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United States v. Schoenfeld

United States District Court, M.D. Florida, Jacksonville Division

June 25, 2019

ROBERT SCHOENFELD, as distributee of the Estate of Steven Schoenfeld, Defendant.



         THIS CAUSE is before the Court on Defendant Robert Schoenfeld's Motion for Partial Summary Judgment as to Penalties and Incorporated Memorandum of Law in Support Thereof (Doc. 64; Motion), filed on January 23, 2019. Plaintiff, United States of America (the Government), filed a memorandum in response on March 7, 2019. See Response in Opposition to Defendant's Motion for Partial Summary Judgment (Doc. 68; Response). With leave of Court, see Order (Doc. 70), Defendant filed a reply. See Defendant's Reply to Response to Motion for Summary Judgment (Doc. 72; Reply). Accordingly, Defendant's Motion is ripe for review.

         I. Factual Background

         This action arises out of the Government's efforts to collect a civil penalty assessed against Steven Schoenfeld by the IRS pursuant to 31 U.S.C. § 5321 based on his alleged willful failure to file a Foreign Bank Account Report (FBAR).[1] See generally Amended Complaint (Doc. 6). The IRS notified Steven Schoenfeld that it had assessed a penalty against him in the amount of $614, 300-50 percent of his foreign bank account's balance at the time of the violation-and demanded payment, but Steven Schoenfeld did not pay the amount demanded.[2] See id. ¶¶ 24-27. As such, on September 29, 2016, the Government initiated this action against Steven Schoenfeld to reduce its assessed penalty to judgment. See generally Complaint (Doc. 1). After learning that Steven Schoenfeld had passed away, the Government filed the operative Amended Complaint on December 14, 2016, naming as defendants the Estate of Steven Schoenfeld and Robert Schoenfeld, as distributee of the Estate. See generally Amended Complaint; Letter from Defense Counsel (Doc. 51-2). On September 25, 2018, the Court dismissed the Estate from this action, leaving Robert Schoenfeld as the only Defendant. See Order on Motion to Dismiss Amended Complaint or in the Alternative for Summary Judgment (Doc. 58; Order). On January 23, 2019, Defendant filed the instant Motion for partial summary judgment, requesting that the Court reduce the penalty assessed against Steven Schoenfeld to $100, 000. See generally Motion.

         II. Statutory and Regulatory Authority

         In 1970, Congress enacted the Currency and Foreign Transactions Reporting Act, commonly referred to as the Bank Secrecy Act (BSA), 31 U.S.C. §§ 5311, et seq. See Pub. L. No. 91-508, 84 Stat. 1114 (1970). The primary purpose of the BSA was to require the making of certain reports that “have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings.” Id. § 202. To effectuate this purpose, in the BSA Congress directed the Secretary of the Department of Treasury to promulgate regulations requiring the reporting of information from United States persons who have relationships or conduct transactions with foreign financial agencies. See id. § 241(a) (codified at 31 U.S.C. § 5314). The Secretary promulgated implementing regulations in 1972. See Financial Recordkeeping and Reporting of Currency and Foreign Transactions, 37 Fed. Reg. 6912 (Apr. 5, 1972) (originally codified at 31 C.F.R. pt. 103).[3] As relevant here, the Secretary's implementing regulations require “each United States person[4] having a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country” to file an FBAR. See 31 C.F.R. § 1010.350(a). Such persons must file the FBAR by June 30 “of each calendar year with respect to foreign financial accounts exceeding $10, 000 maintained during the previous calendar year.” See 31 C.F.R. § 1010.306(c).

         In 2002, the Secretary delegated the authority to administer and enforce the BSA to the Director of the Financial Crimes Enforcement Network (FinCEN), a bureau of the Department of Treasury. See Treasury Order 180-01; Financial Crimes Network, 67 Fed. Reg. 64697 (Oct. 21, 2002). In 2003, FinCEN delegated its “authority to assess and collect civil penalties for noncompliance with FBAR requirements” to the IRS. See Financial Crimes Enforcement Network; Delegation of Enforcement Authority Regarding the Foreign Bank Account Report Requirements, 68 Fed. Reg. 26489 (May 16, 2003). See also Motion, Appendix A: Memorandum of Agreement and Delegation of Authority for Enforcement of FBAR Requirements (Delegation of Authority) at 2.[5]

         As originally enacted, the BSA did not contain a civil penalty provision for failing to comply with the FBAR requirements, see Pub. L. No. 91-508, 84 Stat. 1114 (1970), but Congress added one in 1986. See Money Laundering Control Act of 1986, Pub. L. No. 99-570, Subtitle H, 100 Stat. 3207, § 1357 (October 27, 1986). From 1986 to 2004, the maximum civil penalty for a willful violation of the FBAR requirements was limited to “the greater of (I) an amount (not to exceed $100, 000) equal to the balance in the account at the time of the violation; or (II) $25, 000.” See id. After Congress added the civil penalty for FBAR violations, the Secretary promulgated amended implementing regulations. See Amendments to Implementing Regulations Under the Bank Secrecy Act, 52 Fed. Reg. 11436, 11440, 11446 (Apr. 8, 1987). Among other things, the regulations were updated to reflect civil penalties for violations after October 1986 “to keep the regulations as current as possible.” Id. at 11440, 11446. Specifically, the regulation states in relevant part:

(g) For any willful violation committed after October 27, 1986, of any requirement of § 1010.350, § 1010.360 or § 1010.420, the Secretary may assess upon any person, a civil penalty:
(2) In the case of a violation of § 1010.350 or § 1010.420 involving a failure to report the existence of an account or any identifying information required to be provided with respect to such account, a civil penalty not to exceed the greater of the amount (not to exceed $100, 000) equal to the balance in the account at the time of the violation, or $25, 000.

31 C.F.R. § 1010.820(g)(2) (formerly 31 C.F.R. § 103.47).

         In 2004, Congress increased the maximum civil penalty for willful FBAR violations to the greater of $100, 000 or 50 percent of the account balance at the time of the violation.[6] See American Jobs Creation Act of 2004, Pub. L. No. 108-357, 118 Stat. 1418, § 821 (2004) (codified at 31 U.S.C. § 5321(a)(5)(C)). Specifically, § 5321(a) provides in relevant part:

(5) Foreign financial agency transaction violation.-
(A) Penalty authorized.-The Secretary of the Treasury may impose a civil money penalty on any person who violates, or causes any violation of, any provision of section 5314.
(B) Amount of penalty.-
(i) In general.-Except as provided in subparagraph (C), the amount of any civil penalty imposed under subparagraph (A) shall not exceed $10, 000. . . .
(C) Willful violations.-In the case of any person willfully violating, or willfully causing any violation of, any ...

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