good morning. This is John Richardson speaking with you from Toronto, Canada. Today is Tuesday, November the 12th, 2024, and joining me participated as important update is Virginia Latora Jieker, and we have an update on the life and times of Mr. George Baum, a man who is making F.R. Famous and understandable to the average penalty receiver. Well, Virginia, how are you today? Hi, John. I'm doing great. It's quite late here in Dubai, 8.15 PM, but I'm going to try and keep myself doing well during your podcast, even though it's a bit late for me. Well, this will be a short one in any case. Last time we talked, it's very, very important because the 11th circuit and ruled that basically F.R. penalties are submitted to the 8th Amendment excessive fines clause, right? Yes, that was really great news, and that happened in the case of Mr. Schwartz Baum. It's the first case we know of that has granted that status to F.R. penalties that they are subject to the excessive fines clause, and even though it didn't help Mr. Schwartz Baum in any significant way since the other big penalty amounts were upheld, but there were two smaller accounts that the court determined were fined excessively with the F.R. penalties given the amount in those accounts. So this is great news for mankind. I know a small win for Mr. Schwartz Baum, but a big win for mankind, I would say. I mean, I think that that was a seismic decision. Would you agree? Yes, absolutely. Well, there's a saying in life that no good deed goes unpunished. I noticed that the U.S. government has tried to appeal this decision at least in part, right? Yes. Yes. Let's see what's going to happen now. What they have done is they're trying to, they're trying to advise the court to please clarify a certain portion of their decision in the Schwartz Baum case. Would you say that's an accurate way to describe that? I think that's exactly what they're doing, and I think that they're kind of spooked because, you know, I mean, I just read their petition to appeal it, but it seems pretty clear that they're concerned that the court essentially has conflated the meaning of willful in civil F bar penalties to the meaning and criminal F bar penalties. And although the word willful or willfully is in both statutes, that doesn't mean that they mean the same thing in each of those statutes, right? That's right. The standard for criminal willfulness is much, much higher than the standard for civil willfulness. Yeah, so let's pause on that for a second. For those of you who are F bar affectionate autos or F bar historians or F bar scholars or people who F bar sociologists who appreciate the importance of F bar in American culture, you know, we basically have two separate types of penalties, right? So we can, you know, they can have civil penalties or we can have criminal penalties. And interestingly, under the category of civil penalties, there is a civil willful penalty, as opposed to under criminal penalties, the civil criminal penalty and the criminal penalty, let's start there because I think that's always been more clear and more well-known. What are your thoughts on that, the criminal penalty? So the willful and the standard for a criminal penalty is that there has to be a knowing violation of what's called a known legal duty. So if you did not know about F bar, you didn't know it existed. You had, you know, as many of our clients have told us, I never heard of this thing called F bar. What is it? What am I supposed to have done? So if you didn't know, how could you violate a known legal duty? If you had no knowledge of it, it would not be possible. So you could not have. You have to know very specifically that, you know, there is an F bar law out there. And that law requires me to fill out this form. I mean, you have to actually know that there was a law requiring you to do this, correct? That's right. And that's a very different thing from, you know, intentionally not filling out the form. That's a different thing, isn't it, right? Because I mean, you can intentionally fail to fill out a form without knowing anything about whether there's a legal duty to do it, right? That's right. I mean, that's the story of my life. I hate filling out forms. Do you like filling out forms? No, Joan, that's why I don't do any kind of forms. Yes, exactly, exactly. All right. So reading the petition to get this thing heard again, what the government seems to be saying is, whoa, on a minute here. What the 11th circuit seems to have been saying was, they use exactly the same test for wilfulness when you're considering a civil F bar penalty, then if it were a criminal F bar penalty, right? That's what that's how they're reading the course decision, isn't it? Yes, you know, the court had some ambiguities in there, and part of the law, they did state correctly, but then it seemed it got confusing when they went to other portions in their opinion. And that's what the government is trying to clarify. They're like, well, you got this section right, but then you said this, and that's kind of conflating willful and non willful, and we want to clarify all of this. So the government is saying, look, you know, we'd like for the court to make it very, very clear that the meaning of willful in the criminal context is not the same as the meaning of willful in the civil context. Was that a fair statement? Absolutely. Absolutely. That's exactly what they're worried about, because if you conflate the two criminal and civil willfulness, then it's going to be much more difficult for the government to win on saying this guy acted willfully in a civil context. If I have to prove that it was an intentional violation of a known legal duty. So, yeah, they want that right. So, I mean, if one were cynical, I don't know anybody who is in this regard, but if one were cynical, would you say that it's possible that the government is concerned with preserving its penalty base? Absolutely. Yeah, because I mean, you know, man, that's a much, much higher standard of proof, you know, the intentional violation of a known legal duty than just intentionally not filling out a form, right, or recklessly not filling out a form. Yes, absolutely. But of course, in fairness to the government, though, you know, if they are the same, right, it's