United States of America v. Agrawal

Filing 40

ORDER signed by Judge Lynn Adelman on 12/9/19 granting 30 Motion for Summary Judgment. The Clerk of Court shall enter judgment against defendant Agrawal in the amount of $46,798.48, plus statutory additions that have accrued according to law. (cc: all counsel, defendant) (jad)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
UNITED STATES OF AMERICA,
Plaintiff,
v.

Case No. 18-C-0504

RAM K. AGRAWAL,
Defendant.

ORDER
Through this action, the United States of America seeks to enforce civil penalties
against Ram Agrawal for his alleged non-willful failure to timely report his financial
interest in or authority over certain foreign bank accounts. Agrawal has represented
himself throughout this litigation. Now before me is the United States’ motion for
summary judgment.
I.

BACKGROUND

Ram Agrawal was born in India and moved to the United States in or around
1970. He is a United States citizen. He completed his graduate education in the United
States, and then worked in the United States as a geophysicist and later as a math
instructor at the Milwaukee Area Technical College. He received an inheritance from his
parents in the form of CDs that were held in India. In or around 2002, Agrawal renewed
or purchased new CDs at the State Bank of India. Some of these new CDs matured in
2004 and the remainder matured in 2006.
In September 2004, Agrawal and his wife jointly opened an account at UBS, a
Swiss investment bank. Agrawal used money from CDs in India that were maturing to
fund the UBS account. Agrawal directed UBS to invest the money in non-US SEC

funds, which would be non-taxable. The maximum value of the UBS account was
$999,350 in 2006; $967,129 in 2007; $930,531 in 2008; and $671,425 in 2009. In 2009,
UBS notified Agrawal that it intended to close the account. In 2010, Agrawal closed the
account and received a check from UBS for $671,424.65, which was the remaining
account balance.
Under Treasury Department regulations in effect during the period when Agrawal
held the UBS account, he was required to report the account to the Treasury
Department every year. 31 C.F.R. §§ 103.24, 103.27 (2009). The regulations required
him to use a form prescribed by the Secretary of the Treasury: Form TD F 90-22.1,
Report of Foreign Bank and Financial Account, commonly referred to as an “FBAR.”
However, for each of years 2006, 2007, 2008, and 2009, Agrawal failed to submit timely
FBARs with respect to the UBS account. He also failed to report the State Bank of India
CDs, the UBS account, or the gain or loss from the UBS account on his tax returns for
those years.
At his deposition, Agrawal testified that he prepared his own tax returns in 2006
and 2007, but relied on CPAs to prepare his tax returns in 2008 and 2009. He testified
that he did not tell the CPAs of the existence of the UBS account. Regarding the 2008
tax return preparation, Agrawal testified as follows:
Q.
A.
Q.
A.
Q.
A.
Q.

Did [the CPA] ask you whether you had a foreign
financial account?
I said no.
You told him no?
Yes.
But at this time you still had the UBS account,
correct?
Yes.
Why did you tell [the CPA] no?

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A.

…
Q.

A.
Q.
A.

Because again, the word of [the UBS representative]
that these—this account is not—non-taxable in the
U.S.
You didn’t tell [the CPA] that you had a UBS account
but were told that it was non-taxable and didn’t need
to be reported?
I didn’t tell him.
Okay. Why not?
Because when I trust somebody, like [the UBS
representative], I didn’t tell him.

ECF # 32-17 at 65-66. Regarding the 2009 tax return, Agrawal testified as follows:
Q:
A:
…
Q.
A.
Q.
A.
Q.
A.
Q.
A.
Q.
A.

Did you review the Form 1040 of your tax return to
2009 with [the CPA] before you filed it?
Yes.
The Part III, the information about foreign accounts
and trusts is blank?
Yeah.
Did you ask [the CPA] why it was blank before you
filed your return?
No.
It didn’t cause you any concern?
No.
Why not?
Because I didn’t notice. He should have said no.
Did [the CPA] ask you if you had any accounts in a
foreign country?
No.

