The conscience of a lawyer and “The FBAR Fundraiser”

Having a license to practise law (bar admission) does not a lawyer make. Admission to the Bar, gives an individual the legal right to conduct oneself as  a lawyer. A lawyer operates within a specific construct of ethics and morality. The American Bar Association Model Rules of Professional Conduct make it clear that

A lawyer has an obligation to the client that is more important than loyalty to any other person or entity. This principle is made clear in Rule 1.7 of  The American Bar Association Model Rules of Professional Conduct.  Rule 1.7 clarifies that a lawyer should not act for a client if there exists any conflict of interest. It reads as follows:

Client-Lawyer Relationship
Rule 1.7 Conflict Of Interest: Current Clients

(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:

(1) the representation of one client will be directly adverse to another client; or

(2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.

(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if:

(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;

(2) the representation is not prohibited by law;

(3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and

(4) each affected client gives informed consent, confirmed in writing.

As I argued in a previous post, this must means that a lawyer’s fiduciary obligation to the client must  take precedence over (subject to a duty to tell the truth) any other obligations,  including Circular 230 obligations.

This principle of primary obligation to the client,  has run through the common law, for hundreds of years. It explains the role of a lawyer in unpopular cases. The principle also explains the role of a defense lawyer in a criminal case. On a more general level it explains the role of a lawyer in any case – including cases involving the government.

Many people are familiar with Atticus Finch – the defense lawyer in the book “To Kill A MockingBird”. In this story Atticus takes on an extremely unpopular case. He zealously and competently represents his client against the government. The story of Atticus Finch has motivated many people to become lawyers.

Good lawyers can be found in many different places and capacities – including in this blog of a Military Defense Lawyer. In explaining the duty of a lawyer to his client, the author quotes Lord Brougham in Queen Caroline’s case. Lord Brougham’s description of the duty of the client as follows:

An advocate, in the discharge of his duty, knows but one person in all the world, and that person is his client. To save that client by all means and expedients, and at all hazards and costs to other persons, and, amongst them, to himself, is his first and only duty; and in performing this duty he must not regard the alarm, the torments, the destruction which he may bring upon others.

The Road To Hell Is Paved With Good Intentions

At the beginning, the creation and initial administration of the 2009 OVDP may have been motivated solely by efforts to:

– work with tax cheats, who were residents of the U.S.

– who were using offshore bank accounts to evade U.S. taxes

By 2011 OVDP had morphed into OVDI and it was clear that the purpose of OVDI was to extract money from anyone with an offshore bank account who had not filed an FBAR. By anyone, I mean even people who did not know and had no reason to believe that they were even U.S. citizens! The U.S. government, through the leadership of the IRS, had become an organization that was running a massive, institutionalized “shake down”. As we know, OVDI was a fantastic deal for criminals (imagine being able to repatriate your illegal earnings for 25% and avoid incarceration). So, Mr. Shulman designed a fantastic deal for criminals. The deal was not  good for those who were not criminals.

The reality is that most people who entered OVDI were NOT criminals. They were innocent people who did not know about FBARs, complicated U.S. tax anti-deferral rules, etc. Furthermore, many of them did not know they were required to file tax returns. Who could even suspect the existence of something like an FBAR? But, of course, “Form Nation” never conceived of  a form it didn’t like.

The “non-criminals” affected by OVDI were necessarily:

– people who participated because they believed that law (no matter how immoral) should be their guiding principle;

– people who had spent their lives saving for retirement and therefore had assets to be stolen from them by the IRS

Notice that the people who were not affected by OVDI are:

– people who are not motivated to follow the law;

– people who had never bothered to save for retirement through the acquisition of retirement funds and assets

Since most of “non-criminals” (U.S. citizens living abroad and U.S. immigrants) owed little tax, the IRS weapon of choice is Mr. FBAR. In fact, let’s call OVDI what it really is:

“The FBAR Fundraiser“

If one accepts that government morality, includes  basic precepts of “fairness” and “justice”, then many would conclude that “The FBAR Fundraiser” is immorality in the extreme. With the “FBAR Fundraiser” the U.S. government has secured an invitation to join the most immoral regimes in the history of the modern world. Senator Schumer’s Ex -Patriot Act, has guaranteed  U.S. acceptance to the club. As Roger Conklin said:

“The old gray mare just ain’t what she used to be”.

These are times that try men’s souls!

The fact this that many U.S. citizens abroad  are grappling with how to come into tax compliance. A topic of recent discussion is the issue of OVDI vs. a quiet disclosure. Since, people get their advice from lawyers, the issue then evolved into the ethical obligations of a lawyer in relation to recommending OVDI. I believe that lawyers have an ethical duty to recommend all compliance options. The reality is that any compliance option has the potential to subject a client to “The FBAR Fundraiser”. For those who enter  OVDI it’s called the “in lieu of other penalties” proxy.

But, what is to be done if the IRS decides to assess FBAR penalties? I.e. make good on the purpose of “The FBAR Fundraiser”. What should the lawyer recommend? Should the client fight or pay? Obviously it depends on the circumstances (although I do think that there is a matter of great principle here). The “pay or fight” issue has now emerged in the discussion thread.  Of course this is possible only with the assistance of a lawyer committed to the cause. Mr. FBAR is a particularly nasty piece of work. Mr. FBAR is also vulnerable to challenge on a number of constitutional grounds.

A challenge to Mr. FBAR is possible only when both the targets of “The FBAR Fundraiser” (anybody with money the IRS can take) and lawyers are willing to accept the challenge.

I leave you with the following thoughts of Todundsteur:

http://isaacbrocksociety.com/2012/05/26/why-is-the-quiet-disclosure-qd-so-controversial-between-practitioners/#comment-21060

todundsteuer

May 31, 2012 at 3:57 am

@Michael

Are you, Steven or any other practitioner of your acquaintance aware of any case now pending in any US court where the Justice Department is seeking to enforce a civil fine for a FBAR violation?

Are you aware of any such past case that has ever been tried to a verdict?

Were such a case to be filed would the DoJ be bound by a “quantum” previously proposed and challenged administratively or would the court be free to assess a civil fine in its own discretion.

Since both the constitutional validity of the law as well as the quantum of punishment will depend on the gravamen of the offense in relationship to the punishment sought would this not open the door to wide-ranging civil discovery requests directed against the plaintiff by the defendant concerning the past, present and future law enforcement and/or regulatory utility (or futility) of the FBAR itself?

Would such discovery possibilities not also be available to a defendant faced with a criminal FBAR charge?

If after nearly 8 years of the enhanced FBAR penalty regime and nearly 3 years of OVDI no such civil case has ever been filed, one is compelled to ask:

Why?

Why has no practitioner yet advised or encouraged their client to “call” the government by refusing to pay any FBAR fine or refuse to plea bargain (at least until after discovery is completed) thus daring Schulman & Co. to bring such a civil enforcement action?

Forget Steven Mopsick’s offer of pro bono assistance to anyone faced with a 300% FBAR penalty. I am ready to offer my assistance pro bono to anyone faced with a FBAR collection suit for ANY amount who is prepared to get it on with the DoJ.

It is time to bring this shameful FBAR farce to an end and either expose the naked venality and lawlessness of Shulman’s revenue enhancement through extortion policy for what it is or go down fighting.

Renounce?

I have not yet begun to fight.