United States v. Burga

• Court: District Court, N.D. California
• Decided: November 27, 2023
• Docket: 5:19-cv-03246
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 SAN JOSE DIVISION 7 8 UNITED STATES OF AMERICA, Case No. 5:19-cv-03246-EJD 9 Plaintiff, ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR 10 v. SUMMARY JUDGMENT 11 FRANCIS BURGA, et al., Re: Dkt. No. 34 Defendants. 12 13 Plaintiff, United States of America (“the Government”), filed this action against 14 Defendants Francis Burga (“Francis”) and Francis Burga as the Administrator of the Estate of 15 Margelus Burga (“Margelus”) (collectively “Defendants”) for their failure to report an estimated 16 271 foreign bank accounts to the Internal Revenue Service (“IRS”) for the 2004–2009 reporting 17 years in violation of the Bank Secrecy Act (“BSA”). First Am. Compl. (“Compl.”), ECF No. 32. 18 The Government filed a motion for partial summary judgment seeking a finding that Defendants 19 had a financial interest in or authority over the 271 foreign bank accounts, and their failure to 20 report the accounts was willful. Pl.’s Mot. for Summ. J. (“MSJ”), ECF No. 34. Defendants filed 21 an opposition, and the Government filed a reply. Defs.' Opp’n to MSJ (“Opp’n”), ECF No. 38; 22 Pl.’s Reply in Support of MSJ (“Reply”), ECF No. 39. On October 27, 2023, the Court heard oral 23 arguments and took the matter under submission. ECF No. 43. For the reasons stated below, the 24 Court GRANTS IN PART and DENIES IN PART the Government’s motion for partial 25 summary judgment. 26 I. BACKGROUND 27 The Government is seeking duplicative amounts of $52,581,604 in penalties for 1 Defendants’ alleged willful failure to file Reports of Foreign Bank and Financial Accounts 2 (“FBARs”) for approximately 271 foreign bank accounts in 2004–2009. See Compl. ¶ 35. 3 The Court will begin its discussion by providing a brief overview of Defendants’ 4 background and business, the structure of foreign accounts, entities, and foundations (the 5 “Structure”), and Defendants’ history with FBAR reporting. 6 A. Margelus and Francis Burga 7 Margelus1 was a Romania-born United States citizen with a background in mechanical 8 engineering. Answer ¶ 19.2 Margelus founded Marburg Technologies Inc. (“Marburg”) to design 9 and manufacture precision components and assemblies for the data storage industry. Id. ¶ 20. 10 Francis is a Philippine-born United States citizen with a nursing degree in the Philippines 11 and an undergraduate degree in Business Management in the United States. Id. ¶ 16; Opp’n 2 12 (conceding undergraduate business degree). Francis co-founded Magnebit Corporation 13 (“Magnebit”) to supply magnetic heads and test heads for computers. Answer ¶ 18. Francis 14 developed customer relationships in Asia and was familiar with manufacturing functions in 15 Singapore. Dep. of Francis Burga (“FB”) 18:15–18, 21:5–8, ECF No. 34-1. 16 Margelus and Francis met around 1989 through their businesses after Marburg began 17 supplying Magnebit a computer part called a slider. Id. at 11:3–9. Margelus and Francis 18 developed a romantic relationship around 1990. Id. at 11:13–15. In 1991 and 1993, Margelus and 19 Francis had two children. Answer ¶ 24. They married in 1995. Id. ¶ 25. 20 In early 1990, Margelus convinced Francis to work with him as part of a new company, 21 Glide/Write USA3 (“GWUSA”), a “d.b.a.” of Marburg. Answer ¶ 22. Francis accepted the title of 22 Vice President of Manufacturing and Sales. FB 28:2–13. Approximately two years later, Francis 23 assumed two corporate officer positions for GWUSA: Treasurer and Secretary. Answer ¶ 23. 24 Francis brought customers with her from Magnebit over to GWUSA, and by 1995, GWUSA 25

26 1 Given their shared last name, the Court will refer to Defendants by their first names. 2 All citations to Defendants’ Answer indicate that Defendants concede the facts stated in the 27 corresponding paragraph of the Government’s Amended Complaint. See Compl. 3 GWUSA developed into GW Japan, GW Singapore, and GW Vietnam. See MSJ 25. 1 successfully established a business presence in Asia. Dep. of Marburg Technologies (Francis 2 Speaking as President) (“MT”) 87:4–10, ECF No. 34-4. Margelus died in January 2010, after 3 which time Francis took over all operations as President of GWUSA. Answer ¶¶ 5, 37. 4 Francis testified that, throughout their relationship, Margelus was physically and mentally 5 abusive. FB 133:17–134:9. Margelus kept financial information from Francis and forbade her 6 from asking questions about the business’s financials.4 Id. Margelus often told Francis to sign 7 documents, and he became very upset if Francis asked any questions, calling her “stupid” and 8 “imbecile,” and telling her that she did not need to know anything about the business’s financials. 9 Id. He would say these things in front of others, including colleagues and customers. Id. at 10 133:17–134:9; 88:15–20. Francis would avoid asking Margelus questions to evade this abuse, so 11 she often signed documents without reviewing them. Id. at 133:17–134:9. 12 B. The Structure 13 During the 2004–2009 reporting years, Margelus had caused to be created three foreign 14 foundations established in Liechtenstein, which owned at least twenty-five foreign tiered entities 15 across ten countries, which operated approximately 271 foreign bank accounts. See Compl. ¶ 12; 16 Opp’n 11 (indicating that Defendants do not dispute 271 foreign accounts); App. 1–10 (including 17 Structure charts created by Defendants’ financial advisor, Peter Meier, listing foundations and 18 entities); MSJ App. C, ECF No. 34-26 (list of foreign accounts). The Government refers to this as 19 the “Structure.” MSJ 1. The 271 foreign bank accounts are listed in the Government’s Appendix 20 C, but in the interest of brevity, the Court will provide a big picture overview of the relevant 21 accounts and entities. 22 1. UBS Accounts 23 In October 1993, Defendants opened a joint bank account—the first foreign account at 24 issue—with the Swiss Bank Corporation (now called Union Bank of Switzerland (“UBS”)). App. 25 125–65. Both Margelus and Francis appeared at UBS in person and signed the account 26

27 4 Defendants do not define “financials.” 1 documents. Id. The account was a “numbered account,” meaning it was maintained in secrecy 2 under the pseudonym “Rubag.” App. 126, 148. Six sub-accounts were later created under the 3 joint primary account. Id. at 151, 3907–79. 4 Francis concedes that she had a financial interest in the primary account, but she contests 5 that she had an interest in or authority over the sub-accounts. Opp’n 16. Further, apart from the 6 first UBS account she opened with Margelus in 1993, Francis testified that she did not know the 7 rest of the Structure existed until after Margelus’s death in 2010. FB 123:15–17; see also Dep. of 8 Peter Meier (“PM”) 46:8–11, ECF No. 34-3. 9 2. Aljohn 10 Margelus began creating the Structure’s tiered entities in 1995 by establishing Aljohn 11 Establishment (“Aljohn”) with the help of Peter Meier (“Mr. Meier”), financial advisor at the 12 Liechtenstein Global Trust. PM 17:21–18:7; 69:19–20. 13 In May 1995, Margelus and Francis met Mr. Meier in Liechtenstein. Answer ¶ 29. 14 Francis only briefly met Mr. Meier but did not participate in the substantive meeting between him 15 and Margelus. FB 41:4–11; PM 24:12–25:1. At this meeting, Margelus asked Mr. Meier to set up 16 a company in Liechtenstein to organize GW Asia sales outside of the United States. App. 3632; 17 PM 17:21–18:7. Margelus indicated to Mr. Meier that it was important for Margelus to build and 18 protect a fortune outside the United States. PM 438–13. Upon Margelus’s instruction, Mr. Meir 19 set up a Liechtenstein entity called Aljohn. Id. at 69:6–70:1, 124:2–5. Aljohn’s sole purpose was 20 to receive commission from a Liechtenstein entity called Ingenieurburo Koch Anstalt (“IKA”), 21 which was owned by Liechtenstein resident, Andrea Koch. Id. at 124:2–5, 125:25–126:9, 145:7– 22 13, 436:25–437:12. Mr. Meier introduced Margelus to Mr. Koch. Id. They set up an arrangement 23 whereby IKA would receive cash from GW Japan and GW Singapore sales and forward a portion 24 of the cash to Aljohn and another portion to GWUSA. Id. at 145:18–21, 147:22–148:11, 239:14– 25 19; App. 625–41; Opp’n 7. 