Id. at 68. However, with his response to plaintiff’s motion for summary judgment,
Agrawal submitted an affidavit reversing some of this testimony; he now claims that
both CPAs asked whether he had foreign accounts; that he told them he did have a
foreign account; that the CPAs did not file FBARs on his behalf or report the UBS
account on his tax returns; and that he relied on the CPAs’ expertise. ECF # 36 at 2-3.
Along with this affidavit, Agrawal also filed an errata list amending portions of his
deposition testimony, including the portions cited above. Many of these amendments

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simply change “yes” answers to “no” or vice versa; Agrawal’s explanation for these
amendments is that he “misspoke.” ECF # 37-1 at 11-13.
It is undisputed that in October of 2011, Agrawal’s wife completed and signed
FBARs for calendar years 2006 through 2009 with respect to the UBS account and
submitted those forms to an IRS agent. The Agrawals did not otherwise file the FBAR
forms with the Treasury Department.
On April 12, 2016, a delegate of the Secretary of the Treasury assessed a civil
penalty against Agrawal for nonwillful failure to file FBARs, under the authority of 31
U.S.C. § 5321(a)(5). The United States seeks judgment in the amount of $46,798.48 as
of August 28, 2019, plus penalties, interests and collection costs accrued according to
law. Agrawal says that he has paid $45,000 to the U.S. Treasury, but provides no
documentary support for that assertion.
II.

DISCUSSION

a. Unauthorized Sur-Reply
Agrawal has filed a “response”—i.e., a sur-reply—to the United States reply brief
in support of its motion for summary judgment. ECF # 39. Civil Local Rule 56—which
governs summary judgment and a copy of which Agrawal received with the United
States’ motion for summary judgment, see ECF # 30—does not make provision for the
filing of a sur-reply. Accordingly, pursuant to Civil Local Rule 7(i)—a copy of which
Agrawal also received—Agrawal should have filed a motion requesting leave to file
additional paper. Agrawal did not do so, and has not identified any valid reason why his

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additional argument warrants consideration. Therefore, I will not consider Agrawal’s
unauthorized filing. 1
b. Summary Judgment
Summary judgment is required where “there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). When considering a motion for summary judgment, I view the evidence in the
light most favorable to the non-moving party and must grant the motion if no reasonable
juror could find for that party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 255
(1986).
Pursuant to 31 U.S.C. § 5314(a), the Secretary of the Treasury must require
residents or citizens of the United States to keep records and/or file reports when the
resident or citizen makes a transaction or maintains a relationship with a foreign
financial agency. Thus under 31 C.F.R. § 103.24 (2009), which implemented this statute
at the time relevant to this case, “each person subject to the jurisdiction of the United
States . . . having a financial interest in, or signature or other authority over, a bank,
securities or other financial account in a foreign country” was required to file a FBAR for
each year the person held the account. Such reports were to be filed “on or before
June 30 of each calendar year with respect to foreign financial accounts exceeding

1

A note: Mr. Agrawal has represented himself throughout this litigation. Consistent with
his earlier practice, his unauthorized sur-reply is also signed “Ram K. Argrawal, pro se.”
This document, however, differs substantially in both style and content from Mr.
Agrawal’s earlier submissions. It contains developed legal argument and properly
formatted legal citations; in short, it appears to be the work of a trained and experienced
attorney. Mr. Agrawal is warned that if he knowingly makes factual misrepresentations
to the court—for example, by claiming to represent himself while in fact employing an
attorney to litigate his case—he may expose himself to sanctions under Rule 11 of the
Federal Rules of Civil Procedure.

