Prologue – Department of Justice Exhibits Trophies from FBAR Fundraiser (http://www.justice.gov/tax/offshore_compliance_intiative.htm)
Disclaimer: I want to make it clear that I support the principle that one should obey the law. I do believe tax evasion should be punished. But, I also believe that punishments should be proportional to the crime. It is becoming increasingly clear that FBAR penalties violate any conceivable principle of fairness and morality. Good citizenship requires one to support the principle that it is important that the government adhere to high moral principles and standards. Given a choice of having offshore tax evasion and a completely unprincipled and predatory government, I would opt for the former.
@AtticusinCanada The DOJ is "The Ministry of Love" http://t.co/PSYbgqYlAQ – What an #Orwellian World! http://t.co/p7ldrDJUjp
— U.S. Citizen Abroad (@USCitizenAbroad) June 12, 2013
Note that they proudly include the Curran widow who they simply extorted 21 million dollars from. This makes me sick for the reasons given here. The U.S. government is not A predator. The U.S. government is THE predator. The time has come for these “so called” lawyers to put their energy into a search for justice rather than a search for fees (click on the previous link – really).
It appears that the names on the trophy list are people who have agreed to pay the fines. They probably thought that by “paying” they would put their adventures in FBAR behind them. They are wrong. They will need counseling the rest of their lives.
Q. What options are available to the Government if you don’t pay your FBAR penalty?
A. They have to sue. Looks like we finally have somebody who “might” be willing to “get it on” with the Department of Justice.
Advice: Make sure you get yourself a lawyer with courage and principle.
The Lawsuit for the FBAR Penalty
DoJ Files Action to Collect Multiple 50 Percent Civil #FBAR Penalties in U.S.A. vs. Zwerner http://t.co/ly523P2y7Y – May be 8th am test!
— U.S. Citizen Abroad (@USCitizenAbroad) June 19, 2013
It’s not called the “FBAR Fundraiser” for nothing. The facts are described in the Forbes article as follows and a copy of the complaint is here.
U.S.A. vs. Carl R. Zwerner. On June 11, 2013, the U.S. government filed a Complaint to collect multiple civil FBAR penalties in the amount of $3,488,609.33 previously assessed against Carl R. Zwerner of Coral Gables, Florida for his alleged failure to timely report his financial interest in a foreign bank account, as required by 31 U.S.C. § 5314 and its implementing regulations. See United States v. Carl R. Zwerner, Case # 1:13-cv-22082-CMA (SD Florida, June 11, 2013). According to the Complaint, from 2004 through 2007, Mr. Zwerner, a U.S. citizen, had a financial interest in an account at ABN AMRO Bank in Switzerland (hereinafter, “the Swiss bank account”). The Complaint alleges that the balance of the Swiss bank account from 2004-2007 was at all times greater than $10,000 and that, as such, on or before June 30, 2005, 2006, 2007, and 2008, Mr. Zwerner was required to file an FBAR reporting his financial interest in the Swiss bank account for each year from 2004, 2005, 2006, and 2007, respectively. However, the Complaint also asserts that prior to October 2008, Mr. Zwerner had never reported his financial interest in the Swiss bank account on an FBAR, nor had he reported income he earned from that account on his federal income tax returns.
To many, pursuing multiple year, maximum penalties following submission of amended returns and delinquent FBARs appears punitive. The nature of the underlying actions, if any, that may have led to the filing of the Complaint are unknown. However, the Excessive Fines Clause of the Eighth Amendment and relevant Supreme Court caselaw support a conclusion to the effect that a civil penalty or forfeiture is unconstitutional if the penalty or forfeiture is at least in part “punishment” and such punishment is grossly disproportionate to the conduct which the penalty is designed to punish.The touchstone of the constitutional inquiry under the Excessive Fines Clause is the principle of proportionality – the amount of the penalty must bear some relationship to the gravity of the offense that it is designed to punish.
The Complaint in Zwerner further alleges that on or about October 13, 2008, Mr. Zwerner filed a delinquent FBAR reporting his financial interest in the Swiss bank account during 2007, along with an amended income tax return for 2007; on or about March 27, 2009, Mr. Zwerner filed amended income tax returns and delinquent FBARs for 2004, 2005, and 2006. The basis of the Complaint is that Mr. Zwerner’s alleged failure to timely report his financial interest in the Swiss bank account for 2004-2007 was willful. Apparently, Mr. Zwerner did not hold the Swiss bank account in his own name. The Complaint alleges that from 2004 to 2006 he held the account in the name of any entity called the Bond Foundation and that, in January 2007, he transferred the account to an entity called the Livella Foundation. However, the Complaint asserts that at all times, however, Mr. Zwerner was the beneficial owner of the account.
According to the Complaint, Mr. Zwerner’s original tax returns for 2004 to 2007 did not report any income earned from the Swiss bank account; that the first time he reported such income was when he amended those returns; and that Mr. Zwerner represented on Schedule B of his original tax returns for those years that he did not have an interest in a foreign financial account. The Complaint asserts that Mr. Zwerner “expressly represented to the accountant who prepared his original tax returns for 2006 and 2007 that he had no interest in or signature authority over a financial account in a foreign country.” Further, it asserts that in a “letter dated August 9, 2010, Mr. Zwerner admitted to the IRS that he was aware that he should have reported both the existence of the account and the income he earned from it.”
Why would the DOJ launch this lawsuit?
It is obviously vindictive. Presumably this is punishment for not entering the OVDP program. As we know the GAO criticized the IRS for allowing people to come into tax compliance without offering to pay penalties.
The message from the U.S. government is:
You do NOT under any circumstances fix your tax problems without participating in the FBAR Fundraiser.
This is particularly significant because:
The government is seeking (what appears to be the unusual step of seeking) a multiple year FBAR penalty! Well, this is breaking new ground. In other words, the DOJ is sending a message that we can and we will seek a multiple year FBAR penalty IF WE WANT TO! (How is a lawyer to advise a client.)
The likely effect of this …
The incentives for coming into compliance are deteriorating.
What effect does his have on U.S. citizens abroad?
Probably not much (at least at the moment). As Mr. Rettig writes in his article:
Given the complexities of the Internal Revenue Code, other relevant statutes and life in general, many of the indiscretions associated with an income tax return or FBAR are anything but willful or intentional and definitely not fraudulent in nature. It is also likely that long-term residents of the U.S. might be deemed to have a higher degree of knowledge and will be treated differently than long-term non-residents of the U.S. In each situation, the actual facts and circumstances of each matter must be carefully reviewed before anyone can determine the appropriate method of coming into compliance with the various filing and reporting requirements associated with offshore financial accounts.
Possible conclusion …
If you agree that the FBAR Fundraiser is outrageous – get thee to a consulate and renounce immediately. The United States of today is a country where law has become a substitute for morality! Furthermore, the United States has far too many laws.
Your thoughts …
Jack says he and the DOJ settled without taking it to the Supremes…
Zwerner Case Settles Without Decision on Excessive Fines Issue
@Just Me, Thank you for the update (I should have checked more recent news before posting here). It seems to me that Zwerner threatened with the constitutional argument, and the DOJ got afraid and decided to settle.
“Despite these daunting sums, which do not reflect the economic harm that the United Statues suffered, the government has a strong argument that the fine is constitutional. ”
That doesn’t sound good, but it will be up to the supreme court to decide.
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