The case of Mr. Hom is going to Appeal

As previously mentioned , Joseph DiRuzzo of Fuerst Ittleman, has agreed to represent Mr. Hom in his appeal from the determination that his online poker accounts were bank accounts that had to be disclosed on his FBARs, which we covered here with a link to Jack Townsend’s far superior write up found here.  The matter has potentially far reaching implications, and I am happy to see a quality lawyer assisting Mr. Hom on this matter.  Mr. DiRuzzo shared his initial brief with me, and indicated I could share the same on PT.  Instead of reproducing it in its entirety, I recreate the summary of arguments below.  If you are interested in reviewing the brief, please let me know, and I will be happy to share.  Any mistakes in the below content are almost certainly mine:

I. THE ACCOUNTS AT ISSUE ARE NOT “BANK, SECURITIES, OR OTHER
FINANCIAL ACCOUNTS” UNDER THE BANK SECRECY ACT. THEREFORE,
THE DISTRICT COURT ERRED IN GRANTING THE GOVERNMENT’S
MOTION FOR SUMMARY JUDGMENT…………………………………………………………. 13
A. The Report of Foreign Bank and Financial Accounts & Penalty
Regimes Under the Bank Secrecy Act and its Implementing
Regulations. ………………………………………………………………………………………… 13
B. PokerStars, PartyPoker, and FirePay are not engaged in the business
of banking nor do they function as banks. Thus, the accounts
maintained with each are not “bank accounts” under the BSA. ………………. 16
1. Construing undefined terms in accordance with their ordinary and
natural meanings, the accounts at issue were not “bank accounts”
because PokerStars, PartyPoker, and FirePay do not “engage in the
business of banking.” …………………………………………………………………………. 17
2. When the BSA is read in pari materia with other banking and tax
statutes, it is evident the companies do not engage in the business
of banking. Thus, Hom’s accounts were not bank accounts and did
not trigger a filing obligation. ………………………………………………………….. 21
3. The lower court’s reliance on Clines is misplaced. ………………………………. 25
C. The accounts at issue would not properly be classified as “other
financial accounts” because PokerStars, PartyPoker, and FirePay do
not act as financial agencies. ………………………………………………………………. 28
D. The accounts are not “bank accounts” or “other financial accounts”
under the BSA. ………………………………………………………………………………………. 31
II. THE GEOGRAPHIC LOCATION OF THE ACCOUNT, NOT THE NATIONALITY
OF THE FINANCIAL ENTITY INSTITUTION IN WHICH THE ACCOUNT IS
FOUND DETERMINES WHETHER AN ACCOUNT IS “FOREIGN” FOR FBAR
PURPOSES. THUS, THE DISTRICT COURT’S CONCLUSION TO THE
CONTRARY IS AN ERROR OF LAW AND NECESSITATES REVERSAL. ……………… 32
A. The preamble is irrelevant. …………………………………………………………………. 33
B. The preamble is consistent with the position of the IRS and FinCEN
and advanced by Hom in the lower court that it is the geographic
location of the account funds not the location of the host institution
which is determinative of whether an account is “foreign” under the
BSA. ………………………………………………………………………………………………………. 34
C. The preamble is not entitled to Chervon deference. ………………………………….. 37
1. The regulation is unambiguous. Therefore the District Court erred
in considering the preamble. …………………………………………………………. 38
2. Assuming arguendo that the regulation is ambiguous, the preamble
would not be entitled to Chevron deference. Thus, the District
Court erred. ………………………………………………………………………………………… 40
3. Under the appropriate level of deference, the Court erred in relying
on the preamble as it is an unreasonable interpretation of the
regulation. …………………………………………………………………………………….. 42
4. To the extent the Government relies on the preamble as its basis
for enforcement of the FBAR reporting requirements against
Hom, the preamble violates the APA as an improperly
promulgated legislative rule. ……………………………………………………………….. 43
III. AS A “FOREIGN” ACCOUNT IS DETERMINED BY THE GEOGRAPHIC
LOCATION OF THE ACCOUNT HOLDING THE TAXPAYERS MONEY, THE
DISTRICT COURT ERRED IN GRANTING SUMMARY JUDGMENT BECAUSE A
MATERIAL ISSUE OF FACT REMAINS AS TO WHETHER HOM’S FUNDS WERE
LOCATED IN A FOREIGN ACCOUNT. ……………………………………………………… 45