26 3. Romphil Foundation 27 In 1996 Margelus worked with Mr. Meier to create the Romphil Foundation, a 1 Liechtenstein stiftung (a foundation closely resembling a United States trust, App. 18, 50) to hold 2 Aljohn and other assets. PM 33:2–5, 133:23–134:5. The 2004 bylaws designated Margelus as the 3 sole primary beneficiary for life, and Francis and their two children as second beneficiaries after 4 the death of the primary beneficiary. App. 2005. Margelus appointed himself as Romphil’s 5 protector and designated Francis as his successor. App. 2008–09. The Romphil Foundation 6 ultimately went on to create the remaining entities and hold the entire Structure until 2007. PM 7 33:2–5, 12–13, 133:23–134:5; see, e.g., App. B.1–B.6. 8 4. Bakewell Assets 9 In 1998, the Structure purchased Bakewell Assets, a British Virgin Islands shelf company. 10 PM 267:8–17. Margelus, Francis, and Mr. Meier were all directors of Bakewell. PM 383:1–11. 11 As directors, Margelus, Francis, and Mr. Meier collectively signed a 1998 resolution authorizing 12 Bakewell to open a bank account with LGT and to purchase a property in Hawaii. FB 81:9–14, 13 82:19–22, 84:3–4, 120:12–19; PM 292:3–16; App. 2199–212, 3640. Bakewell is listed as the 14 owner of three foreign accounts at the LGT bank: LGT x6.023, LGT x6.030, and LGT x7216. 15 App. 2020–24. Bakewell was also used to pay boarding school tuition for Francis and Margelus’s 16 children. Id. at 2221–45; 3646. 17 5. Micadema Foundation 18 After the IRS began its investigation into the Structure in 2007, Margelus transferred the 19 UBS accounts to a new stiftung, Micadema. App. 166–69; PM 108:10–13, 321:12–19, 322:11–15, 20 323:22–25. Micadema was created, and the accounts were transferred, on August 7, 2007, the 21 same day that the IRS interviewed Margelus. Id. 22 6. Marfran Foundation 23 Following the initiation of the IRS investigation, the Structure continued to change. See, 24 e.g., App. B.1–B. Amidst these changes, between 2007–2008, all assets in the Romphil 25 Foundation were transferred to Marfran, another stiftung in the Structure. App. 2623, 2586–91. 26 The Government alleges that the Structure still exists today. MSJ 34. 27 1 7. The Structure’s Benefits 2 The proceeds from the Structure were used to purchase for Defendants a multi-million 3 dollar home in Saratoga, CA, Hawaiian real estate, their children’s private boarding school tuition, 4 an Italian vineyard, a luxury tile business, a Swiss investment company, loans, and more. PM 5 75:20–76:14, 84:7–9, 161:12–19, 222:9–223:5, 278:1–11; 313:1–22, 341:24–342:17, 353:3–5, 6 353:22–354:9, 358:20–359:6, 467:9–19; FB 129:16–130; App. 2116–29, 2221–45, 3646. The 7 Government alleges that the Structure was ultimately used to divert and shelter at least $17 million 8 of GWUSA profits through a false invoicing scheme. MSJ 1. 9 A. FBARs 10 Neither Margelus nor Francis filed FBARs for the 2004–2008 reporting years. Margelus 11 and Francis’s tax preparer for these years, Marburg CFO B.G. Ebrahimi (“Mr. Ebrahimi”), 12 testified that he asked Margelus and Francis each year whether they had any foreign accounts, and 13 each year they said no. Dep. of B.G. Ebrahimi (“BG”) 28:22–30:19, 74:8–21, 89:21–90:17, 14 218:9–12, ECF No. 34-6. In 2009, Mr. Ebrahimi asked whether they had foreign accounts in an 15 email to both Margelus and Francis, but Margelus replied without copying Francis and said that he 16 did not have any foreign bank accounts. BG 36:7–16; App. 2879. However, Francis testified that 17 she was never involved in the preparation of their taxes. FB 141:18–142:9. Mr. Ebrahimi also 18 testified that he reviewed the forms with Margelus and Francis each year, but Francis testified that 19 she never reviewed the forms. BG 31:2–16; FB 141:18–142:9. Both Margelus and Francis signed 20 the tax form each year indicating that they did not have foreign accounts, but Francis testified that 21 she signed the documents without reading them to avoid Margelus’s abuse. FB 137:15–138:4. 22 Margelus passed away in January 2010, after which time Francis testified that she was 23 made aware of the Structure by opening IRS letters addressed to Margelus. FB 62:18–25. Francis 24 hired legal representation and filed the first FBAR on behalf of the Estate in 2010 for the 2009 25 reporting year. Id. at 61:19–23; App. 3037. However, Francis only reported 85 foreign accounts, 26 leaving approximately 62 foreign accounts unreported. App. 3037. Francis did not file an FBAR 27 on her personal joint tax return for the 2009 reporting year, which was also filed after Francis 1 became aware of the Structure. 2 II. LEGAL STANDARD 3 Under Federal Rule of Civil Procedure 56, a court may grant summary judgment only 4 when the moving party shows that there is no genuine dispute of material fact. A genuine dispute 5 exists if there is sufficient evidence that a reasonable fact finder could decide in favor of the 6 nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). And that dispute is 7 material if it might affect the outcome of the suit. Id. In determining if a genuine dispute of 8 material fact exists, a court must “tak[e] the evidence and all reasonable inferences drawn 9 therefrom in the light most favorable to the non-moving party.” Torres v. City of Madera, 648 10 F.3d 1119, 1123 (9th Cir. 2011). 11 The moving party bears the burden of persuading the Court that there is no genuine dispute 12 of material fact, and it also bears the initial burden of producing evidence that demonstrates there 13 is no dispute. Cunningham v. Medtronic, Inc., 2018 WL 4053446, at *2 (N.D. Cal. Aug. 24, 14 2018) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). When the moving party bears 15 the ultimate burden of persuasion, its initial burden of production is to “establish ‘beyond 16 controversy every essential element of’” its claim or defense. S. Cal. Gas Co. v. City of Santa 17 Ana, 336 F.3d 885, 888 (9th Cir. 2003) (citation omitted). If the moving party satisfies this initial 18 burden, the nonmoving party can nonetheless defeat summary judgment by showing “the 19 evidence, taken as a whole, could lead a rational trier of fact to find in its favor.” Id. 20 III. DISCUSSION 21 Under the Bank Secrecy Act (“BSA”), residents and citizens of the United States are 22 required to submit FBARs to the Commissioner of the IRS disclosing certain relationships with 23 foreign financial agencies. 31 U.S.C. § 5314(a); 31 C.F.R. § 1010.350. One covered relationship 24 includes “having a financial interest in, or signature or other authority over, a bank, securities, or 25 other financial account in a foreign country.” 31 C.F.R. § 1010.350(a). 26 Liability under the BSA for failing to submit an FBAR arises when four elements are met: 27 (1) the defendant is a United States citizen or lawful permanent resident, (2) the defendant has a 1 financial interest in, or signature or other authority over, a bank, securities, or other financial 2 account in a foreign country, (3) the total balance in the account exceeds $10,000, and (4) the 3 defendant willfully failed to disclose the account. See id. 4 Defendants concede that they are United States citizens and the total balance in all 5 accounts exceeded $10,000. Defendants further concede that Margelus had a financial interest in 6 all accounts and Francis had a financial interest in one UBS account, but not the remaining 7 accounts. Defendants argue that neither Francis nor Margelus willfully failed to file the FBARs. 