UNITED STATES OF AMERICA, Plaintiff, v. JOHN
MARSTELLER, Defendant.
Civil Action No. 7:17CV00441
UNITED STATES DISTRICT COURT FOR THE WESTERN
DISTRICT OF VIRGINIA, ROANOKE DIVISION
2018 U.S. Dist. LEXIS 164706
September 25, 2018, Decided
September 25, 2018, Filed
PRIOR HISTORY: United States
v. Marsteller, 2018 U.S. Dist. LEXIS 87117 (W.D. Va.,
May 22, 2018)
CORE TERMS: default
judgment, foreign bank, calendar year, statutory interest, civil penalties,
entry of default, amount of damages--, reporting requirements, financial
interest, accruing, penalties assessed, failed to pay, form prescribed,
well-pleaded, implementing, recodified, reporting,
exceeded, default, secrecy, notice, reasons stated, certified copies, counsel
of record, late-payment, declaration
COUNSEL: [*1] For United States Of America,
Plaintiff: Katherine M. Reinhart, LEAD ATTORNEY, United States Department Of
Justice, Civil Trial Section, Eastern Region, Washington, DC.
JUDGES: Hon. Glen E.
Conrad, Senior United States District Judge.
OPINION BY: Glen E.
Conrad
OPINION
MEMORANDUM OPINION
This case is
presently before the court on the United States' motion for default judgment.
For the reasons set forth below, the motion will be granted.
Background
On September
22, 2017, the United States filed the instant action seeking to collect civil
penalties assessed against the defendant, John Marsteller,
for failing to report his interest in foreign bank accounts as required by the
Bank Secrecy Act of 1970. See 31 U.S.C. § 5314. On May 22, 2018, the court
authorized the United States to serve Marsteller via
email. A summons and a copy of the complaint were served on Marsteller
on June 11, 2018.
Marsteller failed to
answer or otherwise defend the action within the time period permitted by the
Federal Rules of Civil Procedure. On July 9, 2018, the Clerk filed an entry of
default against Marsteller. Marsteller
has not moved to set aside the entry of default, or otherwise appeared in any
manner in this case. The United States has now moved for default [*2] judgment. The motion
is ripe for disposition.
Standard of Review
Rule 55 of
the Federal Rules of Civil Procedure sets forth a two-step procedure for
obtaining a default judgment. When a defendant fails to plead or otherwise
defend an action, the Clerk of Court is authorized to make an entry of default.
See Fed. R. Civ. P. 55(a). After default is entered by the
Clerk, a party may move for default judgment under Rule 55(b).
In reviewing
a motion for default judgment, the court views all well-pleaded factual
allegations in the complaint as true for purposes of liability. See Fed. R.
Civ. P. 8(b)(6) ("An allegation--other than one relating to the amount of
damages--is admitted if a responsive pleading is required and the allegation is
not denied."); see also Ryan v. Homecomings Fin. Network, 253 F.3d 778,
780 (4th Cir. 2001) ("[T]he defendant, by his
default, admits plaintiff's well-pleaded allegations of fact[.]") (internal citation omitted). Consequently, in the default
judgment context, the "appropriate inquiry is whether or not the face of
the pleadings supports the default judgment and the causes of action
therein." Anderson v. Found. for
Advancement, Educ. & Emp't of Am. Indians, 187
F.3d 628, 1999 U.S. App. LEXIS 18633, at *2 (4th Cir. 1999) (unpublished table
opinion).
If the facts
alleged in the complaint are sufficient to establish liability, the court must
then determine the appropriate amount of damages. Ryan, 253
F.3d at 780-81. The court may make a determination as to the amount of
damages without [*3] a hearing if the
record contains sufficient evidence to support the award. See Anderson v.
Found. for Advancement, Educ. & Emp't of Am. Indians, 155 F.3d 500, 507 (4th Cir. 1998)
(noting that "in some circumstances a district court entering a default
judgment may award damages ascertainable from the pleadings without holding a
hearing").
Discussion
The Bank
Secrecy Act of 1970 was enacted "to require certain reports or records
where they have a high degree of usefulness in criminal, tax, or regulatory
investigations or proceedings." 31 U.S.C. § 5311.
To accomplish this goal, the Act established reporting requirements for
transactions involving foreign financial agencies. 31 U.S.C.
§ 5314. "The provisions of the Act relating to foreign financial
transactions resulted from the concern of Congress that foreign financial
institutions located in jurisdictions having laws of secrecy with respect to
bank activity were being extensively used to violate or evade domestic
criminal, tax, and regulatory requirements." United
States v. Clines, 958 F.2d 578, 581 (4th Cir. 1992) (citing Cal. Bankers Ass'n v. Shultz, 416 U.S. 21, 27, 94 S. Ct. 1494, 39 L. Ed.
2d 812 (1974)).
The Act
authorizes the Secretary of the Treasury to promulgate regulations requiring
citizens of the United States to keep records and file reports of transactions
with foreign financial agencies. Id. (citing 31 U.S.C. § 5314). Under the
applicable regulations, citizens who have a "financial interest in, or signature
[*4] or other authority
over, a bank, securities or other financial account in a foreign country"
are required to "report such relationship to the Commissioner of the
Internal Revenue Service for each year in which such relationship exists,"
and must "provide such information as shall be specified in a reporting
form prescribed under 31 U.S.C. [§] 5314 to be filed by such persons." 31
C.F.R. § 1010.350(a).1 The form prescribed
to report the information required by ß 5314 is the Report of Foreign Bank and
Financial Accounts (TD-F 90.22.1), which is commonly referred to as an "FBAR."
