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West Palm Beach Man Must Repatriate $18.2M To Satisfy FBAR Penalty Assessment

West Palm Beach Man Must Repatriate $18.2M To Satisfy FBAR Penalty Assessment

According to Law360 Florida man must repatriate roughly $18.2 million held in his overseas bank accounts to pay a court judgment finding he failed to disclose his Swiss accounts to the Internal Revenue Service, a federal judge said.

A federal magistrate judge correctly decided that Isac Schwarzbaum must repatriate funds in his overseas accounts to satisfy the judgment for his failure to timely file his reports of foreign bank and financial accounts with the IRS, U.S. District Judge Beth Bloom said in an order Monday.

Judge Bloom rejected Schwarzbaum's arguments that the government's request for a repatriation order represented an improper workaround of the Federal Debt Collection Procedures Act. A repatriation order instead complies with the FDCPA, which provides rules the government must follow when collecting pre- and post-judgment debts, according to the order.

"The Government's Request That The Court Issue An Order Directing Schwarzbaum To Bring Sufficient Funds To The United States To Satisfy The Judgment Is Not Misplaced,"
Judge Bloom Said.

Schwarzbaum's assertions that the FDCPA doesn't apply to his funds because they were never in the U.S. are also unconvincing, Judge Bloom said.

The order Monday adopted recommendations from Magistrate Judge Bruce Reinhart, who said on June 30 that the court has personal jurisdiction over Schwarzbaum, a dual U.S.-German citizen, and can force him to repatriate the funds.

In August, the federal court found that Schwarzbaum willingly failed to report his foreign bank accounts from 2007 through 2009 and was consequently liable for penalties and interest. That amount has since increased to more than $18 million, including civil penalties, late payment penalties and prejudgment interest, according to court filings. Schwarzbaum has appealed that ruling to the Eleventh Circuit.

The government has contended that he has more than $49 million in assets in his overseas accounts that can be used to satisfy some of his debts to the U.S. Schwarzbaum, meanwhile, argued in a filing in July that the government's request for a repatriation order constituted an unauthorized get-around of the FDCPA.

He also said that the government should be relying on the FDCPA's garnishment provision and not the All Writs Act, which the government cited as justification for its repatriation request.

But Judge Bloom said Monday that the FDCPA incorporates the All Writs Act, giving the "courts the authority to take the necessary steps to aid their jurisdiction or to protect their judgments." The court is consequently not using the All Writs Act to improperly supersede the FDCPA as Schwarzbaum has contended, according to the order. 

Moreover, the applicable precedent supports the court's authority to order Schwarzbaum to repatriate the funds, the judge said.

Judge Bloom also noted that Schwarzbaum is allowed to request a pause on the execution of the judgment, pending his Eleventh Circuit appeal. 

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Read more at: Tax Times blog

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