that he has a very sincere and a very zealous intent in these in his findings to quote unquote make the government whole this is a noble and perhaps act little intentional on the part of the court  two in the previous appeal in this matter you probably remember i believe it was the same panel that heard that appeal you found that the the judge had made an award of a penalty in the film out of the of the requested by the government and then under a misinterpretation of section fifteen zero five see hell that through the somehow magic really what ation of these long liquid entries works factors analysis it didn't look at all the factors but it did look at quite a few of them in a fact found factual basis that the company in good faith is really that what they did miss a late when when the i want to talk about what he did reanalyzing the amount of the penalty to be appropriate given the fact he could not war prejudging compensatory interest he said that because he couldn't award the interest  complex machine work factor you know the compensation the need for compensation in the government overrode exclusively all the other factors and based soley on that criterion he assessed the full monetary penalty what he should have done but it seems to me and tell me if you don't think this is a fair reading that the odds are good consider other facts and that deterrence was not completely absent from his are the statutory scheme acted by congress or are need the penalty statute so to be ninety two a provides penalties for variation fractions the compensatory portion of section fifty ninety two is section fift ninety two b which is this court has ruled is a mandatory provision which requires the government be made whole for lost revenue and the barents after it is if we don't give the government that section fifty ninety two statute was revised in one thousand nine hundred seventy eight if the government liquidated it entry was increased duties and scituate or ten or twelve years went by while that issue was litigated in the changed in seventy eight under fifty nine two the congress specifically said we want this d provision in there because we want to be able to collect those duties so your point is that there's absolutely no deterrent factor here in this case there is and if you look to the trial court judges first opinion subsequent to trial he said that this company is going overboard to do the right and the issue before the core is the praise would have merchandise which is inherently complex difficult almost understandable skeen and they try to do their best but have made some it's hard to evaluate what he was talking about terms of compensation and deterrence since he knew that other pot of money going to the government in any about right my right about that you are but if you look at the first decision he did a thorough analysis of as required by this court on really complex machine works he did a fairly thorough analysis and said there's no need for much deterrence here a penalty of ten thousand dollars is appropriate given all the facts and circumstances including that he was awarding two hundred fifty thousand to the government under a new roni as a different catacomb we're arguing is that now that he can't do that why is he suddenly need to assess a two hundred fifty eight thousand dollars penalty as a deterrent to a company he's already said that attempt thousand dollars penalty would be sufficient to turn against the congress made it clear that assessment of the penalties under section fifty nine to be it's not compensatory it's not intended to make the government it's not intended to serve as any recompense it's to serve as a deterrent for future misconduct and he found that this company has an incredibly active proactive compliance program which is still those and that program  run by the lady sitting in the audience that works for national and now for him to suddenly decide though what maybe that wasn't correct because sour grapes i can't assess the interest so i'm going to get the whole penalty if it contravenes congressional a determination based on a thorough analysis of the fourteen factors to come up with an appropriate penalty amount in a movie line to the pre judgment interest and that is it my understanding correctly that you are to at least two arguments are one job is to do a dyno it will review to see if any penalty is appropriate in a shop much of a penalty and until the truck or enters a judgment for a fixed sum of a penalty which could be anywhere from zero to the  ideations off the top of my head but i know it was one of those two groups i know was extensively almost exclusively devoted to case law supporting the notion that section fifty ninety two and indeed is a morning your honor may it please the court national semiconductor attempts to convince the court that congress intended that violators be left in a better position than they would have been had they followed the law in the first instance with respect to both that choose first with respect to the trial court's exercise of its discretion to or the maximum allowable penalty and second with respect to prejudgment interest why would the government want to impose a maximum penalty on a voluntary disclosure because it seems that you're sending the message that there's absolutely no incentive in the future to voluntarily disclose you're going to get the same and only anyway so don't disclose keep it quiet maybe you'll get past the statute of limitations doesn't matter you're going to get a penalty anyway whether you disclose or not well two points and sound like the government's not that all the way through well two points first of all congress mandated that when importers learn of an error on their entry documents that they promptly tell the government that compliance with the law is the baseline expectation it's not a heroic action here and congress imposing and i'm not sure i mean granted and the enforcement for that is the penalty and if you're going to get the maximum penalty either way what's the incentive to be the good guy get the maximum penalty is the amount of interest the incentive to be the good guy is that customs willing force and if as opposed to just paying interest if customs discovers a violation and it's not disclosed then the penalty will be up to two times lost revenue for negligence or twenty percent of the duble value of the goods or all the way up to the value of the merchandise for fraud so those penalties are much stronger and provide a much stronger they provide a strong basis for importers to simply pay the interest on their lost revenue in fact the trial we entered of national semiconductors annual reports and evidence and every year they are earning between twelve and fifty five million dollars of interest and that is mr whitely have a point t we struck down the compensatory