United States District Court, E.D. Pennsylvania
MEMORANDUM RE CROSS MOTIONS FOR SUMMARY
tax penalty action, we must determine whether genuine
disputes of material fact preclude summary judgment on behalf
of Plaintiff, Arthur Bedrosian, or Defendant, the United
States. Bedrosian initiated this suit, alleging that the
United States committed illegal exaction by imposing an
unwarranted tax penalty on him. The United States countersued
for full payment of the penalty it had assessed. For the
reasons discussed below, we deny summary judgment for both
following is a fair account of the factual assertions at
issue in this case, as taken from both parties Statements of
Fact and not genuinely disputed. Bedrosian is a United States
citizen who has had, over the past several decades, a
successful career in the pharmaceutical industry. ECF No. 22,
Def.'s Mot. for Summary Judgment (“Def.'s
Mot.”), Def.'s Statement of Facts
(“DSOF”) ¶¶ 1, 3. He currently holds
the position of Chief Executive Officer at Lannett Company,
Inc., a manufacturer and distributor of generic medications.
Id., DSOF ¶¶ 6, 10. In this role,
Bedrosian supervises approximately 100 employees, signs
contracts and financial statements on behalf of Lannett,
researches FDA regulations, and decides company policy with
respect to FDA filings. Id., DSOF ¶¶ 9-10.
opened a savings account with Swiss Credit Corporation in
Switzerland in the early 1970s, which account was
transitioned to UBS when UBS acquired Swiss Credit
Corporation. Id., DSOF ¶¶ 11-12. At some
point, at least as early as 2005, a second account was added,
although Bedrosian avers that he always considered them one
account. Id., DSOF ¶ 14; ECF No. 26, Pl.'s
Opp'n, Ex. A (Pl.'s Dep. Tr.) at 132:9-133:15. The
client numbers for each account ended in 6167 and 5316.
Def.'s Mot., DSOF ¶ 15. The parties dispute the
extent of Bedrosian's involvement in the management of
his UBS accounts, but it is at least clear that Bedrosian met
with a UBS banker about once a year to review the
accounts' performance. Id., DSOF ¶ 18;
Pl.'s Opp'n, Ex. A at 58:6-21, 115:3-22. During 2007,
the tax year at issue in this proceeding, both UBS accounts
carried balances of significantly more than $10, 000.
Def.'s Mot., DSOF ¶ 19. In November 2008, Bedrosian
requested that UBS close his account ending in 6167 and
transfer all assets therein to another Swiss bank.
Id., DSOF ¶ 20. The following month, he
requested that UBS close his account ending in 5316 and
transfer all assets therein to a domestic account at
Wachovia. Id., DSOF ¶ 21.
the decades that Bedrosian maintained the Swiss accounts, he
did not prepare his own tax returns; rather, two accountants
did so - Seymour Handleman from 1972 until 2006, and Sheldon
Bransky from 2007 onwards. Id., DSOF ¶¶
22-23, 31. Bedrosian did not inform Handleman of the UBS
accounts' existence until the 1990s, because, Bedrosian
avers, “[Handleman] never asked.” Id.,
Ex. S (Pl.'s Dep. Tr.) at 67:1-5. When Bedrosian did tell
Handleman, the accountant said that “for the past 20
years, [Bedrosian had] been breaking the law” because
he was “supposed to be marking [his] return that [he
has] a foreign bank account and [he had not] been doing
that.” Id., Ex. S at 67:7-16. But, in response
to Bedrosian asking what he should do to rectify the problem,
Handleman allegedly told him “to just leave it alone
because the damage was already done” and that, upon
Bedrosian's death, the assets in the Swiss accounts would
be repatriated as part of Bedrosian's estate and taxes
would be paid on them then. Id., Ex. S at 69:18-24.
Based on that advice, as well as his fear that he would be
penalized for his years of noncompliance, Bedrosian did not
report either Swiss account on his tax returns until 2007,
when Handleman died and Bedrosian hired Bransky to take over
his accounting work. Id., Ex. S at 72:1-5,
filed a federal income tax return for 2007 that reflected,
for the first time, that he had assets in a foreign financial
account in Switzerland. Id., DSOF ¶ 34.
Specifically, on Schedule B of his return, Bedrosian answered
“yes” to question 7a asking whether “[a]t
any time during 2007, [he had] an interest in or signature or
other authority over a financial account in a foreign
country, ” and listed Switzerland as the foreign
country in which the account was located. Id., Ex. N
(Pl.'s 2007 Return and FBAR). Bedrosian also filed a
Report of Foreign Bank and Financial Accounts, commonly
referred to as an “FBAR, ” for the first time in
2007. Id., DSOF ¶ 38, Ex. N. But, critically,
he only reported the existence of his Swiss account ending in
5316, which had assets totaling approximately $240, 000, and
did not report the account ending in 6167, which had assets
totaling approximately $2.3 million. Id., DSOF
¶ 38, Ex. N. Bedrosian did not report any of the income
that he earned on either Swiss account on his 2007 return.
