Shaiman v Carpet One of The Hamptons, Inc.

[*1] Shaiman v Carpet One of The Hamptons, Inc. 2010 NY Slip Op 51014(U) [27 Misc 3d 1232(A)] Decided on June 9, 2010 Suffolk Dist Ct, Sixth District Ukeiley, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected in part through June 16, 2010; it will not be published in the printed Official Reports.

Decided on June 9, 2010
Suffolk Dist Ct, Sixth District

Milton Shaiman, C.P.A., Plaintiff,

against

Carpet One of The Hamptons, Inc., Defendant.



BRC 208-08



APPEARANCES:

Elan Markewitz, Esq.

Attorneys for Plaintiff

127 Southfields Road

Riverhead, New York 11901

Law Offices of Michael A. Gajdos, P.C.

Attorneys for Defendant

31 West Main Street, Suite 203

Patchogue, New York 11772

By:Michael A. Gajdos, Esq.

Stephen L. Ukeiley, J.

This civil action was commenced by plaintiff Milton Shaiman, C.P.A. ("Accounting Firm" or "Plaintiff") on or about May 6, 2008 seeking $15,000 for accounting services provided to defendant Carpet One of the Hamptons, Inc. ("Carpet One" or "Defendant") in connection with two (2) audits conducted by the New York State Department of Taxation and Finance ("the State"). Plaintiff's lone cause of action for the reasonable value of its services is based upon the theory of quantum meruit due to the absence of a signed contract or retainer agreement regarding the audits. Defendant denied the substantive allegations of the Complaint and asserted counterclaims for negligence (i.e., accountant malpractice), breach of fiduciary duty and related damages.

Both sides appeared by counsel at the non-jury trial on December 11, 2009, January 15, 2010 and March 15, 2010. Plaintiff's senior accountant Mr. Norman Shaiman ("Mr. Shaiman") testified on behalf of Plaintiff. Mr. James Mowdy, C.P.A. ("Mr. Mowdy") testified on behalf of Defendant. [*2]New York State Department of Taxation and Finance tax auditors Ms. Genevieve Snyder ("Ms. Snyder") and Ms. Lori Collareta ("Ms. Collareta") were called as rebuttal witnesses by Plaintiff. Following the trial, the parties submitted post-trial memoranda of law. Below are the Court's findings of facts and conclusions of law.

FINDINGS OF FACTS

Defendant had been a client of Plaintiff for more than a decade when in March 2007, during a follow-up audit by the State, Defendant terminated the professional relationship. According to Mr. Shaiman, Plaintiff had been on a monthly retainer, and the parties' usual course was to negotiate separate fee arrangements for preparation of Defendant's end-of-year corporate tax returns.

It was undisputed that Plaintiff was the preparer of the tax returns at issue in this case and further that it had been paid for those services. Plaintiff's claim here is narrowly tailored to the award of monies for the non-payment of services rendered in connection with the resulting audits while Defendant's counterclaims focus on the sales tax returns themselves. The testimony demonstrated that Plaintiff utilized the sales figures and financial information provided by Defendant's bookkeeper to prepare the returns without independently verifying the numbers and figures. In fact, Mr. Shaiman testified that other than checking the actual math, he simply inputted the bookkeeper's figures into the tax returns without requesting and/or reviewing the corresponding source or back-up documentation.

The following corporate tax returns were introduced into evidence at the trial: quarterly Sales and Use Tax Returns, December 2002 - February 2004 (Plaintiff's Exhibit 1); quarterly Sales and Use Tax Returns, March 2004 - November 2004 (Plaintiff's Exhibit 3); quarterly Sales and Use Tax Returns, March 2005 - February 2006 (Plaintiff's Exhibit 6); monthly Sales and Use Tax Returns, July, September, and October 2005 (Plaintiff's Exhibit 7); quarterly Sales and Use Tax Returns, March 2006 - May 2006 (Plaintiff's Exhibit 8); and monthly Sales and Use Tax Returns, July, September, and October 2006 (Plaintiff's Exhibit 9).

