Federal
law requires taxpayers to report annually to the Internal Revenue Service
(“IRS”) any financial interests they have in any bank, securities, or other
financial accounts in a foreign country. 31 U.S.C. § 5314(a). The report is
made by filing a completed form TD F 90-22.1 (“FBAR”) with the Department of
the Treasury. 1 See id. § 5314; 31 C.F.R. §
1010.350. The FBAR must be filed on or before June 30 of each calendar year
with respect to foreign financial accounts maintained during the previous
calendar year, 31 C.F.R. § 1010.306(c), and the Secretary of the Treasury may
impose a civil money penalty on any person who fails to timely file the report,
31 U.S.C. § 5321(a)(5)(A). Moreover, in cases where a person “willfully” fails
to file the FBAR, the Secretary may impose an increased maximum penalty, up to
$100,000 or fifty percent of the balance in the account at the time of the
violation. Id. § 5321(a)(5)(C).
The authority to enforce such assessments has been delegated to the IRS. 31
C.F.R. § 1010.810(g).
The civil and criminal penalties for noncompliance with the FBAR
filing requirements are significant. Civil penalties for a non-willful
violation can range up to $10,000 per violation, and civil penalties for a
willful violation can range up to the greater of $100,000 or 50% of the amount
in the account at the time of the violation. Criminal penalties for violating
the FBAR requirements while also violating certain other laws can range up to a
$500,000 fine or 10 years imprisonment or both. Civil and criminal penalties
may be imposed together. The authority to enforce these assessments has been
delegated to IRS.
Under the offshore voluntary disclosure initiative (OVDI)
currently in effect, IRS won't impose certain penalties on taxpayers with
unreported offshore income if the applicable requirements are met. However,
taxpayers don't qualify for favorable treatment under an OVDI if they fail to
timely disclose their interests—so taxpayers in situations similar to the one
in this case are unlikely to qualify for an OVDI.
Willfulness may be proven through inference from conduct meant to conceal or mislead sources of income or other financial information,” and it “can be inferred from a conscious effort to avoid learning about reporting requirements.” United States v. Sturman, 951 F.2d 1466, 1476 (6th Cir. 1991) (internal citations omitted) (noting willfulness standard in criminal conviction for failure to file an FBAR). Similarly, “willful blindness” may be inferred where “a defendant was subjectively aware of a high probability of the existence of a tax liability, and purposefully avoided learning the facts point to such liability.” United States v. Poole, 640 F.3d 114, 122 [107 AFTR 2d 2011-2163] (4th Cir. 2011) (affirming criminal conviction for willful tax fraud where tax preparer “closed his eyes to” large accounting discrepancies). Importantly, in cases “where willfulness is a statutory condition of civil liability, [courts] have generally taken it to cover not only knowing violations of a standard, but reckless ones as well.” Safeco Ins. Co. of America v. Burr, 551 U.S. 47, 57 (2007) (emphasis added). Whether a person has willfully failed to comply with a tax reporting requirement is a question of fact. Rykoff v. United States, 40 F.3d 305, 307 [74 AFTR 2d 94-6999] (9th Cir. 1994); accord United States v. Gormley, 201 F.3d 290, 294 [85 AFTR 2d 2000-514] (4th Cir. 2000) (“[T]he question of willfulness is essentially a finding of fact.”).
Williams, (CA 4 07/20/2012) 110 AFTR 2d ¶ 2012-5639.
The Court of Appeals for the Fourth Circuit, reversing the district
court, has held that an admitted tax evader's failure to file FBARs reporting
his interests in two Swiss bank accounts was willful for purposes of the 31 USC
5321(a)(5) civil penalty. Although the district court found it significant that
the taxpayer had no incentive to continue concealing the accounts at that time,
the Fourth Circuit found that the taxpayer's representations on his tax return
and his guilty plea allocution satisfied the government's burden of proof.
