Wednesday, March 5, 2014

U.S. Motion for Summary Judgment in Zwerner (3/5/14)

I have just had the opportunity to peruse the Government's motion for summary judgment in the Zwerner case.  The motion is here (Note to readers, I have bookmarked the outline of the presentation in the pdf but you must download the pdf to take advantage of the bookmarked table).  The motion was filed 2/28/14.  I did not downloaded or read the exhibits, but have listed them here as presented in the motion.  My quick cut is that the exhibits are not relevant for any comments that I will make here.  The docket entries as of this morning are here.

My comments are:

1. The Government asserts that the burden of proof it must meet to establish willfulness is by a preponderance of the evidence.  Two courts have so held, although in one of the holdings was dicta.  I continue to believe that a strong case can be made for the clear and convincing standard.  I have presented my basic position on this point in earlier blogs, although I have recently refined the argument.  So, maybe I'll post on it later.

2.  The Government asserts the willful blindness, saying it is not necessary to prove Zwerner's knowledge that the law required the filing of the FBAR and imposed penalties for failure to do so.  I think that argument is wrong.  Congress' command was that the person have acted willfully.  In this context, it is clear that willfulness is the intentional violation of a known legal duty.  Nobody can seriously question that proposition. See Ratzlaf v. United States, 510 U.S. 135 (1994), here (the defendant knew of the BSA CTR filing requirement and sought to avoid it but did not know the law penalized it)  The question is whether willful blindness is a substitute for intentional violation of a known legal duty (as the Government appears to argue) or, instead, is simply a fact pattern from which the trier of fact is permitted to infer that the person had the requisite intent to violate a known legal duty, which after all is the command of  the statute.  The cases are fuzzy on this distinction, but if it is as the Government argues -- i.e., a substitute for intentional violation of a known legal duty -- then the position adds to the statutory basis for liability enacted by Congress.  That cannot be right.  I too have recently refined my analysis on this position and may post on it later.  (Note that I usually refer to willful blindness as conscious avoidance, as the label below for links to other blogs on the subject suggests.)

3.  Willfulness -- in the sense of intentional violation of a known legal duty -- is an inference from the facts because, as the Government notes, it is hard to prove the workings of a mind.  It thus should be the rare case that a finding of willfulness is compelled as a matter of law, as the Government asserts.  This is a variation of the concern I express in paragraph 2, but I suppose that willful blindness also is an inference from facts and thus also not well-suited for summary judgment.

The outline for the Government's argument on the defendant's liability is:


II. THE UNDISPUTED MATERIAL FACTS SHOW THAT ZWERNER IS LIABLE
FOR THE PENALTIES ASSESSED AGAINST HIM AS A RESULT OF HIS
WILLFUL FAILURE TO TIMELY FILE FBAR FORMS.
A. U.S. Citizens Must Report to the Department of Treasury the Existence of
Foreign Accounts Over $10,000 in Which They Have an Interest.
B. U.S. Citizens Who Willfully Fail to Report Their Interests in Foreign
Financial Accounts Are Liable for a Civil Penalty Up to 50% of the Value of
the Account in Question for Each Violation.
1. A taxpayer can willfully fail to file an FBAR form, even if he does not
actually know of the FBAR reporting requirements.
2. A taxpayer’s failure to file an FBAR is willful if he acts with reckless
disregard or willful blindness of the reporting requirements.
C. The Undisputed Facts Show that Zwerner’s Failure to Comply with the
FBAR Requirements Was Willful as a Matter of Law.
1. Zwerner’s actions were willful because he intentionally
concealed his Swiss bank account.
2. Zwerner’s actions were willful in that he was reckless or
willfully blind.
III. ZWERNER’S AFFIRMATIVE DEFENSES HAVE NO LEGAL BASIS
A. The Amount of FBAR Penalties Assessed Against Zwerner Does Not Violate
the Eighth Amendment Because the Penalties Are Not Grossly
Disproportional to the Gravity of the Offense.
B. A Comparison of Zwerner’s FBAR Penalties to Others’ Provides No Viable
Defense.
C. Zwerner Is Not Entitled to the Relief Offered Under the IRS’s 2009 Offshore
Voluntary Disclosure Program.
1. Any IRS decision not to accept Zwerner into the Offshore Voluntary
Disclosure Program would not be subject to judicial review.
2. Even if the Court could review an IRS decision not to accept Zwerner
into the Offshore Voluntary Disclosure Program, the evidence shows
that Zwerner did not meet the program’s requirements.
CONCLUSION

For all postings on the Zwerner case, click here.

