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, signed by U.S. District Judge Robert N. Scola, Jr., on June 25, 2024, indicated that the terms of the settlement were not made public but included a public apology from the IRS. When a case is dismissed with prejudice, it means that the decision is final and permanent, preventing any retrial.
Griffin, the founder and CEO of Miami-based hedge fund Citadel, filed suit against the IRS in December 2022 for their failure to safeguard his confidential tax return information, which was leaked to Pro Publica. The lawsuit was filed under section 7431(a) which allows victims to sue for damages for the unauthorized disclosure of their tax information. Despite challenges from the IRS, the court allowed the claim to proceed, questioning whether the evidence supported the allegations against Charles Littlejohn, the contractor revealed as the leaker.
The case continued with the court addressing requests for information during the discovery phase. The court ruled that certain investigative files and documents were protected under section 6103, which bars sharing tax information with third parties. Littlejohn refused to waive his privacy rights, leading to legal complications in accessing relevant files. Littlejohn’s attorneys claimed that the records potentially subject to disclosure contained highly sensitive personal information irrelevant to the case.
Griffin expressed gratitude for the outcome, stating that it would benefit all Americans. The IRS issued a public apology to Griffin and other victims of the data breach caused by Littlejohn, a government contractor. The IRS acknowledged its failure to prevent the breach and outlined steps taken to strengthen data security measures. The IRS assured victims that substantial investments had been made in safeguarding taxpayer information and vowed to work with various agencies to identify and address vulnerabilities.
The IRS recently notified taxpayers impacted by the data breach, including corporate and wealthy individuals such as Donald Trump, Elon Musk, Jeff Bezos, Warren Buffett, and Michael Bloomberg. Charles Littlejohn, the former IRS contractor responsible for the breach, was sentenced to five years in prison after pleading guilty to disclosing tax return information without authorization. The breach exposed sensitive financial data dating back over 15 years, affecting a wide range of individuals, including shareholders in passthrough entities.
The IRS believes that its actions and the resolution of the case will lead to a stronger and more trustworthy process for safeguarding taxpayer information. The agency implemented additional security measures, such as restricting user access, enhancing protective security controls, and implementing tighter email controls. By addressing the vulnerabilities exposed by the data breach, the IRS aims to restore trust in its ability to protect sensitive taxpayer information and prevent future breaches.
