Government Files Suit to Collect $3 Million in FBAR Penalties

UNITED STATES OF AMERICA,
Plaintiff,
v.
EMILIO MENDES DIAS CEREJO,
Defendant.

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA

COMPLAINT

The plaintiff, United States of America, by and through its counsel, complains and alleges the following:

Introduction

1. This civil action is brought by the United States to recover unpaid civil penalties assessed against the defendant, Emilio Mendes Dias Cerejo (“Cerejo”), for his willful failure to report his interest in certain foreign financial accounts timely, as required by 31 U.S.C. § 5314 and its implementing regulations (“FBAR penalty”), plus interest, failure to pay penalties and other additional amounts, such as administrative costs, as provided by law, from the date of assessment until paid.

Authorization for Suit

2. The United States brings this suit under 31 U.S.C. § 3711(g)(4)(C), and in accordance with 31 U.S.C. § 5321(b)(2), at the direction of the Attorney General of the United States and at the request of, and with the authorization of, the Internal Revenue Service (“IRS”), Office of Division Counsel, a delegate of the Secretary of Treasury of the United States.

Jurisdiction and Venue

3. The Court has jurisdiction over this action under 28 U.S.C. §§ 1331, 1345 and 1355(a) because it arises under a federal statute, the United States is the plaintiff, and the action seeks to recover civil penalties assessed under 31 U.S.C. § 5321(a)(5).

4. Venue is proper in this judicial district under 28 U.S.C. §§ 1391(b)(1), (2) and 1395(a) because Cerejo resides in Broward County, Florida, a substantial part of the events or omissions giving rise to the claim occurred in Broward County, and the FBAR penalties at issue accrued in Broward County.

Parties

5. Cerejo is the person against whom the FBAR penalties at issue in this action are assessed for the calendar years 2005, 2006, 2007 and 2008. During the relevant periods, Cerejo was a United States citizen and resided in Cooper City, Florida.

General Background

6. In the early 1980's, Garrett International S.A. (“Garrett”) hired Cerejo, an electrical engineer. Garrett was based in Geneva, Switzerland.

7. Garrett initially sent Cerejo for avionics training in Phoenix, Arizona and Los Angeles, California. Upon completing training, Garrett transferred Cerejo to Johannesburg, South Africa where he worked for approximately three years.

8. In October 1985, AlliedSignal, Inc., formerly, Garrett (“AlliedSignal”) transferred Cerejo to the United States. Cerejo and his family moved to Florida on October 31, 1985.

9. AlliedSignal assisted Cerejo in obtaining an L-1 Visa in order that he could work in the United States. In the early 1990's, Cerejo and his wife, Dawn Hazel Cerejo, were granted citizenship after they had been residents in the United States for five years. Cerejo is a not only a United States citizen, but he is also a citizen of Portugal. Cerejo's wife is a citizen of the United States, South Africa and Portugal.

10. In or about 1993, AlliedSignal began downsizing its operations, and offered to transfer Cerejo to Phoenix. Rather than move again, Cerejo declined the offer and left the company's employ.

11. After leaving AlliedSignal, Cerejo began an avionics consulting business in Florida and operated the business as a sole proprietorship under the name of EMC Consulting a/k/a EMC Aviation Services and Consultants (“EMC Consulting”).

12. Through EMC Consulting, Cerejo provided, and continues to provide, avionics consulting services to both foreign and domestic customers, including governmental entities and airlines. For the relevant years, 2005 through 2008, and in prior years, Cerejo performed his consulting services within and outside the United States.

Emilio Cerejo Willfully Failed To Report His Interest In Certain Foreign Financial Accounts Timely

13. Section 5314 of Title 31 of the United States Code (U.S.C.) authorizes the Secretary of the Treasury to require United States citizens or residents (“U.S. persons”) to file reports when they make a transaction or maintain a relationship for any person with a foreign financial agency. See 31 U.S.C. § 5314(a).

