1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 UNITED STATES OF AMERICA, Case No. 22-cv-07371-DMR

8 Plaintiff, ORDER ON PLAINTIFF'S MOTION 9 v. FOR RECONSIDERATION

10 TUNCAY SAYDAM, Re: Dkt. No. 42 11 Defendant.

12 Plaintiff United States of America (“the Government”) brings this case against Defendant 13 Tuncay Saydam alleging that, from 2013 to 2017, Saydam willfully failed to comply with U.S. tax 14 laws requiring him to annually report his foreign bank accounts in a Report of Foreign Bank and 15 Financial Accounts (“FBAR”).

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(c), 1010.350(a). On 16 July 12, 2024, the court denied the Government’s motion for summary judgment on the issue of 17 whether Saydam’s violation of the statute was willful. [Docket No. 41 (MSJ Order).] On August 18 26, 2024, the Government moved for leave to file a motion for reconsideration of the summary 19 judgment order. [Docket No. 42 (Mot.).] The court granted the motion for leave and construed 20 the motion as the Government’s motion for reconsideration. [Docket No. 43.] Saydam filed a 21 response, [Docket No. 59 (Opp’n)], and the Government filed a reply, [Docket No. 62 (Reply)]. 22 The motion is suitable for resolution without a hearing. Civ. L.R. 7-1(b). For the following 23 reasons, the motion is denied. 24 I. BACKGROUND 25 In its summary judgment order, the court stated in relevant part: “Section 5321(a)(5) does 26 not define willfulness, nor has the Ninth Circuit addressed willfulness in the FBAR context.” MSJ 27 Order 4. The court cited several potential definitions of willfulness, including the objective 1 that a defendant is reckless in the FBAR context if he “(1) clearly ought to have known that (2) 2 there was a grave risk that an accurate FBAR was not being filed and if (3) he was in a position to 3 find out for certain very easily”); the subjective recklessness standard used by Erickson Prods., 4 Inc. v. Kast,

(9th Cir. 2019) (holding that a defendant is reckless in the 5 copyright context if he “knows of a substantial and unjustified risk of such wrongdoing”); and the 6 “willful blindness” standard used in United States v. Goldsmith,

, 1083 (S.D.

) (holding that defendant acted willfully where she “(1) subjectively believed there was a 8 high probability that a fact exists and (2) [took] deliberate actions to avoid learning of that fact”). 9 The court noted that neither party adequately briefed the “willfulness” standard, including 10 the definition of “recklessness” in the FBAR context. MSJ Order 5. The court ultimately denied 11 the motion for summary judgment because “a reasonable juror could conclude that Defendant 12 acted negligently as opposed to willfully under any of the definitions of willfulness discussed 13 above.”

14 On July 12, 2024, the court denied the Government’s motion for summary judgment and 15 found that a genuine issue of material fact remained regarding whether Saydam had willfully 16 violated the FBAR statute. MSJ Order 7. 17 On August 21, 2024, the Ninth Circuit decided United States v. Hughes, No. 23-15712, 18

(9th Cir. Aug. 21, 2024). Joining “every other Court of Appeals to consider 19 this question,” Hughes held that “an objective recklessness standard” applies to willful FBAR 20 violations.

. 21 In light of the newly announced standard in Hughes, the Government diligently sought and 22 was granted leave to file a motion for reconsideration of the summary judgment order. See Civil 23 L.R. 7-9(b)(2) (party may seek reconsideration upon “the emergence of new material facts or a 24 change of law”). The Government also argues that Rule 7-9(b)(3) applies because the summary 25 judgment order did not address parts of the record that are material to the Hughes objective 26 recklessness standard. Mot. at 7-8. 27 II. DISCUSSION 1 violations. It held that “a determination of a willful failure to file an FBAR requires a finding that 2 (1) the filer ‘clearly ought to have known that there was a grave risk that’ the filing requirement 3 was not being met, and (2) the filer ‘was in a position to find out for certain very easily.’”

at 4 *3 (quoting Bedrosian v. United States of Am., Dep't of the Treasury, Internal Revenue Serv., 912

