FBAR Civil Willful Penalty Collection Suit for $17+ Million with Damning Allegations (5/17/21)

Some FBAR willful penalty collection suits are relatively bare bones, asserting only the essentials.  In United States v. Gaynor, (M.D. Fla. Dkt.  2:21-cv-00382 Dkt # 1 Complaint 5/14/21), CL here, the Government goes beyond the essentials with a detailed recounting of damning facts (see pars. 13-92).

The Complaint breaks down the damning facts in the following categories:

A. Decedent inherited her late husband's Swiss bank account

B. Decedent repeatedly met with Swiss bankers

C. Decedent moved her assets to other Swiss banks to avoid tax compliance

D. Decedent hid the offshore accounts from her CPA

E. Decedent failed to file timely FBARs

F. Decedent belatedly made a “quiet disclosure”

G. Decedent attempted to deceive the IRS during its audit

JAT Comments:

1. One allegation that I found interesting is:

90. In a June 2018 filing with the IRS, Decedent asserted through her attorney that she “knew nothing about Gery or its foreign bank accounts” until 2012. She contended, with emphasis in the original, that her “lack of knowledge” was both “obvious and easily provable.”

Since she made the allegation through her attorney, perhaps it was necessary to say it was through the attorney.  On the other hand, on the facts pled in the earlier paragraphs she certainly knew the allegation was false and, if she knew, why didn't the attorney know.  Of course, sometimes clients do not tell their attorneys the truth, with the result that the attorney can make false representations.  It is interesting in this regard that the complaint does allege that the decedent kept the truth about the foreign accounts from her CPA (see par. D, above).  No such allegation is made about the decedent keeping the truth from the attorney.  Perhaps that is because the IRS or DOJ Tax did not try to go beyond the attorney client privilege.

2. The Government makes a better attempt than I have seen in other FBAR complaints to explain its allocation of the FBAR civil willful penalty to multiple open years:

            96. The IRS determined that the statutory maximum penalty for Decedent for calendar years 2009, 2010, and 2011 was in excess of $48 million.

            97. As a matter of policy, however, when the IRS is examining more than one year and the same assets went unreported in multiple years, the IRS will typically avoid penalizing the same assets multiple times and will instead determine a penalty amount that is allocated among the years at issue.

            98. Along those lines, the IRS determined a penalty amount of $17,299,139 in this case.

            99. The IRS allocated $5,691,899 to calendar year 2009, $6,076,373 to calendar year 2010, and $5,530,867 to calendar year 2011.

            100. On May 30, 2019, a delegate of the Secretary of the Treasury assessed civil penalties against Decedent pursuant to 31 U.S.C. § 5321(a)(5)(C) based on her willful failure to file an FBAR for calendar years 2009, 2010, and 2011. The assessments were in the amounts reflected in ¶ 99, supra.