Background. Each U.S. person who has a financial interest in or
signature or other authority over any foreign financial accounts, including
bank, securities, or other types of financial accounts, in a foreign country,
if the aggregate value of these financial accounts exceeds $10,000 at any time
during the calendar year, must report that relationship each calendar year by
filing TD F 90-22.1, Report of Foreign Bank and Foreign Accounts (FBAR) with
the Department of the Treasury on or before June 30, of the succeeding year.
Facts. In '93, J. Bryan Williams opened two Swiss bank accounts in the
name of ALQI Holdings, Ltd., a British Corporation (the “ALQI accounts”). From
'93 through 2000, Williams deposited more than $7,000,000 into the ALQI
accounts and earned substantial interest, but didn't report to IRS either the
income from or his interest in the accounts.
By the fall of 2000, the Swiss and U.S. government authorities had
become aware of the assets in the ALQI accounts. At the U.S. government's
request, the Swiss authorities froze the ALQI accounts in November of 2000.
Williams completed a “tax organizer” (essentially, a client
questionnaire to facilitate return preparation) in January of 2001 which had
been provided to him by his accountant in connection with the preparation of
his 2000 tax returns. In the questionnaire, Williams stated that he didn't have
“an interest in or a signature or other authority over a bank account, or other
financial account in a foreign country.” In addition, he similarly indicated on
his 2000 Form 1040 that he had no such interest or authority, and he also
didn't file an FBAR by the June 30, 2001, deadline.
In January of 2002, upon the advice of his attorneys and accountants,
Williams fully disclosed the ALQI accounts to an IRS agent and, in October of
2002, filed his 2001 federal tax return on which he acknowledged his interest
in the ALQI accounts. He also disclosed the accounts to IRS in February of 2003
as part of his application to participate in the Offshore Voluntary Compliance
Initiative, which was rejected. He also filed amended returns for '99 and 2000,
which disclosed details about his ALQI accounts.
In June of 2003, Williams pled guilty to a two-count superseding
criminal information, which charged him with conspiracy to defraud IRS and
criminal tax evasion in connection with the ALQI accounts. As part of the plea,
Williams agreed to allocute to all of the essential elements of the charged
crimes, including that he unlawfully, willfully, and knowingly evaded taxes by
filing false and fraudulent tax returns on which he failed to disclose his interest
in the ALQI accounts, in exchange for which he received a three-level reduction
under the Sentencing Guidelines for acceptance of responsibility.
In January of 2007, Williams finally filed an FBAR for each tax year
from '93 through 2000. IRS then assessed two $100,000 civil penalties against
him for his failure to file an FBAR for 2000, which Williams failed to pay.
District court's decision. Following a bench trial, the district court
entered judgment in favor of Williams, finding that the government failed to
establish that Williams willfully failed to timely file an FBAR for 2000. The
court found that: (i) Williams “lacked any motivation to willfully conceal the
accounts from authorities,” since the authorities already knew of the accounts;
and (ii) his failure to disclose the accounts “was not an act undertaken
intentionally or in deliberate disregard for the law, but instead constituted
an understandable omission given the context in which it occurred.”
Fourth Circuit reverses. The Court of Appeals for the Fourth Circuit,
in a 2-1 opinion, found the district court's decision clearly erroneous.
The Fourth Circuit found it significant that, on Williams' 2000 return,
he signed under penalty of perjury that he had “examined this return and
accompanying schedules and statements” and that such were true to the best of
his knowledge—which constitutes prima facie evidence that he knew the contents
of the return. He also admitted to never paying attention “to any of the
written words” on his return, which the Court likened to willful blindness.
This, combined with the fact that he gave false answers both on the tax
organizer and on his return, reflected conduct “meant to conceal or mislead
sources of income or other financial information.”
Willams' guilty plea further confirmed that his failure to timely file
an FBAR for 2000 was willful. He acknowledged in his plea that his failure to
report the ALQI accounts was part of a larger tax evasion scheme. The Court
found that Williams couldn't now claim that he was unaware of or somehow lacked
the motivation to willfully disregard the FBAR reporting requirement.
