Kenneth C. Griffin, the billionaire plaintiff seeking damages in the Littlejohn leaker suit, has reached an agreement with the IRS and the Treasury to dismiss the case with prejudice. The order, which did not offer additional explanation, was signed by U.S. District Judge Robert N. Scola, Jr., out of Miami, Florida, on June 25, 2024. The terms of any settlement were not made public.
When a case is dismissed with prejudice, it means that the decision is final—it’s permanently dismissed and can’t be retried. Additionally, all motions in the case—including those to provide information—are now moot.
Background
Griffin, the founder and CEO of Miami-based hedge fund Citadel, is ranked #42 on Forbes’ Billionaires list, with an estimated net worth of $37.2 billion. He filed suit against the IRS in December 2022 for “their willful and intentional failure to establish appropriate administrative, technical, and/or physical safeguards over its records system to insure the security and confidentiality of Mr. Griffin’s confidential tax return information.”
Under section 7431(a), victims may be able to sue for damages for the unauthorized inspection or disclosure of their tax information. If the accused person is an officer or employee of the United States, the taxpayer may sue the United States in district court. If the accused person is not an officer or employee of the United States, the taxpayer may sue the individual.
Griffin’s information was included in the data leaked to Pro Publica, and he filed suit months before IRS “contractor” Charles Littlejohn was revealed to be the leaker. After that discovery, Griffin amended his complaint, but the IRS continued to argue for dismissal, noting, “Since Littlejohn was not an officer or employee of the IRS, Mr. Griffin’s claim for damages in Count I lies not against the United States (as pleaded) under § 7431(a)(1), but rather against Littlejohn under § 7431(a)(2).” The court admitted that there were questions as to whether the claim could properly be brought but continued to allow it, writing, “Whether the evidence ultimately supports the complaint’s allegations that Littlejohn was an IRS employee remains to be seen. But, at least for now, the Court finds the Government’s challenge to subject-matter jurisdiction falls short.”
The case continued to move through the courts, with multiple requests for information. In particular, the plaintiff alleged that the government was failing to provide information during discovery—the period of time when both sides of a case can gather additional evidence.
Responses were mixed, but in at least one ruling, the court noted that the Treasury Inspector General for Tax Administration (TIGTA) investigative files and related documents are protected from disclosure under section 6103. Section 6103 bars sharing tax information with third parties—it’s the very rule that Littlejohn was accused of breaking. The court found that section 6103 would also bar the government from turning over the investigative file to the plaintiffs. However, the court found that to the extent that any TIGTA or IRS personnel, at prosecutorial investigative file Public Integrity Section of the Department of Justice’s (PIN) direction, assisted in the PIN investigation, those materials would not be return information.
Also proving problematic? Littlejohn says that he never waived his privacy rights and has declined requests in Griffin to sign a waiver to grant access to TIGTA and PIN files that pertain to him. In a letter provided to the court, attorneys for Littlejohn noted that he “has not sought to intervene in these proceedings.” Notably, Littlejohn’s attorneys claimed that “the records that are now potentially subject to disclosure contain highly sensitive personal information related to Mr. Littlejohn and those close to him.” For example, they wrote that the government “seized all personal computers and electronic devices at the home Mr. Littlejohn shared with his partner. Those devices contained years of personal files (including financial and medical records) belonging to him, his family, and his partner. Such information not only should be protected, but is entirely irrelevant under Rule 26.”
(Rule 26 is one of the Federal Rules of Civil Procedure (FRCP) focused on providing information for pretrial discovery.)
Comments
Requests for comment from Griffin’s attorneys made early this morning were not returned.
The Department of Justice declined comment, and the IRS deferred to a public statement on the matter, which said, in part, “The Internal Revenue Service sincerely apologizes to Mr. Kenneth Griffin and the thousands of other Americans whose personal information was leaked to the press.”
The statement explains that “Charles Littlejohn was a government contractor providing services to the IRS at the time he made the illegal disclosures. He violated the terms of his contract and betrayed the trust that the American people place in the IRS to safeguard their sensitive information.”
“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. 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.”
The IRS noted that the case raised potential weaknesses in the IRS’s systems as identified by the TIGTA and said that the IRS continues, and will continue on a going-forward basis after this resolution, to work with TIGTA, the Government Accountability Office, other government agencies, and independent third parties to assess the IRS’s systems for potential vulnerabilities.
In May 2024, the IRS noted it had taken additional steps to bolster its internal systems, protocols, and procedures. Those include:
- Further restricting user access.
- More robust protective security controls.
- More frequent data reviews.
- Improved firewalls.
- Stronger 24/7 monitoring.
- New analytical tools.
- Less removable media.
- Tighter email controls.
- Collection and retention of detailed access logs.
- New printer controls.
These actions, the IRS says, “have sharply reduced risks for taxpayers and the tax system.”
Data Breach
Earlier this year, the IRS began notifying more taxpayers impacted by the Littlejohn data breach. Former IRS contractor Charles Littlejohn illegally accessed and distributed to certain news organizations the private tax information of corporate and wealthy individual taxpayers, including former President Donald Trump and fellow billionaires Elon Musk, Jeff Bezos, Warren Buffett, and Michael Bloomberg. The IRS is required, by law, to give notice to any other victims of the breach it can identify, even if their names were never published.
That notice landed in mailboxes as Letter 6613-A, IRC 7431(e) Notification Letter. In this case, Letter 6613-A indicates that an IRS contractor has been charged with the unauthorized disclosure or inspection of the taxpayer’s tax return or return information. The letter says that an IRS independent contractor—not named in the letter but clearly referencing Littlejohn—was charged with the unauthorized disclosure of the taxpayer’s information between 2018 and 2020.
The letter then directed taxpayers to the statute enclosed with the letter and advised taxpayers about the Crime Victims’ Rights Act (CVRA).
Since then, multiple taxpayers have come forward—including reaching out to Forbes directly—regarding receipt of the notice. Littlejohn, who pleaded guilty to disclosing tax return information without authorization and was sentenced to five years in prison, turned over returns and return information dating back more than 15 years covering thousands of the nation’s wealthiest people. The data contained not only tax returns but also investments, stock trades, gambling winnings, audit determinations, and many other types of financial material. But it wasn’t only those wealthy individuals who were impacted—it appears that some taxpayers who were shareholders in passthrough entities were also affected (in other words, their information appeared on Forms K-1 or the equivalent from passthrough entities that had their information leaked).
The IRS says that it “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.”
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