Opinion
23204-16
12-15-2021
Emilio M. Cerejo & Dawn H. Cerejo, Petitioners v. Commissioner of Internal Revenue, Respondent
ORDER
CHRISTIAN N. WEILER JUDGE
This case is calendared for trial at a special trial session commencing June 6, 2022, in Miami, Florida. The issues for decision are whether petitioners are liable for deficiencies and fraud penalties due to their alleged receipt of unreported income for tax years 2003 through 2011.
On October 5, 2021, respondent filed a Motion in Limine seeking admission into evidence business records from the United Bank of Switzerland (UBS) to prove the truth of the matters asserted therein. Petitioner objects on the grounds of hearsay and authentication. As discussed in detail below, we will grant respondent's Motion in Limine.
In 2009 the U.S. Department of Justice reached an agreement with the Swiss Government concerning "accounts of interest" held by U.S. citizens and residents. Pursuant to this agreement the Internal Revenue Service (IRS) submitted to the Swiss Government, under the bilateral income tax treaty between the two nations, a request for information concerning specific accounts believed to be beneficially owned by U.S. taxpayers. The Swiss Government directed UBS to initiate procedures that would lead to turning over to the IRS information in UBS files concerning bank-only accounts, custody accounts in which securities or other investment assets were held, and offshore nominee accounts beneficially owned indirectly by U.S. persons. See U.S. Department of Justice, Press Release, U.S. Discloses Terms of Agreement with Swiss Government Regarding UBS (Aug. 19, 2009), at http://www.usdoj.gov/opa/pr/2009/August/09-tax-818.html.
The parties to the bilateral income tax treaty acknowledged that the Swiss Federal Office of Justice would oversee UBS's compliance with its commitments. Pursuant to this agreement the U.S. Competent Authority received from the Swiss Government information concerning numerous U.S. taxpayers. On or about September 10, 2010, the IRS received 538 pages of information concerning UBS accounts held by or associated with petitioner Emelio Cerejo. This material includes bank records, investment account statements, letters, emails between petitioner and UBS bankers, summaries of telephone calls, and documentation concerning entities through which assets were held. Respondent has submitted with the UBS documents a "Certification of Business Records" executed by Britta Delmas, legal counsel for UBS. Ms. Delmas attached to her certification an index listing Bates-numbered pages as UBS records associated with Mr. Cerejo. Ms. Delmas avers that these records are original records or true copies of records that: (1) were made at or near the time of the occurrence of the matters set forth therein by persons with knowledge of those matters; (2) were kept in the course of UBS's regularly conducted business activity; and (3) were "made by the said business activity as a regular practice". At the bottom of her certification Ms. Delmas "declares under penalty of perjury under the laws of Switzerland that the foregoing is true and correct". Having considered the origin and nature of the UBS records, along with the certification of Ms. Delmas, we are satisfied that the records are authentic business records of UBS and that they were used and kept in the course of UBS's regularly conducted business activities.
Respondent provided fair notice to petitioners of his intent to introduce them as such. See Fed.R.Evid. 902(11), (12). Further, Ms. Delmas signed the records "in a manner that, if falsely made, would subject [her] to a criminal penalty in the country where the certification is signed". Fed.R.Evid. 902(12). Accordingly, we find the documents to be self-authenticating certified foreign records. See Fed.R.Evid. 801(d)(2), 803(6), 902(11), (12).
It is significant that the UBS records were provided pursuant to an agreement between the United States and a foreign government. United States v. Johnson, 971 F.2d 562, 571 (10th Cir. 1992) ("A foundation for admissibility may at times be predicated on judicial notice of the nature of the business and the nature of the records as observed by the court, particularly in the case of bank and similar statements".) (quoting Federal Deposit Ins. Corp. v. Staudinger, 797 F.2d 908, 910 (10th Cir. 1986)).