A.Improper Issuance of Capital Improvement Certificates

According to the accountants and State auditors, where a project is classified as a "capital improvement", such as new construction or the laying of carpet for the first time which was part of Defendant's ordinary course of business, Defendant is responsible for paying tax on the materials purchased, commonly referred to as the use tax, and the customer has no tax obligation. Mr. Shaiman testified that although he had concerns regarding an unusually large percentage of non-taxable sales Defendant had declared for capital improvement projects, he neither posed his concerns in writing nor did he request that Defendant provide a copy of the Capital Improvement Certificates purporting to exempt the customers' tax obligations. Instead, as was his usual practice, Mr. Shaiman merely asked Defendant's representative about the sales and if he received what he considered to be a satisfactory explanation, he would accept the accuracy of the figures. This process regarding questionable transactions apparently was repeated throughout the relationship. The Court [*3]notes that no details were elicited regarding a transaction in which Mr. Shaiman deemed the response unsatisfactory.

The resulting audits confirmed Mr. Shaiman's concerns as it was discovered that Defendant routinely issued Capital Improvement Certificates in error. Mr. Shaiman estimated that Defendant issued in excess of $380,000 in improper Capital Improvement Certificates between the years 2000 - 2002. He further acknowledged that State auditors described Defendant's haphazard issuance of the Certificates as if it was giving away "candy".

B.Defendant Replaced Sales Tax with a "Padding" Fee Equal to 8.5% of the Sale

Another peculiarity uncovered on at least a handful of sales Defendant claimed to be non-taxable, and, as a result, the customer was not charged sales tax, was the inclusion of an additional charge for "padding" equal to the sales tax rate of 8.5% (Plaintiff's Exhibit 2). Mr. Shaiman again denied having any knowledge of this practice until after the audit but he opined that Defendant was "stealing" the tax on these transactions. Mr. Shaiman once again testified that he discussed the matter with Defendant's principal and was satisfied that the practice would cease. Based upon those assurances, Plaintiff continued to represent Defendant until being terminated in 2007.

C.The Audits

Mr. Shaiman testified that he spent approximately seventy-one (71) hours working on the first audit and an additional eighty-one (81) hours on the follow-up audit all at the request of Defendant. Introduced into evidence were Plaintiff's invoices for professional services rendered in connection with both audits, dated July 6, 2004 and March 22, 2007 (Plaintiff's Exhibits 5 and 11, respectively). The Court notes that although both invoices indicate an amount owed of $7,750, Mr. Shaiman testified that the bill for the follow-up audit was $8,910 but that amount was reduced to $7,750 reflecting a credit for Defendant's installation of carpet within Plaintiff's building. At trial, Plaintiff's counsel indicated that his client further reduced the amount of each invoice to $7,500 so that the matter would fall within the Court's subject matter jurisdiction.

1.The Initial Audit (March 1, 2000 - November 30, 2002)

The Initial Audit covered the period March 1, 2000 - November 30, 2002 ("Initial Audit"). Ms. Snyder, a forensic auditor within the State's Special Investigations Unit, testified that Defendant was "probably" selected for audit because the 2000 State sales tax and Federal income tax returns, both of which were prepared by Plaintiff, revealed a $1.3 million discrepancy in sales. She described the discrepancy as "significant" and warranting review of the back-up documentation which had not been adequately provided. Ms. Snyder further testified that every transaction is presumed taxable until the taxpayer sufficiently documents a reason for exemption.

The audit itself revealed, inter alia, that Defendant under reported its sales by nearly $4 [*4]million. Ms. Snyder further elaborated that a portion of the audit included determining the amount of taxes owed on the under reported sales.

At the conclusion of the Initial Audit, the State issued a Statement of Proposed Audit Change for Sales and Use Tax, dated June 16, 2004 (Defendant's Exhibit S). The statement, which was the subject of negotiation, resulted in a finding that Defendant owed $295,896.24 in taxes, plus an additional $62,322 in interest for the period March 1, 2000 - November 30, 2002 (Id.).

The State further sought to impose penalties but Plaintiff's request on behalf of Defendant for an abatement was granted. Plaintiff had argued that the under reporting was due to Defendant's lack of familiarity with the capital improvement tax laws and further Defendant's failure to recognize that it had to pay use tax on materials purchased outside of New York (Plaintiff's Exhibit 4). Agreeing the errors were unintentional, the State waived all penalties.

2.The Compliance Audit (December 1, 2002 - February 28, 2006)

Ms. Collareta testified that the State's follow-up or Compliance Audit ("Compliance Audit") was routine to verify Defendant's compliance with the State's findings from the Initial Audit. The Compliance Audit period was from December 1, 2002 - February 28, 2006.