Dissent. The dissenting judge found that, although the majority opinion
stated the correct standard of review (clear error), it failed to adhere to
that standard and instead substituted its judgment for that of the district
court. The district judge was in a better position to evaluate the credibility
of Williams' testimony, and the district judge also found it significant that
Williams had no “objective incentive” to conceal the ALQU account in June of
2001. Accordingly, the dissenting judge would have affirmed the district court.
.
U.S. v. WILLIAMS, Cite as 110 AFTR 2d 2012-XXXX, 07/20/2012
________________________________________
UNITED STATES OF AMERICA, Plaintiff - Appellant, v. J. BRYAN WILLIAMS,
Defendant - Appellee.
Case Information:
Code Sec(s):
Court Name: UNITED STATES
COURT OF APPEALS FOR THE FOURTH CIRCUIT,
Docket No.: No. 10-2230,
Date Argued: 03/21/2012
Date Decided: 07/20/2012.
Prior History:
Disposition:
HEADNOTE
.
Reference(s):
OPINION
ARGUED: Robert William Metzler, UNITED STATES DEPARTMENT OF JUSTICE,
Washington, D.C., for Appellant. David Harold Dickieson, SCHERTLER &
ONORATO, LLP, Washington, D.C., for Appellee. ON BRIEF: John A. DiCicco, Acting
Assistant Attorney General, Deborah K. Snyder, UNITED STATES DEPARTMENT OF
JUSTICE, Washington, D.C.; Neil H. MacBride, United States Attorney,
Alexandria, Virginia, for Appellant. Lisa H. Schertler, SCHERTLER &
ONORATO, LLP, Washington, D.C., for Appellee.
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT,
Appeal from the United States District Court for the Eastern District
of Virginia, at Alexandria. Liam O'Grady, District Judge.
(1:09-cv-00437-LO-TRJ)
Before MOTZ, SHEDD, and AGEE, Circuit Judges.
Reversed by unpublished opinion. Judge Shedd wrote the majority
opinion, in which Judge Motz concurred. Judge Agee wrote a dissenting opinion.
Judge: SHEDD, Circuit Judge:
UNPUBLISHED
Unpublished opinions are not binding precedent in this circuit.
The Government brought this action seeking to enforce civil penalties
assessed against J. Bryan Williams for his failure to report his interest in
two foreign bank accounts for tax year 2000, in violation of 31 U.S.C. § 5314.
Following a bench trial, the district court entered judgment in favor of
Williams. The Government now appeals. Because we conclude that the district
court clearly erred in finding that the Government failed to prove that
Williams willfully violated § 5314, we
reverse.
I
In 1993, Williams opened two Swiss bank accounts in the name of ALQI
Holdings, Ltd., a British Corporation (the “ALQI accounts”). From 1993 through
2000, Williams deposited more than $7,000,000 into the ALQI accounts, earning
more than $800,000 in income on the deposits. However, for each of the tax
years during that period, Williams did not report to the IRS the income from
the ALQI accounts or his interest in the accounts, as he was required to do
under § 5314.
By the fall of 2000, Swiss and Government authorities had become aware
of the assets in the ALQI accounts. Williams retained counsel and on November
13, 2000, he met with Swiss authorities to discuss the accounts. The following
day, at the request of the Government, the Swiss authorities froze the ALQI
accounts.
Relevant to this appeal, Williams completed a “tax organizer” in
January 2001, which had been provided to him by his accountant in connection
with the preparation of his 2000 federal tax return. In response to the
question in the tax organizer regarding whether Williams had “an interest in or
a signature or other authority over a bank account, or other financial account
in a foreign country,” Williams answered “No.” J.A. 111. In addition, the 2000
Form 1040, line 7a in Part III of Schedule B asks:
At any time during 2000, did you have an interest in or a signature or
other authority over a financial account in a foreign country, such as a bank
account, securities account, or other financial account? See instructions for
exceptions and filing requirements for Form TD F 90-22.1.
J.A. 131. On his 2000 federal tax return, Williams checked “No” in
response to this question, and he did not file an FBAR by the June 30, 2001,
deadline.
