Schwarzbaum Redux – 11th Circuit Issues New Opinion to Correct Statement of FBAR Willfulness Civil Penalty Standard (1/23/25)

In United States v. Schwarzbaum, ___ F.4th ___ (11th Cir. 1/23/25), CA11 here and GS here [to come], the 11^th Circuit revisited the long-running Schwarzbaum FBAR civil penalty litigation. I discussed the immediately preceding visitation/opinion in 11th Circuit on Third Consideration Seals FBAR Willful Penalty Except for Relatively Small Amount Held Excessive Fine under 8th Amendment (Federal Tax Crimes Blog 9/4/24) here. In this new opinion, issued yesterday, the Court starts:

Appellee’s [United States’] petition for panel rehearing is GRANTED. We VACATE our prior opinion in this case and substitute the following in its place:

The Slip Opinion for the prior opinion was 53 pages; the Slip Opinion for this new opinion is 55 pages. For purposes of Federal Tax Crimes and Federal Tax Procedure Blogs, the material changes * only correct misstatements in the original opinion that the FBAR willfulness civil penalty standard is the same as the FBAR willfulness criminal penalty standard (the Cheek/Ratzlaf standard). (See new footnotes on p. 40 n. 7 and p. 46 n. 10.) As all readers of this blog surely know, the civil penalty standard includes recklessness but the criminal penalty standard requires the stricter specific intent requirement in Cheek and Ratzlaf. I don’t think that those corrections affect the bottom-line holdings, so I just copy and paste the succinct summary I provided in the original blog entry.

(1)  (a) held the FBAR civil willful penalties are “fines” within the meaning of the Eighth Amendment; (b) held the minimum $100,000 penalties applying to Schwarzbaum’s accounts with small amounts (those $16,000 or less) are disproportional and excessive; (c) held the penalties on the accounts with significantly larger amounts are not disproportional and thus not excessive; and (d) remanded to the district court to determine the effect of the $300,000 reduction required by the (1)(b) holding.

(2)   (a) rejected Schwarzbaum’s attack that, in a prior appeal, the court held the assessment was “arbitrary and capricious” and thus rendered the assessments invalid from inception; instead holding that the prior holding was that the assessment was “not in accordance with law,” a different standard under APA § 706(2)(A), requiring a remand to the IRS to fix the calculation mistake rather than wipe out the assessments; (b) rejected a related statute of limitations argument that the remand required a new out of time assessment, holding the issue had been decided against Schwarzbaum in an earlier appeal; (c) sustained a lower assessment rather than the correct assessment which would have been higher; and (d) held the district court properly remanded the case to the IRS and retained jurisdiction of the case to consider after the IRS recalculated the penalties.

Use of AI, Including Large Language Models (LLMs), in Tax Court Brief Writing (And Really Other Legal Analysis) (1/22/25)

I erroneously posted on the Federal Tax Crimes Blog a post that I should have posted on the Federal Tax Procedure Blog. I have deleted the content of the Federal Tax Crimes Blog post. To read the blog on the Federal Tax Procedure Blog, see Use of AI, Including Large Language Models (LLMs), in Tax Court Brief Writing (And Really Other Legal Analysis) (1/22/25), here.

New Information for Tax Conspiracy and Related Credit Suisse (through Successor UBS) Initiatives Re Violation of 2014 Plea Agreement (1/19/25)

In United States v. Rosenberg (S.D. FL No. 1:25-cr-20005, CL Dkt. Sheet here), the Government filed an Information with Trial Attorney Certificate, here, charging Gilda Beth Rosenberg (aka Gilda Rosemberg Percezek) with one count of conspiracy to defraud and commit offenses (i.e., both a defraud and an offense conspiracy in one count). Except for the large amounts involved, the allegations are not unusual for U.S. taxpayers who employed Swiss financial institutions to avoid their U.S. tax reporting and paying obligations. That the filing is an information with an attached Trial Attorney Certificate indicating that 0 days of trial is expected suggests that a plea deal has been reached, will be filed with the district court soon, and will be processed to sentencing in due course.

The Information names only one Swiss bank specifically--Union Bancaire Privee Bank. Another, unnamed Swiss bank is alleged to have held Rosenberg’s assets in an “insurance wrapper” account, described as “an investment account around which was wrapped a life insurance policy.” (I don’t know recall the precise tax gambit for such insurance wrappers with life insurance but I assume that it relates at least in part to the nontaxability of life insurance proceeds thus potentially cleansing unreported income behind the “insurance” proceeds.)

Credit Suisse appears to have been somewhere in the mix, perhaps with the insurance wrapper account. Credit Suisse earlier ran afoul of U.S. tax authorities and reached a deal in 2014 to plead guilty to a U.S. tax crime, pay $2 billion, and identify U.S. taxpayers it assisted evade tax.  Credit Suisse Pleads to One Count of Conspiracy to Aiding and Assisting (Federal Tax Crimes Blog 5/19/14; 5/20/14), here. Credit Suisse then apparently breached that deal by not disclosing some U.S. taxpayers (including allegedly Rosenberg). (The amount Credit Suisse paid under the 2014 deal is variously reported but according to my discussion in that blog, the documents indicate the resolution cost Credit Suisse $2 billion.)

Two Recent Tax Crimes Cases Involving Bitcoin (1/19/25)

In my immediately preceding post (2 days ago) on the indictment of Tom Goldstein, I mentioned that among the allegations were allegations that Goldstein had not properly reported his cryptocurrency transactions. I said that I would post some other recent items involving cryptocurrency. These recent items involve Bitcoin, perhaps the most prominent type of cryptocurrency. Goldstein’s indictment does not specify the type of cryptocurrency he allegedly used.