The Compliance Audit produced mixed results. Although Defendant had corrected some of the previous reporting problems, new tax problems were discovered. For instance, on several transactions, Defendant overpaid sales taxes by making duplicate payments to various vendors following its switch from the accrual basis of reporting (report sales as they are made) to a cash basis (report sales when Defendant is paid). While this was an internal matter between the parties, more egregious errors were also discovered, including the continued under reporting of taxable sales and the taking of unauthorized credits.

The initial Statement of Proposed Audit Change for Sales and Use Tax, dated February 23, 2007, indicated that Defendant owed the State an additional $683,777.93 computed as follows; $372,278.58 in unpaid taxes, $167,199.29 in interest, and $144,300.06 in penalties (Defendant's Exhibit J). The undisputed testimony demonstrated that Plaintiff recommended that Defendant accept these findings, but Defendant disagreed.

Instead, Defendant decided to terminate Plaintiff and hired Mr. Mowdy's accounting firm, which along with other professionals retained by Defendant, disputed the findings and provided new information which resulted in the State re-doing the entire audit over the next seven (7) months. Following its re-evaluation, the State agreed to reduce the unpaid tax portion by more than $150,000 (Defendant's Exhibit O), but Defendant again disputed this amount. Eventually, the parties agreed that Defendant had taken $100,830.58 of unauthorized tax credits on pre-paid taxes, and further underpaid its taxes by an additional $105,757.86. The final Statement of Proposed Audit Change for Sales and Use Tax, dated October 23, 2007, demonstrates that Defendant agreed that it owed $206,588.44 in taxes for the period December 1, 2002 - February 28, 2006, plus interest in the [*5]amount of $71,708.64 (Plaintiff's Exhibit 16). The State once again waived the penalties (in excess of $80,000) demonstrating its belief that the under reporting was again unintentional (Id.).

Following the commencement of this lawsuit, Defendant paid all amounts owed the State and a Satisfaction of Judgment was issued on or about January 6, 2009 (Defendant's Exhibit R).

CONCLUSIONS OF LAW

This case presents allegations of malfeasance on the part of both parties in connection with two (2) separate but related series of events (i.e., the preparation of the tax returns and the resulting audits). Accordingly, the Court will evaluate the claims independently and in isolated fashion; beginning with Plaintiff's claim for professional services involving the audits followed by Defendant's counterclaims regarding the preparation of the tax returns.

A.Plaintiff is Entitled to Compensation for the Services Provided During the Audits

To succeed on its cause of action for quantum meruit, Plaintiff must demonstrate (1) the performance of services in good faith; (2) the acceptance of the services by Defendant; (3) an expectation of compensation therefor; and (4) the reasonable value of the services (See Tesser v. Allboro Equipment Co., 2010 NY Slip Op. 4363, 2010 NY App. Div. LEXIS 4273 (2d Dep't May 18, 2010)).

Based upon careful consideration and review of the credible testimony and documentary evidence introduced at trial, Plaintiff demonstrated by a fair preponderance of the evidence that it is entitled to recover for the reasonable value of the services rendered in connection with the audits. The evidence regarding the tasks performed and the number of hours spent by Mr. Shaiman working on the audits was undisputed, and there was no indication that Defendant expected to receive these services gratis. Significantly, Defendant did not elicit the testimony of its principal or the bookkeeper to refute Mr. Shaiman's claims regarding the services provided, which were corroborated, in part, by the testimony of Ms. Snyder and Ms. Collareta, Defendant's request that Plaintiff provide the services and that compensation was expected.

With respect to the reasonable value of the services provided, the testimony and documentary evidence demonstrated that Plaintiff performed the job and negotiated an abatement of all penalties for the underpayment and under reporting of taxes in connection with the Initial Audit. Although Plaintiff apparently recommended that Defendant pay a higher amount of taxes than it ultimately negotiated with the State in connection with the Compliance Audit, there was no credible testimony refuting the quality of the services rendered regarding either audit. Defendant's contention and arguments appear to be in opposition to the services rendered in the preparation of the tax returns rather than those provided in connection with the audits.