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$10,000 maintained during the previous calendar year.” 31 C.F.R. § 103.27 (2009). The
Secretary of the Treasury may impose a civil money penalty on violators of these
provisions, 31 U.S.C. § 5321(a)(5)(A); however, an exception to the statutory penalty
exists where the “violation was due to reasonable cause and . . . the amount of the
transaction or the balance in the account at the time of the transaction was properly
reported,” 31 U.S.C. § 5321(a)(5)(B)(ii).
In this case, there’s no genuine dispute as to whether Agrawal violated the law
when he failed to timely file FBARs regarding the UBS account for tax years 2006-2009.
Agrawal does not contest that he is a US citizen; that he had a financial interest in a
financial account in a foreign country; that the balance of that account exceeded
$10,000 for each of the relevant years; or that he failed to file his FBARs by the June 30
deadline for each of those years. His conduct thus satisfies all the elements required for
liability under 31 U.S.C. §§ 5314 and 5321(a)(5)(A). Agrawal argues, however, that his
conduct is excused because he relied on the advice of tax professionals, and because
he is elderly, unsophisticated about tax law, and speaks English as a second language.
The question I must resolve is whether Agrawal has established a question of material
fact as to his entitlement to the “reasonable cause” exception under § 5321(a)(5)(B)(ii).
Agrawal’s argument is based largely on his and his wife’s affidavits, which he
filed together with his response to plaintiff’s motion for summary judgment. In them, both
Agrawal and his wife claim that they relied on tax professionals to advise them and to
prepare required financial reports, and that they provided full information about their
foreign accounts to these professionals. ECF # 36, ECF # 37. These affidavits directly
contradict Agrawal’s deposition testimony, in which he stated that he responded “no”

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when the CPA who prepared his 2008 tax return asked whether he had any foreign
bank accounts, and that the CPA who prepared his 2009 return did not discuss foreign
accounts with him at all. ECF # 32-17 at 65-68. Although the summary judgment
posture of this case requires me to view the evidence in the light most favorable to
Agrawal, that does not allow him to walk back his deposition testimony with later-filed
contradictory affidavits. “[P]arties cannot thwart the purposes of Rule 56 by creating
‘sham’ issues of fact with affidavits that contradict their prior depositions.” Ineichen v.
Ameritech, 410 F.3d 956, 963 (7th Cir. 2005). 2 I must therefore disregard the affidavits.
For analogous reasons, I disregard Agrawal’s deposition errata sheets—which,
again, largely seek to replace “no” with “yes” answers, and “yes” with “no” answers, on
grounds that Agrawal “misspoke” at his deposition. Though Federal Rule of Civil
Procedure 30(e)(1) provides that a deponent may review and submit changes to a
deposition transcript provided he or she conforms with certain procedural requirements,
the Seventh Circuit has held that this rule does not allow post-deposition changes that
contradict the deponent’s testimony: “We . . . believe, by analogy to the cases which
hold that a subsequent affidavit may not be used to contradict the witness’s deposition,
that a change of substance which actually contradicts the transcript is impermissible
unless it can plausibly be represented as the correction of an error in transcription, such
as dropping a ‘not.’” Thorn v. Sundstrand Aerospace Corp., 207 F.3d 383, 389 (7th Cir.
2000). Agrawal’s proposed amendments cannot plausibly be represented as the

Another feature of the affidavits reinforces the inference that they were manufactured
to gin up an issue of fact: though both affidavits were ostensibly signed and dated April
20, 2019, they both make reference to the United States’ motion for summary judgment,
which was not filed until August 30, 2019.
2

