United States v. Saydam

Background

The United States sued Tuncay Saydam, alleging that he willfully failed to comply with federal requirements to report foreign bank accounts on Reports of Foreign Bank and Financial Accounts, commonly called FBARs, from 2013 through 2017.

The court previously denied the Government’s motion for summary judgment on willfulness. Summary judgment is a decision without a trial when the evidence shows there is no genuine dispute about a material fact. The court found that a reasonable jury could conclude that Saydam acted negligently rather than willfully. The court also noted that the parties had not adequately addressed which definition of willfulness or recklessness applied in the FBAR context.

After that ruling, the Ninth Circuit decided United States v. Hughes. Hughes held that an objective recklessness standard applies to willful FBAR violations. Under that standard, the Government must show that the filer clearly should have known there was a serious risk that the filing requirement was not being met and that the filer could have easily found out for certain. The Ninth Circuit also stated that civil recklessness requires more than ordinary negligence.

Discussion

The Government sought reconsideration based on the new Ninth Circuit standard and argued that the court had not considered parts of the record relevant to that standard. The court rejected the argument that Hughes changed the result. It explained that its earlier order had already considered the objective recklessness standard and had stated that the summary-judgment motion was denied under any of the definitions of willfulness discussed there.

The court found that material factual disputes remained under Hughes. Saydam had submitted evidence that his tax-preparation appointments at H&R Block were brief and routine and that he did not remember anyone asking him about foreign accounts. He also submitted evidence that the H&R Block representatives who assisted him were not qualified to prepare returns involving foreign income.

The Government relied on letters from Saydam’s Swiss bank about the closure of his account and changing U.S. regulations, a withholding-tax questionnaire that Saydam signed, and a W-9 form that he completed for the Swiss account but not for his Turkish accounts. The Government argued that these materials put Saydam on notice of possible U.S. disclosure obligations and that he could have easily asked tax advisers or attorneys about them.

The court concluded that this evidence did not eliminate the factual disputes. A reasonable jury could find that the materials referred only generally to possible U.S. tax obligations and did not show that Saydam clearly should have known there was a serious risk he was violating the FBAR statute. The court also noted evidence that Saydam did not have access to the cited advisers or attorneys until months or years after receiving some of the materials, and that a jury could find it would not have been easy for him to learn about FBAR requirements from his Turkish attorneys.

Disposition

The court held that Hughes did not change the outcome of its earlier summary-judgment order and denied the Government’s motion for reconsideration. The opinion did not resolve the disputed factual question of whether Saydam’s failure to file was willful.