14. Under the implementing regulations of the statute, 31 U.S.C. § 5314, “[e]ach United States person having a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country shall report such relationship” to the IRS “for each year in which such relationship exists . . . [on] a reporting form prescribed under 31 U.S.C. § 5314.” See 31 C.F.R. § 1010.350(a) (formerly, 31 C.F.R. § 103.24(a) (2010)).

15. To fulfill the reporting requirement imposed under 31 U.S.C. § 5314 for the calendar years 2005, 2006, 2007 and 2008, a U.S. person who had a financial interest in, or signature or other authority over, a foreign bank, securities, or other financial account was required to report the interest to the IRS by filing a Form TD F 90-22.1, “Report of Foreign Bank and Financial Accounts,” commonly known as an “FBAR,” by June 30 of the year following any calendar year in which the aggregate balance of such account(s) exceeded, at any time during that calendar year, $10,000. See 31 C.F.R. §§ 1010.306(c) and 1010.350(a) (formerly, 31 C.F.R. §§ 103.24(a) and 103.27(c)(2010)).

Summary of Emilio Cerejo's Interest In Certain Foreign Financial Accounts

16. During 2005 through 2008, Cerejo had a financial interest in, and signature or other authority over, certain financial accounts established and maintained at UBS AG, Banque Cantonale Vaudoise, and Caixa Geral de Depositos.

a. UBS AG Account No. * * * *-* * *-588.

17. On July 5, 1982, Garrett's Finance Director sent a letter to UBS AG (“UBS”) in Geneva, Switzerland, introducing Cerejo and requesting that UBS open an account for him. The July 5^th letter explained that Cerejo was employed by Garrett as an engineer and would require a bank account for the direct depositing of his monthly salary. In response, UBS opened an account, bearing Account No. * * * *-* * *-588, in the name of “Emilio Cerejo et/ou Dawn Hazel Cerejo” (the “UBS account”).

18. Cerejo stated that he was the beneficial owner of the UBS account, and that his wife, Dawn Hazel Cerejo, was designated as a co-beneficiary of the account.

19. From July 1982 through October 1985, Garrett deposited Cerejo's monthly salary to the UBS account. When Cerejo began to work for AlliedSignal in Florida, his salary was deposited to his domestic bank account.

20. After Cerejo left the employ of Allied Signal in 1993, he continued to deposit funds, including income from his consulting business, to the UBS account. Specifically, Cerejo used the UBS account to deposit substantial fees that he earned in connection with consulting services that he provided to customers located outside the United States.

21. Cerejo actively participated in the management and investment of his UBS account, by and through written correspondence, telephone conferences, and in person conferences with his UBS advisors (e.g., Jean-Bernard Riat, Stephane Mundwiler (“Mundwiler”), and Peter Huylenbroeck).

22. Prior to and during the relevant periods, Cerejo met, in person, annually or semi-annually with his UBS advisor to discuss the status of his account. The meetings occurred at the UBS office in Geneva, Switzerland or the advisor's hotel in Boca Raton, Florida.

23. During the relevant periods and prior thereto, Cerejo instructed UBS to make numerous wire transfers from his UBS account. At Cerejo's direction, UBS transferred funds, inter alia, to his other foreign financial account at Caixa Geral de Depositos (“Caixa account”), certain business associates, his domestic account located at Wachovia Bank, N.A. (the “Wachovia account”), and Sallie Mae to pay his son's student loan.

24. When Cerejo instructed UBS, in writing, to transfer the sums of approximately $150,000 to his Wachovia account, and $220,899.42 to Sallie Mae to pay his son's student loan, on June 25, 2003, he requested UBS “not [to] disclose the source of the funds (the sender's name), if possible.” Cerejo made no similar requests when he directed UBS to transfer funds to his Caixa account located in Portugal. Indeed, on June 2, 2005 when he instructed UBS to transfer $20,000 to his Caixa account, he acknowledged “that his name would be mentioned on the transfer.”

25. On April 28, 1997, Cerejo completed an application for a UBS Eurocard. His home address was scratched out on the application, and the address to which any correspondence was to be sent was identified as “C/O UBS, J.M. TELLENBACH, C.P. 2950, 1211 GENEVE 2.”

