United States v. Green

• Decision Date: 27 April 2020
• Docket Number: Case No. 1:19-cv-24026-KMM
• Citation: 457 F.Supp.3d 1262
• Parties: UNITED STATES of America, Plaintiff, v. Jacqueline D. GREEN, et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

457 F.Supp.3d 1262

UNITED STATES of America, Plaintiff,

v.Jacqueline D. GREEN, et al., Defendants.

Case No. 1:19-cv-24026-KMM

United States District Court, S.D. Florida.

Signed April 27, 2020

Adam D. Strait, John P. Nasta, Margaret Sholian, U.S. Department of Justice, Washington, DC, for Plaintiff.

Derick Roberson Vollrath, Jeffrey Adam Neiman, Marcus Neiman & Rashbaum LLP, Fort Lauderdale, FL, Jared Edward Dwyer, Greenberg Traurig, P.A., MIAMI, FL, for Defendants.

ORDER ON MOTION TO DISMISS

K. MICHAEL MOORE, UNITED STATES CHIEF DISTRICT JUDGE

THIS CAUSE came before the Court upon Defendants Jacqueline Green ("Jacqueline") and Bert Green's ("Bert") (collectively, "Defendants") Motion to Dismiss for Failure to State a Claim. ("Mot.") (ECF No. 13). Plaintiff United States of America (the "Government") filed a response in opposition. ("Resp.") (ECF No. 16). Defendants filed a reply. ("Reply") (ECF No. 18). The Motion is now ripe for review.

I. BACKGROUND

The Government seeks to recover unpaid financial penalties imposed upon Marie M. Green ("Marie") for willfully failing to timely file accurate Forms TD F 90-22.1, Report of Foreign Bank and Financial Accounts ("FBAR"), for the years 2010 and 2011. Complaint ("Compl.") (ECF No. 1) ¶ 1. The Court first provides background regarding the FBAR filing requirements and then summarizes the factual background.

A. FBAR Filing Requirements

In 1970, Congress enacted the Currency and Foreign Transactions Reporting Act, commonly referred to as the Bank Secrecy Act ("BSA"), 31 U.S.C. §§ 5311 – 5314, 5316 – 5332, in order to combat money laundering in the United States. See Internal Revenue Serv., Bank Secrecy Act, available at https://www.irs.gov/businesses/small-businesses-self-employed/bank-secrecy-act (last accessed April 1, 2020) ("BSA Guide"); Internal Revenue Manual § 4.26.16 (2017), available at https://www.irs.gov/irm/part4/irm_04-026-016 (last accessed April 1, 2020) ("IRS Manual"). "The BSA requires businesses to keep records and file reports that are determined to have a high degree of usefulness in criminal, tax, and regulatory matters." See BSA Guide. These reports "are heavily used by law enforcement agencies, both domestic and international[,] to identify, detect and deter money laundering whether it is in furtherance of a criminal enterprise, terrorism, tax evasion or other unlawful activity." Id. Congress authorized the Department of Treasury (the "Treasury") to implement the BSA. See 31 U.S.C. § 5314.

Pursuant to the BSA, United States "persons"¹ are required to file an FBAR indicating their financial interests in and/or signatory authority over a foreign account if certain conditions are met. See § 5314(a) ; 31 C.F.R. § 1010.350(a). Specifically, such persons must file an FBAR by June 30 "of each calendar year with respect to foreign financial accounts exceeding $10,000 maintained during the previous calendar year." See 31 C.F.R. § 1010.306(c).

Congress authorized the Secretary of the Treasury (the "Secretary") to assess penalties against those who fail to satisfy the FBAR filing requirement. See 31 U.S.C. §§ 5321 – 22. The Secretary delegated authority to the Internal Revenue Service ("IRS") to impose criminal penalties, and to the Director of the Financial Crimes Enforcement Network ("FinCEN"), a bureau of the Treasury, to impose civil penalties. See IRS Manual. In April 2003, FinCEN delegated its FBAR duties to the IRS. See IRS Manual; IRS Reference Guide. Thus, the IRS is responsible for "[i]nvestigating possible civil violations," "[a]ssessing and collecting civil penalties," and "[i]ssuing administrative rulings." IRS Reference Guide at 1.

The IRS may impose civil penalties based on negligence, see § 5321(a)(6)(A), a pattern of negligent activity, see § 5321(a)(6)(B), a non-willful violation, see § 5321(a)(5)(A), (B), and a willful violation, see § 5321(a)(5)(C). For willful violations, the IRS may impose a criminal penalty and/or a civil penalty. See §§ 5321–22. The civil penalty for a willful violation may not exceed the greater of $100,000, or 50% of the amount in the unreported account at the time of the violation. See § 5321(a)(5)(C).

B. Factual Background ²

Marie, the mother of the Defendants, was a United States citizen residing in the Southern District of Florida at the time of her death on August 5, 2018. Compl. ¶¶ 7, 11–12. Jacqueline is a co-trustee of the Marie Mary Green Revocable Trust, which Marie settled before she died, and the personal representative of Marie's estate. Id. ¶¶ 9, 11. Bert is a co-trustee of the Trust. Id. ¶ 12.

