Payment Willful Judgement Balance on Penalty: Violations: Interest: June 30th of TOTAL: Reporting 31 U.S.C. § 31 U.S.C. § 31 U.S.C. § Year: Year: 5321(a)(5)(C)-(D) 3717(e)(2) 3717(a)-(d) 2008 $328,065.62 $122,375.00 Unknown Unknown Unknown 2009 $288,250.39 $82,082.00 Unknown Unknown Unknown 2010 $331,577.18 $69,389.00 Unknown Unknown Unknown TOTAL: $273,846.00 $30,520.70 $5,086.78 $309,453.48 See Mot. at 23:7-18. In his opposition, Mr. Goldsmith only disputes whether penalties should be imposed under Section 5321(a)(5), but he never argues that the amount of the penalties sought by the Government is incorrect. See generally Oppo. Unfortunately, the Government provides the Court with no information whatsoever as to how these damages were calculated, including but not limited to (1) the calculations for the penalty, (2) how the late payment penalty was calculated, and (3) how the pre-judgment interested was calculated. This leaves the Court guessing whether interest was calculated using the correct dates or applying the correct interest rates. That being said, the Court’s own calculations indicate the damages sought are far below the amount the Government could have sought. First, in order to calculate the penalties, the Court must determine the balances in the Account for the years at issue in U.S. dollars. The exchange rate on previous dates is available on the Federal Reserve’s publicly accessible website. See https://www.federal reserve.gov/releases/h10/default.htm; see also Mot. at 6:26-28, n.3-4 (noting that “[t]he average exchange rate in 2005 was 1.25 dollars to 1 Swiss franc” and “[d]uring the years at issue, the USD:CHF exchange rate moved between .93 and 1.2”); see also Oppo. (failing to refute the accuracy of this exchange rate). The Court, sua sponte, takes judicial notice of these exchange rates. See, e.g., FED. R. EVID. 201(c)(1) (providing that the court “[m]ay take judicial notice on its own,” or sua sponte); see also Waterford Twp. Police v. Mattel, -683:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.382 Page 69 of 73 1 Inc., 321 F. Supp. 3d 1133, 1143 (C.D. Cal. 2018), aff'd sub nom. Castro v. Mattel, Inc., 2 794 Fed. App’x 669 (9th Cir. 2020) (“Exchange rates listed on the Federal Reserve’s 3 system are a fitting subject of a request for judicial notice.”); see also 26 U.S.C. § 986(a) 4 (providing that “[f]or purposes of determining the amount of the foreign tax credit, . . . the 5 amount of any foreign income taxes (and any adjustment thereto) shall be translated into 6 dollars by using the average exchange rate for the taxable year to which such taxes relate”). 7 This website shows that on June 30, 2009, when the FBAR for the 2008 tax year became 8 due, the exchange rate was 1.0867 CHF to $1.00. See https://www.federalreserve.gov/ 9 releases/h10/20090706/. On June 30, 2010, when the FBAR for the 2009 tax year became 10 due, the exchange rate was 1.0774 CHF to $1.00. See https://www.federalreserve.gov/ 11 releases/h10/20100706/. On June 30, 2011, when the FBAR for the 2010 tax year became 12 due, the exchange rate was 0.8413 CHF to $1.00. See https://www.federalreserve.gov/ 13 releases/h10/20110705/. Applying these exchange rates, the values of the Account in U.S. 14 dollars are shown below: Account Balance on Value in 15 Reporting Exchange Rate on Year: June 30th of U.S. Year: Date: 16 Reporting Year: Dollars: 356,705.60 CHF June 30, 2009 1 USD = 1.0867 CHF $328,065.62 17 2008 2009 310,560.97 CHF June 30, 2010 1 USD = 1.0774 CHF $288,250.39 18 2010 278,955.88 CHF June 30, 2011 1 USD = 0.8413 CHF $331,577.18 19 Having determined the Account balances on June 30 th of each applicable year, the 20 Court must next attempt to determine how the Government calculated the penalties it seeks 21 in order to verify the Government seeks the appropriate penalty. The Government seeks 22 penalties pursuant to Section 5321(a)(5)(B)(ii), which allows a penalty of fifty percent 23 (50%) of “the