26. On January 5, 2001, Cerejo executed a UBS declaration to obtain e-banking for his account. In that declaration, he provided his brother's address in Portugal, and not his residential address in Cooper City, Florida.

27. On January 5, 2001, Cerejo signed a UBS declaration, declaring that he was “liable to tax in the USA as a U.S. person,” and agreeing that his UBS account “shall be frozen for all investments in US securities” so that he could avoid the withholding of U.S. taxes, as required by the Treasury regulations.

28. On June 27, 2003, Cerejo signed a UBS form, declaring that he was a U.S. citizen subject to tax in the United States, and directing that his UBS account not invest in or hold U.S. securities so that he could avoid the withholding of U.S. taxes, as required by the Treasury regulations.

29. On June 27, 2003, Cerejo also executed UBS's Managed Accounts Programme Application Form UBS Managed Fund Portfolio and agreed, in pertinent part, that:

[He was] conscious of the fact, that UBS [is] not providing tax advice to [him] as part of the UBS Managed Fund Portfolio Service and that, to the extent necessary, [he has] consulted with [his] tax adviser regarding this investment.

30. On March 14, 2006, Cerejo borrowed $500,000 from UBS for a period of three years, and requested that the proceeds be invested “as discussed, including 50% in Commodity Funds.”

31. On July 25, 2008, after UBS had notified Cerejo of certain problems that it was encountering in servicing the accounts of U.S. customers, Cerejo met with his UBS advisor at UBS in Geneva, Switzerland to discuss the future of his account. A translated bank contact log reflects the following exchange that occurred between the UBS advisor and Cerejo during that meeting: “Customer is here specifically to see me knowing that I am going to change departments, in order to discuss the current situation of the bank with regard to U.S. customers. I explain[ed] the decision of the bank to him, i.e., exit from here max. 24 months; if not, W-9 form. Customer takes note of this and will reflect upon his alternatives.”

32. On July 25, 2008, Cerejo signed a UBS form, instructing the bank to sell all of his U.S. money market funds and invest the proceeds into a monthly UBS fiduciary until further notice, and that any incoming funds should be added to the new monthly fiduciary. Cerejo also instructed UBS that “[t]his reinvestment instruction replaces & cancel[s] any standing orders [he] provided in the past.”

33. On July 25, 2008, Cerejo executed UBS's Confirmation of Receipt UBS Retained Mail, confirming the receipt of 184 documents dated from July 29, 2003 through July 25, 2008, and directing UBS to destroy the remaining 590 documents that he would not take with him.

34. On September 26, 2008, Cerejo visited the UBS office in Geneva, and advised, inter alia, that he had decided to close his UBS account and requested that UBS transfer the account's assets to Banque Cantonale Vaudoise (“BCV”) in Lausanne, Switzerland. According to a translated bank contact log entry, and as confirmed by letter dated September 26, 2008, Cerejo instructed UBS, in pertinent part, to: “1) . . . close the mandate by selling all. AIRE[, an investment,] must be sold at maturity. 2) . . . convert ALL currencies into CHF [i.e., Swiss francs] so we only do transfers in CHF. 3) . . . close the loan today and reimburse it today. . . .”

35. Cerejo's $500,000 loan, including interest thereon, was paid before UBS transferred the account's assets to BCV.

36. By letter dated September 30, 2008, Cerejo advised Mundwiler to close his UBS account and “make the final payment in Swiss Francs to the account at BCV.”

37. By letter dated November 26, 2008, Cerejo requested UBS, by and through Mundwiler, to convert the remaining funds in his UBS account into Swiss Francs (CHF) and transfer them to BCV to the attention of his BCV advisor, David Rime. He also requested that the following three mutual funds (without selling them) be transferred to BCV: UBS Key Selection CHF, UBS Key Selection USD, and UBS Commodity Fund CHF. He then directed UBS to close his account after the above transactions were completed.