Petitioners contends that Ms. Delmas cannot certify that the UBS records were business records because she is not a "qualified person" in that she was not a custodian of business records or other qualified witness. Fed.R.Evid. 803(6), 902(11). However, "[a]ll that is required of [a qualified] witness is that he or she be familiar with the record-keeping procedures of the organization". United States v. Baker, 458 F.3d 513, 518 (6th Cir. 2006). Ms. Delmas's experience as in-house legal counsel for UBS indicates that she has familiarity with UBS's routine procedures for the preservation of business records. She has certified the authenticity of documents on behalf of UBS in this Court. See, e.g., Harrington v. Commissioner, Docket 13531-18 (Order served on Feb. 19, 2020). Ms. Delmas has also filed sworn declarations on behalf of UBS in her capacity as Global Head of E-Discovery at UBS. See Olenicoff et al. v. UBS AG et al., Docket No. 8:15cv02116 (C.D. Cal.) (ECF 481) (filed Sept. 12, 2011); see also Fed.R.Evid. 201. As a lawyer tasked with supervising production of UBS records for internal investigation and discovery, Ms. Delmas was well equipped to make the certification involved here.
Petitioners next contend -- assuming Ms. Delmas's affidavit satisfies the "qualified person standard" -- that the UBS documents cannot be classified as business records, since UBS is not a trustworthy source and the method and circumstances of the production indicate a lack of trustworthiness. However, petitioners failed to advance any legal reasoning to support this assertion. Rather, petitioners maintain that since UBS has acted fraudulent in the past, they are per se an untrustworthy source of information. Petitioners point to the Deferred Prosecution Agreements between the United States Department of Justice and UBS, and UBS's subsequent violation of those agreements. In further of their untrustworthiness argument, petitioners contend that it is impossible due to the sheer volume of pages - allegedly more than 2.5 million pages - for Ms. Delmas's certification to establish that the accompanying records were created as part of UBS's regularly conducted business activity.
A party wishing to have evidence which would otherwise fall under one of the hearsay exceptions excluded, must make an affirmative showing of untrustworthiness. Kehm v. Procter & Gamble Mfg. Co., 724 F.2d 613, 618 (8th Cir. 1983). Furthermore, Federal Courts have broad discretion in determining whether business records meet the trustworthiness standard of Fed.R.Evid. 803(6). Id. at 626.
Pursuant to the U.S.-Swiss agreement, UBS was directed to produce to the IRS all records from its files associated with specified U.S. clients. UBS performed for its clients services well beyond those that banks typically discharge in connection with ordinary checking accounts. UBS helped to create trusts, corporations, and other entities to hold its clients' investments, solicited its clients' investment goals, and attempted to manage the investments in a manner consistent with its clients' objectives. It is thus not surprising that UBS would retain, as part of its regularly conducted business activity, records of communications with its clients. See United States v. Johnson, 971 F.2d 562, 571 (10th Cir. 1992) ("[B]ank records are particularly suitable for admission under Rule 803(6) in light of the fastidious nature of record keeping in financial institutions, which is often required by governmental regulation".)
Petitioners appears to concede that the bank statements and investment account statements constitute business records. While they question the admissibility of other documents such as letters, third party communications, and summaries of "client contacts". However, many of this correspondence were sent by Mr. Cerejo to, or received by Mr. Cerejo from, UBS bankers. Petitioners remain free to dispute at trial the contents of particular communications included in the UBS records, if they choose to do so.
Finally, with respect to the allegation of untrustworthiness, petitioners do not specifically explain how UBS actions impacts the accuracy or trustworthiness of the produced records at issue here. Pursuant to the U.S.-Swiss agreement, UBS produced to the IRS all records associated with U.S. persons that it could locate in its files. The Swiss Federal Office of Justice was tasked with overseeing UBS's compliance with its commitments. It is conceivable that UBS's search failed to locate certain documents, and its bankers may not necessarily have kept copies of every document of which they were aware; however, it is not conceivable that UBS somehow altered the records and they are no longer reliable. If petitioners know of other relevant exculpatory records, they are free to bring them to the Court's attention at trial of this matter. It remains clear to us that the 538 pages of documents that UBS did produce were authentic business records maintained by UBS in the ordinary course of its business, and that these records may properly be admitted into evidence in this case.
In consideration of the foregoing, it is ORDERED that respondent's Motion In Limine, filed October 5, 2021, is granted.