Gov't wants suit over IRS data leak tossed

The U.S. asked a judge to dismiss a lawsuit by hedge fund manager Ken Griffin against the Internal Revenue Service after the billionaire accused the agency of failing to protect his confidential financial information. 

The Citadel founder seeks financial damages over a data breach that led to ProPublica's publication of private data about some of the wealthiest U.S. taxpayers. Griffin accused the IRS of failing to establish appropriate safeguards, saying on "information and belief" that unidentified IRS workers leaked his tax returns and return information to ProPublica between 2019 and March 2022.

In a filing Tuesday in Miami federal court, U.S. lawyers said Griffin filed a "textbook shotgun pleading" that speculates IRS workers leaked his information even though ProPublica said it didn't know the source of the tax information it published about Griffin and other wealthy Americans. 

Saul Martinez/Bloomberg

"Griffin speculates that some unknown individual(s) in an organization of nearly 80,000 employees, using unknown methods and exploiting unspecified security weaknesses, wrongfully obtained his return information," U.S. lawyers wrote. Griffin infers that someone at the IRS "gave that information to ProPublica, while omitting or discounting all other possibilities or explanations."

While it's "certainly understandable" that Griffin would want to know how his return information became public, the section of the Internal Revenue Code dealing with privacy bars release of "the existence or details of any investigations" related to the case, the U.S. said. 

In a statement, Citadel spokesperson Zia Ahmed said: "Every year the IRS expects over 150 million Americans to file their taxes, and taxpayers expect the IRS to protect their personal data. It is unforgivable that the IRS continues to shamelessly abdicate its basic duty to safeguard this private information. The fact that the tax returns of Ken and hundreds of others, which only the IRS had access to, ended up in ProPublica's hands is due to the IRS's malfeasance or negligence. Neither is acceptable."

'Needle in haystack'

Finding a culprit among the vast IRS workforce requires the U.S. to "search for a needle in a haystack," the U.S. wrote. "But the needle may not even be in the haystack," the government said. "ProPublica does not know if the source of the information was the IRS and acknowledges that the source may be a hostile state actor." 

Both Treasury Secretary Janet Yellen and former IRS Commissioner Charles Rettig said they referred publication of Griffin's return information to the U.S. Treasury Inspector General for Tax Administration. 

If events reveal "beyond speculation and conjecture" that his return information violated the Internal Revenue Code, "then Griffin can file suit," the government said. 

Republicans, who control the House of Representatives, have pledged to use their power to investigate the breach and the IRS response. 

The ProPublica report said billionaires including Jeff Bezos and Elon Musk had in some years paid minimal or no income tax even as their fortunes soared. It outlined the tax strategies available to the top 0.1%. 

Griffin reported an average annual income of almost $1.7 billion between 2013 and 2018 and paid an average federal tax rate of 29.2% during that time, ProPublica reported. 

Griffin has a net worth of $34.8 billion, according to the Bloomberg Billionaires Index.

Michael Bloomberg, majority owner of Bloomberg News parent Bloomberg LP, was also among those included in the reporting.

In its filing, the U.S. said that Griffin failed to allege actual damages, which is necessary under the Privacy Act. 

The case is Griffin v. Internal Revenue Service, 22-cv-24023, US District Court, Southern District of Florida.