38. On December 17, 2008, Cerejo directed UBS to close the UBS account.

39. For the calendar years 2005, 2006, 2007 and 2008, the account balance of the UBS account as of June 30, 2006, 2007, 2008 and 2009 was $5,238,033, $6,770,516, $5,739,601 and $0, respectively.

b. Banque Cantonale Vaudoise Account No. * * * * * * *119.

40. On September 26, 2008, Cerejo opened an account with BCV in Lausanne, Switzerland, bearing Account No. * * * * * * *119 ( the “BCV account”).

41. Cerejo opened the account in the name of “MAPUTO 4684627.” Cerejo stated that he is the beneficial owner of the BCV account, and that his wife is designated as a co-beneficiary of the account.

42. In September and November, 2008, Cerejo instructed UBS to transfer all assets held in his UBS account, to his BCV account. See ¶¶ 34-37, supra, for discussion regarding the UBS account. UBS made two transfers to the BCV account, one on November 11, 2008, and the other on December 3, 2008.

43. Cerejo used the BCV account to deposit income that he earned from the consulting services that he performed for customers located outside the United States.

44. Cerejo maintained the BCV account until May 2011, when he directed BCV to transfer the assets to an account that he opened at Pictet & Cie in Switzerland.

45. Neither Cerejo's name nor his address appeared on the BCV account statements.

46. For the calendar year 2008, the account balance of the BCV account as of June 30, 2009 totaled $4,662,108.

c. Caixa Geral de Depositos Account No. * * * * * * * * *300.

47. Cerejo stated that during the relevant periods, he and his brother, Armando Mendes Cerejo, jointly owned an account maintained at Caixa Geral de Depositos in Portugal, known as the “Caixa account.”

48. The Caixa account is held in the name of “Emilio Mendes Dias Cerejo” and bears Account No. * * * * * * * * *300.

49. Armando Cerejo resides in Lisbon. He is neither a citizen nor resident of the United States.

50. During the relevant periods, Cerejo's pension from the Portuguese Army was deposited into the Caixa account. Additionally, Cerejo made occasional wire transfers from his UBS account to the Caixa account.

51. For the calendar years 2005, 2006, 2007 and 2008, the account balance of the Caixa account as of June 30, 2006, 2007, 2008 and 2009 was $12,872, $1,724, $8,083 and $9,071, respectively.

Emilio Cerejo Did Not File FBARs Timely

52. The aggregate amount of the balances of Cerejo's foreign financial accounts exceeded $10,000 during each of the calendar years 2005, 2006, 2007 and 2008. See ¶ 75, infra.

53. As a consequence, Cerejo was required to report his interest in those foreign financial accounts on a timely filed FBAR. Specifically, Cerejo was required to file an FBAR, reporting his financial interest in, and signature or other authority over, the foreign financial accounts (i.e., UBS Account No. 588; BCV Account No. 119; Caixa Account No. 300) for the calendar years 2005, 2006, 2007 and 2008 on June 30, 2006, 2007, 2008 and 2009, respectively.

54. Cerejo did not file timely FBARs for the calendar years 2005 through 2008. Indeed, he did not file delinquent FBARs until December 4, 2013. See ¶ 63, infra.

Emilio Cerejo Opted Out of the 2011 Offshore Voluntary Disclosure Initiative

55. By letter, UBS advised Cerejo that it would be disclosing information regarding his UBS account to the U.S. authorities and suggested that he consider participating in the IRS's Voluntary Disclosure program.

56. Upon receipt of the UBS letter, Cerejo contacted ZBG, a law firm in Geneva, to contest UBS's release of his account information to the U.S. authorities. ZBG referred him to Akin Gump who, in turn, referred him to Christopher S. Rizek, Esq. (“Rizek”) of Caplin & Drysdale.

57. On August 18, 2010, Cerejo, by and through Rizek, made a voluntary disclosure to Special Agent Guerrero of the IRS's Criminal Investigation Division (“CID”), disclosing his interest in the foreign financial accounts that he had established and maintained at UBS and BCV during 2003 through 2008.

