United States v. Jung Joo Park

Decision Date24 May 2019
Docket NumberNo. 16 C 10787,16 C 10787
Citation389 F.Supp.3d 561
Parties UNITED STATES of America, Plaintiff, v. Jung Joo PARK, Charles C. Park, James Park, Nina Park, and John Doe, as representative of the estate of Que Te Park, Defendants.
CourtU.S. District Court — Northern District of Illinois

W. Damon Dennis, Pro Hac Vice, Mary A. Stallings, Department of Justice, Tax Division, Washington, DC, AUSA, United States Attorney's Office, Chicago, IL, for Plaintiff.

David T. Arena, DiMonte & Lizak, Park Ridge, IL, Kevin K. McCormick, DeWald Law Group PC, Arlington Heights, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

HON. JORGE L. ALONSO, United States District Judge

Plaintiff, the United States of America, brings this action against surviving family members of Que Te Park to collect a financial penalty assessed against him for failing to report his foreign bank accounts. His children, defendants Charles C. Park, James Park, and Nina Park, have moved to dismiss the claims against them. Additionally, James Park has moved to quash service of process on behalf of his mother, Jung Joo Park. For the following reasons, the motions are denied.

BACKGROUND

The following facts are taken from the government's Third Amended Complaint and are assumed true at this early stage of the proceedings. Que Te Park ("Mr. Park") was a businessman who lived in Inverness, Illinois. Through his business entities, QT, Inc., and Q-Ray Company, Mr. Park sold "Q-Ray" bracelets. A Q-Ray bracelet was an ionized piece of jewelry that purported to relieve pain and arthritis

by affecting the wearer's "chi." Mr. Park's businesses sold Q-Ray bracelets via television infomercials, websites, and trade shows, generating net sales figures of approximately $87 million.

Mr. Park's wife, Jung Joo Park ("Mrs. Park") served as Secretary of QT, Inc. and Q-Ray Company. Their son Charles was an officer, shareholder, and director of QT, Inc., as well as a shareholder of Ion Ray Co., Ltd., a corporation that distributed Q-Ray bracelets. The Parks' son James was a full-time employee of QT, Inc., and served as a director, and he was also a shareholder of Ion Ray Co., Ltd. The Parks' daughter Nina was a shareholder of Ion Ray Co., Ltd., and Ion Ray, Inc., another corporation that marketed and sold Q-Ray bracelets.

In May 2003, the Federal Trade Commission ("FTC") filed suit against Mr. Park, his business entities, and Mrs. Park for false and misleading advertising of the Q-Ray bracelets. See Compl., FTC v. Que Te Park et al. , Case No. 03 C 3578, 2003 WL 22331260 (N.D. Ill. May 27, 2003), ECF No. 1. Following a bench trial, the court entered final judgment against Mr. Park and the business entities, granting relief that included disgorging approximately $16 million. See FTC v. QT, Inc. , 512 F.3d 858, 860 (7th Cir. 2008). Mr. Park allegedly returned to consumers only $11.8 million of the $16 million due to them, and the FTC moved for the appointment of a receiver to conduct an accounting, prevent dissipation of assets, recover fraudulently transferred assets, and repatriate foreign assets to satisfy the FTC's judgment.

Mr. Park filed for Chapter 7 bankruptcy protection in February 2007, just two days after the FTC filed its motion for appointment of a receiver. On May 3, 2007, the bankruptcy court approved the trustee's appointment of an examiner to investigate Mr. Park's affairs and determine whether he had concealed assets. The bankruptcy court ordered Mr. Park to surrender his property and sit for an examination, but sometime in late 2007 or early 2008, Mr. Park fled the country. The trustee filed an adversary proceeding to contest the discharge of Mr. Park's debts, alleging that he had concealed assets to defraud creditors.

On June 30, 2008, the United States Department of Justice sought an order from a federal court in Miami to authorize the Internal Revenue Service ("IRS") to use a John Doe summons to request information from Swiss bank UBS AG about United States taxpayers who may be using Swiss bank accounts to evade federal income taxes. Following service of the summons on July 21, 2008, the government received banking information for accounts of which Mr. and Mrs. Park were beneficial owners. Their tax returns did not reflect their interest in these Swiss bank accounts. The government alleges that Swiss banks' compliance with its attempts to obtain information from them was receiving publicity in 2008 and thereafter, which drove taxpayers such as Mr. Park to disclose foreign bank accounts they had not previously disclosed.

