Thursday, May 16, 2024

CPAs and Attorneys Don't Get to Say "They Did Not Know" - Ex-CFO& CPA $44M FBAR Penalty Upheld

According to Law360The former chief financial officer of a Russian gas company who was sentenced to seven years in prison for hiding money in Swiss banks can't escape the government's civil suit seeking nearly $44 million in reporting penalties, a Florida federal judge ruled Wednesday.

In an order denying a dismissal request by ex-Novatek CFO Mark Gyetvay, U.S. District Judge John L. Badalamenti said the government had sufficiently alleged that Gyetvay had willfully failed to file a foreign bank account report, or FBAR, for 2014 on a Swiss account.

Specifically, The Judge Noted The Government's
of Gyetvay As "A Financially Educated, Savvy,
International Businessman" With A Background as a CERTIFIED PUBLIC ACCOUNTANT and Audit Partner,

Who Retained A Swiss Wealth Firm To Help Him Hide 
His Ownership Of Foreign Accounts.

The government's complaint also presented facts showing Gyetvay transferred the account to his wife after being asked to show he complied with U.S. tax laws, and that he swore to the Internal Revenue Service he lived in Russia when really he had a home in Florida, Judge Badalamenti said.

"In a nutshell, the complaint alleges myriad deliberate actions over the course of a decade by Mr. Gyetvay that establish plausible allegations of willfulness," Judge Badalamenti said in the order.

Gyetvay, in his October request to dismiss the suit, called the government's penalty "staggering." He asked the court to reduce the damages amount to $100,000, the penalty for a lower level of willful FBAR violation. The government's steeper penalty, equal to up to 50% of the account balance, is allowed only for a limited subclass of willful violations, he argued, namely those that involve a failure to report the existence of an account or its identifying information.

Gyetvay did report the account in question to the IRS for 2014, and he included the bank and account number, he said.

Judge Badalamenti rejected that argument Wednesday, saying Gyetvay erroneously interpreted the law as requiring a partial, rather than a full, reporting of account information, which includes the amount of money in the account.

According to the government's June complaint, the U.S. Treasury Department already had slapped Gyetvay with $38.6 million in penalties in 2021 for the inaccurate FBAR for 2014. Gyetvay's failure to pay pushed it to the $44 million being sought, the government said.

Gyetvay falsely reported that he had only signatory authority and no financial interest in the account for 2014, but he later admitted in an amended filing that it contained $79 million, the government said. By falsely claiming only signatory authority, Gyetvay avoided a requirement to report the value of the assets in the account, the government said.

Gyetvay has maintained his innocence since being indicted in 2021 and is appealing his conviction, which triggered not only the prison sentence but an order to pay $4 million in restitution. A Florida federal judge said in October that the appeal was unlikely to succeed, however, and denied Gyetvay's request to delay reporting to prison while he awaits the outcome.

Have an FBAR Penalty Problem?  
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