58. By letter dated April 29, 2011, the IRS advised Cerejo that CID had preliminarily accepted his voluntary disclosure. The IRS also advised Cerejo that his case had been referred to the Austin Campus for resolution of his civil liabilities for tax, interest and penalties, and would be considered under the provisions of the 2011 Offshore Voluntary Disclosure Initiative (“2011 OVDI”). The IRS further advised that Cerejo must comply with the terms of the 2011 OVDI, including submitting all required information (e.g., amended income tax returns (Forms 1040) and FBARs for 2003 through 2010) by August 31, 2011, to receive reduced penalty consideration and avoid examination.

59. On August 29, 2011, Cerejo, by and through Rizek, requested an extension of time for 90 days, to comply with the submission of information requirement under the 2011 OVDI. Cerejo claimed that an extension was needed because he was waiting to receive information from UBS.

60. Thereafter and before December 9, 2011, Rizek advised the IRS that he was no longer representing Cerejo.

61. On December 9, 2011, Cerejo requested an extension of an additional 6 months, to provide the information required under the 2011 OVDI. In support of this extension request, Cerejo claimed that he needed additional time to obtain certain information from UBS.

62. From September 24, 2012 through December 17, 2013, Internal Revenue Agent Sherman Burger (“Agent Burger”) had numerous communications with Cerejo and/or his representatives, Robert Panoff, Esq. (“Panoff”) and Richard Reed, CPA (“Reed”), seeking to obtain Cerejo's compliance with the submission requirements of the 2011 OVDI.

63. On December 4, 2013, Cerejo, by and through Reed, electronically filed delinquent FBARs for the calendar years 2003 through 2008.

64. On December 17, 2013, Cerejo submitted amended income tax returns (Forms 1040X) for 2003 through 2008, and delinquent original income tax returns (Form 1040) for 2009 and 2010. See ¶ 68, infra.

65. From January 2014 through September 2014, Internal Revenue Officer Judy Hongvanthong and Cerejo's representatives, Panoff and Reed, attempted to agree to payment terms so that Cerejo would be in compliance with the requirements of the 2011 OVDI. However, the parties could not agree on acceptable payment terms.

66. In October 2014, Cerejo retained Jeffrey Neiman, Esq. (“Neiman”) to represent him. From October 2014 through May 2015, Agent Burger and Neiman had discussions, inter alia, regarding Cerejo's failure to comply with the requirements of the 2011 OVDI. By letter dated May 18, 2015, Neiman advised the IRS that Cerejo was opting out of the 2011 OVDI.

Emilio Cerejo Did Not Disclose His Interest In Certain Foreign Financial Accounts on His Income Tax Returns

67. Cerejo and his wife filed timely joint income tax returns (“Forms 1040”) for 2003 through 2008. Cerejo prepared the returns for those years, and on those returns, he failed to disclose any income from, or his interest in, the foreign financial accounts (i.e., the UBS account, BCV account, and Caixa account).

68. When Cerejo was participating in the 2011 OVDI, he engaged Reed to prepare amended income tax returns for him and his wife for 2003 through 2008. See ¶¶ 62 and 64, supra. On December 17, 2013, Cerejo submitted the amended returns, and those returns reported the following income that he earned from, or deposited into, his foreign financial accounts for 2003 through 2008:

	2003	2004	2005	2006	2007	2008
Interest Income	$1,078	$92	$24	$-	$-	$2,795
Dividend Income	-	1,939	4,003	7,460	8,473	11,019
Pension Income	3,687	4,124	4,190	4,352	4,881	5,343
Capital Gains	-	-	-	-	2,508	-
Miscellaneous Income	-	-	-	9,918	-	-
EMC Consulting — Gross Receipts	275,130	990,620	-	949,711	194,500	-
Total	$279,895	$996,775	$8,217	$971,441	$210,362	$19,157

