United States District Court, D. Connecticut
MEMORANDUM AND ORDER
Michael P. Shea, U.S.D.J.
the United States of America (“the Government”),
filed this suit to reduce to judgment a civil penalty the
Internal Revenue Service assessed against Paul G. Garrity,
Sr., under 31 U.S.C. § 5321(a)(5), for his alleged
willful failure to report his interest in a foreign account
he held in 2005, in violation of 31 U.S.C. § 5314. In
anticipation of trial, which is scheduled for June, the Court
ordered the parties to submit briefs addressing the legal
question of what standard of proof governs this
case-preponderance of the evidence or clear and convincing
evidence. (ECF No. 99.) The Government argues that the
standard of proof is preponderance of the evidence.
Defendants Diane M. Garrity, Paul G. Garrity, Jr., and Paul
M. Sterczala (collectively, “Defendants”), as
fiduciaries of the Estate of Paul G. Garrity, Sr., argue that
the standard of proof is clear and convincing evidence. In
addition, although not ordered by the Court to do so, the
parties have also briefed the separate question of whether
the Government must show that Mr. Garrity, Sr. intentionally
violated a known legal duty to establish a
“willful” violation of Section 5314 or whether
the Government may satisfy its burden of proof by showing
that Mr. Garrity, Sr. acted recklessly. Defendants urge the
former standard, while the Government urges the latter.
reasons discussed below, I agree with the Government on both
Government filed this action on February 20, 2015 to collect
an outstanding civil penalty, known as the Report of Foreign
Bank and Financial Accounts (“FBAR”) penalty,
from the estate of Mr. Garrity, Sr., who died in 2008. The
Government had assessed the penalty against Mr. Garrity, Sr.
for his allegedly willful failure to timely report his
financial interest in, and/or his authority over, a foreign
bank account for the 2005 calendar year, as required by 31
U.S.C. § 5314 and its implementing regulations. (ECF No.
1.) The balance of the penalty as of February 20, 2015 was
$1, 061, 181.09. Jury selection is currently scheduled for
June 6, 2018.
relevant portions of subsection (a)(5) of 31 U.S.C. §
5321, the statute under which the United States sues to
recover a civil FBAR penalty, provide:
Penalty authorized. - The Secretary of the Treasury may
impose a civil money penalty on any person who violates, or
causes any violation of, any provision of section 5314.
(B) Amount of penalty. -
(i) In general. - Except as provided in subparagraph (C), the
amount of any civil penalty imposed under subparagraph (A)
shall not exceed $10, 000.
(ii) Reasonable cause exception. - No. penalty shall be
imposed under subparagraph (A) with respect to any violation
(I) such violation was due to reasonable cause, and
(II) the amount of the transaction or the balance in the
account at the time of the transaction was properly reported.
(C) Willful violations. - In the case of any person willfully
violating, or willfully causing any violation of, any