The Court further finds the amounts charged to be fair and reasonable, and the fact that Plaintiff reduced the amount of the Invoices to enable it to pursue its claims within this Court is of [*6]no particular moment (Plaintiff's Exhibits 5 and 11).

Accordingly, Plaintiff satisfied its burden of proof on its claim for quantum meruit, and, as a result, it is entitled to a judgment in the amount of $15,000 for services rendered in connection with the audits. This award is subject to any reasonable offsets Defendant may be entitled on its counterclaims for the negligent preparation of the tax returns as discussed below.

B.Defendant's Counterclaims

Although the Court makes no findings or determinations regarding the claims of bad faith asserted by both parties, it is troubling that the parties appeared perfectly content with their relationship until Defendant was caught failing to pay in excess of $630,000 in taxes and interest to the State. Notwithstanding the difference of opinion in assessing blame, the issue presented on the counterclaims is whether Plaintiff acted in accordance with generally accepted accounting principles in preparing Defendant's tax returns.

1.Accountant Malpractice (First and Second Counterclaims)

The first and second counterclaims are for damages resulting from the alleged accountant malpractice in connection with the preparation of Defendant's tax returns. To succeed on its claims, Defendant must demonstrate that Plaintiff departed from the accepted standards of practice and was the proximate cause of the damages claimed (See Kristina Defense Enterprises, Inc. v. Arnold, 41 AD3d 788, 838 NYS2d 667 (2d Dep't 2007)).

a.The In Pari Delicto Defense

Although not plead in a responsive pleading, Plaintiff asserts what amounts to be the in pari delicto defense. The in pari delicto doctrine is an equitable defense based upon agency principles that preclude the recovery of damages by a party that is at fault (See generally Symbol Technologies, Inc. v. Deloitte & Touche, LLP, 2009 NY Slip Op. 7826, 888 NYS2d 538 (2d Dep't 2009)). Here, Plaintiff contends that Defendant either had knowledge of or at least reasonably should have known, unbeknownst to Plaintiff, that it was under reporting its taxable sales, and, as such, Plaintiff was entitled to rely upon the figures Defendant provided in the preparation of Defendant's tax returns.

Although Plaintiff is correct that a party at fault may be barred from recovering damages, based upon careful consideration of the credible testimony and the documentary evidence presented at trial, the Court finds that the defense does not bar recovery here. The credible evidence demonstrated that Plaintiff was, at minimum, negligent by failing to discover the $1.3 million discrepancy in reported sales on the 2000 State sales tax and Federal income tax returns, which, according to Ms. Snyder, was the "probable" reason why Defendant was audited in the first regard. Indeed, had Plaintiff simply reviewed the returns it prepared, it would have noticed the discrepancy and made the appropriate corrections and inquiries. Or if dissatisfied with Defendant's explanation, [*7]it could have simply chosen to disassociate altogether. Plaintiff did neither.

Significantly, had Plaintiff checked its own work product, the reporting errors would have been discovered notwithstanding any action or omission by Defendant, including the nearly $4 million under reporting of its sales. Since Plaintiff was at fault independent from any wrongdoing on the part of Defendant, it is liable for actual damages it caused Defendant to sustain.

b.Plaintiff May Not Ignore an Apparent Inaccuracy or Inconsistency

Plaintiff's argument that it could simply rely upon Defendant bookkeeper's sales figures is equally unavailing and without merit. While it is well-established that an accountant may reasonably rely upon the sales figures and financial data provided by its client in the preparation of the client's tax returns, an accountant may not turn a blind eye to an obvious discrepancy and must further investigate questionable transactions and/or findings (See Florenta Caprer v. Nussbaum, 36 AD3d 176, 195-96, 825 NYS2d 55, 72 (2d Dep't 2006) (quoting State Street Trust Co. v. Ernst, 278 NY 104, 112, 15 NE2d 416 (1938))). This principle coupled with the applicable accounting standards at the time of the audits demonstrates that Plaintiff bears a portion of responsibility.

The applicable standard at the relevant times alleged herein was codified at 31 C.F.R. § 1034, which stated, in pertinent part:

Relying On Information Furnished By Clients. A practitioner advising a client to take a position on a return, or preparing or signing a return as a preparer, generally may rely in good faith without verification upon information furnished by the client. However, the practitioner may not ignore the implications furnished to, or actually known by, the practitioner, and must make reasonable inquiries if the information as furnished appears to be incorrect, inconsistent, or incomplete.