interesting to the government. See, the government makes the point that in the criminal context and the test of the intentional violation of a known legal duty to make the point that they're different. I mean, I suppose that to some extent, you know, this also could go the other way, but then I mean, I'm not sure what would that mean to go the other way. But, you know, we would not want, we would not want somebody to be convicted. Primarily, if it were short of the intentional violation of a known legal duty, right, you sure wouldn't want that. No. So, you know, I find myself in a situation here where I think the government's actually, if the decision was in fact ambiguous. I think the government actually is performing a public service and getting this clarified. Do you agree with me on that? I don't think the government's main purpose was to provide this public service. I think the main thing they were concerned about was going forward. We want it crystal clear that the civil willful standard is not an intentional violation of a known legal duty. You know, other cases have decided this. They have whittled away over time. I mean, you and I have been studying F bar for, I don't know how many years now. And we have seen we all thought originally the cheek standard. That's what it's known as was the intentional violation of a known legal duty. We all thought that that was what willful meant in the civil context for F bar violations. And we found out through the court cases that have come down that know that is not what we consider to be willful. You can be willful in violating the F bar rules if you are in reckless disregard of the rules and regulations or if you have what's called willful blindness. Like you kind of turn your head the other way and don't investigate when you've been given certain clues that you should be investigating further and you don't do it. So, for example, if you see on schedule B, the question, do you have a far and financial account and you don't look further about that G to find out what does that mean? Should I be checking yes on this? Should I look at the instructions and understand more? If you don't do any of that, then you know, the court can look at you and say, well, maybe, you know, you've had some willful blindness going on. So the government wants to make it crystal clear that what they mean in the civil context with willfulness is just that. It doesn't mean you need this intentional disregard of a known legal duty. And that's right. Yeah, I think that's I think that's their prime motivator as well. And this, of course, is I would guess, I mean, if I were sitting around listening to government lawyers talking about this, you know, I would guess that. You know, the biddener decision, right, you know, where they're saying in the non willful civil context, the penalty is perform based rather than per account, right? And we've discussed before about how that might incentivize them to go for the willful civil penalty, right? That's right. Ten thousand bucks a pop for a non willful violation, perform per calendar year. You know, there's not much incentive there when if that same action could be somehow determined to be willful under a lower standard of proof, then they can get 50% of the value of the account or $100,000, whichever is greater. So if you know, you got a million right there. Yeah, and then once we move into the civil will fall, we're outside the scope of the $10,000 for the, you know, just based on one form, right? I think it moves into the word. Yeah. Yes. It's our local violations. Yes. Well, you know, Virginia, I think that's probably right. Yeah, I think that the court is concerned that that 11th Circuit decision and Schwartzman might limit their penalty base going forward, right? Mm hmm. And that, of course, is a bad thing. Well, we'll see how it goes. I mean, there's impossible to predict this stuff, but do you think the court is likely to clarify that and just write a one sentence. Yeah, we clarify. We'd clarify that to be aware that clarify. There's nothing about it is that couldn't anyway reduce the government's penalty base. I think they will clarify it because I think the court, not only looking at it from the perspective of wants to protect the penalty base, I think the court would be more concerned with, we want to make sure that this decision will be, you know, read in a way that's going to be fair to people coming down the road and citing it as precedent. And we don't want, we don't want, you know, judges or juries to be confused on this issue. And so there is enough precedent out there saying what willfulness means in the civil context for an F bar violation. And let's clarify that because we don't want, we don't want some poor person to be, you know, hit with a willful violation when it might not be, and it could have been non willful because of our quote, unquote. My guess is they're going to clarify it too. Man, it is complicated being an American citizen, isn't it? Yes, it is. And it's complicated to be an American tax advisor as well. Yes. Wow. All right. Well, this has been an interesting discussion. You know, this, this Mr. Schwartzbaum, I mean, he has, like, he has brought an understanding of F bar to the masses, hasn't he? Oh, my gosh, yes. I mean, his cases have involved so many different facets for F bar. I mean, guys, simply unbelievable. I think that you and I ought to create the Isaac Schwartzbaum to F bar university. Interestingly enough, when I first blogged about Mr. Schwartzbaum, I got an email from him, and he requested that I take down my blog post. Really? Yes, yes. I was reporting on one of the first case, I think that involved him. And I very politely replied, and I said, dear Mr. Schwartzbaum, your case is a matter of public record. And my blog post is just advising readers about your case. I mean, you know, my blog posts are very factual. I don't get into politics. I don't get into, you know, what I know, how any of your blog posts could offend anybody. Exactly. So, you know, I just said to him, sorry, it's staying up there. And I never heard from him again. But I've had a few follow up blog posts about Mr. Schwartzbaum, because his various issues in the F bar world have educated us. They have educated us. I mean, one