In Bittner v. United States, the Court faced a statutory interpretation question pertaining to the methodology of charging parties under the Bank Secrecy Act (BSA). While this is a civil case, it carries potentially ground-breaking effects on criminal law.
The defendant/appellant, Alexandru Bittner, was born in Romania and obtained citizenship in the United States after emigrating in 1982. In 1990, Bittner returned to Romania and launched a successful business career in the now post-Soviet country. When Bittner returned to the United States in 2011, he learned of the legal requirements for preparing and submitting his financial reports—reports which, at that point in time, were five years overdue. After submitting the late financial reports, the United States discovered that Bittner owned 272 bank accounts that had not undergone the necessary disclosures under the BSA. Although Bittner subsequently hired a new accountant and remedied the disclosure issues, the U.S. government fined him 2.72 million dollars, or $10,000 per account that he had not disclosed.
Bittner challenged the fine, arguing that only one violation of the BSA occurred, since the negligent lack of disclosure happened on a single form, as required by 31 C.F.R. § 1010.350(g). Bittner argued that if he had falsely disclosed his financial statements on separate occasions, then the government’s cumulative fine would be proper, but as it stands, there was a single act of omission and thus liability for only a single $10,000 fine. In short, Bittner argued that penalties should accrue on a per-report basis. The Eastern District of Texas ruled for Bittner but the Fifth Circuit disagreed.
The Supreme Court then granted certiorari to answer the following questions: “Does someone who fails to file a timely or accurate annual report commit a single violation subject to a single $10,000 penalty? Or does that person commit separate violations and incur separate $10,000 penalties for each account not properly recorded within a single report?” Justice Gorsuch wrote for the Court majority in parts I, II-A, II-B, and III, joined by Chief Justice Roberts and Justices Alito, Kavanaugh and Jackson. Justice Jackson also signed on to part II-C of Justice Gorsuch’s opinion.
Justice Gorsuch performed an analysis on the language in 31 U.S.C. §§ 5314 and 5321 to determine that penalties only accrue per report, and not per account. To support this conclusion, Justice Gorsuch further notes that the government’s per-account argument is inconsistent with the guidance issued by the Department of the Treasury to the public, which also suggests a per-report approach.
In the portion of the decision joined by Justice Jackson, Justice Gorsuch applies the standard articulated in Commissioner v. Acker to this case: statutes which impose penalties against a party from the government should be construed to favor the party. When applying this standard, Justice Gorsuch argues that it is clear the per-report approach is required rather than preferred.
For one, the choice of approach will have an impact on criminal violations of the BSA. While Bittner’s case pertains to the civil non-willful violations of the BSA under § 5321(a)(5)(A) and (B)(i), the construction of § 5321 is identical to the criminal provisions within 31 U.S.C. § 5322, which cover willful violations of the BSA.
Justice Gorsuch speculates that, if the government’s per-account theory prevailed for § 5321, then it must also apply for § 5322. Applying a per-account theory to § 5322, if Bittner were tried criminally for his violations of the BSA, then under the same statute he would be subject to a $68 million fine, and 1,360 years in prison, instead of $1.25 million and 25 years. Therefore, according to Justice Gorsuch, this speculative criminal punishment indicates that the cumulative structure advocated for by the government in both civil and criminal instances breaches the rule of lenity.
Justice Barrett dissented, joined by Justices Thomas, Kagan and Sotomayor. Justice Barrett’s objection to Justice Gorsuch’s reasoning is a more permissive reading of the statute. In her construction, the violation would be a failure to disclose the amounts in each foreign account, as that is the objective of the statute in question. Considering this context, there is nothing prohibiting the charging of a defendant severally in these instances. She argues that the Court’s position is derived from a willful misreading of the statute and permits several violations of law in pursuit of lenity.
While this is a civil case, Justice Gorsuch’s link to the neighboring § 5322, the near-identical criminal half of the BSA, is instructive in how the federal government must charge non-disclosure of financial information. Considering that an omission of several counts only satisfies a single charge, enforcement of the statute against those who may be hiding financial information within foreign countries may get increasingly difficult as the penalties may not be commensurate with the criminal misdeed. Justice Gorsuch’s opinion does indicate that the government can fix this loophole by clarifying regulations, and one can only assume that the Executive Branch will re-evaluate its regulations and procedures for the prosecution of falsified financial disclosures following the Court’s outcome in this case.