Id., DSOF ¶ 35.
after 2008, UBS told Bedrosian that it would be providing his
account information to the United States government.
Id., DSOF ¶ 41. Around this time, prior to the
government's initiation of its investigation, Bedrosian
hired an attorney to look into his reporting obligations as
they pertained to the Swiss accounts. Id., Ex. S at
85:11-24, 184:11-185:23. In August 2010, Bedrosian filed an
amended federal return for 2007 on which he reported the
approximately $220, 000 of income he had earned from the
Swiss accounts. Id., DSOF ¶ 43, Ex. P
(Pl.'s Amended 2007 Return). He also filed an amended
FBAR for 2007 in August 2010, on which he reported both UBS
accounts rather than just the one ending in 6167. Pl.'s
Mot., PSOF ¶ 13, Ex. D (Pl.'s Amended 2007 FBAR).
Although Bedrosian took this corrective action before the
government began its audit, he did not do so until after the
IRS had discovered the existence of the two accounts.
Id., PSOF ¶ 38; Def.'s Mot., Ex. Q (IRS
Memo) (stating that UBS supplied the IRS with information
about the existence of the account ending in 6167 on July 19,
initiated its investigation of Bedrosian in April 2011, with
a focus on tax year 2008. Pl.'s Mot., PSOF ¶ 14.
Beginning then, Bedrosian engaged with the Service
cooperatively, providing them with all documentation
requested. Id., PSOF ¶¶ 17-19. The
investigation culminated in a case panel of IRS agents
recommending that Bedrosian be penalized for non-willful
violations of the FBAR reporting requirement and that the
case against him be closed. Id., PSOF ¶ 27, Ex.
F (John West Dep. Tr.) at 51:10-16. For reasons unclear in
the record, the case was not closed but instead was
re-assigned to another IRS agent, Pamela Christensen, who
conducted her own review and concluded that Bedrosian's
violation of Section 5314 had been willful. Id.,
PSOF ¶¶ 29-30, Ex. G (Pamela Christensen Dep. Tr.)
at 17:8-15, 21:18-21. On July 18, 2013, the IRS sent
Bedrosian a letter stating that it was imposing a penalty for
his willful failure to file TDF 90-22.1, the FBAR form, for
tax year 2007. Id., PSOF ¶ 35, Ex. I (Letter
from IRS). The proposed penalty was $975, 789.17, 50% of the
maximum value of the account ($1, 951, 578.34) and therefore
the largest penalty possible under the regulations.
Id., PSOF ¶ 36, Ex. I.
filed suit on October 27, 2015, alleging one count of illegal
exaction (ECF No. 1). The United States answered on February
26, 2016 and asserted a counterclaim for full payment of the
penalty it alleged was due, as well as accrued interest on
such penalty, a late payment penalty, and other statutory
additions to the penalty (ECF No. 5). Bedrosian filed an
answer to the counterclaim on March 21, 2016 (ECF No. 7).
Both parties then moved for summary judgment, the United
States on November 30, 2016 (ECF No. 22) and Bedrosian on
December 5, 2016 (ECF No. 25). Oppositions were filed on
December 19, 2016 (ECF Nos. 26, 27) and the United States
replied on December 23, 2016 (ECF No. 28).
district court should grant a motion for summary judgment if
the movant can show “that 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). A
dispute is “genuine” if “the evidence is
such that a reasonable jury could return a verdict for the
nonmoving party.” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). A factual dispute is
“material” if it “might affect the outcome
of the suit under the governing law.” Id.
seeking summary judgment always bears the initial
responsibility for informing the district court of the basis
for its motion and identifying those portions of the record
that it believes demonstrate the absence of a genuine issue
of material fact. Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986). Where the non-moving party bears the burden
of proof on a particular issue at trial, the moving
party's initial burden can be met simply by
“pointing out to the district court . . . that there is
an absence of evidence to support the nonmoving party's
case.” Id. at 325. After the moving party has
met its initial burden, the adverse party's response
must, “by citing to particular parts of materials in
the record” set out specific facts showing a genuine
issue for trial. Fed.R.Civ.P. 56(c)(1)(A). “Speculation
and conclusory allegations do not satisfy [the non-moving
party's] duty.” Ridgewood Bd. of Educ. v. N.E.
ex rel. M.E., 172 F.3d 238, 252 (3d Cir. 1999)
(superseded by statute on other grounds as recognized by
P.P. v. West Chester Area Sch. Dist., 585 F.3d 727,
730 (3d Cir. 2009)). Summary judgment is appropriate if the