Subsequently, upon the advice of his attorneys and accountants, Williams
fully disclosed the ALQI accounts to an IRS agent in January 2002. In October
2002 he filed his 2001 federal tax return on which he acknowledged his interest
in the ALQI accounts. Williams also disclosed the accounts to the IRS in
February 2003 as part of his application to participate in the Offshore
Voluntary Compliance Initiative. 2 At that time he also filed amended returns
for 1999 and 2000, which disclosed details about his ALQI accounts.
In June 2003, Williams pled guilty to a two-count superseding criminal
information, which charged him with conspiracy to defraud the IRS, in violation
of 18 U.S.C. § 371, and criminal tax evasion, in violation of 26 U.S.C. § 7201,
in connection with the funds held in the ALQI accounts from 1993 through 2000.
As part of the plea, Williams agreed to allocute to all of the essential
elements of the charged crimes, including that he unlawfully, willfully, and
knowingly evaded taxes by filing false and fraudulent tax returns on which he
failed to disclose his interest in the ALQI accounts. In exchange for his
allocution, Williams received a three-level reduction under the Sentencing
Guidelines for acceptance of responsibility. 3
In his allocution, Williams admitted the following:
I knew that most of the funds deposited into the Alqi accounts and all
the interest income were taxable income to me. However, the calendar year tax
returns for §93 through 2000, I chose
not to report the income to my -- to the Internal Revenue Service in order to
evade the substantial taxes owed thereon, until I filed my 2001 tax return.
I also knew that I had the obligation to report to the IRS and/or the
Department of the Treasury the existence of the Swiss accounts, but for the
calendar year tax returns 1993 through 2000, I chose not to in order to assist
in hiding my true income from the IRS and evade taxes thereon, until I filed my
2001 tax return.
....
I knew what I was doing was wrong and unlawful. I, therefore, believe
that I am guilty of evading the payment of taxes for the tax years 1993 through
2000. I also believe that I acted in concert with others to create a mechanism,
the Alqi accounts, which I intended to allow me to escape detection by the IRS.
Therefore, I am -- I believe that I'm guilty of conspiring with the people
would (sic) whom I dealt regarding the Alqi accounts to defraud the United
States of taxes which I owed.
J.A. 55 (emphasis added).
In January 2007, Williams finally filed an FBAR for each tax year from
1993 through 2000. Thereafter, the IRS assessed two $100,000 civil penalties
against him, pursuant to § 5321(a)(5),
for his failure to file an FBAR for tax year 2000. 4 Williams failed to pay
these penalties, and the Government brought this enforcement action to collect
them. Following a bench trial, the district court entered judgment in favor of
Williams, finding that the Government failed to establish that Williams
willfully violated § 5314. The
Government timely appealed.
II
The parties agree that Williams violated § 5314 by failing to timely file an FBAR for
tax year 2000. The only question is whether the violation was willful. The
district court found that (1) Williams “lacked any motivation to willfully
conceal the accounts from authorities” because they were already aware of the
accounts and (2) his failure to disclose the accounts “was not an act
undertaken intentionally or in deliberate disregard for the law, but instead
constituted an understandable omission given the context in which it occurred.”
5 J.A. 378–79. Therefore, the district court found that Williams's violation
of § 5314 was not willful.
We review factual findings under the clearly erroneous standard set
forth in Federal Rule of Civil Procedure 52(a). Walton v. Johnson, 440 F.3d
160, 173–74 (4th Cir. 2006) (en banc). “Our scope of review is narrow; we do
not exercise de novo review of factual findings or substitute our version of
the facts for that found by the district court.” Id. at 173. “If the district
court's account of the evidence is plausible in light of the record viewed in
its entirety, the court of appeals may not reverse it even though convinced
that had it been sitting as the trier of fact, it would have weighed the
evidence differently.” Id. (quoting Anderson v. City of Bessemer City, 470 U.S.
