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Norman v. United States

United States Court of Appeals, Federal Circuit

November 8, 2019

MINDY P. NORMAN, Plaintiff-Appellant
v.
UNITED STATES, Defendant-Appellee

          Appeal from the United States Court of Federal Claims in No. 1:15-cv-00872-EJD, Senior Judge Edward J. Damich.

          Paula Schwartz Frome, Garden City, NY, argued for plaintiff-appellant.

          Deborah K. Snyder, Tax Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by Geoffrey Klimas, Richard E. Zuckerman, Travis A. Greaves, Gilbert Steven Rothenberg.

          Before Prost, Chief Judge, Moore and Wallach, Circuit Judges.

          Prost, Chief Judge.

         Mindy P. Norman appeals a July 31, 2018 decision by the U.S. Court of Federal Claims finding that: (a) Ms. Norman willfully failed to file a Report of Foreign Bank and Financial Accounts ("FBAR") in 2007; and (b) the Internal Revenue Service ("IRS") properly assessed a penalty of $803, 530 for this failure. For the reasons stated below, we affirm.

         Background

         I

         Ms. Norman, a school teacher, opened a foreign bank account with the Swiss bank UBS in 1999. More specifically, she opened a "numbered account," which, unlike a "named account," means income and asset statements for the account list only the account number and not Ms. Norman's name or address. From 2001 to 2008, her account balance ranged between approximately $1.5 million and $2.5 million.

         Ms. Norman was actively involved in managing and controlling her account. For instance, she frequently spoke with Mr. Thomann, her UBS representative, about the account, both in person and over the phone. She gave UBS instructions detailing how to invest her funds. For example, she signed a document inhibiting UBS from investing in U.S. securities on her behalf, which helped prevent disclosure of her account to the IRS. She also withdrew funds from the account in 2002. She received the withdrawal- which appears to have been either for $10, 000 or $100, 000[1]-in cash from Mr. Thomann. That the withdrawal was received in cash again helped to prevent disclosure of the foreign account to the IRS.

         UBS client contact records indicate that in April 2008, Ms. Norman expressed surprise and displeasure when she was informed of UBS's "new business model, "[2] which the Court of Federal Claims found referred to UBS's business decision to "no longer provide offshore banking" and to work "with the U.S. Government to identify the names of U.S. clients who may have engaged in tax fraud." See Norman, 138 Fed.Cl. at 194 (quoting statement by UBS representative Mark Branson while testifying at a Senate Subcommittee hearing). Just before UBS publicly announced this new business plan in July 2008, Ms. Norman closed her account with UBS and transferred her funds to another foreign bank.

         II

         Under 31 U.S.C. § 5314(a), U.S. persons who have relationships with foreign financial agencies are required to disclose such relationships to the Treasury Department. This disclosure is effectuated by filing a Report of Foreign Bank and Financial Accounts ("FBAR").

         Ms. Norman did not file a timely FBAR disclosing the existence of her UBS account in any year, including in 2007, which is the tax year at issue in this case. In addition, Ms. Norman signed, under penalty of perjury, her 2007 tax return, which falsely indicated that she had no interest in any foreign bank account. She signed her tax return after her accountant sent her a questionnaire specifically inquiring whether she had an interest in any foreign bank accounts.

         In 2008, Ms. Norman was referred to an accountant who filed amended tax returns and late FBARs. The IRS subsequently opened an audit of Ms. Norman. During this audit, Ms. Norman made numerous false statements to the IRS. For instance, Ms. Norman told the IRS, both during an interview and in a letter, that she first learned of her foreign account in 2009. In the letter, she further stated that she "was shocked to first hear about the existence of foreign accounts" in her name. J.A. 133. After retaining counsel, Ms. Norman sent the IRS a second letter "to correct several misstatements." J.A. 145-47. In this letter, she admitted that she had known for over a decade that she had an "interest" in a foreign bank ...


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