Former CPA Charged with Filing False Streamlined Submission

From the DOJ press release.

A federal grand jury returned a superseding indictment charging Brian Booker, a former resident of Fort Lauderdale, Florida, whose business specialized in international trade, with failing to file Reports of Foreign Bank and Financial Accounts (FBARs) and filing false documents with the Internal Revenue Service (IRS).

According to the superseding indictment, Booker, a former Certified Public Accountant, owned a cocoa trading company that was organized under the laws of the Republic of Panama.  Booker allegedly operated that company from Venezuela, Panama, and his former residence in Fort Lauderdale, Florida.  The superseding indictment further alleges that, for calendar years 2011 through 2013, Booker failed to disclose his interest in financial accounts located in Switzerland, Singapore, and Panama on annual Reports of Foreign Bank and Financial Accounts (FBARs) as required by law.  Booker also allegedly filed false individual income tax returns for tax years 2010 through 2012 that failed to report to the IRS all of Booker’s foreign bank accounts.

Filing a false streamlined submission

The more interesting charge is for the filing of a false document in conjunction with the Streamlined Domestic Offshore Procedures. It is the first case in which the government has brought a charge for the filing of a false document in a streamlined case.

Here are some facts from the indictment. An indictment is an accusation. Note that a defendant is presumed innocent unless and until proven guilty.

On or about October 14, 2015, [the Defendant] submitted to the IRS a Certification by U .S. Person Residing in the United States for Streamlined Domestic Offshore Procedures (IRS Form 14654, “Streamlined submission”).

In his Streamlined submission, the defendant certified under the penalties of perjury that he learned about the FBAR filing requirements in 2008 and that he mistakenly believed that only personal financial accounts had to be reported on the FBAR.

The defendant also certified under the penalties of perjury that he was eligible for treatment under the Streamlined procedures and that his failure to report all income, pay all tax, and submit all required information returns, including FBARs, was due to non-willful conduct.

IRC Sec. 7206(1) – perjury and false statements

A person may be convicted under IRC 7206(1) if the person willfully provides any return, statement, or other document under the penalties of perjury, and which he does not believe to be true and correct as to every material matter. It is often used as an alternative when the government doesn’t have a strong enough case for tax evasion under IRC 7201.

While typically applied to the filing of false returns, IRC 7206(1) can also be applied to other tax forms, such as in this case, Form 14654.

In U.S. v. Levy, 533 F2d 969 (5th Cir. 1976) the false statement conviction was reversed because the Form 433-A, while signed under penalties of perjury, was not a form authorized by statute. Other circuits may have interpreted it differently. I’m not aware of any statute authorizing the use of Form 14654.

Another interesting question is: can certifying that one is non-willful by itself be considered a materially false statement? A person stating they are non-willful is not a statement of fact, but a exculpatory statement or a conclusion of law. It would be similar to a person stating they are “not guilty” and then being charged with making a false statement after being convicted.

The statement that he learned about the FBAR filing requirement in 2008, however, is a statement of fact made by the taxpayer.

Streamlined submissions are for non-willful taxpayers only

Non-willful conduct is defined as conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirement of the law.

Willful conduct includes knowing violations, but also willful blindness to tax laws and reckless violations of them. The taxpayer’s CPA background, the location of the accounts, indicating ‘no’ on Schedule B questions, and significant foreign business activities are considered indicative of willfulness. The taxpayer in this case should have entered the OVDP (now the traditional voluntary disclosure program).