8 That leaves two overarching questions for the Court to decide on this motion: 9 (1) Are there genuine disputes of material fact that Francis had a financial interest, signature 10 authority, or other authority over the Structure’s 271 foreign bank accounts during the 11 reporting years 2004–2009? 12 (2) Are there genuine disputes of material fact that Margelus and Francis acted willfully in 13 failing to file FBARs for the reporting years 2004–2009?5 14 A. Financial Interest, Signature Authority, or Other Authority 15 Defendants concede that Margelus had a financial interest in all the accounts at issue. 16 Opp’n 16. The only issue remaining is whether Francis had a financial interest, signature 17 authority, or other authority in the accounts at issue during the 2004–2009 reporting years. 18 The parties concede that the terms “financial interest,” “signature authority,” or “other 19 authority” were not defined in the FBAR statute or the applicable regulations during the reporting 20 years at issue. See MSJ 23–24; Opp’n 15. However, the parties reference the definitions from the 21 FBAR instructions during the relevant filing years, and the Treasury issued regulations largely 22 consistent with these FBAR instructions in 2011. See id.; 31 C.F.R. § 1010.350(e). 23 The FBAR instructions defined having a “financial interest” as being either (1) the owner 24 of record or (2) the holder of legal title or an account for which the owner of record or holder of 25

26 5 As an initial matter, Defendants object as to the use of the IRS’s interview of Margelus on 27 August 7, 2007, as hearsay. Opp’n 9. The Court did not rely on this document in its Order here, therefore the Court will not address Defendants’ evidentiary objection at this time. 1 legal title is: (a) an agent or nominee or someone acting on behalf of the person, (b) a corporation 2 that the person owns more than 50 percent of (directly or indirectly), or (c) a trust that the person 3 has a beneficial interest in more than 50 percent of the assets. App. 3040. 4 The instructions defined “signature authority” as being able to “control the disposition of 5 money or other property in it by delivery of a document containing his or her signature (or his or 6 her signature and that of one or more other persons) to the bank or other person with whom the 7 account is maintained.” Id. 8 The instructions defined “other authority” as being able to “exercise comparable power 9 over an account by direct communication to the bank or other person with whom the account is 10 maintained, either orally or by some other means.” Id. 11 While there is limited case law analyzing financial interest, signature authority, and other 12 authority in this context, the Court finds some cases instructive. For example, in United States v. 13 Clines, 958 F.2d 578, 583 (4th Cir. 1992), the Fourth Circuit found “other authority” where the 14 defendant had complete control over the corporation owning the bank account—while the 15 defendant was not listed as the owner of the account, the funds were at his disposal whenever he 16 wanted, and the currency was transferred directly to him at his direction. Id. Similarly, in United 17 States v. McBride, 908 F. Supp. 2d 1186, 1203 (D. Utah 2012), the District of Utah court found 18 authority and financial interest where the defendant maintained a deliberately disguised ownership 19 structure in which he could direct his corporation to place its profits in the offshore accounts. See 20 also, e.g., United States v. Markus, No. CV 16 2133, 2018 WL 3435068, at *5 (D.N.J. July 17, 21 2018) (noting that “[c]ourts have repeatedly found that ‘other authority’ exists where a foreign 22 account is held by someone who acts on behalf of another, or an entity that is indirectly controlled 23 by a U.S. person” and finding that the defendant had other authority where he solicited payments 24 to the account for his own purposes through his father and brother). 25 The Court sees two categories of accounts in the Government’s arguments that Francis had 26 a financial interest in or authority over the foreign bank accounts in the Structure. First, there are 27 the accounts where the Government supports its arguments with undisputed documentary evidence 1 from the banks, i.e., the UBS accounts, Raiffeisen x50.17, GKB x0.100, and LGT accounts 2 opened by Bakewell Asset. Second, there are accounts where there is no documentary evidence, 3 and the Government relies on disputed circumstantial evidence to show “other authority.” The 4 Court will parse out each below. 5 1. UBS Accounts 6 The Government argues that Francis had a financial interest in seven total UBS accounts 7 because she opened the primary account, x7.405, from which six sub-accounts were created. MSJ 8 25. Defendants concede that Francis had a financial interest in the UBS primary account x7.405 9 from 2004–2007, but Defendants contest that Francis had a financial interest, signature authority, 10 or other authority in any of the six UBS sub-accounts, or in the primary UBS account after it was 11 transferred to Micadema after 2007. Opp’n 16. The Court will separately analyze the UBS 12 accounts from 2004–2007, and the UBS accounts after 2007. 13 a. UBS Primary Account and Sub-accounts 14 The Government has provided UBS bank documents showing Francis’s signature on the 15 primary account UBS x7.405, App. 125–65, and bank statements listing the sub-accounts UBS 16 x405, x280.0, x280.1, x280.3, x280.4, x280.5 on the same documents as the primary account, 17 App. 151, 3907–79. Defendants’ sole argument in response to this evidence is that “the 18 documents offered do not support this claim.” Opp’n 16. Defendants did not expand on this 19 argument during the hearing. 20 The Court finds that there is no genuine dispute of material fact that Francis had a financial 21 interest in both the primary account UBS x7.405 and the sub-accounts UBS x405, x280.0, x280.1, 22 x280.3, x280.4, x280.5 from 2004–2007. The Government has presented UBS bank statements 23 listing the sub-accounts under the primary account in which Francis concedes financial interest. 24 App. 125–65, 151, 3907–79. This evidence supports a finding that UBS considered the owner of 25 record for the primary account to also be the owner of record for the sub-accounts. Under the 26 FBAR instructions at that time, being the owner of record for the sub-accounts at UBS gives 27 Francis a financial interest in those accounts. See App. 3040. Beyond vaguely claiming that the 1 documents do not support the Government’s conclusion, Defendants have not offered any 2 evidence to create a genuine dispute of this material fact. 3 b. UBS Accounts after the 2007 Transfer to Micadema 4 After Margelus was interviewed by the IRS in 2007, Margelus transferred all funds out of 5 the UBS accounts and into Micadema. PM 108:10–13, 321:12–19, 322:11–15, 323:22–25, 6 405:21–406:18; App. 166–69. The Government offers one argument as to why Francis retained 7 financial interest in UBS account x7.405 after it was transferred to Micadema after 2007: “[W]hen 8 the funds held in UBS x7405 were transferred to Micadema in 2007, Francis’ one-half interest in 9 these funds did not magically disappear; Micadema became the nominee for the Burgas even 10 though Margelus initiated the transaction.” MSJ 25. Defendants respond that the Government has 11 offered no evidence that Francis was listed on the Micadema documents or considered the owner 12 of these accounts by the bank. Opp’n 16. Further, Defendants highlight that the Government does 13 not offer any evidence that Micadema was the nominee for Francis. Id. at 16–17. 14 The Court finds that there are genuine disputes of material fact regarding whether Francis 15 retained her financial interest in the UBS accounts after they were transferred to Micadema in 16 2007. The Government offers no evidence to support its argument that Francis’s financial interest 17 in these funds remained after the transfer and summarily states that Micadema was the nominee 18 for the Burgas without defining nominee. See United States v. Quiel, No. CV-21-00094, 2023 WL 19 4351543, at *6–7 (D. Ariz. July 5, 2023) (finding no financial interest where the government 20 argued nominee theory without defining nominee, among additional factual disputes). 