Id. An FBAR must be filed with the Internal Revenue Service on or before
June 30 of each calendar year for foreign financial accounts that exceeded
$10,000 during the previous calendar year. 31 C.F.R. §
1010.306(c).
1 The
regulations applicable to reports of foreign financial accounts were formerly
published at 31 C.F.R. §§ 103.24 and 103.27. They
were recodified without material change in a new
chapter effective March 1, 2011. See United States v. Williams, 489 F. App'x 655, 656 n.1 (4th Cir. 2012) (citing Transfer &
Reorganization of Bank Secrecy Act Regulations, 75 Fed. Reg. 65806 (Oct. 26,
2010)). For ease of reference, the court's citations are to the recodified sections.
The Secretary
of the Treasury may impose a civil monetary penalty on any person who violates
the reporting requirements under ß 5314. 31 U.S.C. §
5321(a)(5)(A). The penalty for non-willful violations of the reporting
requirements cannot exceed $10,000. Id. § 5321(a)(5)(B).
The authority to enforce such penalties has been delegated to the Internal
Revenue Service. 31 C.F.R. § 1010.810(g).
In this case,
the undisputed facts establish that Marsteller had a
financial interest in foreign bank accounts that exceeded $10,000 during the
2008, [*5] 2009, 2010, and 2011
calendar years. However, for each of the years at issue, Marsteller
did not timely file FBARs reporting his financial interest in the
foreign accounts, as required by ß 5314 and its implementing regulations.
In August of
2015, Marsteller signed an agreement with the
Internal Revenue Service consenting to the assessment and collection of civil
penalties in the amount of $10,000 per year for each of the four years at
issue, for a total amount of $40,000. On January 19, 2016, the Internal Revenue
Service issued the agreed-upon assessments against Marsteller.
The following day, the Internal Revenue Service provided notice of the
assessments and made a demand for payment. Since that time, Marsteller
has failed to pay the assessments. As of August 1, 2017, the total balance owed
to the United States, including penalties for late payment under
31 U.S.C. § 3717 and statutory interest, is $44,295.89.
By failing to
answer the complaint, Marsteller is deemed to have
admitted that he failed to report his interest in foreign bank accounts during
the 2008, 2009, 2010, and 2011 calendar years, as required by ß 5314 and its
implementing regulations. Marsteller is also deemed
to have admitted that he consented [*6] to
the assessment of civil penalties totaling $40,000, that notice of the
assessments and a demand for payment were issued to him, and that he has failed
to pay the assessments. The court concludes that the government's allegations
are sufficient to establish Marsteller's liability
for the penalties assessed against him for the relevant period.
The court
must next determine the amount of liability. The United States has submitted a
sworn declaration from Nancy Beasley, the FBAR Penalty Coordinator with the
Internal Revenue Service, along with copies of the penalty assessment
certification forms issued to Marsteller and an
itemized list of the total amount due as of August 1, 2017, including
late-payment penalties and interest.2 These submissions establish
that a combined total of $40,000.00 in civil penalties was assessed against Marsteller on January 19, 2016, and that the unpaid balance
of the assessments, plus accrued interest and late-payment penalties, is
$44,295.89 as of August 1, 2017. Marsteller has not
disputed the validity of the assessments or the calculations made by the
Internal Revenue Service. The court is convinced that the declaration and other
exhibits provide a sufficient [*7] evidentiary basis for an award of
damages in favor of the United States, and that no hearing is necessary.
Accordingly, judgment will be entered in favor of the United States for the
balance due as of August 1, 2017, plus statutory interest and penalties
accruing thereafter until paid.
2 The United
States also submitted evidence demonstrating that Marsteller
is not on active duty with the armed forces, thereby satisfying its
requirements under the Servicemembers Civil Relief
Act. See 50 U.S.C. App. ß 521(b).
Conclusion
For the
reasons stated, the court will grant the United States' motion for default
judgment against Marsteller. Judgment will be entered
in favor of the United States and against Marsteller
in the amount of $44,295.89, as of August 1, 2017, plus statutory interest and
penalties accruing thereafter until paid.
The Clerk is
directed to send certified copies of this memorandum opinion and the
accompanying order to the defendant and all counsel of record.
DATED: This
25th day of September, 2018.
/s/ Glen E.
Conrad
Senior United
States District Judge
FINAL JUDGMENT
For the
reasons stated in the accompanying memorandum opinion, it is now
ORDERED
as follows:
1. The United
States' motion for default judgment against John Marsteller
(Docket No. 11) is GRANTED;
2. Judgment
is entered in favor of the United States and against John Marsteller
in the amount of $44,295.89, as of August 1, 2017, plus statutory interest [*8] and penalties accruing
thereafter until paid; and
3. This
action shall be stricken from the active docket of the court.
The Clerk is
directed to send certified copies of this order and the accompanying memorandum
opinion to the defendant and all counsel of record.
DATED: This
25th day of September, 2018.
/s/ Glen E.
Conrad
Senior
United States District Judge