balance in the account at the time of the violation” where the violation arises 24 from “a failure to report the existence of an account.” As shown below, the Court, through 25 its own calculations, determines the penalty sought by the Government does not exceed, 26 and in fact, is far below, the fifty percent (50%) penalty of the Account balance the 27 Government could seek: Account 28 Penalty: -693:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.383 Page 70 of 73 1 2 Year: 3 4 Balance on June 30th of Reporting Year: Penalty Sought: 2008 $328,065.48 $122,375.00 6 2009 $287,929.70 $82,082.00 7 2010 $331,340.87 $69,389.00 8 TOTAL: 5 9 Penalty Sought Divided by Account Balance: $122,375.00 $328,065.48 $82,082.00 $287,929.70 $69,389.00 $331,340.87 Percentage of Balance Sought as Penalty by Government: = 0.372814199 37% = 0.284759372 29% = 0.209269529 21% $273,846.00 In addition to the statutory penalties, the Government also seeks late payment 10 penalties, see FAC at 8, ¶ 41; see also Mot. at 23:7-18, pursuant to 31 U.S.C. § 3717(e)(2), 11 which allows “[t]he head of an executive, judicial, or legislative agency,” like the Secretary 12 of the Treasury, to “assess on a claim owed by a person . . . . a penalty charge of not more 13 than 6 percent a year for failure to pay a part of a debt more than 90 days past due.” See 14 also Exhibit 3 to Petrila Decl. at 12 (warning in the June 27, 2018 letter from the IRS to 15 Defendant that “[i]n accordance with 31 U.S.C. § 3717(e)(2), a late payment penalty charge 16 of 6% each year will be assessed on any portion of the penalty that remains unpaid 90 days 17 from the date of this letter”). In this case, ninety (90) days from the date of the IRS’ letter 18 is September 25, 2018. As shown below, six percent 6% penalty on the penalties sought 19 by the Government amounts to $15,489.66 for 2008, $10,389.56 for 2009, and $8,782.94 20 for 2010, for a total of $34,662.15: 21 22 23 Year: 24 Penalty for Willful Violations: 25 2008 2009 27 2010 28 TOTAL: 26 $122,375.00 $82,082.00 $69,389.00 $273,846.00 Late Payment Penalty Penalty Due Date (Daily 6% Daily Penalty Days Penalty x Annual Penalty Began to Since: Days Since Penalty: Amount: Accrue: Penalty Accrued): $7,342.50 $20.12 9/25/2018 770 $15,489.66 $4,924.92 $13.49 9/25/2018 770 $10,389.56 $4,163.34 $11.41 9/25/2018 770 $8,782.94 $34,662.15 Late Payment Penalty Sought by IRS: Unknown Unknown Unknown $30,520.70 -703:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.384 Page 71 of 73 1 Thus, the Court finds the actual late penalty owed or allowed by law ($34,662.15) 2 exceeds the late payment penalty sought by the Government ($30,520.70), and as such, the 3 penalty sought by the Government is appropriate. 4 Finally, the Government also seeks pre-judgment interest, see FAC at 8, ¶ 41; see 5 also Mot. at 23:7-18, pursuant to 31 U.S.C. § 3717(a)-(d), which allows the Secretary of 6 the Treasury, to “charge a minimum annual rate of interest on an outstanding debt . . . that 7 is equal to the average investment rate for the Treasury tax and loan accounts for the 128 month period ending on September 30 of each year, rounded to the nearest whole 9 percentage point.” The Government provides no information as to what the average tax 10 and loan rates were or what years it used (i.e., the years the debt accrued or the years, or 11 2008 through 2010, or the years it sought the debt, 2018). This interest accrues from the 12 date “notice of the amount due is first mailed to the debtor at the most current address of 13 the debtor available.” 31 U.S.C. § 3717(b)(2). However, if the amount due is paid within 14 thirty (30) days of receiving notice, no interest will be charged. 