interest part of the earlier opinion and rather transparently it was all shifted in the penalty this time around isn't that a little transparent as he would perhaps say we believe that the court's intent was clear on remain from this court and that that was just like when the court erroneous we applied section fifteen  five to make the government whole it applied instead the complex and she'd factors under this court's direction that had the same effect and this time to follow the law correctly in other words the entire case the entire judgment t is predicated on the compensatory that or nothing else know that the court of international trade had also noted a lot of errors by the by national semiconductor for instance the genesis of the claim was that the customs compliance head was built for a number of years while levies violations were being made but at the same time the national semiconductor had three employees whose full time job was to collect refunds from customs on duty drawback none of those people were shifted into customs compliance duties to make sure that on the payment side of the shop the law was complied with the court there was there was evidence that there was a fair amount of negligence in this case just responding to concerned with fresh air that don't rate a raise with respect to the so policy implications of that government position and might correct that the government would not necessarily if the drug here hit given half of the amount rather than the entire amount do you think the government would be here arguing that the court the c i t abused its discretion for not awarding argued that the trial or has discretion to issue a penalty anywhere between zero and the maximum amount we argue that or it would be pretty much of a stretch for us to argue that in this case looking at the pre judgment interest section this is a penalty there's no way to know what what is going to be therefore no way to avoid it doesn't that suggest it's not subject to interested all well no it's an equitable remedy your honor and that the is the same as saying there's no legal basis for no not off the pre judgment interest is under the trial court's equitable authority twenty eight u s c fifteen eighty five which the same editable authority as a district court in this case the trial for correctly in our view analogized into the interest only penalty under fifteen one hundred two c with liquidated damages which is all that this really is plaintiff decided to nothing in the legislative history indicating that congress intended the interest only penalty to be a punishment just that just by happenstance it's located in fifty ninety two c ah likewise we cited to numerous cases noting that section fifty ninety two has all its called him on it it's a monetary penalty correct and the legislative history and everything else seems to show that at least in part i and you're telling us i mean the judge that here it's a compensatory form of liquidated damages is that no you think that's an accurate characterization of the supervision we don't believe the judge help it was a compensatory for a liquidated damages we believe the trial ascertainable from day one just because the government has not yet proved that harm doesn't mean that the harm was not readily ascertainable the government had proved it until the court issued its final judgment  you argued a moment ago that this penalty is wholly within the discretion of the church right yeah and that whatever he would set it that would probably be appropriate in that instance you're also admitting that national semiconductor had no way to know what he was going to award as the penalty they couldn't avoid the penalty how can they be liable for interest on something that is unavoidable  at the discretion of the judge you're supposed to somehow divine what it's going to be and make a deposit need vance i'm confused well because we cited to a number of cases that are very similar situation which were the f c c case as we said it's a cases where the f c c obtained before the district court and civil actions disgorgement of insider trading profits which is also one of those things that's not readily ascertainable and likewise we're prejudgment interest upon that i'm out to prevent the unjust enrichment of the by a later well that's exactly what's happening here  going to become interest on the interest that was awarded as a penalty remember he awards this penalty as compensation to make sure the government's ma the form of interest and now you're going to get interest on the interest yes yes we will and in fact it's like with mastercard if i were to charge a thousand dollars and i were to wait for five years and then my bill for with master card has gone up to two thousand dollars i pay a thousand dollars and say ok we're even if the case were then whine through litigation for another five years and the bill is once again gone from that one thousand up to two thousand dollars i am i going to be liable only for one thousand more i'm going to be liable for the two thousand that's all that's happening here this is and the trial court noted that it's a unique situation it's a case of first impression that only involves interest under section fifty ninety two c four it's a very unique situation because interest only penalty although it's a penalty by name is on its face compensation otherwise why would congress impose punishments the seem to be arguing that the amount of this penalty really isn't in the discretion of the judge it's whatever is necessary to compensate the government and therefore is ascertainable and wholly subject to interest but that's not what you argued before no it is because the trial court has given the authority to  look at a number of factors and a core group of those factors are they are the factors that concern that concern when mediation making sure that the government is made whole and those are the main factors that the court relied upon here but would congress the other way on your master card example the thing that strikes me there is the master card tells me in advance what the interest rate is and what i'm going to be paying on a national semiconductor has no way of knowing either in the situation that you're talking about they don't know the amount that they're going to be subject to that's the discretion of the judge and they don't even know the interest rate well are for the interest rate people do know they will be subject to the treasury rate whatever it is and that that changes as time goes forward just as the interest rate on our credit cards changes as time goes forward  yes with respect to the amount of penalty the trial judge does have so you know mastercard i know exactly what it is because i know how much i've paid or have been paid and they send me a little notice every month that's correct but the notice