21 2. Raiffeisen x50.17 22 The Government argues that Francis had signature authority over Raiffeisen x50.17, 23 another foreign account under the Structure. MSJ 25. In support of its argument that Francis 24 could control the disposition of money with her signature, the Government provided Raiffeisen 25 bank documents showing Francis’s signature on a 10,000 EUR withdrawal from this account in 26 December 2009. App. 3821–24. Defendants rebut that the Government’s evidence is insufficient 27 because they did not provide a signature card from the bank. Opp’n 25. Defendants also argue 1 that Francis believed that Raiffeisen x50.1 belonged to Margelus, and she believed that she was 2 only added to the account after Margelus died. Id. 3 The Court finds that there are no genuine disputes of material fact regarding whether 4 Francis had signature authority over Raiffeisen x50.17. The ability to withdraw money from an 5 account using your signature is the quintessential definition of signature authority. The Court 6 rejects Defendants’ argument that the Government is required to also present a signature card from 7 the bank to show signature authority. The undisputed bank document showing Francis withdrew 8 10,000 EUR is enough to establish that Francis had the authority to make withdrawals from this 9 account. The Court also finds irrelevant Defendants’ argument that Francis did not think her name 10 was on the account. This contention does not create a genuine dispute over the fact that she did, in 11 fact, have the authority to withdraw funds using her own name in 2009. 12 3. GKB x0.100 13 The Government argues that Francis had signature authority over GKB x0.100, another 14 foreign account under the Structure. MSJ 25. In support of its argument that Francis could 15 control the disposition of money with her signature, the Government provided a bank document 16 showing Francis’s name on a 2009 signature card for this account. App. 3894–95. Defendants 17 counter that the Government has not presented evidence that she conducted any transactions with 18 this account. Opp’n 26. Defendants also suggest that this is not Francis’s real signature in their 19 opposition. Id. 20 The Court finds that there are no genuine disputes of material facts regarding whether 21 Francis had signature authority over GKB x0.100. The signature card supports a finding that 22 Francis would have been able to transact with the bank using her signature. The Court rejects 23 Defendants’ argument that the Government is also required to present evidence of transactions to 24 meet their burden. Further, while Defendants suggest that the signature may not belong to 25 Francis, Defendants do not argue, or provide evidence to support to argument, that this is in fact 26 not Francis’s signature; instead, they merely highlight that Francis has not affirmatively testified 27 that it is in fact her signature. Opp’n 17. This is not evidence that creates a genuine dispute of 1 material fact. 2 4. LGT Accounts Opened by Bakewell Assets 3 The Government argues that Francis had a financial interest or signature authority over 4 three foreign LGT accounts opened by Bakewell Assets: LGT x6.023, LGT x6.030, and LGT 5 x7216. MSJ 25; App. 2020–24. In support of its argument that Francis could control the 6 disposition of money with her signature, the Government presents a 1998 resolution Francis 7 signed as director authorizing Bakewell to open a bank account with LGT and to purchase a 8 property in Hawaii. FB 81:9–14, 82:19–22, 84:3–4, 120:12–19; PM 292:3–16; App. 2199–212, 9 3640. The Government also presents another resolution signed by Francis and the other directors 10 authorizing the sale of that property and wiring the proceeds to LGT x16AA (later classified as 11 x6.023). App. 2212. Defendants argue that Francis had no interest in or authority over Bakewell- 12 owned accounts because, “[a]lthough she signed a Bakewell resolution permitting Mr. Meier to 13 open an account at LGT[,] she had no recollection of this and no involvement with this account.” 14 Opp’n 11. 15 The Court finds that there are no genuine disputes of material facts regarding whether 16 Francis had signature authority over the LGT accounts opened by Bakewell. The resolutions show 17 that Francis used her signature as a director of Bakewell to authorize the creation of bank accounts 18 and wire proceeds from a property sale. Francis’s memory of this account or her involvement 19 with it does not change the undisputed fact that, by signing a resolution to open the foreign bank 20 account and authorizing the deposit of proceeds from the Hawaiian property sale, Francis did in 21 fact control the disposition of money or other property with her signature. 22 5. Remaining Accounts in the Structure 23 Francis’s financial interest, signature authority, or other authority in the remaining 24 accounts is not as apparent. As Defendants highlight, Francis was not considered the beneficial 25 owner of the remaining accounts by the relevant banks and there are no documents showing her as 26 having an interest in the accounts. Opp’n 24. Thus, the Government’s arguments rest on the 27 theory that Francis’s role in GWUSA provided her with “other authority” over the remaining 1 accounts.6 Reply 4–5. To have “other authority,” under the FBAR form definition, Francis had to 2 be able “exercise comparable power over an account by direct communication to the bank or other 3 person with whom the account is maintained, either orally or by some other means.” App. 3040. 4 The Government essentially argues that Francis “exerted significant, indirect authority” 5 over accounts in the Structure that related to GWUSA’s business entities, including GW Japan, 6 GW Singapore, and GW Vietnam, because of her role as Vice President of Marketing and Sales at 7 GWUSA. MSJ 25. The Government has provided evidence that as Vice President of Marketing 8 and Sales, Francis negotiated sales, set pricing, mandated payment terms on correspondences, and 9 directed customers to send purchase orders to GW Japan or GW Singapore rather than GWUSA. 10 MSJ 4. The Government argues that these duties show that she had authority over the foreign 11 bank accounts related to the entities where she sent purchase orders. Reply 4–5. 12 Defendants argue that the Government has failed to produce evidence sufficient to show 13 indirect authority over the accounts. Opp’n 17. While Defendants do not contest the fact that 14 Francis played a significant role in the sales and marketing division, Francis has testified 15 repeatedly throughout her deposition that she was not involved whatsoever in GWUSA’s financial 16 matters. See, e.g., MT 48:6–12; 96:14–19; 143:3–5; 214:10–215:5. Further, Francis testified that 17 she was unable to exert any authority over the company’s finances because of Margelus’s abuse 18 and control over all finances. FB 88:15–20; 133:17–134:9. 19 The Court finds it instructive to review a similar set of circumstances in McBride. There, 20 the court in the District of Utah found “other authority” where the defendant maintained a 21 deliberately disguised ownership structure in which he could direct his corporation to place its 22 profits in the offshore accounts. McBride, 908 F. Supp. 2d at 1203. The court found that the 23 defendant exercised substantial control over the accounts by communicating with the 24 corporation’s employees and instructing them on how to transfer funds specifically to the foreign 25