5 comments:

  1. GlobalCapitalismMarch 6, 2014 at 1:52 AM

    ......1. A taxpayer can willfully fail to file an FBAR form, even if he does not

    actually know of the FBAR reporting requirements............

    Zwerner again next to McBride a classic example of bad facts making bad law => turkish bazar for all other Minnows !

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  2. update : a Motion for Summary Judgment filed on behalf of the U.S. government is pending in the Zwerner matter. Depending on a decision regarding this Motion, the jury trial in Zwerner is scheduled to commence during the two-week trial period beginning May 19, 2014.

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  3. Mr. Zwerner's attorneys have filed replies to this. I have not had the time to go through all the paperwork (one deposition is about 100 pages long) but there are allegations that the agent dictated certain things for Mr. Zwerner to say which were not correct. (I am being tactful.)

    Keep in mind also that Mr. Z followed legal advice to initiate a voluntary disclosure in 2008 which was a year before the 2009 OVDI was created. If he had demurred and waited until 2009 he would have fallen under the 20% penalty provided by the 2009 program.

    In my opinion, the most the IRS should have gone for would have been 20%, just like people who joined after the 20% program deadline ended, and before the 25% program started, were rolled into the 25% program. And, following the VD practice that existed prior to the 2009 OVDI, he should have received a Letter 3800.

    He also followed legal advice. Among other things, although he contacted his attorney(s) during the first half of 2008, and the FBAR for 2007 was due on 6/30/2008, he did not file it by then but included it with his return for 2007 (deadline of Oct. 15, 2008 with extension) so that FBAR was not filed on time. The IRS is also demanding 50% for the 2007 FBAR.

    I really don't have the time to dig deeply into the court filings (those interested in doing so may want to take a look at pacer.gov, a paid but reasonably priced government court document retrieval service.)

    On a personal note, I admire Mr. Z for fighting this.

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  4. Anonymous,

    Thanks for the information. I pulled from Pacer the following documents:

    20140307 Zwerner Response on US MSJ (TJ001).pdf
    20140317 US Reply on US MSJ (TJ001).pdf
    20140407 Pretrial Stipulation (TJ001).pdf
    20140407 Proposed Jury Instructions (TJ001).pdf
    20140407 US Motion in Limine (TJ001).pdf
    20140407 US Proposed Jury Verdict Form (TJ001).pdf
    20140407 Zwerner Motion in Limine (TJ001).pdf
    20140407 Zwerner Proposed Jury Verdict Form (TJ001).pdf

    I did not pull down the exhibits, which I do not think material to understanding the general posture of the case. I will be posting these documents to the blog or readers to view. Those wishing the underlying exhibits can go to Pacer.

    Jack Townsend

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  5. James Mark MintonMarch 5, 2015 at 2:13 AM

    Jack Zwerner has been and always will be one of the most straight up Law Abiding Citizens I have ever met. In the Gaming Industry. Real Estate Industry or on a personal level of any man I have ever met in the Business World! You know what is wrong with America? I call it the Crab Pot Syndrome. Simply put. It Is Jealousy. Imagine a crab trying to get out of the pot. The rest of the crabs will reach up and literally Rip the poor thing apart because they want to drag it back down there with them. I call them very sore pitiful Losers. Jack helped keep Order In Vegas in The Gaming Industry WHEN THERE WAS NONE. HOW SOON WE FORGET! THE IRS Who was supposed to be appointed for an interim in WW2.Has turned
    out to be the the biggest extortionest The United States has ever seen.AGAINST THE AMERICAN PEOPLE. I WOULD BE WILLING TO MAKE A BET TODAY THAT JACK ZWERNER HAS PAID MORE
    Taxes. Than all of you PITIFUL sore losers. Or disgruntled crabs that will soon be eaten by others!
    TAXES THAN PRESIDENT OBAMA. PRESISIDENT CLINTON COMBINED. I KNOW HE IS A DEMOCRAT! THATS THE ONLY BAD THING THAT
    I could say about choices he has made. HE IS MORE OF AN AN AMERICAN THAN THE PEOPLE HE AND THE MAJORITY ELECTED TO RUN THIS NATION OF SHEEP! HONEST FAIR AND FORTHRIGHT! BE GRATEFUL ALL OF YOU PITIFUL EXCUSES FOR SEA FOOD.. CRABS in the pot
    I COULD SAY ABOUT HIS ACTIONS!

    ReplyDelete

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