In 2018, the Secretary of the Treasury timely assessed over $2.7 million in civil penalties against M. David Fesko (“Fesko”) for failure to file Reports of Foreign Bank and Financial Accounts (“FBARs”) from 2008-2012. In 2020, the United States filed suit against Fesko seeking judgment in excess of $3 million. In 2024, judgment was entered against Fesko’s estate for over $3.8 million.

The facts of the case were not helpful to the taxpayer. Fesko was a sophisticated businessman with numerous domestic and foreign entities. He set up many foreign accounts in different jurisdictions in the names of foreign companies he controlled without filing FBARs. He then tried to rectify this first by making a “quiet disclosure” by amending his income tax returns to reflect unreported income from some of the foreign accounts and then by repatriating the offshore funds into domestic trust accounts.

The holding in the Fesko case serves as a reminder that U.S. persons with financial interests or signature authority over foreign financial accounts must file an FBAR if the aggregate value of such accounts exceeds $10,000 at any time during the calendar year, and that someone who willfully fails to file an FBAR may be subject to civil penalties equal to the greater of $100,000 or 50% of the balance of the account at the time of the violation (and to potential criminal penalties).

A link to the case (US v. Fesko) can be found here: United States v. Fesko, 2:20-cv-00367-APG-EJY | Casetext Search + Citator

Thank you David Goldstein for this week’s Tax Tracker!