26 6 The Government’s MSJ groups Defendants together as “the Burgas” in its financial interest 27 arguments, so the Court cannot discern which arguments related to which Defendant. The Court pulls the Government’s arguments specific to Francis from its Reply and oral arguments. 1 bank. Id. The corporation initiated bank transfers at request of the defendant, and none of his 2 requests to transfer were denied. Id. The corporation treated the accounts as the defendant’s 3 accounts and the defendant had the expectation of enjoying the benefit of the assets. Id. 4 The facts here are distinguishable. There is no evidence that Francis herself maintained the 5 deliberately disguised ownership Structure, instructed the corporation’s employees to transfer 6 funds to a foreign bank, initiated transfers to and from the banks, or expressed the expectation of 7 being able to transact with the banks. While Francis admittedly had contact with the Structure’s 8 invoicing scheme by sending purchase orders to GW Asia, which then sent cash to IKA and then 9 back to GWUSA, her role could conceivably have stopped there. Based on her testimony, Francis 10 had no role in the banking operations behind the scenes, and this conclusion is supported by 11 Francis’s testimony that Margelus alone controlled the business and family finances and prevented 12 Francis’s involvement because of physical and mental abuse. A trier of fact could conceivably 13 find that Francis’s role in GWUSA was removed enough from the financial aspect of the company 14 whereby Francis had no authority over the remaining bank accounts in the Structure. 15 Given the genuine disputes of material fact regarding Francis’s authority over the Structure 16 as a Vice President at GWUSA, the Court finds summary judgment regarding the remaining 17 accounts inappropriate at this time.7 18 * * * 19 The Court finds that there are no genuine disputes of material fact regarding whether 20 Francis had a financial interest, signature authority, or other authority over UBS accounts x7.405, 21 x405, x280.0, x280.1, x280.3, x280.4, and x280.5 (from 2004 until the 2007 transfer), Raiffeisen 22 x50.17, GKB x0.100, and LGT x6.023, LGT x6.030, and LGT x7216. However, there remain 23 genuine disputes of material fact regarding whether Francis had a financial interest, signature 24 authority, or other authority in the remaining accounts in the Structure. 25 26 7 The Government also argues that Francis had financial interest in all the accounts under a California community property theory because she was married to Margelus. MSJ 26. There is 27 no legal support for this theory in the FBAR context and the Government did not elaborate at oral arguments, so the Court declines to grant the Government’s motion on this ground. 1 B. Willfulness 2 Section 5321(a)(5) does not define willfulness. The Ninth Circuit and the Supreme Court 3 also have not defined willfulness for the purposes of this statute. However, “courts adjudicating 4 civil matters have held that an individual is willful where he/she exhibits a reckless disregard of a 5 statutory duty.” Jones v. United States, No. SACV1900173JVSRAO, 2020 WL 4390390, at *6 6 (C.D. Cal. May 11, 2020) (quoting United States v. Bussell, 2015 WL 9957826, at *5 (C.D. Cal. 7 Dec. 8, 2015) (citing Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 57 (2007)). 8 The Third, Fourth, Eleventh, and Federal Circuits have applied an objective reckless 9 standard to willful FBAR violation cases. See, e.g., United States v. Horowitz, 978 F.3d 80, 88 10 (4th Cir. 2020) (“[W]e conclude that, for the purpose of applying § 5321(a)(5)’s civil penalty, a 11 ‘willful violation’ of the FBAR reporting requirement includes both knowing and reckless 12 violations . . . . ”); Norman v. United States, 942 F.3d 1111, 1115 (Fed. Cir. 2019) (determining 13 that willfulness in the context of § 5321(a)(5)(C) includes recklessness); Bedrosian v. United 14 States, 912 F.3d 144, 152 (3d Cir. 2018) (agreeing that willfulness in this context is met by 15 knowingly or recklessly failing to file an FBAR); United States v. Rum, 995 F.3d 882, 889 (11th 16 Cir. 2021) (“[W]e hold that willfulness in § 5321 includes reckless disregard of a known or 17 obvious risk. In so doing, we join with every other circuit court that has interpreted this 18 provision.”). District courts in the Ninth Circuit have also largely applied an objective 19 recklessness standard. See, e.g., Kurotaki v. United States, No. CV 22-00063 JMS-WRP, 2023 20 WL 6604892, at *4 (D. Haw. Oct. 10, 2023); United States v. Goldsmith, 541 F. Supp. 3d 1058, 21 1083 (S.D. Cal. 2021); United States v. Cohen, 2019 WL 8231039, at *7 (C.D. Cal. Dec. 16, 22 2019); United States v. de Forrest, 463 F. Supp. 3d 1150, 1157 (D. Nev. 2020).8 23 The Third and Fourth Circuits analyze objective recklessness in the FBAR context by 24 considering whether the taxpayer “(1) clearly ought to have known that (2) there was a grave risk 25

26 8 Defendants urge the Court to adopt a subjective standard requiring willful intent, arguing that the standard should be stricter considering the substantial fine here. Opp’n 19. Considering the 27 guidance from other circuits and district courts within the Ninth Circuit, the Court declines Defendants’ invitation and will adopt the objective recklessness standard. 1 that an accurate FBAR was not being filed and if (3) he was in a position to find out for certain 2 very easily.” Horowitz, 978 F.3d at 89 (quoting Bedrosian, 912 F.3d at 153 (cleaned up)). 3 Courts have also held that “[w]illfulness may [] be proven ‘through inference from conduct 4 meant to conceal or mislead sources of income or other financial information.’” Id. (quoting 5 United States v. Williams, 489 F. App'x 655, 658 (4th Cir. 2012)). However, courts are split as to 6 whether signing a tax form puts a person on constructive notice of the FBAR requirements such 7 that the failure to comply is evidence of willfulness. Compare, e.g., Williams, 489 F. App'x at 659 8 (holding that signing a tax form is prima facie evidence that the taxpayer had constructive 9 knowledge of the FBAR requirements); United States v. Bohanec, 263 F. Supp. 3d 881, 890 (C.D. 10 Cal. 2016) (same); with United States v. Flume, 2018 WL 4378161, at *7 (S.D. Tex. Aug. 22, 11 2018) (declining to follow the holdings in Williams); United States v. Schwarzbaum, 2020 WL 12 1316232, at *7 (S.D. Fla. Mar. 20, 2020) (same). 13 There is limited case law in the Ninth Circuit analyzing willfulness in this context, but the 14 Court finds a few opinions instructive. In United States v. Cohen, No. CV 17-1652-MWF (JCX), 15 2019 WL 8231039, at *7 (C.D. Cal. Dec. 16, 2019), the court found genuine disputes of material 16 fact regarding willfulness. The government identified “substantial conduct” demonstrating 17 willfulness, including the defendant signing various paperwork setting up the foreign account, 18 signing multiple tax forms referencing FBAR requirements, being told by her attorney about the 19 FBAR requirements, and being able to have easily asked her husband, accountant, or attorney 20 about FBAR requirements. Id., at *7. The defendant identified genuine disputes of material fact, 21 including that she did not know the bank account was foreign, she did not know how much money 22 was in the accounts, and she disputed the fact that her attorney told her of the requirements. Id. 23 The court found that these disputes precluded it from finding willfulness “as a matter of law.” Id. 24 In United States v. Katholos, No. 17CV531JLSHKS, 2022 WL 3328223, at *8 (W.D.N.Y. 25 Aug. 10, 2022), the district court in the Western District of New York also found genuine disputes 26 of material fact regarding willfulness. The government offered evidence that the defendant failed 27 to communicate with her accountant about her foreign accounts, failed to review the returns 1 prepared for her, and concealed her foreign accounts by using numbered USB accounts, keeping 2 all mail from the accounts at UBS, and not identifying herself as a United States citizen at UBS. 3 Id. The defendant identified genuine disputes of material fact, including that the materiality of the 4 failure to communicate with her accountant would depend on a credibility determination of the 5 accountant’s testimony, the use of numbered accounts and holding mail cannot be viewed in a 6 vacuum, and the defendant used her United States passport to open the UBS accounts. Id. The 7 court found that these disputes precluded it from finding willfulness as a matter of law, stating: “A 8 jury could . . . conclude that Katholos's conduct reveals willful blindness, or establishes a pattern 9 of conduct so unreasonable as to constitute reckless disregard. Still, . . . a reasonable jury could 10 conclude otherwise. And that is enough to make summary judgment on the issue of willfulness 11 inappropriate.” Id. (cleaned up) (quotations omitted) (quoting Island Software and Computer 12 Serv., Inc. v. Microsoft Corp., 413 F.3d 257, 264 (2d Cir. 2005)). 