Government Appeal of Williams FBAR Case (1/24/12)

Readers will recall that I have posted several blogs on the Williams case where the trial judge refused to find willfulness for purposes of the onerous FBAR penalty.   I post the prior blogs at the end of this blog.  The Government appealed the case.  I now provide links to the Government's briefs.  (Note that these links are to pdf copies that I OCR'd within the pdf file and I provide certain highlights related to the points I discuss in this blog.)

The key points I note are as follows:

1. A lot of the fight is about whether Williams should be bound by -- hanged by, perhaps -- statements he made during a plea allocution in the earlier criminal case.  I am not going to comment on that.

2. A key argument the Government makes if it cannot hang Williams on those statements is that willfulness for purposes of the FBAR penalty is perhaps not the same as Cheek willfulness or even Ratzlaf willfulness (Ratzlaf v. United States, 510 U.S. 135 (1994), the statutory amendment for Ratzlaf did not amend the willfulness civil penalty in question here).  Willfulness is not a term with a single meaning, but certainly in the tax law it has a specific meaning -- intentional violation of a known legal duty.  And, Ratzlaf said it had that meaning the Treasury reporting requirements.  So a good argument, I  think, can be made that the standard is the same as the Cheek standard, but the Government argues otherwise.  Indeed, the Government claims that recklessness will  suffice -- in effect, the Government imports something like a conscious avoidance (aka willful blindness and other terms) into the concept.  I suppose that, if willful should be interpreted by analogy to the criminal provisions requiring willfulness, then perhaps the conscious avoidance concept, if valid for criminal purposes for the high willfulness standard, should also apply for civil FBAR willfulness.  (See my prior blogs on conscious avoidance by clicking the conscious avoidance link below.)  In any event, it seems to me that the standard should not be different, only a less strict standard of proof applies in a civil case.

3. There is no discussion in the briefs about the burden of proof the Government is required to meet.  I have discussed this issue before (see blog cited below), and believe that the burden is clear and convincing.  The trial judge in Williams applied a preponderance standard, and held that the Government even failed to meet that burden.  If the judge was right as to the quality of the Government's evidence, then necessarily the Government failed to meet the clear and convincing standard.  Nevertheless, since a key part of the Government's argument is that, on the record, the trial judge erred in making the finding that the Government had not proved willfulness, it is surprising that Williams did not try to engage this issue so as to require that the Government clear a greater hurdle for this argument to gain traction.  Indeed, since nothing is really engaged on this issue, I am concerned that the Court of Appeals would be lulled into the repeating the preponderance error (if indeed it is error).

The case is tentatively calendared for during the 3/20/12 - 3/23/12 argument session.

Those are my comments  for  now.  I may add more later.

United States Opening Brief in Williams Case, here.

Williams Answering Brief in Williams Case, here.

United States Reply Brief in Williams Case, here.

Prior Blogs:

NTA Discussion of the Williams Case (1/12/12), here.

Burden of Proof for Willfulness in FBAR Violations (9/6/11), here.

The Williams Offshore Account Saga Continues - You Win Some, You Lose Some (4/28/11), here.

Government Fails to Prove Willfulness in FBAR Civil Case (9/2/10), here.

See also these blogs for related content:

Practitioner Experience with No Answers to the FBAR Question on Form 1040 (10/5/10), here.

Government Pursues FBAR Penalty in Civil Case (10/31/10), here.