IRS Apologizes To Hedge Fund Magnate Over Leaked Tax Returns

Authored by Matt McGregor via The Epoch Times,

The Internal Revenue Service (IRS) has issued an apology as a part of a settlement agreement with hedge fund manager Kenneth Griffin, who had sued after a government contractor leaked his confidential tax information.

The Citadel LLC owner filed the complaint against the IRS after a government contractor disclosed his confidential tax information to the nonprofit investigative journalism platform ProPublica in 2019. According to the complaint, the contractor the IRS identified as Charles Littlejohn “exploited the IRS’s willful failure” to set up “adequate, administrative, technical, and physical safeguards” to protect its data.

The IRS apologized to Mr. Griffin and “the thousands of other Americans whose personal information was leaked to the press,” in a June 25 statement. Both Mr. Griffin and the IRS filed a motion to dismiss the case on June 24.

“The IRS takes its responsibilities seriously and acknowledges that it failed to prevent Mr. Littlejohn’s criminal conduct and unlawful disclosure of Mr. Griffin’s confidential data,” the IRS said.

“Accordingly, the IRS assures Mr. Griffin and the other victims of Mr. Littlejohn’s actions that it has made substantial investments in its data security to strengthen its safeguarding of taxpayer information.”

In January, the Department of Justice announced that Mr. Littlejohn was sentenced to five years in prison for disclosing private tax returns, a charge to which he pleaded guilty in October 2023.

“He violated his responsibility to safeguard the sensitive information that was entrusted to his care, and now he is a convicted felon,” said Acting Assistant Attorney General Nicole Argentieri of the Justice Department’s Criminal Division.

The lawsuit said ProPublica later published confidential tax information, acknowledging that the information was from “people who, in good faith, sent their tax and personal and private information to the Internal Revenue Service with no expectation that it would ever be made public,” the lawsuit said.

“ProPublica boasted that the information it obtained was ‘not just tax returns,’ but also included ‘information that is sent to the IRS about financial activities’ such as ‘income and taxes,’ ‘investments, stock trades, gambling winnings and even the results of audits,’” the complaint said. “Significantly, ProPublica identified the IRS as the source of the confidential information it published, including Mr. Griffin’s return information.”

‘Systematic Failures’

According to the complaint, the Treasury Inspector General for Tax Administration (TIGTA)—the IRS’s independent oversight department—frequently warned the IRS of “systematic failures” in its data-protection systems.

“Despite these warnings, however, the IRS continues to willfully and intentionally fail to establish adequate safeguards to protect Mr. Griffin and other taxpayers’ confidential tax return information,” the lawsuit said.

In its apology, the IRS acknowledged the weaknesses in the system and said it will work with TIGTA and other agencies “to assess the IRS’s systems for potential vulnerabilities.” 

“The agency believes that its actions and the resolution of this case will result in a stronger and more trustworthy process for safeguarding the personal information of all taxpayers,” the IRS said.

Though they aren’t named in the court documents, the tax returns of billionaires such as Elon Musk, Jeff Bezos, and Michael Bloomberg were named in a ProPublica disclosure in 2021, a year after The New York Times published former President Donald Trump’s tax returns.

Mr. Littlejohn’s Clearance

The DOJ said in a 2023 court document that Mr. Littlejohn had top IRS clearance from 2018 to 2021.

He used this clearance to upload data on his website and contacted several news organizations about providing tax returns for them to publish.

“In or about July and August 2020, Defendant accessed unmasked IRS data associated with thousands of the nation’s wealthiest people, including returns and return information dating back over 15 years,” the DOJ said.

One unidentified news organization published up to 50 articles using the information Mr. Littlejohn provided, the DOJ said.

ProPublica told The Epoch Times in a previous report that it didn’t “know the identity of the source who provided this trove of information on the taxes paid by the wealthiest Americans.”

ProPublica responded to a request for a comment on the case, saying: “As we reported from the first day the series appeared, we didn’t know the identity of the source who provided this trove of IRS files. After careful deliberation, ProPublica published select, newsworthy tax details of some of the richest Americans to inform the debate about the fairness of our tax system. These stories clearly served the public interest.”