What Went Wrong is our series on real, published cases. Each entry follows what the documents said, what the court did, and what it teaches. Every quotation comes from the court’s own opinion. These are other parties’ cases, not our clients, and they predict nothing about any reader’s situation.
People who call us about an old, unreported foreign account usually have two questions. How bad can this get, and if the IRS piles on, will a court pull the number back down? One Boca Raton case answers both. It is the case in which the Eleventh Circuit, the federal appeals court that covers Florida, quoted the Taxpayer Advocate’s description of the maximum FBAR penalty as “among the harshest civil penalties the government may impose.” Eight years of litigation, two appeals, and a constitutional ruling no other circuit had ever made moved the judgment from $12,555,813 to $12,255,813. Everything else the fight produced was worse.
The setup
The Eleventh Circuit’s first opinion opens by stating the rule, that U.S. citizens with over $10,000 in foreign bank accounts must report them to the IRS every year on the form everyone calls the FBAR, and then delivering the man. “For several years in the early 2000s, Isac Schwarzbaum did not. After the IRS discovered Schwarzbaum’s omissions, and determined that he had acted willfully, it imposed several million dollars in civil penalties, and the government sued to collect.”
Schwarzbaum’s money was his father’s first. The father built a fortune of roughly $60 to $70 million in the German textile business and then in real estate, moved to Switzerland in the early 1990s, and kept the wealth spread across Swiss bank accounts. The gifts to his son began in 2001, when he moved an existing Swiss account into Schwarzbaum’s name, and continued until his death in 2009. Schwarzbaum had become a U.S. citizen in 2000 and kept a home in Boca Raton, splitting each year among Florida, Switzerland, and Costa Rica. By the years at issue he held interests in eleven Swiss accounts and two in Costa Rica, and the district court found he kept the money abroad because he lived abroad, not to evade U.S. reporting.
The paperwork told a messier story. Several Swiss accounts were opened on his German passport rather than his American one, with the banks holding his mail, account pseudonyms, and an election not to invest in U.S. securities. His CPAs had told him foreign assets needed no reporting unless they had a U.S. connection. The Eleventh Circuit’s verdict on that theory ran four words. “This was bad advice.” His 2006 and 2007 FBARs each listed a single Costa Rican account, the 2007 one self-prepared after he read the form’s instructions. He filed no 2008 report until December 2011, and his 2009 form listed one Swiss and two Costa Rican accounts. In 2010 he entered the IRS’s Offshore Voluntary Disclosure Initiative, disclosed his holdings, then opted out and was referred for examination.
The IRS found the violations willful and ran its math from each account’s highest balance in each year. The raw statutory maximums came to about $35.4 million. Even the IRS thought that was too much, so it zeroed out three of the four years and spread 2008’s $13.7 million figure across all four, assessing $1,173,778 for 2006 and $4,185,271 for each of 2007, 2008, and 2009. He did not pay, and in August 2018 the government sued him in the Southern District of Florida.
The fight
The bench trial ran five days in October 2019. In March 2020 the district court held that the 2006 violation was non-willful but that 2007 through 2009 were willful, and the hinge was that 2007 form he prepared himself. Once he had read the FBAR instructions, reliance on years of bad professional advice stopped being reasonable, and in this corner of the law recklessness counts as willful. As the Eleventh Circuit later recounted, the district court found that Schwarzbaum “was aware, or should have been aware, of a high probability of tax liability with respect to his unreported accounts.”
The same ruling caught the IRS’s error. The statute measures a willful penalty by the account balance at the time of the violation, and the violation happens on the June 30 filing deadline, but the IRS had used each account’s highest balance for the whole year. As the appeals court would put it, “In calculating Schwarzbaum’s FBAR penalties, the IRS took a wrong fork in the road by starting with the wrong numbers.” The district court’s fix was to rebuild the penalties itself, entering judgment for $12,907,952, later trimmed to the originally assessed $12,555,813.
The first appeal, decided in January 2022, affirmed the willfulness finding and agreed the IRS had used the wrong balances. Then it took away the trial court’s remedy. “The district court lacked the power to recalculate Schwarzbaum’s FBAR penalties.” Calculation belongs to the agency, and by redoing the numbers itself “the district court invaded the agency’s turf.” The only lawful fix was to send the penalties back to the IRS.
The recomputation is the part clients never believe. Using the correct June 30 balances, the IRS came back with $13,521,328, about 7.7 percent higher than the number built on its own mistake. Schwarzbaum had won the calculation battle and raised his own penalty. Only the government’s decision to cap its request at the original $12,555,813 kept the judgment where it was, and the district court entered it again in November 2022.
The second appeal produced the holding the tax world now cites. After issuing one opinion in August 2024 and then vacating it on the government’s petition for rehearing, the panel ruled in January 2025 that “FBAR penalties are in substantial measure punitive in nature. Therefore, under controlling Supreme Court precedent, they are subject to review under the Eighth Amendment’s Excessive Fines Clause.” No other federal appeals court had ever held that, and the only one to face the question had held the opposite. The opinion is blunt about why. “No matter how you cut it, it’s apparent that this statute is designed to inflict punishment at least in part.” At one point the court observed that “Schwarzbaum was assessed an FBAR penalty for 2007 equal to 3,264% of his tax deficiency.”