Prior to her death, Marie had interests in or signatory authority over several foreign bank accounts dating back to the 1980s. Id. ¶¶ 13–48. First, Marie had a financial interest in and signatory authority over an account with Bank Leumi Le-Israel in Tel Aviv, Israel ("Bank Leumi"). Id. ¶ 17. On August 13, 1980, Isidor Green ("Isidor"), Marie's husband until his death in July 2005, directed the creation of Arbel Holding, Inc., a Panamanian corporation. Id. ¶¶ 10, 13. On May 24, 1988, Arbel Holding's Board of Directors authorized the company to open an account with Bank Leumi and instruct Bank Leumi that Isidor, Marie, and Defendants were authorized to direct the investment funds in the account and to withdraw funds. Id. ¶ 14. In July 1990, Arbel Holding instructed Bank Luemi to close its accounts and transfer the assets to an account in the name of Isidor and Marie, which ended with the digits '617. Id. ¶ 15. On April 25, 1997, Isidor, Marie, and Bert opened an account with Bank Luemi in the name of "Acuva Bat Itzhak," which also ended with the digits '617 ("'617 Account") and therefore appears to be same as the account opened in July 1990. Id. ¶ 16. Isidor, Marie, and Bert requested that the account contain the name "Acuva Bat Itzhak" but not any of their names and to hold all mail concerning the account rather than transmit it to the United States. Id. ¶ 18. Thereafter, in 2005 and 2006, Marie signed on behalf of "Acuva Bath Itzhak" to acknowledge receipt of mail held at Bank Leumi concerning the '617 Account, signed instructions to Bank Leumi regarding how funds in the '617 Account should be invested, and signed a declaration with respect to the Leumi Account stating that she was not a resident of Israel for purposes of the Israeli Income Tax Ordinance. Id. ¶¶ 19–21.

Second, Marie had a financial interest in an account with Union Bancaire Privee ("UBP") in Switzerland. Id. ¶ 25. On July 13, 2006, a Panamanian entity with the name "Acuva Bath Itzhak Corp." was formed, without a business purpose, on Marie's behalf and opened an account with UBP ("UBP Account"). Id. ¶¶ 22–24. The UBP Account's opening agreement instructed UBP to hold mail concerning the account. Id. ¶ 26. Although, Acuva Bath Itzhak Corp. stated on a Swiss banking form that Marie was the "beneficial owne[r] of the assets," Acuva Bath Itzhak Corp. filed a false "Declaration of Non-U.S. Entity status" regarding the UBP account, which stated that it was the beneficial owner of the UBP Account for the purposes of U.S. Withholding Tax regulations. Id. ¶¶ 26, 28. On June 9, 2009, Marie and Jacqueline visited UBP in Geneva, Switzerland, withdrew cash from the UBP Account, and instructed UBP to close the account and transfer the assets pursuant to forthcoming instructions. Id. ¶ 29. The next month, Acuva Bath Itzhak liquidated the UBP Account to transfer the balance to an account with Bank Leumi in the name of Templaide Associates Inc. ("Templaide Account"). Id. ¶ 30.

Third, Marie had a financial interest in the Templaide Account. Id. ¶ 34. On June 23, 2008, a Panamanian entity named "Templaide Associates Inc." ("Templaide") was formed, without a business reason, on Marie's behalf and on July 31, 2008, Templaide opened an account with Bank Leumi, the Templaide Account. Id. ¶¶ 31–33. While opening the Templaide Account, Templaide provided a false "Declaration of Non-U.S. Entity Status" to Bank Leumi, which stated that the beneficial owner of the account was a corporation and not a U.S. citizen or resident. Id. ¶ 35. However, Templaide also provided to Bank Leumi a "Lawyer's Confirmation regarding the identification details of the parties controlling the Corporate Entity," which contradicted the "Declaration of Non-U.S. Entity Status" because it listed three British citizens, Marie, Jacqueline, and Jacqueline's husband as controlling Templaide. Id. ¶ 36. During 2010, the highest balance in the Templaide Account was $5,630,938. Id. ¶ 37. Although Marie was required to file an FBAR on or before June 30, 2011 reporting her interest in the Templaide Account, she did not. Id. ¶¶ 56, 57. On January 20, 2010, the Templaide Account was liquidated, the funds were converted to Euros and Swiss francs, and then the funds were transferred to an account at Mercantile Discount Bank B.M. in Tel Aviv, Israel in the name of "Uzi Pinchasi Adv. In Trust for Green Marie Mary" ("Mercantile Account"). Id. ¶ 38. However, Marie never reported the Mercantile Account to the United States on an FBAR. Id. ¶ 39.

Fourth, Marie had a financial interest in an account with the Bank of Jerusalem. Id. ¶ 43. On December 16, 2009, a Panamanian entity named "Black Pearl Worldwide Corporation" was formed, without a business reason, and thereafter opened an account with Bank of Jerusalem in Jerusalem, Israel in the name of Blackpearl Worldwide ("BoJ Account"). Id. ¶¶ 40–42. During 2010, the highest balance in the BoJ Account was $3,484,383 and during 2011, the highest balance was $3,572,440. Id. ¶¶ 44, 45. Although Marie was required to file an FBAR reporting her interest in the BoJ Account for 2010 and 2011, she did not. Id. ¶¶ 56–59. On October 22, 2012, Blackpearl Worldwide transferred the balance of the BoJ Account to another account. Id. ¶ 46.

Fifth, Marie had an interest in an account with BNP Paribas, S.A. Id. ¶ 47. On June 25, 1990, Isidor and Marie opened a joint account with United Overseas Bank...