(3d Cir. 2018)). The Ninth Circuit emphasized that “civil recklessness requires 6 proof of something more than mere negligence.” Id.1 7 Hughes does not change the outcome of the court’s summary judgment decision in this 8 instance. The court cited Kast but also cited the objective recklessness standard. See MSJ Order 7 9 (citing Horowitz, 978 F.3d at 81-82; Goldsmith, 541 F. Supp. 3d at 1091). The court explicitly 10 stated that its decision was based on “any of the definitions of willfulness discussed above,” 11 including the objective recklessness standard. Id. at 5. 12 Material disputes of fact remain under the standard announced in Hughes; namely, whether 13 Saydam “clearly ought to have known” there was a “grave risk” that he was in violation of the 14 FBAR statute and was “in a position to find out for certain very easily.” From 2014 to 2017, 15 Saydam filed Schedule B forms through tax preparing services at H&R Block, in which he falsely 16 stated that he did not have a financial interest in or signature authority over a financial account 17 located in a foreign country. [Docket Nos. 34-55 (2014 Tax Return), 34-56 (2015 Tax Return), 18 34-57 (2016 Tax Return), 34-58 (2017 Tax Return) (collectively “Saydam Tax Returns”)]. As the Government concedes, however, false statements in a signed tax return are not dispositive 19 evidence of recklessness. Reply 2-3. Saydam raises evidence that a reasonable person in his 20 position may not have known of the grave risk that he was violating the FBAR requirements, 21 because he testifies that his H&R Block appointments were short and routinized and that he did 22 23

24 1 Defendant appears to argue that Hughes did not alter the standard for recklessness, but merely 25 defined willful blindness. Opp’n 8-9. Defendant argues that Kast controls, so recklessness still requires some type of subjective awareness of risk by the defendant. Id. This is blatantly 26 incorrect and unhelpful. Hughes clearly held that in the FBAR context, “‘willfulness’ can be shown by proof of objective recklessness as well as subjective intent.”

, at *1 27 (citing Safeco Insurance Co. of America v. Burr,

(2007)). It is indisputable that 1 not remember anyone asking him about foreign accounts. [Docket No. 34-1 (Dep. Tuncay 2 Saydam) 159-160, 162.] Additionally, Saydam raises evidence that it would not have been very 3 easy for him to find out for certain whether he had FBAR reporting requirements, because the 4 H&R Block representatives who helped him were not qualified to prepare returns related to 5 foreign income. [Docket Nos. 34-3 (Linda Dunn Dep.); 34-4 (German Gomez Dep.); 34-5 6 (Morris Rorer Dep.).] 7 The Government argues that the court failed to consider parts of the record that are 8 material under Hughes. Specifically, the Government cites to (1) two letters that Saydam received 9 from his Swiss bank informing him that his account was being closed due to tightening U.S. 10 regulations, and recommending that he “consult with a qualified tax advisor to determine if there 11 exist any U.S. tax consequences in connection with the closure of the banking relationship” 12 [Docket Nos. 34-16; 34-21]; (2) a U.S. Withholding Tax Questionnaire for Natural Persons that Saydam signed for his Swiss bank account “to correctly determine the status and qualification of 13 the safe custody account holder for the purpose of U.S. Withholding Tax” [Docket No. 34-12]; 14 and (3) the fact that Saydam filled out a W-9 form for his Swiss bank account, but not for any of 15 his Turkish bank accounts [Docket No. 36-6 (Saydam W-9)]. Mot. 8. The Government argues 16 that these materials indicate that Saydam was on notice of “potential disclosure obligations” 17 involving his foreign accounts.

18 These pieces of evidence do not eliminate the existence of material disputes of fact. The 19 recklessness standard in Hughes requires more than non-specific references to potential U.S. tax 20 disclosure obligations and consequences. A reasonable jury could conclude that this evidence is 21 insufficient to demonstrate that Saydam “clearly ought to have known” there was a “grave risk” 22 that he was in violation of the FBAR statute. The Government also argues that Defendant could 23 have “very easily” followed up on the materials by inquiring about them with his H&R Block tax 24 advisors or his Turkish attorneys representing him regarding one of his Turkish accounts. Reply 25 4-5. But the record indicates that Defendant did not have access to these tax advisors or attorneys 26 until months or years after receiving the cited materials. Additionally, as discussed above, the 27 H&R Block representatives were not qualified to prepare returns related to foreign income and 1 met with Saydam in brief, routinized appointments. With respect to the attorney, a reasonable jury 2 may decide that it would not have been “very easy” for Defendant to find out about U.S. FBAR 3 tax requirements by asking his Turkish attorneys. 4 III. CONCLUSION 5 For the foregoing reasons, Hughes does not change the outcome of the summary judgment 6 order. The motion for reconsideration is denied. 7 8 IT IS SO ORDERED. 9 Dated: September 16, 2024 10 ______________________________________ Donna M. Ryu 11 Chief Magistrate Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27