564, 573–74 (1985)). However, notwithstanding our circumscribed review or the
deference we give to a district court's findings, those findings are not
conclusive if they are “plainly wrong.” Id. (quoting Jiminez v. Mary Washington
College, 57 F.3d 369, 379 (4th Cir. 1995)). The clear error standard still
requires us to engage in “meaningful appellate review,” United States v. Abu
Ali, 528 F.3d 210, 261 (4th Cir. 2008), and where objective evidence
contradicts a witness' story, or the story itself is “so internally
inconsistent or implausible on its face that a reasonable factfinder would not
credit it, ... the court of appeals may well find clear error even in a finding
purportedly based on a credibility determination.” United States v. Hall, 664
F.3d 456, 462 (4th Cir. 2012) (citing Anderson, 470 U.S. at 575). Thus, “[a]
finding is clearly erroneous when, although there is evidence to support it,
the reviewing court on the entire evidence is left with a definite and firm
conviction that a mistake has been committed.” F.C. Wheat Maritime Corp. v.
United States, 663 F.3d 714, 723 (4th Cir. 2011).
Here, the evidence as a whole leaves us with a definite and firm
conviction that the district court clearly erred in finding that Williams did
not willfully violate § 5314. Williams
signed his 2000 federal tax return, thereby declaring under penalty of perjury
that he had “examined this return and accompanying schedules and statements”
and that, to the best of his knowledge, the return was “true, accurate, and
complete.” “A taxpayer who signs a tax return will not be heard to claim
innocence for not having actually read the return, as he or she is charged with
constructive knowledge of its contents.” Greer v. Commissioner of Internal
Revenue, 595 F.3d 338, 347 [105 AFTR 2d
2010-977] n. 4 (6th Cir. 2010); United States v. Doherty, 233 F.3d 1275, 1282 [86 AFTR 2d 2000-6691]
n.10 (11th Cir. 2000) (same). Williams's signature is prima facie evidence that
he knew the contents of the return, United States v. Mohney, 949 F.2d 1397, 1407 [68 AFTR 2d 91-5938] (6th
Cir. 1991), and at a minimum line 7a's directions to “[s]ee instructions for
exceptions and filing requirements for Form TD F 90-22.1” put Williams on
inquiry notice of the FBAR requirement.
Nothing in the record indicates that Williams ever consulted Form TD F
90-22.1 or its instructions. In fact, Williams testified that he did not read
line 7a and “never paid any attention to any of the written words” on his
federal tax return. J.A. 299. Thus, Williams made a “conscious effort to avoid
learning about reporting requirements,” Sturman, 951 F.2d at 1476, and his
false answers on both the tax organizer and his federal tax return evidence
conduct that was “meant to conceal or mislead sources of income or other
financial information,” id. (“It is reasonable to assume that a person who has
foreign bank accounts would read the information specified by the government in
tax forms. Evidence of acts to conceal income and financial information,
combined with the defendant's failure to pursue knowledge of further reporting
requirements as suggested on Schedule B, provide a sufficient basis to establish
willfulness on the part of the defendant.”). This conduct constitutes willful
blindness to the FBAR requirement. Poole, 640 F.3d at 122 (“[I]ntentional
ignorance and actual knowledge are equally culpable under the law.”)
Williams's guilty plea allocution further confirms that his violation
of § 5314 was willful. During that
allocution, Williams acknowledged that he willfully failed to report the
existence of the ALQI accounts to the IRS or Department of the Treasury as part
of his larger scheme of tax evasion. This failure to report the ALQI accounts
is an admission of violating § 5314,
because a taxpayer complies with § 5314
by filing an FBAR with the Department of the Treasury. In light of his
allocution, Williams cannot now claim that he was unaware of, 6 inadvertently
ignored, or otherwise lacked the motivation to willfully disregard the FBAR
reporting requirement.
Thus, we are convinced that, at a minimum, Williams's undisputed
actions establish reckless conduct, which satisfies the proof requirement
under § 5314. Safeco Ins., 551 U.S. at
57. Accordingly, we conclude that the district court clearly erred in finding
that willfulness had not been established.