13 1. Margelus 14 The Court finds that there are no genuine disputes of material fact as to whether Margelus 15 willfully failed to comply with the FBAR filing requirement. 16 2004–2008 17 Defendants concede the following facts. Margelus alone managed the family’s financial 18 affairs as well as the business affairs of Marburg, with the assistance of Mr. Ebrahimi. Opp’n 5. 19 Margelus, along with Francis, opened the first foreign account at issue in 1993 at UBS. Id. at 26. 20 Margelus told Francis that he needed to open the account for consulting work and needed Francis 21 as a co-signer. Id. at 6. Approximately two years later, Margelus met with Mr. Meier in 22 Liechtenstein and set up Aljohn to hold profits for GWUSA. Id. at 6–7. Margelus set up the 23 agreement with IKA whereby IKA received funds from GW Asia sales and remitted a portion of 24 those funds to GWUSA and a portion to Aljohn. Id. at 7. Margelus had advised Francis and 25 others at GWUSA, including Mr. Ebrahimi, that IKA was acting as a middleman or sales 26 representative for GWUSA. Id. Margelus and Mr. Ebrahimi handled GWUSA’s finances and 27 accounting and handled tracking or accounting for transactions with IKA. Id. In 1996, Margelus 1 created Romphil to hold Aljohn and other assets. Id. In 2007, Margelus created Micadema, which 2 held other bank accounts in the Structure. Id. at 8. Mr. Meier provided the balance sheets and 3 profit and loss statements from the foreign foundations to Margelus. Id. at 9. Mr. Ebrahimi 4 testified that he prepared the 2004 to 2008 tax returns and verbally asked Margelus the question 5 about foreign accounts each year. Id. at 12. Mr. Ebrahimi received a “no” response each year, 6 which caused him to answer “no” on the Schedule B question about foreign accounts each year. 7 Id. In 2009, regarding the tax return for the 2008 year prior, Mr. Ebrahimi asked Margelus about 8 foreign accounts in email, to which Margelus angrily responded that he did not. Id. at 13. Mr. 9 Ebrahimi testified that each year, Margelus would review the completed returns before they were 10 submitted and would sign them. Id. Margelus remained in control of GWUSA and was making 11 business decisions up until his death. Id. at 9. 12 The Government argues that Margelus was not only the beneficial owner of the Structure, 13 but that he was in complete control. MSJ 8–9. Margelus instructed Mr. Meir to create the 14 foundations and entities, actively managed and held control over the Structure, and consistently 15 reviewed financial statements from the entities. Yet, the Government highlights that the 16 undisputed evidence shows that Margelus denied having foreign accounts to Mr. Ebrahimi and 17 reviewed the tax forms indicating that he did not have foreign bank accounts prior to signing and 18 filing them each year. BG 28:22–30:19, 36:7–16; 74:8–21, 89:21–90:17; App. 2879. The 19 Government also argues that the Court can infer willfulness through Margelus’s conduct of trying 20 to conceal forms of income through this intricate Structure of foreign foundations, entities, and 21 bank accounts. MSJ 29. Taken together, the Government argues that these facts show not only 22 objective recklessness, but an intentional willful failure to file FBARs. Id. at 32. 23 Defendants argue that there are genuine disputes of material fact under two theories. First, 24 Defendants argue that Margelus had been advised by Mr. Meier that under Liechtenstein law he 25 had no legal rights to the Foundation assets, therefore he “could have in good faith believed that he 26 did not have a financial interest in the bulk of the accounts at issue which would create a factual 27 issue as to his recklessness as to those accounts.” Opp’n 23. Second, Defendants argue that there 1 is a factual dispute as to whether Mr. Ebrahimi asked Margelus about foreign accounts in each of 2 the years at issue. Id. at 23–24. 3 The Court finds that Defendants’ arguments do not create a genuine dispute of material 4 fact. Under the Third and Fourth Circuits’ test, the undisputed facts show that Margelus 5 objectively ought to have known, or even subjectively did know, that there was a grave risk that 6 FBARs were not being filed and was able to find out for certain very easily. 7 First, Margelus ought to have known about the FBAR requirements. He personally 8 authorized and controlled 271 foreign accounts. Each year, he was asked whether he had foreign 9 accounts. A reasonable person in the same or similar circumstances—with a known financial 10 interest in 271 foreign accounts who is asked each year while preparing his taxes whether he has 11 foreign accounts—ought to have made the connection that he was required to report these 12 accounts on his taxes. While Defendants claim that there is a factual dispute as to whether Mr. 13 Ebrahimi asked Margelus about foreign accounts each year, Defendants have not provided any 14 evidence to rebut Mr. Ebrahimi’s testimony (unlike with Francis below). Defendants also 15 highlight that Mr. Ebrahimi himself did not know about FBAR requirements until 2008. Id. 16 However, this does not change the fact that Mr. Ebrahimi still asked Margelus each year about the 17 foreign bank accounts based on the questions prompted by TurboTax rather than his own 18 knowledge of the requirements. BG 218:9–12. 19 Second, there is no dispute that Margelus ought to have known that there was a grave risk 20 that the filing requirements were not being met. When Margelus told Mr. Ebrahimi that he did not 21 have any foreign bank accounts, and reviewed and signed the tax forms indicating that he did not 22 have foreign bank accounts, Margelus should have known that there was a grave risk, indeed 23 certainty, that the filing requirements were not being met. The Court is unpersuaded by 24 Defendants’ argument that Margelus could have in good faith believed that he did not have to file 25 FBAR statements because Mr. Meier told him that he had no legal rights to the foundations’ assets 26 under Liechtenstein law. As an initial matter, Defendants have offered no evidence to suggest that 27 Margelus did in fact believe he had no rights in the foundations. But further, even if they had 1 offered this evidence, under the objective standard, a reasonable person in the same or similar 2 circumstances ought to have known that he would still be required to report the foreign bank 3 accounts that held his income and supported his business and family, regardless of whether he had 4 legal rights to the foundations under Liechtenstein law. 5 Third, even if it is unclear whether Margelus objectively ought to have known about the 6 requirements and risk they were not being met, Margelus was in a position where he could have 7 very easily discovered this information. When Mr. Ebrahimi asked him if he had foreign bank 8 accounts, given his control over the company and financial institutions, Margelus was very easily 9 able to find out why he would be asked that question. When Margelus undisputedly reviewed his 10 tax forms prior to signing and filing, Margelus was again presented another opportunity to ask 11 questions and find out why that question would be on the form. 12 Finally, based on the undisputed size and intricacies of the Structure, the Court can infer 13 that Margelus’s conduct in creating and maintaining this Structure reflected an effort to conceal or 14 mislead sources of income or other financial information. While this conduct alone does not 15 satisfy the Government’s burden, it adds important context to the undisputed facts above and 16 allows the Court to further infer willfulness. 