United States v. Solomon

570 F.Supp.3d 1195

UNITED STATES, Plaintiff,

v.Evelyn SOLOMON, BY AND THROUGH her Guardian Julia SOLOMON, Defendant.

CASE NO. 20-82236-CIV-CANNON/Reinhart

United States District Court, S.D. Florida, West Palm Beach Division.

Signed October 27, 2021

John P. Nasta, U.S. Department of Justice, Tax Division, Washington, DC, for Plaintiff.

Joseph Andrew DiRuzzo, III, Daniel Lader, DiRuzzo & Company, Ft. Lauderdale, FL, for Defendant.

ORDER DENYING DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT [ECF No. 11] AND GRANTING PLAINTIFF'S CROSSMOTION FOR PARTIAL SUMMARY JUDGMENT [ECF No. 18]

AILEEN M. CANNON, UNITED STATES DISTRICT JUDGE

THIS CAUSE comes before the Court upon Defendant's Motion for Partial Summary Judgment (the "Motion") [ECF No. 11] and Plaintiff's Cross-Motion for Partial Summary Judgment (the "Cross-Motion") [ECF No. 19]. The Court has reviewed the Motion, the Cross-Motion, and the full record [ECF Nos. 10, 18, 19, 31, 32, 37]. Upon careful review, Defendant's Motion for Partial Summary Judgment is DENIED , and Plaintiff's Cross-Motion for Partial Summary Judgment is GRANTED .

FACTUAL BACKGROUND¹

This is an action brought by the United States ("Government" or "United States") to enforce non-willful civil penalties assessed against Defendant Evelyn Solomon ("Solomon" or "Defendant") for failing to timely report her financial interest in foreign bank accounts, as required by the Bank Secrecy Act ("BSA"), 31 U.S.C. § 5311, et seq. , and implementing regulations.

The following facts are undisputed. Solomon is a United States Citizen and resides in Florida. During the 2004–2010 tax years, Solomon had access to several foreign bank accounts, but she did not report those accounts to the Internal Revenue Service ("IRS") as required by law [ECF No. 10 ¶ 1; ECF No. 18-3; ECF No. 18 ¶¶ 26, 28; ECF No. 31 ¶¶ 26, 28]. Specifically, Solomon did not file a "Report of Foreign Bank and Financial Accounts" form, commonly known as an "FBAR," for tax years 2004–2010 [ECF No. 18 ¶ 26; ECF No. 31 ¶ 26]. On March 13, 2012, however, as part of the IRS's 2012 Offshore Voluntary Disclosure Program ("OVDP"), Solomon filed FBARs for 2004–2010, voluntarily disclosing her financial interest in multiple bank accounts during those years [ECF No. 18 ¶¶ 27–29; ECF No. 31 ¶¶ 27–29].

The statute of limitations to assess penalties for violating 31 U.S.C. § 5314 is six years [ECF No. 10 ¶ 2; ECF No. 18 ¶ 2]. As relevant here, however, Solomon signed two consent agreements, each entitled "Consent to Extend the Time to Assess Civil Penalties Provided by 31 U.S.C. § 5314 for FBAR Violations" [ECF No. 10-1; ECF No. 10-2]. Solomon signed the first consent agreement on August 26, 2013, stating that, for violations of 31 U.S.C. § 5314 during the years "2004–2011," penalties provided by 31 U.S.C. § 5321 "may be assessed at any time on or before December 31, 2015" [ECF No. 10-1]. On February 10, 2017, Solomon signed a second agreement, this time listing out the years individually: "2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011" [ECF No. 10-2]. This second agreement states that, for violations of 31 U.S.C. § 5314 during those years, penalties under 31 U.S.C. § 5321 "may be assessed at any time on or before December 31, 2018" [ECF No. 10-2]. Pertinent portions of both forms are pictured below [ECF Nos. 10-1 and 10-2], and both forms are followed by a signature block with dated, handwritten signatures from Solomon and a designated IRS representative:

[ECF No. 10-1].

[ECF No. 10-2].

On November 17, 2018, after Solomon signed both consent forms, Solomon signed an IRS Form 13449 document entitled "Agreement to Assessment and Collection of Penalties" [ECF No. 18 ¶ 31; ECF No. 31 ¶ 31]. Solomon's attorney at the time also signed the form on November 19, 2018 [ECF No. 18 ¶ 32; ECF No. 31 ¶ 32]. The form states the following above the signature line: "I consent to the immediate assessment and collection of the penalty amount specified above," and then it lists $200,000 as the "TOTAL proposed penalty" [ECF No. 18-3 p. 1]. In the following pages of the form, under the heading "Foreign Account Penalty Information," the form itemizes that $200,000 total, listing twenty separate $10,000 penalties, each associated with a particular foreign bank account/institution/agent listed on the form, corresponding to the calendar years 2004–2010 [ECF No. 18-3 pp. 2–4].²

On December 12, 2018, the IRS assessed penalties against Solomon in the total amount of $200,000—specifically, $10,000 penalty for each of the twenty unreported foreign bank accounts during the years 2004–2010 [ECF No. 18 ¶ 33; ECF No. 31 ¶ 32].