31 C.F.R. § 1034(a)(3) (emphasis added).

Mr. Shaiman's testimony regarding his confidence and general inquiries regarding the accuracy of the figures provided by Defendant was wholly inadequate and belied by the fact that the returns he prepared for the same period included a $1.3 million discrepancy in sales which he should have noticed but failed to do so. At minimum, this discrepancy, which the State auditor described as "significant" and probably triggered the audit, was detectable simply by inspecting the returns, similar to what the State auditors had done, without the need for supporting documentation. Apparently, this was not done here, and the Court further notes that there was no testimony regarding an inquiry by Plaintiff pertaining to the $1.3 million discrepancy.

Accordingly, Plaintiff deviated from the then generally accepted accounting principles when it either ignored or failed to detect the $1.3 million discrepancy on the 2000 State and Federal tax returns and further failed to make the reasonable necessary inquiries to verify the accuracy of the information which, at minimum, on the tax returns themselves, appeared "to be incorrect, inconsistent, or incomplete" (See 10 C.F.R. § 1034 (note, this standard had since been modified [*8]effective September 2007);[FN1] see also United States v. Akaoula, 1999 U.S. App. LEXIS 2079, 99-1 U.S. Tax Cas. (CCH) P50,262 (10th Cir. 1999) (affirming and reversing in part trial court's conviction of tax preparer for aiding and assisting in the preparation of false tax returns, making false statements to the Internal Revenue Service and forging United States Treasury checks)).

Thereafter, even after the Initial Audit, Plaintiff inexplicably continued to prepare Defendant's tax returns without independently verifying the accuracy of the data notwithstanding Mr. Shaiman's concerns that there had been a "criminal element" to Defendant's conduct. Moreover, his explanation that Defendant continued to provide reasonable explanations to any questions he may have posed is simply not credible given the circumstances of this case.

The omissions and ignoring of the obvious resulted in a second finding of significant under reporting of sales and the unauthorized taking of more than $100,000 in disallowed credits which Defendant eventually agreed to settle by paying the State an additional $206,588.44 in taxes, plus interest in the amount of $71,708 (Plaintiff's Exhibit 16). Further confounding the situation was that in some instances, Defendant was actually paying taxes twice.

In any event, Plaintiff had knowledge or, at minimum, reason to believe the figures presented were inaccurate and incomplete, and its failure to demonstrate that it made reasonable inquiry and/or

request the corresponding back-up documentation from Defendant regarding the tax returns was in contradiction with the then generally accepted accounting principles (see 31 C.F.R. § 1034(a)(3)).

Based upon the foregoing, the Court finds that Plaintiff departed from the accepted standards of accounting practice.

c.Statute of Limitations Defense was Waived

At trial, Plaintiff for the first time asserted that the counterclaims are barred by the applicable statute of limitations. Accountant malpractice claims are governed by a three (3) year statute of limitations period commencing from the "receipt of the accountant's work product" (CPLR 214(6); see Ackerman v. Price Waterhouse, 84 NY2d 535, 541, 620 NYS2d 318, 320-21 (1994)). The "receipt" of the work product triggers the running of the statute of limitations even where "[t]he aggrieved party is then ignorant of the wrong or injury" (Price Waterhouse, supra , 84 NY2d at 541, [*9]620 NYS2d at 320-21).

CPLR §§ 3211(a)(5) and 3211(e) provide that a defense based upon the statute of limitations is waived unless it is raised in a responsive pleading or a pre-answer motion to dismiss. Since the defense was not raised here by Plaintiff until at the close of trial, the defense was waived and may not be considered (Fade v. Pugliani, 8 AD3d 612, 614, 779 NYS2d 568, 570 (2d Dep't 2004)). In light of the waiver, the Court need not address the issue whether the statute of limitations period was extended by the continuous representation doctrine.

2.Expenses For Mr. Mowdy (Third Counterclaim)

Defendant did not introduce any testimony or paid bills regarding the work performed and/or expenses incurred by the replacement accountant Mr. Mowdy, and, as such, there is no basis from which the Court may award Defendant damages on the third counterclaim, which is hereby dismissed.