17 2009 Filing 18 Margelus did not file an FBAR while he was alive. After he died in January 2010, his 19 Estate, administered by Francis, filed its first FBAR for the 2009 reporting year. FB 61:19–23; 20 App. 3037. However, the Estate claimed only 85 of the estimated 147 foreign accounts existing 21 throughout the 2009 filing year, excluding an estimated 62 accounts. App. 3037. Given that 22 Francis filed this FBAR on behalf of the Estate, to aid in the flow of the analysis, the Court will 23 address this filing in the section below analyzing Francis’s willfulness. 24 2. Francis 25 Francis, as the Government states, “presents a different set of circumstances.” MSJ 21. 26 2004–2008 27 The Court finds that there are many genuine disputes of material facts regarding whether 1 Francis should have known about the FBAR filing requirements and the grave risk that they were 2 not being met, or was able to find out very easily, for the filing years 2004–2008. This issue will 3 ultimately rely on a credibility determination, which is inappropriate for summary judgment. 4 First, there is conflicting evidence regarding whether Francis had knowledge, or should 5 have had any knowledge, of most9 of the foreign bank accounts in the Structure during the 6 reporting years 2004–2008. The Government argues that she ought to have had knowledge of the 7 Structure because of her role as Vice President of Marketing and Sales at GWUSA, but Francis’s 8 testimony contradicts this argument. Francis testified that her title did not give her the access to 9 information that the Government suggests. MT 48:6–12; 96:14–19; 143:3–5; 214:10–215:5. 10 While Francis managed sales and marketing, Francis testified that she was not actually given any 11 access to the company’s finances and was prohibited from even asking questions due to 12 Margelus’s abuse. Id.; see also FB 88:15–20; 133:17–134:9. Even in his illness, Francis testified 13 that Margelus maintained control over the company. MT 16:5–6, 214:5–12. While Francis was 14 included on invoices referencing some of the foreign entities in the Structure, she testified that she 15 believed that the foreign entities played legitimate roles in GWUSA’s business. MT 48:6–15, 16 102:11–15, 102:25–103:8, 131:9–25, 133:7–17, 186:10–20, 198:12–19. Under the objective 17 analysis, a reasonable jury could find that a person in the same or similar circumstances—working 18 as Vice President of Sales and Marketing, carrying out international invoicing and sales 19 negotiations, and facing the type of abuse Francis describes that prevented her from involving 20 herself in the company’s financials or asking questions—should not necessarily have known about 21 the Structure. To conclude either way, the jury would have to determine the credibility of 22 Francis’s testimony. 23 Second, even if Francis knew or ought to have known about the accounts,10 there is 24

25 9 Notably, the Government does not specify which accounts they allege Francis knew about or should have known about. Instead, the Government argues that Francis should have had 26 knowledge of the entire Structure because of her role as Vice President of Marketing and Sales without specifically tying her role to each account at issue. 27 10 Further, even if Francis knew or should have known about the Structure, the Government will still need to prove that she had a financial interest, signature authority, or other authority over the 1 conflicting evidence regarding whether she ought to have known about the FBAR requirements 2 and the grave risk that they were not being met. Mr. Ebrahimi testified that he asked Margelus 3 and Francis whether they had foreign accounts each year, but Francis testified that she was never 4 asked and was never involved in the preparation of the tax forms. BG 28:22–30:19, 74:8–21, 5 89:21–90:17; FB 141:18–142:9. The Government also presented an email Mr. Ebrahimi sent to 6 both Margelus and Francis asking whether they had foreign bank accounts, but Margelus replied 7 without including Francis. BG 36:7–16; App. 2879. There is no evidence that Francis saw the 8 original email since she did not respond to it and was not included in the correspondences 9 following. BG 36:7–16; App. 2879. It is possible that Francis did not read the email. While her 10 signatures on the tax forms indicating that she did not have any foreign bank accounts could be 11 considered evidence that Francis had constructive knowledge of the FBAR requirements and the 12 risk they were not met, this alone is not enough to show willfulness. 13 Third, regardless of whether Francis clearly ought to have known that there was a grave 14 risk that the filing requirements were not being met, there are genuine disputes of material fact 15 regarding whether she had the opportunity to find out for certain very easily. Given Margelus’s 16 alleged abuse and control over the family and business finances, it is possible that Francis was not 17 able to easily ask questions about the Structure without facing further abuse. And given her 18 testimony regarding her more limited role in the company, it is possible that she did not have 19 access to the spaces, conversations, and documents that would have given her the opportunity to 20 discover the foreign accounts, the obligation to report, and the risk that they were not reporting. 21 Finally, unlike Margelus, the Court cannot infer willfulness based on conduct to conceal or 22 mislead sources of income. While Francis operated sales and marketing, including managing 23 invoices to GW Singapore and GW Japan which sometimes referenced other entities in the 24 Structure including Aljohn and IKA, Francis testified that she believed IKA, GW Singapore, and 25 GW Japan played a legitimate role in GWUSA’s sales process, and she did not know about Aljohn 26

27 remaining accounts to prove that her failure to file FBARs as to those accounts was willful. 1 until after Margelus’s death. MT 48:6–15, 102:11–15, 102:25–103:8, 131:9–25, 133:7–17, 2 186:10–20, 198:12–19. 3 Given the breadth of disputed material facts, the Court finds summary judgment as to 4 Francis’s willfulness during the reporting years 2004–2008 inappropriate at this time. 5 2009 6 However, the facts differ as to the FBAR for the 2009 reporting year. 11 After Margelus 7 died in January 2010, Francis took over operations as President of GWUSA. MT 16:2–6. On 8 March 10, 2010, Francis received multiple letters addressed to Margelus from the IRS asking for 9 information about several offshore entities. App. 2888–89, 2891–907. After receiving the letters, 10 Francis retained counsel to investigate the Structure. FB 60:5–8, 61:14–16. Francis then had her 11 2009 joint tax return prepared by H&R Block. FB 139:12–17. Despite hiring counsel and 12 investigating the accounts in the Structure, and despite withdrawing 10,000 EUR from Raiffeisen 13 x50.17 in December 2009, Francis still answered no when asked whether she had “an interest in or 14 a signature or other authority over a financial account in a foreign country.” App. 2577, 3821–24. 15 Given these new facts after Margelus’s death, the Court finds that, specifically for the 2009 16 reporting year, Francis ought to have known that there was a grave risk that FBARs were not 17 being filed, and she was able to find out for certain very easily. 18 First, there is no longer conflicting evidence regarding whether Francis ought to have 19 known about the Structure. At this point in time, Francis had received correspondences from the 20 IRS regarding some of the accounts and hired legal representation to investigate the Structure. 21 Just months prior to filing, Francis personally withdrew 10,000 EUR from one of the foreign 22 accounts in the Structure. App. 3821–2. Francis had enough information about the Structure to 23 discover the accounts in which she had financial interest, signature authority, or other authority. 24 Second, there is no longer conflicting evidence regarding whether Francis ought to have 25 known about the FBAR requirements and the grave risk that they were not being met. Unlike the 26

