Is This Fair? 3200% FBAR Penalty

“Does this seem fair?” asks tax attorney Anthony E. Parent.
In Another FBAR Penalty Victory for IRS and DOJ, Mr. Parent writes of the “shocking” case where “the Department of Justice strong-armed an elderly widow into accepting a plea deal that included an FBAR penalty equal to 3200% of the total tax evaded.”
Mr. Parent gives information from DOJ:

Mary Estelle Curran of Palm Beach, Fla., pleaded guilty today in the U.S. District Court for the Southern District of Florida to filing false tax returns for tax years 2006 and 2007, the Justice Department and Internal Revenue Service, Criminal Investigation (IRS-CI) announced….According to the plea agreement, Curran’s conduct caused a tax loss to the government of approximately $667,716…Curran has agreed to pay a civil penalty in the amount of 50 percent of the high balance of the accounts, which is $21,666,929.

The 79 year old Florida woman inherited off-shore accounts from her husband. She did not report these and did evade taxes.
Mr. Parent says:

Absurd or not — here’s the thing —if she didn’t take the plea, if she lost at trial, her penalty could have been double.  The FBAR penalty could be assessed per each year! Also, Ms. Curran could have evaded only $10,000 in taxes, and still be subjected to the same FBAR penalty of $21,666,929 because the account was value at $42,000,000.

Clearly, this is very different from the situation of most of us who simply have bank accounts, assets and investments where we live, work and, in many cases, where we are citizens.  We can only hope someone in US will wake up to to the differences between the situations. Plus, we in Canada know CRA will not collect for IRS (and most of us don’t have $42 million sitting around in our banks accounts. If you do, I want to get to know you better!)
Yet, Mr. Parent gives another example of a Colorado man who “created a vast criminal conspiracy” to file false returns in the names of deceased individuals, but had a penalty of 19.25%
This article in Private Banker reports Mrs. Curran could face up to six years in prison in addition to the financial penalty she will pay. Plus:

According to Assistant Attorney General Kathryn Keneally, Curran was being made an example of.

I am not condoning what Ms. Curran did. She is a resident of the US and she evaded taxes through foreign accounts. That is and should be a criminal offense and she should pay a penalty for it. In fact, people like Mr. and Mrs. Curran may be the very reason why honest law-abiding people living outside US are facing the nightmare we are facing.
But, I will let you answer for yourself Mr. Parent’s question.

“Does this seem fair?”


9 thoughts on “Is This Fair? 3200% FBAR Penalty

  1. FATCA Will Have Devastating Impact on American Expatriates
    “Most of us are aware how U.S. government regulations hurt people living in the United States. But too little attention is paid to how federal regulations can be damaging towards U.S. citizens living outside the country. American expatriates cannot even escape the regulatory nightmare that’s coming out of Washington, D.C.”
    “A growing number of Americans living abroad are actually renouncing their U.S. citizenship. This seemingly drastic step makes it much easier for them to have a bank account and operate a business overseas. In Time Magazine, a business owner John based in Switzerland says that, “the U.S. government creates conflict and abuses me. I feel under duress to understand and comply with laws that have nothing to do with and are constantly changing—almost never in my favor… Every time I turn around, I get smacked in the face with some new restriction as a result of being a U.S. citizen abroad. “
    “The IRS should not bully American citizens living and working outside of the United States’ borders. FATCA will have devastating impacts on the U.S. economy while infringing on the liberty of American expatriates. It needs to be repealed immediately.”

  2. The elderly widow is likely near the end of her life and won’t be able to take the money with her when she moves on to better places. As such, this was likely the perfect situation for the US government to set an example with the hope of scaring the non-compliant into seeking compliance. Just or not, one would think that the penalty would be the same regardless of the location of the bank and that honest, hardworking expats abroad are not treated similar for making a mistake on the reporting of their local checking account.

  3. This case is a clear example of unconstitutional abuses by the IRS and Treasury. To my mind, the case could be used as evidence in a foreign court that the US government is no longer legitimate and must not be allowed to enforce its laws abroad.

  4. This case is so clear-cut a violation of the 8th amendement that it should be used in foreign courts to block any application of US law abroad.

  5. Sometimes I wonder if judges in the US know how to read or have bothered to read the Constitution.
    Amendment VIII
    Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.
    Amendment IX
    The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

  6. It was mentioned on Jack’s blog that she had top notch lawyers.
    She seems too tired to fight, but as you mentioned, it is constitutional abuse.
    It seems like the perfect case for going to trial and take the case all the way to the supreme court. It’s sad that she has not the will to fight. We need someone like her to do it and render FBAR fines inconstitutional.
    On the other hand, I think there must be details that we don’t know, like incriminating communications/emails etc that show that she has done it on purpose.
    I am not so sure that she is the housewife who doesn’t have any clue about finances and just did nothing with the inherited money, as she is depicted in some press articles I read. There must have been some incriminating evidence.
    Still, the fine is out of proportion with the amount of taxes due, and should be rules inconstitutional.

  7. @Christophe: You may be correct. Or maybe IRS likes bullying Grandmas through fear. Bullies are known for going after people who they deem to be weaker than the bully.
    This decision certainly shows IRS as “financial terrorists” (Thanks to OMG for that term from several months ago. I have used in in contact with Flaherty and with Ministry of Finance.
    OMG, I miss you and hope you are doing OK. Pop in and visit with us some time.

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