FBAR Collection Suit Settled Before Jury Verdict Announced (8/27/19)

I previously reported on pretrial skirmishing in the Government's FBAR collection suit in United States v. Dadurian (S.D. Fla. 9:18-cv-81276).  See Court Denies Motion for Partial Summary Judgment on FBAR Willful Penalties (Federal Tax Crimes Blog 8/16/19), here, and Two New FBAR Opinions -- Nothing New Here (Federal Tax Crimes Blog 6/27/19), here.  I report here on the conclusion of the case.

The case went to trial and was submitted to the jury.  Before the verdict was announced, however, the parties settled the case, where the Government originally sought judgment for $2.7 million, for $1 million.  (However, see below as to how the settlement will be effected.) Apparently, there was some drama involved because the jury reached a verdict before the settlement was finally reached, so the parties had to choose to complete the settlement or accept the jury verdict (then unknown, although reached).  See FBAR Trial Settles With Recklessness Standard, TNT (8/29/19) (with the estimable Lee A. Sheppard contributing to the article).  I do not have a link to the article because it is behind a paywall, and getting Tax Analysts' permission to post is a nuisance, as well as (in my experience) requiring some wait period before posting.  Those with a TNT subscription should just go look at it there, although the important details are no different than I offer here drawn solely from the court documents I retrieved from Court Listener (which everyone can access free here).

The jury verdict held Dadurian liable for the accounts she had caused to be set up, but as noted the jury verdict does not control.  I have not attempted to determine the amount of the liability based on the jury verdict, but it was substantially less than the $2.7 million the Government claimed.

Here are the relevant documents from Court Listener:

• The Stipulation Regarding Settlement, here.
• The Jury Verdict (Mooted by the Settlement), here.

JAT Comments:

1.  Nothing particularly unusual here except, of course, the drama in having to choose between the settlement and the unknown jury verdict.

2.  The Stipulation Regarding Settlement is, I think, somewhat noteworthy as to how the settlement gets effected.  Here is the relevant part:  “The material terms of the settlement are as follows: Dadurian will stipulate to a judgment in the full amount of the penalties, plus interest accruing under 31 U.S.C. § 3717. The United States will agree to mark the judgment satisfied if Dadurian pays the United States $1,000,000.00 within 90 days of today.” So, there will be a judgment indicating Dadurian's liability for the full amount and then the judgment liability will be settled for $1 million.  (I guess this sentence is redundant, but that seems a strange way to effect a settlement; it seems to me the more straightforward way to settle would be to enter judgment in the amount of the settlement; if anyone knows why the settlement was structured in this way, please make a comment or email me at jack@tjtaxlaw.com.

Addendum 8/27/19 2:45pm:

3.  With regard to Comment #2, Bob Steinberg, an attorney-CPA, in Palmetto Bay Fl., asks whether this settlement format will give rise to cancellation of indebtedness income.  I think I can argue that both ways (if I had to).  Still, I would presume that somebody addressed that issue in reaching the settlement.  However, I would appreciate any analysis of that issue that readers may make either by comment or by email jack@tjtaxlaw.com.