United States v. Giraldi

UNITED STATES OF AMERICA, Plaintiff, v. FRANK GIRALDI, Defendant.

Civil Action No. 20-2830 (SDW) (LDW)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY

March 16, 2021

NOT FOR PUBLICATION

OPINION

WIGENTON, District Judge.

Before this Court is Defendant Frank Giraldi's ("Defendant") Motion for Partial Summary Judgment ("Motion") pursuant to Federal Rule of Civil Procedure ("Rule") 56. Jurisdiction is proper pursuant to 28 U.S.C. §§ 1331, 1345, and 1355. Venue is proper pursuant to 28 U.S.C. § 1391. This opinion is issued without oral argument pursuant to Rule 78. For the reasons stated herein, Defendant's Motion is GRANTED.

I. BACKGROUND

This action involves a dispute over Congress's intended penalty for the non-willful failure to file a Report of Foreign Bank and Financial Accounts (commonly referred to as an "FBAR" form) pursuant to the Bank Secrecy Act ("BSA" or the "Act") of 1970, 31 U.S.C. § 5311, et seq., and its corresponding regulations. Before turning to the Motion, this Court provides a brief overview of pertinent provisions from the BSA to contextualize the undisputed material facts.

A. Legal Background

Congress enacted the BSA in 1970 to curb money laundering and other financial crimes inresponse to the increasing unavailability of bank records—both foreign and domestic—of persons suspected to be involved in illegal financial activities. Cal. Bankers Ass'n v. Shultz, 416 U.S. 21, 26-28 (1974); see 31 U.S.C. § 5311. For example, a primary purpose of the BSA is to deter tax evasion that can occur when individuals maintain foreign financial bank accounts. United States v. Kahn, No. 17-7258, 2019 WL 8587295, at *4 (E.D.N.Y. Sept. 23, 2019). Accordingly, the Act seeks to require certain reports and records that aid in "criminal, tax, or regulatory investigations or proceedings," or in conducting "intelligence or counterintelligence activities . . . ." 31 U.S.C. § 5311; see Bedrosian v. U.S. Dep't of Treasury, IRS, 912 F.3d 144, 147 (3d Cir. 2018). To this end, Congress tasked the Secretary of the Treasury to promulgate rules that require United States ("U.S.") citizens, residents, or those doing business in the U.S. to keep records and/or file reports when they "make[] a transaction or maintain[] a relation for any person with a foreign financial agency."¹ 31 U.S.C. § 5314(a).

The Secretary has implemented Section 5314 through a series of regulations. See, e.g., 31 C.F.R. §§ 1010.350, 1010.306. These regulations require the annual filing of an FBAR form for covered individuals who have "a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country." 31 C.F.R. § 1010.350. Furthermore, an FBAR form must be filed by June 30 only if a covered person's foreign financial accounts exceed $10,000 during the prior calendar year. 31 C.F.R. § 1010.306(c).

The BSA authorizes the Secretary of Treasury to impose civil monetary penalties on individuals who violate any provision of Section 5314. 31 U.S.C. § 5321(a)(5)(A). Initially, theAct only provided civil penalties for willful violations of Section 5314. Kahn, 2019 WL 8587295, at *4-5 (providing an in-depth overview of the BSA's legislative history). In 2004, however, Congress amended the BSA to include penalties for non-willful violations. Id. at *8; see 31 U.S.C. § 5321(a)(5)(B)(i). The BSA presently provides for civil penalties as follows:

(5) Foreign financial agency transaction violation.--

(A) Penalty authorized.--The Secretary of the Treasury may impose a civil money penalty on any person who violates, or causes any violation of, any provision of section 5314.

(B) Amount of penalty.--

(i) In general.--Except as provided in subparagraph (C), the amount of any civil penalty imposed under subparagraph (A) shall not exceed $10,000.

(ii) Reasonable cause exception.--No penalty shall be imposed under subparagraph (A) with respect to any violation if--

(I) such violation was due to reasonable cause, and

(II) the amount of the transaction or the balance in the account at the time of the transaction was properly reported.

(C) Willful violations.--In the case of any person willfully violating, or willfully causing any violation of, any provision of section 5314--

(i) the maximum penalty under subparagraph (B)(i) shall be increased to the greater of--

(I) $100,000, or

(II) 50 percent of the amount determined under subparagraph (D), and

(ii) subparagraph (B)(ii) shall not apply.

(D) Amount.--The amount determined under this subparagraph is--

(i) in the case of a violation involving a transaction, the amount of the transaction, or

(ii) in the case of a violation involving a failure to report the existence of an account or any identifying information required to be provided with respect to an account, the balance in the account at the time of the violation.