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correction of an error of transcription. Therefore, I rely on Agrawal’s original deposition
testimony in considering whether he has established a material issue of fact as to
whether there was a “reasonable cause” for his violation of the FBAR reporting
requirement.
Neither § 5321 nor its corresponding regulations define “reasonable cause” in the
FBAR reporting context, and there’s little development in the case law. Sections 6651(a)
and 6664(c)(1) of the Internal Revenue Code, however, use and define the term in the
tax compliance context, and courts have found those provisions instructive in construing
the reasonable cause standard applicable in the FBAR context. See Jarnagin v. United
States, 134 Fed.Cl. 368, 376 (Fed. Cl. 2017); Moore v. United States, 2015 WL
1510007 at *4 (W.D.Was. 2015); see also Thomas v. UBS AG, 706 F.3d 846, 851 (7th
Cir. 2013)(Seventh Circuit indicating similarity between 31 U.S.C. § 5321(5)(B)(ii) and
26 U.S.C. § 6664(c)). The regulations implementing 26 U.S.C. § 6651 equate the
reasonable cause standard with a standard of “ordinary business care and prudence.”
26 C.F.R. § 310.6651-1(c)(1). The regulations interpreting 26 U.S.C. § 6664(c)(1) state
that the determination whether a taxpayer acted with reasonable cause “is made on a
case-by-case basis, taking into account all pertinent facts and circumstances,” and
further that “generally the most important factor is the extent of the taxpayer’s effort to
assess the taxpayer’s proper liability.” 26 C.F.R. § 1.6664-4(b)(1).
On the record before me, no reasonable juror could find that Agrawal acted with
ordinary business care and prudence, or that he made a reasonable effort to
understand his FBAR reporting responsibilities, when he failed to file his FBARs for the
years 2006-2009. By his own admission, Agrawal self-prepared his 2006 and 2007 tax

8

returns; he did not disclose the existence of a foreign financial account on Schedule B
despite a direct question on the issue. And according to his deposition testimony, in
2008 and 2009, he did not tell the CPAs preparing his tax return of the existence of the
UBS account or question the CPA’s decision to leave blank the Schedule B question
about foreign bank accounts. A taxpayer acting with ordinary business care, or one
making a reasonable effort to understand his responsibilities, would have sought
informed advice about the reporting requirements alluded to in Schedule B; seeking
such advice would necessarily involve the taxpayer notifying the advisor of the
existence of the foreign account. See Jarnagin, 134 Fed.Cl. at 378 (“A taxpayer who
signs a tax return will not be heard to claim innocence for not having actually read the
return, as he or she is charged with constructive knowledge of its contents.”)(quoting
United States v. Williams, 489 Fed.Appx. 655, 659 (4th Cir. 2012)); see also Richardson
v. Comm’r, 125 F.3d 551, 558 (7th Cir. 1997)(Taxpayer could not establish reasonable
cause for underpayment of taxes on the basis of reliance on an expert where the record
contained “no evidence that a professional, after being informed of the circumstances,
advised her that she did not have taxable income in the relevant years.”)(emphasis
supplied).
Agrawal’s arguments that he is elderly, speaks English as a second language,
and has an inexpert understanding of tax reporting requirements do not sway my
reasonable cause analysis. By his own admission, Agrawal has sufficient mental acuity
technical facility with the English language to work as a math teacher and as a
geophysicist—and, for that matter, to represent himself in this litigation. He had
sufficient financial savvy to draft a letter to a UBS requesting that the funds in the

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account be invested in non-taxable, non-US SEC funds. ECF # 32-17 at 28. The record
therefore does not support Agrawal’s argument that his naivety excuses him from
exercising ordinary business care by seeking advice regarding his obligation to file an
FBAR. Compare Jarnagin, 134 Fed. Cl at 378. I conclude, therefore, that Agrawal has
not established an issue of material fact as to whether his failure to file his FBARs was
due to a reasonable cause. The United States is entitled have the penalties it has
assessed against Agrawal reduced to judgment.
III.

CONCLUSION

For the foregoing reasons, IT IS ORDERED that the United States’ motion for
summary judgment (ECF # 30) is GRANTED. The Clerk of Court shall enter judgment
against defendant Agrawal in the amount of $46,798.48, plus statutory additions that
have accrued according to law.
Dated at Milwaukee, Wisconsin, this 9th day of December, 2019.

s/Lynn Adelman________
LYNN ADELMAN
District Judge

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