Sunday, December 15, 2019

Court Grants Summary Judgment on FBAR NonWillful Penalty Collection Suit (12/15/19)

In United States v. Agrawal (E.D. Wisc. Dkt. 18-C-0504 Order Dtd. 12/9/19) (CL here and GS here), the Court granted summary judgment to the Government on its complaint (CL here) for judgment on 4 years of nonwillful FBAR penalty at $10,000 per penalty (plus interest and costs).  (Note:  CL is Court Listener and GS is Google Scholar.)  Since he had the account, his only defense to the nonwillful penalty was reasonable cause.  He tried to defend himself against the penalty, acting pro se without an attorney.

His deposition testimony quoted in the opinion is interesting and shows that he was lucky to have avoided the willful penalty.  (Of course, the IRS did not have his deposition testimony when it imposed the penalty.)  The following is from the opinion:
At his deposition, Agrawal testified that he prepared his own tax returns in 2006 and 2007, but relied on CPAs to prepare his tax returns in 2008 and 2009. He testified that he did not tell the CPAs of the existence of the UBS account. Regarding the 2008 tax return preparation, Agrawal testified as follows: 
Q. Did [the CPA] ask you whether you had a foreign financial account?
A. I said no.
Q. You told him no?
A. Yes.
Q. But at this time you still had the UBS account, correct?
A. Yes.
Q. Why did you tell [the CPA] no?
A. Because again, the word of [the UBS representative] that these — this account is not — non-taxable in the U.S.
. . .
Q. You didn't tell [the CPA] that you had a UBS account but were told that it was non-taxable and didn't need to be reported?
A. I didn't tell him.
Q. Okay. Why not?
A. Because when I trust somebody, like [the UBS representative], I didn't tell him.
ECF # 32-17 at 65-66. Regarding the 2009 tax return, Agrawal testified as follows: 
Q: Did you review the Form 1040 of your tax return to 2009 with [the CPA] before you filed it?
A: Yes.
. . .
Q. The Part III, the information about foreign accounts and trusts is blank?
A. Yeah.
Q. Did you ask [the CPA] why it was blank before you filed your return?
A. No.
Q. It didn't cause you any concern?
A. No.
Q. Why not?
A. Because I didn't notice. He should have said no.
Q. Did [the CPA] ask you if you had any accounts in a foreign country?
A. No. 
Id. at 68. However, with his response to plaintiff's motion for summary judgment, Agrawal submitted an affidavit reversing some of this testimony; he now claims that both CPAs asked whether he had foreign accounts; that he told them he did have a foreign account; that the CPAs did not file FBARs on his behalf or report the UBS account on his tax returns; and that he relied on the CPAs' expertise. ECF # 36 at 2-3. Along with this affidavit, Agrawal also filed an errata list amending portions of his deposition testimony, including the portions cited above. Many of these amendments simply change "yes" answers to "no" or vice versa; Agrawal's explanation for these amendments is that he "misspoke." ECF # 37-1 at 11-13.
 And, as often the case, he had other bad facts.

But, to repeat, he is lucky to have avoided the willful penalty which would have been much more.

JAT Comment:

1. The Court noted that Agrawal filed a "sur-reply" that was unauthorized without leave of court, which he did not request.  The Court said that, because he did not request leave, the Court would not consider the filing.  But, although it did not consider the filing, it clearly did read the filing, noting in footnote 1:
A note: Mr. Agrawal has represented himself throughout this litigation. Consistent with his earlier practice, his unauthorized sur-reply is also signed "Ram K. Argrawal, pro se." This document, however, differs substantially in both style and content from Mr. Agrawal's earlier submissions. It contains developed legal argument and properly formatted legal citations; in short, it appears to be the work of a trained and experienced attorney. Mr. Agrawal is warned that if he knowingly makes factual misrepresentations to the court — for example, by claiming to represent himself while in fact employing an attorney to litigate his case — he may expose himself to sanctions under Rule 11 of the Federal Rules of Civil Procedure.

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