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Federal Tax

Hedge Fund Manager Sues IRS, Treasury Over Tax Info Leak

Tim Shaw  

Tim Shaw  

Multibillionaire and CEO of global investment firm Citadel Ken Griffin sued the IRS and the U.S. Treasury Department, alleging his tax return information was unlawfully disclosed due to a lack of safeguards to protect confidential data.

Filed December 13 in the U.S. District Court for the Southern District of Florida, Griffin’s complaint accuses the IRS of willful or grossly negligent unauthorized disclosure, arguing that IRS systems are “vulnerable to, among other things, malicious efforts by IRS employees or contractors to illicitly obtain and misappropriate confidential taxpayer information.”

Griffin was among other wealthy U.S. individuals, such as Jeff Bezos, Warren Buffet, and Elon Musk, who whose tax return information was showcased in a ProPublica series that began in June 2021. The new organization’s aim was to shed light on how the nation’s highest earners pay less in federal income taxes than average Americans. It is unclear how the organization obtained the data, or from whom. ProPublica claimed to not know the original source or sources. The series reignited a national conversation about income inequality and whether the wealthy pay their fair share of taxes.

The IRS’ webpage on the Right to Confidentiality section of the Taxpayer Bill of Rights states that taxpayers “have the right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law,” and “to expect appropriate action will be taken against employees, return preparers, and others who wrongfully use or disclose taxpayer return information.”

Code Sec. 6103 generally prohibits IRS employees from releasing tax information outside certain exceptions, such as pursuant to a court order or as part of nontax criminal investigations. David Hudson Jr., an assistant professor of law at Belmont University College of Law, wrote that ProPublica itself is in the clear and was protected under the First Amendment to publish information it had obtained. The law is more concerned with the leak of said documents itself.

According to Griffin’s suit, authored by Jason Sternbern of Quinn Emanuel Urquhart & Sullivan, LLP, the IRS violated the Privacy Act by failing to “establish appropriate administrative, technical, and physical safeguards to insure the security of confidential tax return information, including Mr. Griffin’s confidential tax return information.”

The complaint cited the Treasury Inspector General for Tax Administration’s fiscal 2020 report assessing the IRS’s information technology program, which raised concerns about how the agency handled the “privacy of taxpayer data, access controls, system environment security, and separation of duties as well as security policies, procedures, and documentation.”

Griffin is seeking $1,000 for each unauthorized disclosure, the max allowed.

ProPublica’s editor-in-chief, Stephen Engelberg, as well as former president Dick Tofel, wrote in an essay alongside the publication of the first entry in its series that they “believe that disclosing the identities of billionaires who paid little to no taxes in years their fortunes grew by billions of dollars will help readers understand the magnitude of the tax advantages the ultrarich enjoy.”

 

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