On June 10, 2010, Mr. Park filed amended tax forms for the years 2007 and 2008. Mr. Park had timely filed a 2007 Report of Foreign Bank Accounts ("FBAR") form, but he had only disclosed three foreign bank accounts on that form, and his 2007 Form 1040 reported interest income of only $9,900 from an HSBC bank account in China. In 2010, his amended form 1040X for 2007 showed additional income from foreign bank accounts totaling nearly $240,000. For 2008, Mr. Park had not timely filed any FBAR form, but in 2010, he filed a delinquent 2008 FBAR form, which disclosed not three but ten foreign bank accounts—the UBS account, four other Swiss bank accounts, two Chinese accounts, and three Korean accounts—containing more than $7 million.

Between 2008 and his death in 2012, Mr. Park made numerous transfers to Nina. From June 7, 2010, to May 4, 2012, he transferred $43,017 to Nina through her Chase bank account. In June 2008, through Mrs. Park, he provided Nina and Mrs. Park $280,000 to purchase a condominium at 2101 West Rice Street in Chicago, titled in the name of Nina and Mrs. Park. In 2009, Mrs. Park transferred her interest in the condo to Nina, making her the sole title holder, and Nina has earned rental income from the condo ever since.

In 2011, the IRS initiated an audit of Mr. Park's tax accounts. During the audit, the government learned that Mr. Park died in July 2012. Under the terms of a will executed and notarized in Illinois, his assets were to be placed into a revocable trust, which became irrevocable upon Mr. Park's death. The beneficiaries were the four defendants in this case. Mrs. Park was the Successor Trustee to Mr. Park; if she was unable to act as trustee, then Charles, James, and Nina ("the Park children") were Successor Co-Trustees.

Mr. Park owned substantial property in South Korea. After Mr. Park's death, despite the existence of the Illinois will and without probating it, Mrs. Park and Charles arranged with South Korean probate attorneys between November 2012 and January 2013 to oversee a sale of the South Korean property and a distribution of the proceeds of over $3.6 million to the Park children and Mrs. Park. Each of the Park children received $400,000 from the sale of the South Korean property. Mrs. Park received $2,300,000.

On November 21, 2014, the IRS assessed a penalty against Mr. Park of $3,509,429.50, fifty percent of the value of his foreign bank accounts, for his willful failure to file a timely FBAR form for 2008. The penalty remains unpaid.

The government's complaint consists of six counts: Count I, against Charles and Mrs. Park, as representatives of Mr. Park's estate, to reduce the 2008 FBAR civil penalty to judgment; Count II, against Mrs. Park, for fiduciary liability under 31 U.S.C. § 3713 ; Count III, for fiduciary liability of Charles Park under 31 U.S.C. § 3713 ; Count IV, to set aside fraudulent transfers under 28 U.S.C. § 3304 ; Count V, to set aside fraudulent transfers under the Illinois Fraudulent Conveyances Act; and Count VI, for federal common law restitution/unjust enrichment.

Mrs. Park now resides in South Korea, and the government has not served her there. The government attempted to serve her at James's home in Georgia. James moves to quash service. The Park children move to dismiss the complaint.

ANALYSIS

"A motion under Rule 12(b)(6) tests whether the complaint states a claim on which relief may be granted." Richards v. Mitcheff , 696 F.3d 635, 637 (7th Cir. 2012). Under Rule 8(a)(2), a complaint must include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The short and plain statement under Rule 8(a)(2) must " ‘give the defendant fair notice of what the claim is and the grounds upon which it rests.’ " Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson , 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) (ellipsis omitted)).

Under federal notice-pleading standards, a complaint's "[f]actual allegations must be enough to raise a right to relief above the speculative level." Twombly , 550 U.S. at 555, 127 S.Ct. 1955. Stated differently, "a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly , 550 U.S. at 570, 127 S.Ct. 1955 ). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). "In reviewing the sufficiency of a complaint under the plausibility standard, [courts must] accept the well-pleaded facts in the complaint as true, but [they] ‘need[ ] not accept as true legal conclusions, or threadbare recitals of the elements of a cause of action, supported by mere conclusory statements.’ " Alam v. Miller Brewing Co. , 709 F.3d 662, 665-66 (7th Cir. 2013) (quoting Brooks v. Ross , 578 F.3d 574, 581 (7th Cir. 2009) ).

Additionally, any claims of or including acts of fraud must comply with Federal Rule of Civil Procedure 9(b), which requires the pleading party to "state with particularity the circumstances constituting fraud." United States ex rel. Presser v. Acacia Mental Health Clinic, LLC , 836 F.3d 770, 775 (7th Cir. 2016). Although...

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