III
For the foregoing reasons, we reverse the judgment of the district
court and remand this case for proceedings consistent with this opinion.
REVERSED
Judge: AGEE, Circuit Judge, dissenting: The majority correctly recites
that we review only for clear error the district court's dispositive factual
finding that Williams' failure to file the FBAR was not willful. Maj. Op. at
9–10. The majority also correctly notes the limited scope of review under that
standard. Id. In my view, however, my colleagues in the majority do not adhere
to that standard, instead substituting their judgment for the judgment of the
district court. As appellate judges reviewing for clear error, we are bound by
the standard of review and therefore I respectfully dissent. We recently
explained how circumscribed our review under the clear error standard must be:
“This standard plainly does not entitle a reviewing court to reverse
the finding of the trier of fact simply because it is convinced that it would
have decided the case differently.” Anderson v. Bessemer City, 470 U.S. 564,
573 (1985). “If the district court's account of the evidence is plausible in
light of the record viewed in its entirety, the court of appeals may not
reverse it even though convinced that had it been sitting as the trier of fact,
it would have weighed the evidence differently.” Id. at 573–74.
“When findings are based on determinations regarding the credibility of
witnesses,” we give “even greater deference to the trial court's findings.” Id.
at 575.
United States v. Hall, 664 F.3d 456, 462 (4th Cir. 2012). Applying this
standard to the case at bar, I conclude the district court's judgment should be
affirmed. The majority opinion rightly points out that there is evidence
supporting the conclusion that Williams' failure to file the FBAR was willful,
particularly if adopting the majority's conclusion that a “willful violation”
can include “willful blindness to the FBAR requirement” or “intentional
ignorance.” Maj. Op. at 12. That evidence could have led a reasonable
factfinder to conclude that the violation was willful, as the majority
believes. 1 But there is also evidence supporting the opposite view. First,
there is Williams' direct testimony that he was unaware of the FBAR requirement
in June 2001 (when it was supposed to be filed) and that he did not willfully
(or recklessly) fail to file it. The district judge, who had the opportunity to
observe Williams' demeanor while testifying, expressly found that “Williams'
testimony that he only focused on the numerical calculations on the Form 1040
and otherwise relied on his accountants to fill out the remainder of the Form
is credible ....” J.A. 379. Significantly, the district court also found that
there was no objective incentive for Williams to continue to conceal the ALQI
account in June 2001, because at that time he knew that the United States
government had requested the ALQI accounts be frozen, and thus Williams knew
the United States government knew about those accounts. As the district court
reasoned, if Williams had known about the FBAR requirement, there would have
been little incentive for him under those circumstances to refuse to comply
with it as of June 2001. Additional evidence supporting the district court's
finding includes the undisputed evidence that, after June 2001, Williams and
his advisors began formal disclosures of the ALQI accounts, including the
filing of amended income tax returns, but they did not backfile FBAR reports.
These disclosures included direct disclosures of the ALQI accounts to the IRS
in January 2002. The district court explained the significance of this
disclosure to the IRS: “[t]hough made after the June 30, 2001” FBAR filing
deadline, the disclosure “indicates to the Court that Williams continued to
believe the assets had already been disclosed. That is, it makes little sense
for Williams to disclose the ALQI accounts merely six months after the deadline
he supposedly willfully violated.” J.A. 378. This was a logical and supported
finding for the district court to make on the record before it. The district
court's decision was set forth in a detailed opinion that fully explained the
evidence supporting its findings. Had I been sitting as the trier of fact in
this bench trial, I may well have decided differently than did the district
judge. But I cannot say that I am left with a “definite and firm conviction”
that he was mistaken. Thus, I cannot agree with the majority that the
Government has established clear error. I also address briefly the two other
grounds for reversal asserted by the United States and rejected by the district
court: collateral estoppel and judicial estoppel. 2Specifically, the Government
points to Williams' criminal conviction and, in particular, the language in his
plea allocution, see Maj. Op. at 6, as requiring a finding that both types of
estoppel apply. I disagree. We review the district court's denial of judicial
estoppel only for abuse of discretion, see Jaffe v. Accredited Sur. & Cas.
