BEDROSIAN v. THE UNITED STATES OF AMERICA, DEPARTMENT OF THE TREASURY, INTERNAL REVENUE SERVICE

Filing 95

ORDER THAT RE PENALTY AMOUNT AS OUTLINED HEREIN. SIGNED BY HONORABLE MICHAEL M. BAYLSON ON 1/29/21. 1/29/21 ENTERED AND COPIES E-MAILED.(jaa, )

Case 2:15-cv-05853-MMB Document 95 Filed 01/29/21 Page 1 of 4

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
ARTHUR BEDROSIAN

CIVIL ACTION

v.

NO. 15-5853

THE UNITED STATES OF AMERICA,
DEPARTMENT OF THE TREASURY,
INTERNAL REVENUE SERVICE
MEMORANDUM AND ORDER RE PENALTY AMOUNT
Following this Court’s Judgment filed September 20, 2017, and an appeal by the United
States, the Third Circuit ordered a remand. Bedrosian v. United States, Dep’t of Treasury, IRS,
912 F.3d 144 (3d Cir. 2018). After additional briefing by the parties, the Court found that Plaintiff
Arthur Bedrosian acted willfully in failing to file a FBAR. Bedrosian v. United States, 15-5853,
2020 WL 7129303 (E.D. Pa. Dec. 4, 2020). The Court then ordered the parties to confer and file
joint or separate statements regarding the amount of the penalty to be imposed. (ECF 87.) The
parties have filed separate statements (ECF 90, 91), and responses (ECF 92, 93).
Bedrosian argues that no penalty should be imposed because the government has failed to
meet its burden to prove the amount of the penalty. The government argues that Bedrosian has
admitted to the amount on multiple occasions, and in the alternative that the government’s
submissions prove the amount. Further, the government explains that the relevant statutes and
Internal Revenue Service (“IRS”) guidance dictate the imposition of the maximum penalty amount
in this case.
The maximum penalty for a willful violation of the FBAR reporting requirement is the
greater of $100,000 or 50% of the bank account balance at the time of the violation. 31 U.S.C. §
5321(a)(5)(C), (D). Interest accrues from the date the “notice of the amount due is first mailed to

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Case 2:15-cv-05853-MMB Document 95 Filed 01/29/21 Page 2 of 4

the debtor.” 31 U.S.C. § 3717(b)(2). In addition, a late-payment penalty must be assessed for the
portion of the debt that remains unpaid after 90 days. 31 U.S.C. § 3717(e)(2).
In this case, the IRS assessed the maximum penalty of 50% of the bank account balance
which was $975,789. For purposes of calculating interest, notice of the amount due was mailed to
Bedrosian on January 30, 2015. Bedrosian made a payment of $9,757 on August 26, 2015.
According to the government, the unpaid amount as of January 4, 2020, taking into account
interest, late fees, and the amount already paid is $1,371,371.
The documents submitted by the government for purposes of proving the penalty amount
are as follows:
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Exhibit R: A spreadsheet created by UBS which shows the monthly balances (in Swiss
Francs) of a bank account for the years 2001 through 2008. The government submits that
it is Bedrosian’s UBS account ending in 6167.

•

Exhibit U: A statement by UBS’s legal counsel that documents attached to Exhibit U are
documents maintained by UBS which:
o “1. were made at or near the time of the occurrence of the matters set forth therein,
by (or from information transmitted by) a person with knowledge of those matters;
o 2. were kept in the course of regularly conducted business activity;
o 3. were made by the said business activity as a regular practice; and,
o 4. if not original records, are duplicates of original records.”
Exhibit R is listed as one of the documents attached to Exhibit U.

•

Exhibit S: Swiss Franc to U.S. Dollar exchange rates for the years 2006 through 2011

•

Exhibit T: The account balances in Exhibit R converted to U.S. Dollars using the exchange
rates from Exhibit S

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Case 2:15-cv-05853-MMB Document 95 Filed 01/29/21 Page 3 of 4

In United States v. Williams, the District Court faced a similar situation as here. Originally,
the District Court found that Williams’ actions in failing to file an FBAR were not willful, and the
Fourth Circuit, finding that Williams did act willfully, reversed and remanded to the District Court
for imposition of the penalty. United States v. Williams, 489 Fed. App’x. 655, 660 (4th Cir. 2012).
On remand, the Court noted that the issue of liability had been resolved and the Court’s task was
to “review the penalty amount for abuse of discretion under the ‘arbitrary and capricious’ standard
of the Administrative Procedure Act.” United States v. Williams, No. 09-437, 2014 WL 3746497,
*1 (E.D. Va. June 26, 2014) (citing 5 U.S.C. § 706). The Court described this standard as “narrow
and deferential” and stated the it “must not substitute [the Court’s] judgment for the agency’s, and
must only review the record to ensure that the agency engaged in reasoned decision-making and
that there was a ‘rational connection between the facts found and the choice made.’” Id. (quoting
Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto Ins. Co., 463 U.S. 29, 43 (1983)).
After reviewing the parties’ submissions, the Court finds that the government has not
abused its discretion in the amount of the penalty imposed. At no point does Bedrosian argue that
the stated amount in his account is incorrect, he only argues that the documents presented by the
government are not admissible. Although the government asserts that the doctrine of judicial
admission requires this result, the Court relies on the documents identified by the government in
reaching its decision. However, the Court notes that the admissions pointed to by the government
at least demonstrate that the penalty amount sought by the government was not a surprise to
Bedrosian or his counsel. Therefore, based on the Exhibits described above the Court finds that
the government has not abused its discretion in imposing the maximum penalty against Bedrosian.

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AND NOW, upon consideration of the parties’ statements regarding the penalty amount
(ECF 90, 91) and the responses (ECF 92, 93), it is hereby ORDERED that judgment is entered in
favor of the United States and against Arthur Bedrosian
in the amount of $1,371,371.43 as of January 4, 2021, consisting of:
1. The penalty assessed against him under 31 U.S.C. § 5321(a)(5) in the amount of
$975,789.17,
2. Bedrosian’s payment of $9,757.89 on August 26, 2015, and
3. interest and penalties accruing on the unpaid portion of the original assessment, in
accordance with 31 U.S.C. § 3717, at the rates of 1% and 6% per annum,
respectively.
Further interest and penalties will accrue as follows:
Interest will continue to accrue under 31 U.S.C § 3717(a)(1) from January 4, 2021 until the
date of entry of this judgment. Interest will then accrue under 28 U.S.C § 1961 from the date of
entry of this judgment until the judgment is paid. Penalties will continue to accrue in accordance
with 31 U.S.C § 3717(e)(2) from January 4, 2021 until judgment is paid.
The clerk shall close this case.

BY THE COURT:
s/ Michael M. Baylson
_______________________________
MICHAEL M. BAYLSON, U.S.D.J.
DATED: 1/29/2021

/Volumes/Judge Baylson/CIVIL 15/15-5853 Bedrosian v United States/15cv5853 Memo and Order Re Penalty.docx

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