you don't know if six months down the road master card might raise your interest rate or lower it will have to give me notice one thing they do just as the treasury gives notice no there's no notice here until the judge in his or her discretion decide is that the operational requirement here yes we presented evidence that it was that yet did yes yes they should this everyone should assume it's going to be to match them home even though the trial court has a high level of discretion court has a tremendous amount of discretion the statute doesn't compel the maximum however the important thing to keep in mind is if congress really intended if congress really intended the prior disclosure provision to punish to punish violators why would it have imposed a ceiling on that amount that only puts the parties in some semblance of the same position they would have been had there been no violation that fact that fact alone really makes it very clear that congressional intent was not to punish with the interest only penalty it happens to be located in fifteen ninety two c which contains penalties but if an important disclosure discloses their negligence and gross negligence all that happens is they're put in the same position they would have been had they never committed the violation and then within that same section there is a doubt and i don't understand if congress contemplated the trial courts can award less than that because it's also contemplated that contemplated that the maximum would be the injury that was suffered by the government and that was why congress  is there a pretty good correlation between the arguments judge procedures making and what happened here no your honor because not only any any reduction either a pre judgment interest or of the penalty here would put national semiconductor in a better position than it would have been had a fall of the law it would put national semiconductor in a better position than its competitors that follow the law they want and in fact in this case because there's the remainder of section fifteen ninety two which imposes much harsher penalties then remediation contained in the interest only penalty likewise the possible criminal prosecution for intentional unlawful action there are a number of other deterrent medicine's just a quick scan of the complex machine factors identifies to me at least four that suggest that voluntary compliance should be taken into effect the good faith effort of the defendant to comply the degree of culpability the history the shocking the conscience of the court there's a lot there that suggests by when you have voluntary compliance maybe you take that into consideration not simple compensation compensation compensation or let's for two reasons the trial court's decision should be sustained first  that's within the trial court's discretion to weigh the factors and as this court noted any violator can find refuge in at least one of the complex machine factors i listed fo yes you listed four that form a core group together second the trial court did find that there was deterrent value in imposing the full interest penalty as well as making the government whole through pre judgment interest in weighing those factors can you wind up here mr to see  complied with this court's directive in both applying the complex machine factors and providing a very reasoned basis for exercising its equitable of or to award prejudged that's thank you thank you  over five minutes to make your own the government continues to focus on this issue of making the government whole by a awarding interest but as we stated earlier at the time congress and act section fifty that amended section fifty nine to interrupt a glow ninety five for ten an i q of seventy eight under payments of duty where there was no violation but simply an honest under payment of duty later determined by custom straps years earlier and assessed against the importer no interest would accrue so so it was this was not an interest free loan from the government to national because no interest would have been owing the interest penalty was achieved so that people who did violate the law would have to pay interest because those that did not violate the law but subsequently ill substantial increase duties did not have to pay interest and in fact that was the case until   you shouldn't gain from your violations but at the time this law was enacted they didn't get anything by their violation because they would not have the interest on the money under any circumstances whether or not there was a but what if there was not a violation so had they simply honestly under or not negligently under paid the duties on the same entries at that time and then governments have oh by the way you will was nine hundred eighty five thousand dollars  increased duties that should have been paid five years ago under the statute in one nine hundred seventy eight the government was only entitled to get the nine seventy eight it was not entitled to any interest the only time it would be entitled the interest would be if there was a penalty and if there was a violation and then it was subsequently disclosed so so the so the it's not making the government whole it's giving the government a penalty on top of the duties which would not have otherwise importer had there not been a violation so it is in fact the penalty is in fact an increase amount of money to be paid by violator who owes money as opposed to a non violator who simply customs a little later found owed money so it isn't a windfall to anybody it's in fact a penalty against someone who negligently underpays duties where is someone who criminal conduct and the fifth amendment prohibits someone from having to disclose to the government potentially criminal conduct what about the did the district court's pretty clear findings that  errors here were serious lapses in your responsibility to comply with the statute that you have any substantial benefit from this and that there's no dispute but that you can pay the amount there's no notice three additional factors we we there's no just question we could pay the amount but the mere thought of three additional complex machine factors the the serious lapses were the customs compliance manager of national during the time this happened had been in that position for about twenty years he had several  last him but then the labs he was on for seven years i mean that might explain a year or two it was it was one it was one violation with respect to a number of entries the there were no other violations with respect other entries during that period of time in this was a time national semiconductor during the period question was filing ten to twelve thousand consumption entries a year on a billion dollars plus for the imports  play all right the honorable court is adjourned until tomorrow morning at ten a