The court will not consider Arthur Bedrosian's argument that the U.S. should have used a subjective standard to determine whether he acted recklessly in failing to report an account he held at UBS in Switzerland on his 2007 tax forms. Bedrosian had almost $1.9 million in the account, which he had operated since the 1970s, according to court documents.
Bedrosian, former chief executive officer of pharmaceutical company Lannett, had appealed a 2022 Third Circuit ruling affirming a $1 million penalty that had grown to $1.4 million including interest and late fees. He argued that the appellate court erred by using an objective standard and not a subjective standard to determine whether he willfully avoided reporting his account. An objective standard saying that he should have known he needed to report his account is too broad, he argued, and can be interpreted to include almost every instance of nonreporting.
A district court initially struck down the penalty when it first considered the case, finding that while Bedrosian had negligently failed to report his Swiss bank account, he had not acted willfully.
The Third Circuit remanded the case in 2018, determining that it was unclear whether the court had used the correct legal standard to determine Bedrosian's willfulness. In reviewing the case a second time, the district court decided that Bedrosian's conduct was egregious enough to rise to the level of a deliberate act.
Bedrosian appealed again, and a Third Circuit panel agreed with his earlier argument that the government failed to set a foundation for evidence that it used to determine his account balance and penalty. However, an admission by Bedrosian's attorney during opening statements that his client had about $2 million in his account, the panel said, was sufficient to set the penalty amount, which is equal to 50% of the account balance. In September, the panel declined to rehear the case.
Ian Comisky of Fox Rothschild LLP, who represents Bedrosian, said he was disappointed in the Supreme Court's decision not to review the case. The Supreme Court held in June that the standard for scienter, or knowledge of wrongdoing, in False Claims Act cases is subjective, not objective, Comisky noted. He said he had hoped the court would extend that reasoning in a different context to Bedrosian and "clarify an important area of the law with respect to the imposition of penalties."
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