Ahlgren 

In United States v. Ahlgren ((W.D. TX No. 1:24-cr-00031) [CL has two docket sheets here and here with some documents available by checking both sheets], the defendant allegedly failed to report major income from Bitcoin transactions and allegedly certain other cryptocurrency including Bitcoin Cash, Bitcoin Gold, Etherium [Ethereum], and Litecoin. Ahlgren was indicted on seven counts of filing false tax returns and structuring deposits to evade currency transaction reporting requirements. Ahlgren was detained pending trial. (See Dkt. Entry 15 dated 4/9/2024 titled Order of Detention Pending Trial, here; Dkt Entry 22 dated 4/25/24 titled Government’s Advisory to the Court Regarding Detention Remand, here; and Dkt Entry 24 dated 4/22/24 and titled Order, here) Pretrial Detention is unusual in tax crimes cases.

Ahlgren thereafter pled guilty to one count of tax perjury, § 7206(1), and sentencing judgment was accordingly entered. (See Dkt Entry 45 dated 12/13/24 titled Judgment in A Criminal Case, here.) The count of conviction under the plea was a single count with a maximum three-year sentence. The Court sentenced Ahlgren to 24 months incarceration which would permit, with good time credit, a sentence served of less than 24 months. The Court imposed restitution of $1,095,031 which presumably is the unpaid criminal tax loss. Although restitution is not normally imposed in tax cases, it can be imposed if agreed in the plea agreement. This restitution is the amount that the IRS can assess without further ado under the restitution-based assessment (“RBA”) procedures. See §§ 6201(a)(4) & 6213(b)(5). The IRS may further audit Ahlgren's tax liabilities and assert more tax but will have to proceed under the deficiency procedures.

Further, shortly after sentencing, the Court entered a restraining order (See Dkt. Entry 50 dated 1/6/25 titled Restraining Order, here) requiring Ahlgren to

Tom Goldstein--SCOTUSblog founder, Prominent Supreme Court Advocate, and High-Stakes Gambler--Indicted for Tax and Related Crimes and False Statements to Mortgage Lenders (1/17/25; 1/19/25)

Yesterday's big news in tax crimes was the indictment of Tom Goldstein, the co-founder of SCOTUSblog, a big-time Supreme Court advocate, and high-stakes gambler. The indictment lays out  major and many crimes including

• tax crimes (evasion § 7201, aiding and assisting § 7206(2), willful failure to pay tax § 7203)
• aiding and abetting 18 U.S.C. § 2) and 
• mortgage-related crimes (including false statements 18 USC § 1014) and 
• seeks forfeiture for mortgage-related crimes. 

A significant feature is Goldstein’s apparent addiction to high-stakes gambling and to other vices, which may include metaphorically wine, women, and song (with emphasis on women).

For those interested in delving deeper into the details, I provide a link to the indictment along with some of the more insightful articles on the subject. This will allow readers to pursue the matter further as they wish.

Links:

• Indictment, CL here. (The CL docket sheet is here, although it is sparsely populated with only the indictment now.)
• David Lat, SCOTUSblog Founder Tom Goldstein Hit With 22-Count Federal Indictment (Original Jurisdiction 1/17/25), here.
• Amanda Robert and Lee Rawles, SCOTUSblog founder Tom Goldstein faces tax evasion charges (ABA Journal 1/16/25), here.
• Francis Chung, Supreme Court blog publisher Tom Goldstein, a high-stakes poker player, indicted on tax charges (Politico with Associated Press 1/16/25), here.
• Added 1/19/25 1pm: Dan Morse, Supreme Court attorney who founded SCOTUSblog is charged in tax case (WAPO 1/17/25), here.

In the pattern of conduct for tax evasion, the indictment alleges cryptocurrency tax violations. (See ¶ 21, 24.n., 70-72, 81, & 83; there have been some other relatively recent cryptocurrency tax crimes items that I have been meaning to blog, but I will do that later, perhaps this weekend.)

My editorial comment is that the pattern of conduct alleged shows amazing hubris or chutzpah or some type of pervasive psychological or antisocial disorder.

Added 1/17/25 3:55pm: One comment I read on one blog write-up was that this case is ripe for a good storyteller such as Michael Lewis to write a book that should be a  bestseller.

Updates on Developments in IRS Penalty Administration and Voluntary Disclosure (1/11/25)

I post here links to earlier posts on my Federal Tax Procedure Blog about the IRS’s Voluntary Disclosure Practice (“VDP”). ABA Tax Section Comments on VDP Disclosure Form 14457, Voluntary Disclosure Practice Preclearance and Application (1/5/25), here; and IRS Voluntary Disclosure Practice (VDP) Requires Taxpayer Admit Criminal Willfulness (11/29/24; 1/5/25), here.

Also, I have just recently learned that, in the National Taxpayer Advocate’s Annual Report to Congress 2024, here, the NTA discusses two of 10 Most Serious Problems Encountered by Taxpayers that relate to tax administration of the type addressed in this blog (Federal Tax Crimes) and the companion blog (Federal Tax Procedure). Items 9 and 10 are, respectively:

9. Civil Penalty Administration (pdf 16 pages), here; and

10. Criminal Voluntary Disclosure (pdf 17 pages), here.

The most relevant to the initial item in this blog is the Criminal Voluntary Disclosure which I generally refer to as the IRS Voluntary Disclosure Practice (“VDP”). From the discussion of both items, I gather that the practitioner community has major concerns with IRS administration, that the NTA has listened to those concerns (calling the community “external stakeholders”), and that, in large part, the NTA has adopted those concerns.

Although it probably does not matter what I believe, I will state my belief anyway: