United States v. Saydam

Background

The United States sued Tuncay Saydam under federal tax laws requiring annual Reports of Foreign Bank and Financial Accounts, commonly called FBARs. The parties did not dispute that Saydam held foreign accounts with a combined balance exceeding $10,000 from 2013 through 2017, was required to file FBARs during that period, and failed to file them timely. The only disputed legal issue was whether his failure was “willful,” which would make him liable for civil willful FBAR penalties.

Saydam maintained bank accounts in Turkey and Switzerland and later transferred funds from his Swiss accounts to Turkish accounts. From 2013 through 2017, he prepared his United States tax returns during in-person appointments with tax preparers at H&R Block in Delaware. He did not disclose his foreign accounts during those appointments and did not file FBARs. His tax returns from 2014 through 2017 answered “No” to Schedule B’s question asking whether he had a financial interest in or signature authority over a foreign account.

Summary-Judgment Standard

Summary judgment is proper only when there is no genuine dispute about a material fact and the moving party is entitled to judgment under the law. The court must view the evidence favorably to the nonmoving party and may not weigh evidence, decide which witnesses are credible, or resolve factual disputes. A factual dispute is genuine when a reasonable jury could decide the issue for the nonmoving party.

Willfulness

The governing statute imposes liability for willfully failing to file an FBAR. The court explained that courts interpreting the statute have treated willfulness as including knowing and reckless violations, and some courts have also included willful blindness. The court did not decide which precise definition governed because, under each definition discussed, a reasonable jury could conclude that Saydam’s conduct was negligent rather than willful.

The court emphasized that negligence does not establish willfulness and that recklessness requires more than merely failing to know something that a person should have known. The court also noted that the parties had not adequately briefed the willfulness standard and would need to analyze it more thoroughly when preparing jury instructions.

Disputed Evidence

The Government argued that Saydam’s false answers on Schedule B and his signatures under penalty of perjury established willfulness. Saydam argued that his H&R Block preparers never asked him about foreign accounts, so he did not understand that those accounts were relevant to his United States tax returns. The Government responded that the preparers testified they always asked clients about foreign accounts and that Saydam’s signatures alone established willfulness.

The court noted that courts disagree about whether signing a tax form, by itself, puts a person on notice of the FBAR requirement. It distinguished a case in which additional evidence supported a finding of recklessness, including use of a numbered account, concealment from a tax preparer, and failure to review an inaccurate return. The court found that Saydam did not use a numbered account and that some evidence suggested conduct inconsistent with an attempt to conceal his accounts, including providing a form listing his United States address and taxpayer identification number to a Swiss bank.

The court also found relevant disputes about the H&R Block appointments. Although the preparers testified that they always asked clients about foreign accounts, the record did not show exactly what they asked Saydam, and none remembered the details of his appointments. Saydam testified that the appointments lasted at most 20 minutes, that he relied on the preparer to complete the forms, and that he briefly reviewed only the amounts he owed. A reasonable jury could find that the short, routine interviews and signed tax forms did not establish willfulness, or could instead find that Saydam acted willfully by failing to review Schedule B or consult a tax preparer specializing in foreign income.

Disposition

Considering the evidence in the light most favorable to Saydam, the court held that a reasonable jury could determine that he acted negligently rather than willfully. The Government’s motion for summary judgment was denied. The court also denied as moot the Government’s objections to exhibits it did not rely on in deciding the motion.