Co., 294 F.3d 584, 595 n.7 (4th Cir. 2002), and its denial of collateral
estoppel de novo, Tuttle v. Arlington Cnty. Sch. Bd., 195 F.3d 698, 703 (4th
Cir. 1999). Judicial estoppel generally requires three elements:
First, the party sought to be estopped must be seeking to adopt a
position that is inconsistent with a stance taken in prior litigation. The
position at issue must be one of fact as opposed to one of law or legal theory.
Second, the prior inconsistent position must have been accepted by the court.
Lastly, the party against whom judicial estoppel is to be applied must have
intentionally misled the court to gain unfair advantage.
Zinkand v. Brown, 478 F.3d 634, 638 (4th Cir. 2007) (citations and
internal quotations omitted). Similarly, a party seeking to apply collateral
estoppel must establish five elements:
(1) the issue sought to be precluded is identical to one previously
litigated; (2) the issue [was] actually determined in the prior proceeding; (3)
determination of the issue [was] a critical and necessary part of the decision
in the prior proceeding; (4) the prior judgment [is] final and valid; and (5)
the party against whom estoppel is asserted ... had a full and fair opportunity
to litigate the issue in the previous forum.
Sedlack v. Braswell Servs. Grp., Inc., 134 F.3d 219, 224 (4th Cir.
1998); Collins v. Pond Creek Mining Co., 468 F.3d 213, 217 (4th Cir. 2006).
“The doctrine ... may apply to issues litigated in a criminal case which a
party seeks to relitigate in a subsequent civil proceedings .... [For example],
a defendant is precluded from retrying issues necessary to his plea agreement
in a later civil suit.” United States v. Wight, 839 F.2d 193, 196 (4th Cir.
1987). In my view, the district court correctly concluded that
there remains a factual incongruence between those facts necessary to
[Williams'] guilty plea to tax evasion and those establishing a willful
violation of § 5314. That Williams intentionally
failed to report income in an effort to evade income taxes is a separate matter
from whether Williams specifically failed to comply with disclosure
requirements contained in § 5314
applicable to the ALQI accounts for the year 2000.
J.A. 379. Put differently, Williams never allocuted to failing to file
the FBAR form, and certainly did not admit willfully failing to file it.
Neither his plea agreement nor his allocution even referred to the FBAR or § 5314. Indeed, the Treasury Department
itself notes that the FBAR is a separate reporting requirement and not a tax
return, nor is it to be attached to a taxpayer's tax returns. See J.A. 225,
237, 246. In short, pleading guilty to hiding the existence of the two accounts
for income tax purposes does not necessarily establish that Williams willfully
failed to file a FBAR for 2000. Indeed, other separate and distinct tax
penalties (including penalties for fraud) were separately sought by the IRS
from Williams for his failure to report the income in the accounts, pursuant to
26 U.S.C. §§ 6662 and 6663. See Williams v. Comm'r of Internal Revenue, 97 T.C.M. (CCH) 1422, 4 [TC Memo 2009-81]
(Apr. 16, 2009). The FBAR-related penalty is not a tax penalty, but a separate
penalty for separate conduct. Thus, viewed as distinct issues, collateral
estoppel is inapplicable here because Williams' willfulness in failing to file
the FBAR is not an issue “identical to one previously litigated.” Sedlack, 134
F.3d at 224. Likewise, judicial estoppel is inapplicable because there is
nothing about Williams' stance on willfulness here that is “inconsistent with
[the] stance taken” in his criminal proceedings. Zinkand, 478 F.3d at 638.
Accordingly, I would further hold that the district court did not err in
declining to apply either collateral estoppel or judicial estoppel. For all of
these reasons, I respectfully dissent and would affirm the judgment of the
district court.