69. After Cerejo opted out of the 2011 OVDI, the IRS conducted an examination of the joint income tax returns filed by Cerejo and his wife for 2003 through 2011, and it determined that the couple had failed to report substantial amounts of income from foreign sources. As a consequence, the IRS proposed, inter alia, adjustments to the couple's income for 2003, 2004, 2005, 2006, 2007 and 2008 in the amounts of $725,491, $1,574,573, $636,233, $956,263, $787,005 and $1,878,674, respectively. Based on the proposed adjustments, above, the IRS proposed tax deficiencies in the amounts of $283,601, $591,223, $290,643, $133,243, $257,117 and $792,308 for 2003, 2004, 2005, 2006, 2007 and 2008, respectively. The IRS also proposed to assess civil fraud penalties against Cerejo in the total amount of $728,641 for 2003 through 2008.¹

70. The Forms 1040 for 2003 through 2008 included a Schedule B that asked: “At any time during [the relevant calendar year], did you have an interest in or a signature or other authority over a financial account in a foreign country, such as a bank account, securities account, or other financial account?” Despite having an interest in multiple foreign financial accounts during 2003 through 2008 (and having received over $1,500 of taxable interest and/or ordinary dividends for 2004 through 2008), Cerejo failed to file a Schedule B with the returns that he prepared and filed for 2003 through 2005 and 2008. With regard to the returns that he prepared and filed for 2006 and 2007, he included a Schedule B, but he answered “no” to the question that asked whether he had “an interest in or a signature or other authority over a financial account in a foreign country.”

71. The Schedule B also directed Cerejo to consult the instructions for Form TD F 90-22.1 in order that he could determine if the FBAR filing requirements applied to him for 2003 through 2008.

72. For the reasons described in paragraphs 6 through 71, above, Cerejo knew that he had a legal duty to file timely FBARs that reported his interest in all foreign financial accounts for the calendar years 2005, 2006, 2007 and 2008, and despite having that knowledge, he willfully failed to file FBAR reports for each of those calendar years by their prescribed filing dates.

Claim for Relief

73. Section 5321(a)(5) of Title 31 U.S.C. provides for the imposition of civil penalties on any person who fails to comply with the FBAR reporting requirements under 31 U.S.C. § 5314.

74. In the case of any person who willfully violates the FBAR reporting requirements, inter alia, by failing to file a timely FBAR report, disclosing the existence of a foreign financial account or any identifying information required to be disclosed with regard to said account, the maximum amount of the penalty that may be assessed for such violation is the greater of: (i) $100,000; or (ii) 50% of the balance in the account at the time of the violation. See 31 U.S.C. § 5321(a)(5)(C), (D).

75. From the records that the IRS obtained from Cerejo before he opted out of the 2011 OVDI, and UBS pursuant to an income tax treaty, it determined that the aggregate amounts of the highest balances of Cerejo's foreign financial accounts (sometimes referred to herein as the “FF Accounts”) during the calendar years 2005, 2006, 2007 and 2008, are as follows:

CALENDAR YEAR 2005

Account No.	Highest Balances of Cerejo's FF Accounts
UBS Account No. 588	$4,664,039
Caixa Account No. 300	20,444
Total for Calendar Year 2005	$4,684,483

CALENDAR YEAR 2006

Account No.	Highest Balances of Cerejo's FF Accounts
UBS Account No. 588	$5,947,144
Caixa Account No. 300	15,542
Total for Calendar Year 2006	$5,962,686

CALENDAR YEAR 2007

Account No.	Highest Balances of Cerejo's FF Accounts
UBS Account No. 588	$6,187,200
Caixa Account No. 300	25,093
Total for Calendar Year 2007	$6,212,293

CALENDAR YEAR 2008

Account No.	Highest Balances of Cerejo's FF Accounts
UBS Account No. 588	$6,187,200
BCV Account No. 119	4,662,108
Caixa Account No. 300	12,291
	$10,861,599
Less: BCV Account No. 1192	4,662,108
Total for Calendar Year 2008	$6,199,491