Then came the application, and it is the part to read twice. The court measured each account and each year on its own, and nearly every penalty survived. That includes $100,000 assessments on UBS accounts already closed by the June 30 deadline after holding $8.6 million and $15.6 million during 2008, a $100,000 assessment on an account whose deadline balance was negative though it had held over $15 million the year before, and the five penalties of half an account’s balance, which ran from about $1.5 million to $4.3 million. The single casualty was a small account at Aargauische Kantonalbank that never held more than about $16,000, with June 30 balances of $11,872, $10,601, and $9,966 in the three willful years. The government had sought the statutory maximum of $100,000 on it each year anyway. “A fine that is over eight times the amount in the account on the day of the assessment, and over six times the greatest amount ever held in the account, constitutes an excessive penalty.” The court struck all three. To “sanitize the final judgment from any constitutional violation,” it ordered the judgment reduced by $300,000, leaving $12,255,813 plus late fees and interest, entered in April 2025.
That opinion settled the amount. It settled nothing else, because the collection fight had been running in parallel since 2021 and had turned ugly. In March 2023 the district court ordered Schwarzbaum to bring enough money back from Switzerland to pay the debt, which with interest and penalties had reached $17,929,717.88, and gave him a month to do it. He did not. The court held him in civil contempt in December 2023. He failed to appear at his sanctions hearing in August 2025, living abroad again, and in May 2026 the court ordered him incarcerated until he complies, directed that an arrest warrant issue, and referred his non-appearance to the U.S. Attorney for possible criminal contempt charges. Days before this post published, the court denied his newest motion, a jury-trial argument it held he had waived by never once demanding a jury in seven years of litigation. The case that began with an unfiled form is still generating orders in 2026, eight years after it was filed.
What it teaches
The willful math compounds per account and per year, and constitutional review trims edges rather than rescuing anyone. Thirteen accounts across four years produced a raw statutory exposure of about $35.4 million before the IRS itself pared it down. When the Eleventh Circuit became the first federal appeals court to put these penalties under the Excessive Fines Clause, the win was worth $300,000 to the man who secured it, and the judgment kept $12,255,813. The court called the aggregate “not grossly disproportionate to Schwarzbaum’s willful years-long concealment of tens of millions of dollars in many overseas bank accounts found in two separate countries.” The Constitution polices the outliers, the $100,000 penalty on the $11,872 account. It does not redo the math on the accounts that matter.
The cheapest constitutional argument is the one you never have to make. Buried in the setup is the detail that decides how to read this whole story. In 2010, Schwarzbaum was inside the IRS’s voluntary disclosure program with his holdings disclosed. He opted out, and the examination that followed became the case above. What staying in would have cost him is unknowable, and no honest lawyer will pretend otherwise. What opting out cost him is public record. Voluntary disclosure exists for exactly this moment, an account holder coming forward on structured terms while that door is open, and the door closes once the government finds you first.
The whole case was decided at willful versus non-willful, years before anyone sued. The district court found the 2006 violation non-willful and the next three years willful, and the difference was one act. He read the FBAR instructions while preparing his own 2007 form, and from then on the old advice could no longer carry him. Watch what the classification did to the money. The non-willful year’s $1,173,778 assessment fell out of the judgment, while the three willful years cost $12,555,813. The line between willful and non-willful is drawn from facts that already exist by the time anyone calls a lawyer, which is why an honest assessment of a foreign-account problem always starts there.
Cases like this begin as questions someone decided not to ask. Most people with a foreign account are nowhere near this story, and a short conversation is usually enough to establish that. We screen exactly this fact pattern, which accounts, which years, what was filed, and how the record would read to an examiner, and then map the realistic paths back into compliance. If old FBARs have been sitting in the back of your mind, start with our guide to FBAR penalties, then bring the details to a free 30-minute consult. Schwarzbaum’s case has run eight years and is not over. A first look at yours takes thirty minutes.
The case. United States v. Schwarzbaum, 24 F.4th 1355 (11th Cir. 2022) and 127 F.4th 259 (11th Cir. 2025). Quotations are from the Eleventh Circuit’s published opinions; the collection orders described above are from the public docket of the Southern District of Florida, where the case remains active as of August 2026. The parties were not clients of this firm, and every case turns on its own facts.
Related Guides
- FBAR penalties guide
- Willful vs non-willful FBAR violations
- IRS voluntary disclosure
- The FBAR statute of limitations
Reviewed by Kevin D. Klagge, Esq., Fla. Bar No. 99502. Attorney Kevin Klagge represents families, businesses, and international clients in estate and tax planning, business structuring, and international law, with a focus on Florida legal tools. He litigates estate and business issues in court. This article is general information about Florida law, not legal advice, and does not create an attorney-client relationship.