37 U.S.C. § 3717(d). Here, 15 the Government cautioned Plaintiff in its June 27, 2018 letter, that “[i]n accordance with 16 31 U.S.C. § 3717(a)-(d), interest will accrue at the rate of 1% per year,” which will be 17 charged as of the date of this letter if payment isn’t received within 30 days,” or by Friday, 18 July 27, 2018. See Exhibit 3 to Petrila Decl. at 12. Because payment was not received, 19 interest accrued at the rate one percent (1%) as of June 30, 2018. As shown below, applying 20 a one percent (1%) interest rate to the penalties sought by the Government results in pre21 judgment interest of $3,185.10 for the 2008 tax year, $2,136.38 for the 2009 tax year, and 22 $1,806.02 for the 2010 tax year, for a total of $7,127.50 for all three years. Pre-Judgment Interest: 23 Penalty for Annual Daily Actual Date Letter Days 24 Year: Willful Interest Interest Interest Was Mailed: Since: Violations: (1%): Rate: Accrued: 25 2008 $122,375.00 6/27/2018 950 $1,223.75 $3.3527 $3,185.10 26 2009 $82,082.00 6/27/2018 950 $820.82 $2.2488 $2,136.38 $69,389.00 6/27/2018 950 $693.89 $1.9011 $1,806.02 27 2010 TOTAL: $273,846.00 $7,127.50 28 Interest Sought by Plaintiff: Unknown Unknown Unknown $5,086.78 -713:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.385 Page 72 of 73 1 Thus, the actual interest owed ($7,127.50) exceeds the pre-judgment interest sought 2 by the Government ($5,086.78). Accordingly, the amount of interest the Government 3 seeks is appropriate. 4 In sum, although the Government did not provide the Court with any information as 5 to how the penalties it seeks were calculated, the Court finds the amounts sought do not 6 exceed the amounts permitted by law. Thus, the Court awards the Government damages 7 as follows: Damages: Amount: Penalty for Willful Violations (31 U.S.C. § 5321(a)(5)(C)-(D)): $273,846.00 9 Late Payment Penalty (31 U.S.C. § 3717(e)(2)): $30,520.70 $5,086.78 10 Pre-Judgement Interest (31 U.S.C. § 3717(a)-(d)): TOTAL: $309,453.48 11 V. CONCLUSION 12 For the above reasons, the Court GRANTS Plaintiff’s Motion for Summary 13 Judgment as follows: 14 1. The Court finds that Mr. Goldsmith’s repeated and admitted lack of care 15 reaches the standard of reckless disregard for the law required to constitute a willful 16 violation of Section 5314. Such lack of care is shown by, inter alia, his (1) filing inaccurate 17 official tax documents under penalty of perjury, which he testified he reviewed, (2) signing 18 foreign banking documents without any review, (3) failing to inform his tax preparer about 19 his Swiss Account despite receiving a questionnaire from that tax preparer explicitly asking 20 about foreign accounts, and (4) setting up his Swiss Account as a numbered account with 21 a hold mail service. 22 2. Because the Court finds Mr. Goldsmith willfully violated Section 5314, it 23 concludes that assessment of the civil money penalty provided under Section 5321(a)(5) is 24 appropriate in the amounts sought by the Government, which are below the amount of fifty 25 percent (50%) of the account balance allowed under the law. 26 3. The Clerk of the Court will enter judgment in favor of Plaintiff, the United 27 States of America, in the amount of $309,453.48, consisting of (1) $273,846.00 in penalties 28 8 -723:20-cv-00087-BEN-KSC Case 3:20-cv-00087-BEN-KSC Document 27 Filed 05/25/21 PageID.386 Page 73 of 73 1 authorized by 31 U.S.C. § 5321(a)(5)(C)-(D) for willful violations of Mr. Goldsmith’s 2 obligation to report foreign accounts during the 2008, 2009, and 2010 tax years; (2) 3 $30,520.70 in late payment penalties authorized by 31 U.S.C. § 3717(e)(2); and (3) 4 $5,086.78 for pre-judgment interest authorized by 31 U.S.C. § 3717(a)-(d). Plaintiff shall 5 also recover post-judgment interest pursuant to 28 U.S.C. § 1961 from the date of judgment 6 until the judgment is paid in full. 28 U.S.C. § 1961(a). 7 4. All future dates in this case are vacated, including but not limited to the June 8 7, 2021 Final Pretrial Conference. 9 10 IT IS SO ORDERED. DATED: May 25, 2021 HON. ROGER T. BENITEZ United States District Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -73- 3:20-cv-00087-BEN-KSC

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