3.Defendant is Entitled to an Offset Against the Cost of the Audits

In assessing damages on the first and second counterclaims, the Court notes that during closing arguments, Defendant's counsel withdrew Defendant's claim for reimbursement of the taxes it paid as a result of the audits since it was undisputed that Defendant owed those monies to the State notwithstanding any act or omission by Plaintiff, and, as a result, Defendant is not seeking an award for the taxes paid.

Regarding the interest paid on those taxes, which Defendant does seek to recover, it has been held in accountant malpractice cases that the Court must decide "if the tax liability would have been avoided but for the erroneous advice" of the accountant (See Apple Bank for Savings v. Price Waterhouse Coopers, LLP, 2009 NY Slip Op. 50948U, 23 Misc 3d 1126A (NY Cty. Sup. Ct. April 14, 2009)). Where the tax liability was inevitable, the interest paid on the late payment, as well as the back taxes, are not recoverable (Id. (citing Alpert v. Shea Gould Climenko & Case, 160 AD2d 67, 72, 559 NYS2d 312 (1st Dep't 1990) (recovery of back taxes and interest disallowed because plaintiff would have inevitably incurred the tax liability)); Freschi v. Grand Coal Venture, 767 F.2d 1041 (2d Cir. 1985) (claim for interest denied where the interest would constitute a windfall), reversed on other grounds, 478 U.S. 1015, 106 S. Ct. 3325 (1986); Gaslow v. KPMG, LLP, 19 AD3d 264, 797 NYS2d 472 (1st Dep't 2005) (claim for back taxes dismissed since reimbursement would have put plaintiff in a better position than entitled); cf. Jamie Towers Housing Co., Inc. v. Lucas, 296 AD2d 359, 745 NYS2d 532 (1st Dep't 2002) (permitting claim for interest on delinquent taxes where managing agent failed to pay the taxes in a timely manner)).

In the instant matter, Defendant is not entitled to an award for the simple interest paid the State because Defendant owed the liability notwithstanding Plaintiff's conduct. To award such interest would be rewarding Defendant, which clearly bears at least some of the responsibility for its gross under payment of taxes, for the use of the monies the State would have had if Defendant [*10]had paid its taxes properly. This would constitute a windfall, and, as such, it is not a proper award.

Accordingly, the lone damages demonstrated at trial are the monies Plaintiff was awarded herein for the work performed in connection with the audits. The Court is of the view that since it appears the audits were triggered by the $1.3 million discrepancy on the State sales tax and Federal income tax returns prepared by Plaintiff, which Plaintiff should have detected and, at minimum, brought to Defendant's attention to attempt to resolve prior to the audits, Defendant is entitled to an offset against Plaintiff's award. Plaintiff should not be compensated for work that it in essence created due to its negligence or could have been altogether avoided had Plaintiff discovered and communicated the discrepancy to Defendant.

The decision to award an offset in no way condones Defendant's conduct described herein, however, Defendant presumably relied upon its accountant's advice, and in this case, there was no evidence that Plaintiff even raised the issues at hand with Defendant.

Notwithstanding the Court's finding that the parties both prevailed herein, applying the right of offset, the claims negate one another, thereby warranting dismissal of all claims (See Westinghouse Credit Corp. v. D'Urso, 278 F.3d 138, 149 (2d Cir. 2002) (holding that "[e]ntities that owe each other money to apply their mutual debts against each other, thereby avoiding the absurdity of making A pay B when B owes A") (internal citation omitted)).

The Court has considered the remaining arguments and find them to be without merit.

Accordingly, it is hereby

ORDERED, that Complaint is dismissed; and it is further

ORDERED that the Counterclaims are dismissed in their entirety.

This constitutes the Decision and Order of the Court.

Dated: June 9, 2010

_____s/Stephen L. Ukeiley______________

STEPHEN L. UKEILEY, J.D.C. Footnotes

Footnote 1: The relevant standard now reads,

Relying On Information Furnished By Clients. A practitioner advising a client to take a position on a tax return, document, affidavit or other paper submitted to the Internal Revenue Service, or preparing or signing a tax return as a preparer, generally may rely in good faith without verification upon information furnished by the client. The practitioner may not, however, ignore the implications of information furnished to, or actually known by, the practitioner, and must make reasonable inquiries if the information as furnished appears to be incorrect, inconsistent with an important fact or another factual assumption, or incomplete.

31 C.F.R. § 1034(d).