________________________________________
1
TD F 90-22.1, which is a form
issued by the Department of the Treasury, is titled “Report of Foreign Bank and
Financial Accounts” and is commonly referred to as the “FBAR.” The regulations
relating to the FBAR were formerly published at 31 C.F.R. §§ 103.24 and 103.27,
but were recodified in a new chapter effective March 1, 2011. See Transfer
& Reorganization of Bank Secrecy Act Regulations, 75 Fed. Reg. 65806 (Oct.
26, 2010). For ease, our citations are to the recodified sections.
________________________________________
2
The IRS rejected the
application and turned it over to the attorney for the United States who was
conducting a grand jury investigation of Williams.
________________________________________
3
Williams also agreed to pay all
taxes and criminal penalties due for tax years 1993 through 2000, but he has
since refused to pay some of those taxes and penalties and has engaged the IRS
in litigation over that issue. See Williams v. Commissioner of Internal
Revenue, 97 T.C.M. (CCH) 1422 [TC Memo
2009-81] (Apr. 16, 2009).
________________________________________
4
The statute of limitations for
assessing penalties for tax years 1993 through 1999 had expired by the time the
IRS assessed the civil penalties. See 31 U.S.C. § 5321(b)(1) and (2).
________________________________________
5
In making its determination,
the district court emphasized Williams's motivation rather than the relevant
issue of his intent. See Am. Arms Int'l v. Herbert, 563 F.3d 78, 83 (4th Cir.
2009) (“[M]alice or improper motive is not necessary to establish
willfulness.”). To the extent the district court focused on motivation as proof
of the lack of intent, it simply drew an unreasonable inference from the
record. In November 2000, Swiss authorities met with Williams to discuss the
ALQI accounts and thereafter froze them at the request of the United States
Government. Although the Government knew of the existence of the accounts,
nothing in the record indicates that, when the accounts were frozen, the
Government knew the extent, control, or degree of Williams's interest in the
accounts or the total funds held in the accounts. As Williams admitted in his
allocution, his decision not to report the accounts was part of his tax evasion
scheme that continued until he filed his 2001 tax return. Thus, his failure to
disclose information about the ALQI accounts on his 2000 tax return in May 2001
was motivated by his desire not to admit his interest in the accounts, even
after authorities had been aware of them for over six months. Rarely does a person
who knows he is under investigation by the Government immediately disclose his
wrongdoing because he is not sure how much the Government knows about his role
in that wrongdoing. Thus, without question, when Williams filed in May of 2001,
he was clearly motivated not to admit his interest in the ALQI accounts.
________________________________________
6
In fact, seven months before
his criminal allocution, Williams sent a letter to the IRS requesting to
participate in the Offshore Voluntary Compliance Initiative “[p]ursuant to Rev. Proc. 2003-11.” J.A. 183–84. On the
first page of Revenue Procedure 2003-11,
the IRS specifically informs applicants that a primary benefit of the Initiative
is that participating taxpayers can avoid penalties for having failed to timely
file an FBAR. Clearly, Williams was aware of the FBAR at the time of his
allocution. Further, to the extent Williams asserts he was unaware of the FBAR
requirement because his attorneys or accountants never informed him, his
ignorance also resulted from his own recklessness. Williams concedes that from
1993–2000 he never informed his accountant of the existence of the foreign
accounts — even after retaining counsel and with the knowledge that authorities
were aware of the existence of the accounts.
________________________________________
1
Some of that evidence, of
course, is subject to two interpretations. For example, the majority reasons
that Williams' reference in his allocution to the “Department of the Treasury”
is necessarily an admission he violated
§ 5314. Because the IRS is a bureau of the Department of the Treasury,
however, the reference in his plea could instead be interpreted as a simple
acknowledgement of that fact. Indeed, there was no reference in the criminal
proceedings to Section 5314 or the FBAR
at all.
________________________________________
2
In light of its holding that
the district court clearly erred in finding the violation not willful, the
majority did not have cause to address either estoppel argument. Because I
would affirm the district court and the Government contends that both types of
estoppel prevent Williams from challenging the willfulness of his violation, it
is necessary to address those points.
________________________________________
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