PROCEDURAL HISTORY

On December 9, 2020, the United States filed a single-count complaint against Solomon seeking a judgment for non-willful penalties under 31 U.S.C. § 5321 in the amount of $226,657.54 as of November 6, 2020, plus penalties and interest that continue to accrue [ECF No. 1 pp. 5–7].

On February 1, 2021, Solomon moved for partial summary judgment seeking to reduce the penalty to $70,000 [ECF No. 11 p. 17]. Solomon argues that the penalty assessed against her should be partially time barred as to the penalties for violations in 2004–2009 [ECF No. 11 pp. 4–11]. Solomon also argues that non-willful violations of 31 U.S.C. § 5314 should be assessed on a per-form rather than on a per-account basis, thereby reducing the number of violations and the corresponding total penalty from approximately $200,000 to $70,000 (not including interest) [ECF No. 11 pp. 11–17].

On February 16, 2021, the Government responded to Solomon's Motion and cross-moved for partial summary judgment [ECF No. 19]. The Government argues that the six-year statute of limitations in 21 U.S.C. § 5321(b)(1) is non-jurisdictional in nature and therefore waivable, and that Solomon clearly and knowingly waived the limitations period by consenting to the extension agreements referenced above. As for the total amount of the penalty assessed ($70,000 versus $200,000), the Government asserts that, based on the plain text and structure of the Bank Secrecy Act and implementing regulations, see 31 U.S.C. §§ 5314(a), 5321(a)(5)(A)-(B) ; 31 C.F.R. §§ 1010.350, 1010.306, it properly assessed the penalty using a per-account basis rather than on a per-form basis [ECF No. 19 pp. 3–15]. The Motion and Crossmotion are both ripe for adjudication.

LEGAL STANDARD

Summary judgment is appropriate where there is "no genuine issue as to any material fact [such] that the moving party is entitled to judgment as a matter of law." Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Fed R. Civ. P. 56(a). An issue of fact is "material" if it might affect the outcome of the case under the governing law. See Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). It is "genuine" if the evidence could lead a reasonable jury to find for the non-moving party. See id. ; see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). At summary judgment, the moving party has the burden of proving the absence of a genuine issue of material fact. See Allen v. Tyson Foods Inc. , 121 F.3d 642, 646 (11th Cir. 1997). The non-moving party's presentation of a "mere existence of a scintilla of evidence" in support of its position is insufficient to overcome summary judgment. Anderson , 477 U.S. at 252, 106 S.Ct. 2505.

"For factual issues to be considered genuine, they must have a real basis in the record." Mann v. Taser Int'l, Inc. , 588 F.3d 1291, 1303 (11th Cir. 2009) (internal quotation marks omitted). Speculation or conjecture cannot create a genuine issue of material fact. Cordoba v. Dillard's, Inc. , 419 F.3d 1169, 1181 (11th Cir. 2005). The moving party has the initial burden of showing the absence of a genuine issue as to any material fact. Clark v. Coats & Clark, Inc. , 929 F.2d 604, 608 (11th Cir. 1991). In assessing whether the moving party has met this burden, the court must view the movant's evidence and all factual inferences arising from it in the light most favorable to the non-moving party. Denney v. City of Albany , 247 F.3d 1172, 1181 (11th Cir. 2001). Once the moving party satisfies its initial burden, the burden shifts to the non-moving party to come forward with evidence showing a genuine issue of material fact that precludes summary judgment. Bailey v. Allgas, Inc. , 284 F.3d 1237, 1243 (11th Cir. 2002) ; Fed. R. Civ. P. 56(e).

DISCUSSION

A. Statute of Limitations

The Court first considers Solomon's argument that the $200,000 penalty assessed against her for FBAR violations in years 2004–2010 is partially time barred as to all but year 2010. The answer is no; Solomon clearly and unambiguously waived any statute of limitations defense by consenting to an extension of the time provided to assess civil penalties under 31 U.S.C. § 5321.

The Bank Secrecy Act provides as follows: "The Secretary of the Treasury may assess a civil penalty [for violations of 31 U.S.C. § 5314 ] at any time before the end of the 6-year period beginning on the date of the transaction with respect to which the penalty is assessed." 31 U.S.C. § 5321(b)(1). There is no dispute that the application limitations period is six years [ECF No. 10 ¶ 2; ECF No. 18 ¶ 2].

Solomon contends that, by the time she signed the first consent form on August 26, 2013, the limitations period for tax years 2004–2006 already had expired [ECF No. 11 p. 8; ECF No. 10-1]. As for years 2007–2009, Solomon argues that, although the first waiver extended the limitations period for those years until December 31, 2015, such period had expired by the time she signed the second waiver on February 10, 2017 [ECF No 11 p. 8; ECF No. 10-2]. In other words, according to Solomon, the waivers she signed did not have the effect of extending the limitations period because, by the time she signed them, the limitations period covering her conduct had expired—leaving nothing to...