76. From the records that the IRS obtained from Cerejo before he opted out of the 2011 OVDI, and UBS pursuant to an income tax treaty, it determined that the balances of Cerejo's foreign financial accounts on the following dates on which the FBARs were due to be filed for the calendar years 2005, 2006, 2007 and 2008, are as follows:

CALENDAR YEAR 2005

Account No.	Balances of Cerejo's FF Accounts on the FBAR Filing Date of June 30, 2006
UBS Account No. 588	$5,238,033
Caixa Account No. 300	12,872
Total for Calendar Year 2005	$5,250,905

CALENDAR YEAR 2006

Account No.	Balances of Cerejo's FF Accounts on the FBAR Filing Date of June 30, 2007
UBS Account No. 588	$6,770,5163
Caixa Account No. 300	1,724
Total for Calendar Year 2006	$6,772,240

CALENDAR YEAR 2007

Account No.	Balances of Cerejo's FF Accounts on the FBAR Filing Date of June 30, 2008
UBS Account No. 588	$5,739,6014
Caixa Account No. 300	8,083
Total for Calendar Year 2007	$5,747,684

CALENDAR YEAR 2008

Account No.	Balances of Cerejo's FF Accounts on the FBAR Filing Date of June 30, 2009
UBS Account No. 588	$-0-
BCV Account No. 119	4,662,108
Caixa Account No. 300	9,071
Total for Calendar Year 2008	$4,671,179

77. Based on the balances of Cerejo's FF Accounts as of the FBAR filing dates for 2005, 2006, 2007 and 2008, as identified in paragraph 76, above, the maximum penalty amounts that the IRS may assess against Cerejo for willfully failing to file FBAR reports timely for the following calendar years are as follows:

CALENDAR YEAR 2005

Account No.	Maximum Amount of the the FBAR Penalty
UBS Account No. 588	$2,619,017
Caixa Account No. 300	100,000
Total for Calendar Year 2005	$2,719,017

CALENDAR YEAR 2006

Account No.	Maximum Amount of the the FBAR Penalty
UBS Account No. 588	$3,385,258
Caixa Account No. 300	100,000
Total for Calendar Year 2006	$3,485,258

CALENDAR YEAR 2007

Account No.	Maximum Amount of the the FBAR Penalty
UBS Account No. 588	$2,869,801
Caixa Account No. 300	100,000
Total for Calendar Year 2007	$2,969,801

CALENDAR YEAR 2007

Account No.	Maximum Amount of the the FBAR Penalty
UBS Account No. 588	$100,000
BCV Account No. 119	2,331,054
Caixa Account No. 300	100,000
Total for Calendar Year 2008	$2,531,054
Total for Calendar Years 2005 through 2008	$11,705,130

78. Although the statute establishes the maximum amount of the penalty that may be assessed against a person for willfully violating the FBAR reporting requirements, it also grants the IRS the discretion to reduce the penalty if the circumstances warrant such a reduction. See 31 U.S.C. § 5321(a)(5).

79. Here, the IRS exercised its discretion and limited the FBAR penalty assessed against Cerejo for 2005 through 2008 to an amount equal to 50% of the aggregate of the highest balances of his foreign financial accounts for the calendar year 2007 (i.e., $3,106,146). Accordingly, the IRS, in its discretion, reduced the FBAR penalty from $11,705,130, to $3,106,146, and further determined that the penalty should be allocated among all willful FBAR violations in 2005 through 2008 based on the aggregate of the highest balances of Cerejo's foreign financial accounts for the calendar years at issue:

Calendar Year	Aggregate of the Highest Balances of Cerejo's FF Accounts	Allocation of FBAR Penalty
2005	$4,684,483	$631,021
2006	5,962,686	803,201
2007	6,212,293	836,824
2008	6,199,491	835,100
Total	$23,058,953	$3,106,146

See ¶ 75, supra.