27 11 The Court’s willfulness finding only applies to the accounts where the Court found financial interest, signature authority, or other authority during the 2009 reporting year. 1 2004–2008 reporting years, Francis does not contest that she worked with H&R Block to file her 2 2009 returns. While Francis contests that she was asked about foreign accounts by H&R Block, 3 Francis also signed her tax form indicating that she had no foreign bank accounts, and unlike the 4 prior years, Margelus was no longer alive to pressure Francis to sign documents without reviewing 5 them. A reasonable person in the same or similar circumstances ought to have noticed this 6 question and made the connection that she was required to report her foreign bank accounts on her 7 taxes. 8 Third, there are no longer genuine disputes of material fact regarding whether Francis had 9 the opportunity to easily discover the Structure and FBAR requirements. Francis was now the 10 President of GWUSA. She had access to an attorney, an accountant, and all GWUSA’s records. 11 Francis was no longer under the control of Margelus and no longer pressured to not ask questions 12 about the company’s finances. When Francis was asked about whether she had foreign accounts 13 for the 2009 reporting year, unlike the years prior, Francis had the opportunity to find out about 14 the FBAR requirement and the likelihood that it was not being met very easily. 15 Therefore, the Court finds there are no genuine disputes of material facts regarding 16 whether Francis’s failure to file an FBAR for the 2009 reporting year—after having all the 17 resources and information available to her to investigate the accounts and after personally 18 withdrawing money from the foreign Raiffeisen account mere months prior—was willful. 19 2009 (On Behalf of the Estate) 20 Similarly, the facts differ as to the FBAR Francis filed on behalf of the Estate in 2010 for 21 the 2009 reporting year, which reported only 85 foreign bank accounts, omitting approximately 62 22 accounts. App. 3037. The Government argues that the failure to report the remaining 62 accounts 23 was also willful. During oral arguments, the Government classified the attempt at compliance as 24 halfhearted and argued that this filing was a mere extension of the previous pattern of willfulness. 25 ECF No. 43. 26 Defendants argue that willfulness here is a question of fact. The Estate relied on counsel in 27 determining there were only 85 accounts. Opp’n 26. During oral arguments, Defendants argued 1 that the number of accounts may be wrong, but it was based on the information Mr. Meier 2 provided to Francis, and there is a factual question as to whether relying on Mr. Meier was 3 reckless or willful, or merely negligent. ECF No. 43. Further, Defendants argue that omitting the 4 62 accounts could have been an innocent mistake—while there were 147 accounts throughout 5 2009, Defendants suggest that Francis reported only 85 accounts because there were only 85 6 accounts at the end of the year. Id. at 1–2, 13, 24. 7 The Court agrees that the 2009 filing year does present a different set of circumstances 8 than the 2004–2008 filing years. However, the Court still finds that the failure to report an 9 estimated 62 accounts was willful. As previously stated, Francis was now in a position of great 10 power at GWUSA and had access to attorneys, accountants, and the company’s financials. Upon 11 discovering the Structure after Margelus’s death, particularly after discovering the great breadth of 12 the Structure, a reasonable person in the same or similar circumstances should have made every 13 effort to fully investigate the foreign accounts. Instead, Francis, on behalf of the Estate, relied 14 completely on Mr. Meier to investigate, and she once again signed the forms without reviewing 15 the information. While Defendants suggest that Francis believed she only had to list the accounts 16 at the end of the year rather than throughout the year, Defendants offer no evidence to support this 17 suggestion. Further, the instructions clearly require reporting any foreign account that exceeded 18 $10,000 “at any time during the calendar year.” App. 3040. Considering this clear instruction and 19 the lack of evidence supporting the suggestion that Francis believed she only had to report the 20 accounts existing at the end of 2009, Defendants’ argument does not move the needle enough to 21 create a genuine dispute of material fact. 22 Ultimately, when filing the 2009 report on behalf of the Estate, Francis was no longer 23 unaware of the Structure, no longer under the control of an abusive spouse, no longer pressured to 24 sign documents without reading them, and no longer prevented from reviewing family or business 25 financial information. Considering this significant change in circumstances, Francis, on behalf of 26 the Estate, ought to have known about the missing 62 accounts and the grave danger that FBARs 27 were not filed for them, and Francis was clearly in a position of power with access to the resources 1 necessary to have easily discovered the accounts and requirement that they all be reported. 2 Therefore, the Court finds no genuine dispute of material fact regarding whether the Estate 3 willfully failed to report the remaining 62 accounts for the 2009 reporting year. 4 kK 5 The Court finds that there are no genuine disputes of material fact regarding whether 6 || Margelus willfully failed to file FBARs for the Structure from 2004—2008, or whether his Estate 7 || willfully failed to report the 62 accounts omitted in its 2009 return. The Court also finds that there 8 are no genuine disputes of material fact regarding whether Francis willfully failed to file an FBAR 9 for the 2009 reporting year for those accounts in which she had financial interest or authority. 10 || However, there remain genuine disputes of material fact regarding whether Francis’s failure to file 11 FBARs during the 2004-2008 reporting year was willful. 12 || IV. CONCLUSION 5 13 For the foregoing reasons, the Court GRANTS IN PART and DENIES IN PART the 14 || Government’s motion for partial summary judgment. 15 The Court finds genuine disputes of material facts exist regarding whether Francis had a a 16 || financial interest, signature authority, or other authority over the foreign accounts in the Structure 3 17 other than UBS accounts x7.405, x405, x280.0, x280.1, x280.3, x280.4, and x280.5 (from 2004 18 until the 2007 transfer), Raiffeisen x50.17, GKB x0.100, and LGT x6.023, x6.030, and x7216; and 19 || whether Francis’s failure to file FBARs for the reporting years 2004-2008 was willful. Therefore, 20 || the Court DENIES the Government’s motion for summary judgment as to those accounts during 21 the years indicated and GRANTS the Government’s motion as to the remaining accounts. 22 IT IS SO ORDERED. 23 Dated: November 27, 2023 24 25 eeOD. 6 EDWARD J. DAVILA United States District Judge 27 28 || Case No.: 5:19-cv-03246-EJD ORDER GRANTING IN PART AND DEN. IN PART MOT. FOR SUMM. J.