Did Mr. #FBAR really pay a surprise visit to Canada?

Update June 19, 2017:

The Department of Justice sued Mr. Pomerantz in Seattle. The purpose of the lawsuit was to get a judgment against Mr. Pomerantz. Interestingly, the Government lost the lawsuit for reasons unrelated to the substance of the issue. The Government failed to plead the facts that it needed to succeed in the lawsuit.

A full discussion of the ongoing adventures or Mr. Jeffrey Pomerantz and Mr. FBAR is here.

The FBAR Chronicles continue …

First, A Public Service Announcement – Mr. FBAR Get’s A New Filing Due Date

 

This is one more of my posts about Mr. FBAR. Mr. FBAR is a mean, nasty vicious thug who has no place in any civilized society.

Thomas Jefferson once said:

Were it left to me to decide whether we should have a government without newspapers, or newspapers without a government, I should not hesitate a moment to prefer the latter.

My thoughts are that:

Were it left to me to decide whether we should have FBAR without outlaws, or outlaws without FBAR, I should not hesitate a moment to prefer the latter.

Unfortunately, Mr. FBAR has become the new symbol of American citizenship. Furthermore, Mr. FBAR disproportionately affects the local bank accounts of Americans abroad – becoming (in effect) a form of “domestic terrorism” against U.S. citizens living outside the United States.

Mr. FBAR As Applied To The Canada U.S. Dual Citizen …

As reported by CBC news, Global News in Canada, The Isaac Brock Society and various Facebook groups. a U.S. Canada dual citizen (Jeffrey P. Pomerantz – the Defendant) has been sued in Washington State, by the U.S. Department Justice, to collect FBAR penalties for the years 2007, 2008, and 2009. It appears that at the present time, the Defendant lives in Vancouver, Canada.

The actual “Complaint” filed in the Court which summarizes and explains the Government’s allegations is found here. (If you have read this far, you should pause and read the Complaint.)

The facts are horrendous. Basically the Defendant was assessed significant FBAR penalties which increased through interest charges to the point where they had grown to approximately $800,000 U.S. dollars (approximately 1,100,000 million Canadian dollars) by the time the law suit was commenced in 2016. FBAR penalties are frightening, draconian and are really a form of Civll Forfeiture. One comment, as reported on the Isaac Brock Society put it:

On a practical note, there is one commenter in particular, Kathy “Powell”, who could use upticks on the CBC article for her efforts to set things straight … if anyone here has CBC commenting privileges. (I gave mine up when “real names” were required.)

As for Jeffrey Pomerantz who is truly living “a friggin’ nightmare”, there’s just too little information to create a clear picture of his situation. I won’t judge him as others at CBC are doing. I’m just shaking my head at how those without a clue keep tossing in misinfoturds to muddy the waters even more. What is crystal clear to me is that the villain in this scene is the IRS/DOJ and even if Jeffrey Pomerantz is guilty of something he doesn’t deserve to be completely impoverished for it.

The complaint filed by the Department of Justice is here and should be read by all bloggers and other commenters. At first blush one gets the impression that this case is primarily about the IRS assessing an FBAR penalty on a Canadian citizen resident in Canada and that the penalty was based on unreported Canadian bank accounts. This interpretation reinforces the fear (real and legitimate) that the IRS might attempt to attempt to confiscate the wealth of Canadian citizens resident in Canada through  civil forfeiture FBAR penalties. I do NOT believe that this is a fair reading of the Department of Justice Compliant. (The situation is  bad enough without expanding it’s reach. There is no need to accelerate the “fear mongering”.)

This case is more like a Homelander with unreported bank accounts in Switzerland …

Here is why.

Please note that this story is based on FBAR violations for the tax years of 2007, 2008 and 2009. Based on the Department of Justice complaint, we see the exploration of the following factual allegations.

Factual allegations:

A. Was The Defendant a U.S. Resident Or A Canadian Resident During The Years In Question?

Although it is unclear, it appears likely that the Defendant was a both a U.S. citizen and a U.S. resident during all or some of the years of 2007, 2008 and 2009. The CBC article includes:

While the Justice Department’s complaint says Pomerantz lived in the United States during all three years, documents prepared by Pomerantz’s side found in the court file say he and his wife, a Canadian-Norwegian dual citizen, only lived in California for part of 2008 and 2009 before moving back to Canada.

Assuming that he was a U.S. citizen residing in the United States, his case (presumably) would have been viewed as that of a Homelander with offshore accounts.

B. Where Were The Offshore Accounts That Were The Basis For The FBAR Penalties?

RBC (Royal Bank Of Canada Accounts):

The Department of Justice complaint  (paragraphs 12 and 13) describes the existence of RBC accounts which were opened “prior to or during 2007”. A reading of the brief suggests that the RBC accounts were NOT counted towards the FBAR penalties. The RBC accounts were in the name of a Vancouver, Canada based company. Although not conclusive, this suggests the the Department of Justice did NOT target those specific RBC accounts located in Canada.

Swiss Bank Accounts In The Name Of A Turks And Caicos Corporation

The Department of Justice pleading (paragraphs 8 to 10) allege the Defendant opened:

– five swiss bank accounts in the name of a Turks and Caicos Island Corporation;

– that the Turks and Caicos Corporation performed no active business but was opened for the sole purpose of  holding the Defendant’s investments (paragraph 7); and

– that the income from the accounts was NOT reported on the 2007 – 2009 tax returns (paragraphs 22, 36 and 44).

In other words, the FBAR penalties should be seen as penalties imposed on Swiss bank accounts (sounds horrible) which were located outside the Defendant’s country of residence (in a tax haven).

The Two CIBC “PERSONAL CHECKING” Accounts Opened Prior To 2001

Paragraph 5 of the Government’s Complaint describes two CIBC accounts that:

– were opened prior to 2001

– remained open during the years of 2007, 2008 and 2009

– were not reported on an FBAR.

(Because they were “checking accounts” it is unlikely that they generated taxable income.)

Although we can (I think) assume that these accounts were located in Canada, the compliant  does not specifically state this.

Nevertheless, my impression is that:

– although the CIBC accounts were included in the group of accounts that were part of the FBAR penalty base (see paragraphs 17, 31 and 41);

– the FBAR penalties were motivated by the Swiss bank accounts opened for the benefit of the Turks and Caicos Corporation.

To summarize …

Nobody deserves the treatment that this defendant was subjected to. It is however, wrong to interpret this case as the IRS attempting to impose FBAR penalties on the Canadian bank accounts of Canadian residents. There is enough FBAR hysteria already! This case should be seen as the IRS attempting to impose an FBAR penalty based on the unreported offshore Swiss accounts that were for the use of an offshore (Turks and Caicos) corporation used to hold personal investment assets.

Although FBAR penalties are (in general) unconscionable, unfair, draconian and a form of civil forfeiture):

this case should NOT be interpreted that the IRS attempting to impose FBAR penalties on the Canadian bank accounts of Canadian residents.

This post has been based largely on the Department of Justice complaint as filed in the Court.

John Richardson