80. By letter dated April 1, 2016, Gary Yingst, Group Manager, advised Cerejo of the IRS's intent to assess an FBAR penalty against him under 31 U.S.C. § 5321(a)(5) for willfully failing to meet the filing requirements of 31 U.S.C. § 5314, and that the IRS proposed to assess the FBAR penalty in the following amounts for the following calendar years:

Calendar Year	Proposed FBAR Penalty Assessments (Excluding Accruals)
2005	$631,021
2006	803,201
2007	836,824
2008	835,100
Total Proposed FBAR Penalty Assessments (Excluding Accruals)	$3,106,146

81. By letter dated June 10, 2016, Cerejo, by and through his representative, requested a conference with IRS Appeals to protest the FBAR penalty that the IRS proposed to assess against him for 2005 through 2008.

82. By letter dated November 8, 2017, after an appeals conference was held, Svetlana Wrightson, an IRS Appeals Officer, advised Cerejo, by and through his representative, that IRS Appeals sustained the IRS's determination to assess FBAR penalties against him for 2005 through 2008. See ¶ 80, supra; ¶ 83, infra.

83. Because Cerejo willfully failed to file FBARs timely for 2005, 2006, 2007 and 2008, disclosing his interest in all foreign financial accounts during those calendar years, a delegate of the Secretary of the Treasury, on September 12, 2017, assessed civil penalties of $3,106,146 against him under 31 U.S.C. § 5321(a)(5)(C), (D), plus accruals thereon.

84. On September 12, 2017, a delegate of the Secretary of the Treasury gave notice of the FBAR penalty assessments described in paragraph 80, above, to Cerejo (and his representative) and made demand for their payment. The notice was sent to Cerejo, via certified mail, to his residence located in Cooper City, Florida.

85. Although notice of the assessments has been given and demand for their payment has been made, Cerejo has failed and refused to pay the unpaid balance of the FBAR penalties assessed against him for 2005, 2006, 2007 and 2008, including accruals thereon. As a result of the above, the failure to pay penalty was assessed, and that penalty and interest have accrued since September 12, 2017.

86. As of September 18, 2018, there is due and owing from Cerejo, after application of any credits and payments, the sum of $3,327,150.41 for the unpaid balance of the civil penalties assessed against him under 31 U.S.C. § 5321(a)(5), including interest and failure to pay penalties under 31 U.S.C. § 3717, for the calendar years 2005, 2006, 2007 and 2008, plus interest, failure to pay penalties and other additional amounts, such as administrative costs, that have accrued and continue to accrue, as provided by law, from September 18, 2018 to the date of payment.

87. The United States is entitled to entry of a judgment against Cerejo in the amount of $3,327,150.41, plus interest, failure to pay penalties and other additional amounts, such as administrative costs, that have accrued and continue to accrue, as provided by law, from September 18, 2018 until paid.

WHEREFORE, the plaintiff, United States of America, requests the following relief:

a. That this Court enter judgment in favor of the United States of America, and against Emilio Mendes Dias Cerejo, in the amount of $3,327,150.41 for the civil penalties assessed against him under 31 U.S.C. § 5321(a)(5), including the accrual of interest and failure to pay penalties under 31 U.S.C. § 3717, for the calendar years 2005, 2006, 2007 and 2008, plus interest, failure to pay penalties and other additional amounts, such as administrative costs, that have accrued and continue to accrue, as provided by law, from September 18, 2018 until the judgment is paid.

b. That this Court award the United States its costs in this action, and such other and further relief as justice requires.

Respectfully submitted this 11^th day of September, 2019.

RICHARD E. ZUCKERMAN
Principal Deputy Assistant Attorney General

LYNNE M. MURPHY
Trial Attorney, Tax Division
U.S. Department of Justice
La. Bar No. 20465
D.C. Bar No. 485928
P.O. Box 14198
Ben Franklin Station
Washington, D.C. 20044
Telephone: (202) 514-5881
Facsimile: (202) 514-9868
E-mail: lynne.m.murphy@usdoj.gov

OF COUNSEL:

ARIANA FAJARDO ORSHAN
United States Attorney

The complaint will be served, via certified mail, on the named defendant, Emilio Mendes Dias Cerejo.