of the things that we just spoke about earlier is the fact he has foreign accounts. They are in Switzerland. He was now told by the court, ordered by the court to repatriate the foreign funds into the U.S. so that they could be attached by the U.S. government to satisfy the F bar penalties. And the reason the court can order him to do that is because they have jurisdiction over him because he is a U.S. citizen. They don't have jurisdiction over the foreign assets. Okay. They're in Switzerland to get attachment of those assets is very, very difficult for the government. So, the easier way to do it is to mandate that the U.S. person repatriate them to America so they can be attached. I don't know what's happened with that. If he has done it, I sort of doubt it, given his demeanor and the way he has been handling his cases. I doubt it. But, you know, you never know. It'll be interesting. Interesting to see whatever happens because, you know, I've read, and I don't know much about this because I've never handled this kind of case. But the F bar penalty has been assessed. It's millions of dollars. His monies are all in Switzerland. What's to prevent him now from, you know, acting in contempt of court, not repatriating back to the U.S., setting up various asset protection schemes of one sort or another, I don't know. And I think with this kind of F bar penalty, if it's been reduced to judgment, there's only a certain amount of time that the government has to try and satisfy that. Like, after a certain number of years, they're barred. So, my guess is he's getting, you know, pretty heavy duty advice as to how he can protect his millions. Clearly, he's got, you know, he's got an army of the finest lawyers money can buy. I'm sure the, you know, I mean, look at how far he's fought this stuff. I mean, you know, this is more than just a guy who wants to fight this stuff. I mean, this is somebody who's just, you know, armed to the shield, right? Absolutely, absolutely. And, you know, they're probably looking at, I don't know his nationality. I'm guessing he might be Swiss. I know he's, I've read somewhere, he's a naturalized citizen. So, he has another nationality that I doubt he gave up. So, he went to Switzerland. Let's assume for the sake of argument that he is Swiss. I don't think under the Swiss treaty with the US or anything like that, that they can extradite him, that the Swiss government would extradite him to the States. So, you know, maybe he can really fight this thing with every possible legal weapon available. Well, he is fighting. I mean, it's pretty clear that he is. Right. I know, but let's say, I think his next, or he's probably already implementing some steps for acid protection that, you know, they can't, they can't get the money. I don't know. It's, it's a fascinating case. I wish we could be a fly on the wall in his legal offices over there in Switzerland. Well, he's, you know, I think he's, in all seriousness, I think that he's performed a very important public service. You know, all his escapades, right, has, you know, what it's done is it's, it's assumed a relatively consistent fact pattern, right? And, you know, people have seen so many aspects of our issues through that fact pattern. So, I mean, you know, that's, that's really good. But I mean, I think the best is yet to come because, you know, contextually, of course, we have the first circuit and TOTH, you know, ruling that somehow F.R. penalties are not excessive. And, and, and, and the TOTH petition to hear the thing. But I think it's, I think it's likely the Supreme Court may take this case now that we got this direct conflict between the first and the 11th circuits. What do you think? So, Schwartz, follow on to the Supreme Court. Maybe, maybe. I mean, look, it's ridiculous that they say, in my view, that they say this F.R. penalty is not subject to the excessive fines clause. That's absolutely foolish. You know, it's, it's almost insulting the way they've argued this. So, I hope the Supreme Court does take it and set this record. I hope they do too. I mean, this stuff is just, you know, it's like the great Charles Adams, you know, his book about taxation, civilization. Had this, had this phrase where he called these things, these laws synthetic felonies. You know, things that are mostly, you know, divorced from any kind of common sense of morality. You know, they're just. They're written now somewhere. And I think that, you know, there's probably qualified because my understanding with the sky is that, again, you know, this is money inherited from his father. This was not money that was somehow that had escaped US taxation or, you know, this sort of stuff. I mean, you know, it's just, it's just. And it was ridiculous to strive a word. I'm not sure. But I mean, I think the majority of humanity was very surprised that for failing to file a few pieces of paper, you know, they would take, you know, 12, you know, 50% of the sky is now worth or something, right? I, you know, John, I can't remember what else is involved here. In other words, was he earning a lot of money by investments with these foreign accounts and the income was unreported. So that gives rise to other issues. I don't think it was just a matter of he didn't file an F bar. I think there's more to this entire case. Well, I think that a book ought to be written about this short. And of course, you know, I mean, it's the guy's fascinating. You know, obviously, I mean, most people wouldn't not dig in their heels that he sent that this guy does. No, he's a rebel. I like it. Let's see where it takes us because we are learning so much. Yeah. Well, okay. You know, you're writing about Mr. F far and generally and Mr. Shores found particularly in your blog. So what are your what are your blog coordinates as we bring us to a close today. Okay. So people can find all of the blog posts, and we do have a whole category on FBAR. You can find it at www.us-tax.org. All right. All right. Well, that's great. Thanks for connecting with me, Dan. You know, as long as they're as long as FBAR penalties continue, Virginia. You're going to have plenty of fodder for podcasts, I guess, right? I think so, John. Yes. I think so. Thanks so much for having this great discussion with me today. Thank you.
