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Secrecy Act against Bedrosian for will- The Third Circuit’s decision analysis, and the Third Circuit concluded
fully filing an inaccurate FBAR: 50% of The Third Circuit affirmed the district that the trial record supported each of
the balance of the undisclosed account at court’s decision. It found that the court them. Applying the definition of willful-
the time of the violation. The IRS deter- had correctly held that Bedrosian’s ness it had set out in Bedrosian’s earlier
mined the balance in the account at the conduct was willful and that while the appeal to the facts, the Third Circuit held
time of the violation was $1,951,578.34, IRS had not proved the balance in his that the district court did not err in deter-
and it calculated the 50% penalty to be accounts supported the penalty imposed, mining that Bedrosian acted willfully by
$975,789.17. Bedrosian initially refused Bedrosian’s lawyer had acknowledged that failing to disclose his second Swiss bank
to pay the penalty but eventually did and the balance was large enough to support account on the FBAR.
then filed a refund suit in district court. the penalty assessed. Maximum penalty: The maximum
The district court sided with Bed- The Third Circuit explained the penalty amount — like willfulness — is
rosian. After a one-day bench trial, the amount of a civil penalty for a violation of an element of the cause of action to
court determined that the IRS had failed the Bank Secrecy Act depends on three collect the penalty. So, similar to a deter-
to prove Bedrosian had willfully filed things: (1) whether the violation was will- mination of willfulness, it was a factual
an inaccurate FBAR. It found that the ful, (2) the calculation of the maximum finding the district court must have made
evidence did not reflect “conduct meant penalty permitted by law, and (3) the based on the evidence presented at trial.
to conceal or mislead or a conscious ef- IRS’s discretionary decision whether to The IRS based its penalty calculation on
fort to avoid learning about the reporting assess a penalty at or below the statutory information from a document — labeled
requirements.” According to the court, maximum. Bedrosian, in his appeal, only Exhibit R — it introduced that purported
Bedrosian was at most negligent. challenged the district court’s holding to be a listing of the monthly balances in
The IRS appealed the decision to the regarding the first two requirements. Bedrosian’s undisclosed accounts. Bed-
Third Circuit, which took a more expan- Willfulness: Bedrosian challenged rosian argued that Exhibit R was lacking
sive view of the scope of willfulness for an the district court’s findings on two fronts: any detail connecting the numbers on it
FBAR (Bedrosian, 912 F.3d 144 (3d Cir. (1) the court exceeded the scope of the to the undisclosed account, so it was in-
2018)), finding that it includes not only remand by making supplemental findings admissible evidence that could not be re-
knowing but reckless conduct. The court that led to its conclusion he acted will- lied on to prove that the penalty amount
stated that if the IRS could show Bedro- fully; and (2) his conduct was not willful. assessed was lawful.
sian (1) “clearly ought to have known” (2) On the first point, Bedrosian argued The Third Circuit agreed with Bedro-
“there was a grave risk” the FBAR filing that the Third Circuit remanded only sian. Exhibit R contained no name on the
requirement “was not being met,” and if “to confirm that the district court’s result page, no account number, and no bank
(3) he “was in a position to find out for would be the same under the now-settled name, and the numbers listed did not
certain very easily,” it would satisfy the standard,” not for it to reopen the eviden- even indicate what currency they referred
willfulness element (quoting Carrigan, 31 tiary record and make or reconsider factu- to. The court observed that the document
F.3d 130, 134 (3d Cir. 1994)). The court al findings. The Third Circuit disagreed, only showed “someone’s ‘monthly balance’
was, however, unsure whether the district stating that it placed no limitation on the for something somewhere,” and, because
court had applied the test, so it remanded proceedings on remand. Instead, it noted, the IRS had entered the evidence without
the case “for further proceedings consis- its opinion actually anticipated that the testimony from a witness laying a founda-
tent with our opinion” and for the court district court would reconsider its factual tion for it, it was just a slip of paper with
to “render a new judgment.” findings and its judgment. Though the no relevance to Bedrosian’s case. Thus, the
On remand, the district court, after opinion did not explicitly state that the exhibit could not be used to confirm that
reevaluating the trial record from an ob- district court could review the full record the penalty Bedrosian was charged was
jective viewpoint, determined Bedrosian and make supplemental factual findings, 50% of the undisclosed account balance.
acted willfully because he “recklessly dis- the court found doing so was well within Nonetheless, the Third Circuit found
regarded the risk that his FBAR was in- the “spirit of the mandate.” that the penalty amount was confirmed
accurate.” The district court also ordered On the second point, reviewing the because Bedrosian’s counsel had admit-
him to pay the penalty in the amount district court’s decision under the clear ted that the account balance was at
the IRS calculated (plus interest) because error standard, the Third Circuit found least $1,951,578.34 in the proceedings.
the agency had “not abused its discretion the court had made a rational decision In particular, the court pointed to the
in the amount of the penalty imposed.” that was grounded in credible evidence. counsel’s opening statement, in which he
Bedrosian again appealed the court’s In its analysis, the district court made conceded that “there was about 2 million
decision to the Third Circuit. five supplemental findings to aid in its U.S. dollars” in the undisclosed account.

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