31 U.S.C. § 5321(a)(5).

B. Factual Background

Turning to the Motion, this Court summarizes the undisputed facts.² Defendant is a U.S. citizen who resides in New Jersey and owned four (4) foreign financial accounts during the tax years currently at issue—2006, 2007, 2008, and 2009 ("Relevant Tax Years"). (D.E. 20-1 ¶ 3; D.E. 25 ¶ 3; D.E. 8 ¶¶ 4, 9.) The Government maintains that Defendant should have disclosed his four (4) accounts on an FBAR form for each of the Relevant Tax Years. (D.E. 20-1 ¶¶ 3-4; D.E. 25 ¶¶ 3-4.) In September 2014, Defendant entered the Internal Revenue Service's ("IRS") voluntary disclosure program and self-reported that he did not file FBAR forms for any of the Relevant Tax Years. (D.E. 20-1 ¶ 5; D.E. 25 ¶ 5.)

On November 2, 2017, the Government proposed a penalty assessment of $160,000 against Defendant for his alleged non-willful failure to file FBAR forms.³ (D.E. 20-1 ¶ 7; D.E. 25 ¶ 7.) The Government's proposed assessment is comprised of sixteen (16) separate $10,000 penalties, including one penalty for each of Defendant's four (4) accounts that were not disclosed on four (4) FBAR forms. (D.E. 20-1 ¶ 8; D.E. 25 ¶ 8.) A breakdown of the Government's penalty assessment is depicted in the chart below:

Tax Year

Number of Foreign

Financial Accounts

Penalty

2006

4

(4 accounts x $10,000 each) = $40,000 Penalty

2007

4

(4 accounts x $10,000 each) = $40,000 Penalty

2008

4

(4 accounts x $10,000 each) = $40,000 Penalty

2009

4

(4 accounts x $10,000 each) = $40,000 Penalty

Total Penalty = $160,000

(D.E. 20-1 ¶ 8; D.E. 25 ¶ 8.) Thereafter, the IRS denied Defendant's appeal of the Government's proposed penalty assessment. (D.E. 20-1 ¶ 10; D.E. 25 ¶ 10.) Thus, on July 18, 2018, the Government formally assessed $160,000 in FBAR penalties against Defendant. (D.E. 20-1 ¶ 11; D.E. 25 ¶ 11; D.E. 25 at 8, Fact A; D.E. 26-2 at 1, Fact A.) On July 24, 2018, the Government sent Defendant a demand letter for payment of $160,000. (D.E. 20-1 ¶ 11; D.E. 25 ¶ 11.) Defendant ultimately paid the Government $60,000 total, comprised of four (4) $15,000 checks, one for each of the Relevant Tax Years.⁴ (D.E. 20-1 ¶ 12; D.E. 25 ¶ 12.)

The Government filed this lawsuit on March 16, 2020, for the remainder of Defendant's penalty assessment plus interest.⁵ (D.E. 1 ¶ 22; D.E. 20-1 ¶ 13; D.E. 25 ¶ 13.) On December 22, 2020, Defendant filed the instant Motion seeking partial summary judgment on the issue of whether, pursuant to Section 5321(a)(5)(B)(i) of the BSA, his alleged non-willful failure to file FBAR forms may result in maximum penalties of $10,000 for each undisclosed account.⁶ (D.E.20; D.E. 20-1.) The Motion was fully briefed on January 29, 2021. (D.E. 24; D.E. 26.)

II. LEGAL STANDARD

Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The "mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). A fact is only "material" for purposes of a summary judgment motion if a dispute over that fact "might affect the outcome of the suit under the governing law." Id. at 248. A dispute about a material fact is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. The dispute is not genuine if it merely involves "some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).

The moving party must show that if the evidentiary material of record were reduced to admissible evidence in court, it would be insufficient to permit the nonmoving party to carry its burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Once the moving party meets its initial burden, the burden then shifts to the nonmovant who must set forth specific facts showing a genuine issue for trial and may not rest upon the mere allegations, speculations, unsupported assertions or denials of its pleadings. Shields v. Zuccarini, 254 F.3d 476, 481 (3d Cir. 2001). "In considering a motion for summary judgment, a district court may not make credibility determinations or engage in any weighing of the evidence; instead, the non-moving party's evidence 'is to be believed and all justifiable inferences are to be drawn in his favor.'" Marino v. Indus. Crating Co., 358 F.3d 241, 247 (3d Cir. 2004) (quoting Anderson, 477 U.S. at 255).

The nonmoving party "must present more than just 'bare assertions, conclusory allegations or suspicions' to show the existence of a genuine issue." Podobnik v. U.S. Postal Serv., 409 F.3d 584, 594 (3d Cir. 2005) (quoting Celotex Corp., 477 U.S. at 325). Further, the nonmoving party is required to "point to concrete evidence in the record which supports each essential element of its case." Black Car Assistance Corp. v. New Jersey, 351 F. Supp. 2d 284, 286 (D.N.J. 2004). If the nonmoving party ...