Arthur Bedrosian v. United States, et al.

Under 31 U.S.C. § 5321(a)(5), any U.S. person who fails to report a foreign account containing more than $10,000 at any point in the calendar year is subject to a civil penalty. If the individual acted non-willfully, the penalty is capped at $10,000. If the individual acted “willfully,” the maximum penalty is increased to the greater of $100,000 or half the balance of the undisclosed account(s) at the time of the violation, for each year the violation continues. For the year at issue, Petitioner disclosed one of his offshore accounts on the required form, but not the other held at the same bank. He later amended his filing to voluntarily disclose the omitted account. After a bench trial to determine the appropriate penalty, the district court found that the omission was merely negligent, triggering the lesser penalty. On appeal, the Third Circuit expansively redefined “willfully” and remanded. Applying the new standard, the district court reversed itself and found— based on the exact same evidence—that Petitioner acted willfully after all, imposing the maximum penalty of $975,789 plus interest. The Third Circuit affirmed. The question presented is: Whether willfulness under 31 U.S.C. § 5321(a)(5)(C) should be determined according to a subjective, rather than objective, standard that focuses on an individual’s knowledge and intent in failing to disclose a foreign account.