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Ken Griffin, the multibillionaire CEO of the Citadel investment firm, sued the Internal Revenue Service and the Treasury Department today for what he alleges was an “unlawful disclosure of Griffin’s confidential tax return information.”
Beginning in 2021, ProPublica started publishing The Secret IRS Files, a series of stories on the tax avoidance techniques of the ultrawealthy. The series is based on IRS tax information covering thousands of the wealthiest Americans over more than 15 years. Articles have detailed how Elon Musk, Jeff Bezos and other billionaires keep their income tax rates lower than those of average Americans and how some billionaires can go years and years without paying any income tax.
Republican members of Congress have repeatedly criticized the IRS over what they allege was a data breach and have vowed investigations now that the party has secured a majority in the House for 2023. Griffin is one the top Republican donors in the country.
The Treasury Inspector General for Tax Administration and Justice Department have said they are investigating the tax record disclosures. The IRS did not immediately respond to a request for comment on the suit.
Two ProPublica stories this year revealed Griffin’s income in recent years and his tax payments.
The lawsuit, filed in federal court in the Southern District of Florida, alleges the IRS “made these unlawful disclosures knowingly, or at the very least negligently or with gross negligence.”
“Despite being aware of its security deficiencies for over a decade, the IRS willfully failed 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,” it says. “IRS personnel exploited these willful failures to misappropriate Mr. Griffin’s confidential tax return information and unlawfully disclose that information to ProPublica for further publication.”
Griffin, who Forbes estimates is worth $32 billion, is seeking $1,000 for each act of “unauthorized” disclosure, citing a specific IRS statute, as well as unspecified legal damages, and that taxpayers pay his legal costs.
In a comment, a Griffin spokesperson wrote: “IRS employees deliberately stole the confidential tax returns of several hundred successful American business leaders. It is unacceptable that government officials have failed to thoroughly investigate this unlawful theft of confidential and personal information. Americans expect our government to uphold the laws of our nation when it comes to our private and personal information — whether it be tax returns or health care records.”
He did not respond to a question about how much the legal effort is costing him.
In an essay published alongside the first article in the Secret IRS Files series, ProPublica’s editor-in-chief, Stephen Engelberg, and its then-president, Dick Tofel, explained that ProPublica was publishing the tax information “quite selectively and carefully” because “we believe it serves the public interest in fundamental ways, allowing readers to see patterns that were until now hidden.” The Secret IRS Files series sparked a broad conversation about the fairness of the U.S. tax system, and a number of legislative proposals followed in its wake, including a proposal by the Biden administration for a billionaire’s tax.
ProPublica has declined to elaborate on how and when we obtained the tax information or to comment on any investigations of the leak. We do not know who the source or sources of the tax information was.
In an April story about the top earning Americans and what taxes they paid, ProPublica reported that Griffin had the fourth-highest income in the country between 2013 and 2018, according to the data. He reported an average annual income of nearly $1.7 billion. Griffin paid a tax rate of 29.2% during these years, a higher rate than many of his hedge fund manager peers but significantly lower than the top marginal income tax rate of around 40%.
That article explained that even though our system is designed to tax the rich at higher rates than everyone else, it doesn’t work that way for those at the apex of the income pyramid. On average, they pay far lower tax rates than the merely affluent do. And even among the top 400 earners, people from certain industries have it better than others: Tech billionaires pay rates well below hedge fund managers.
In response to that article, a spokesperson for Griffin said the tax rates in the IRS data “significantly understate” what Griffin pays, because the rates were lowered by charitable contributions and do not reflect local and state taxes. He also said Griffin pays foreign taxes, which aren’t included in IRS calculations of effective tax rate.
In a second story, ProPublica showed how much Griffin stood to gain from having bankrolled a fight against an income tax increase in his then-home state of Illinois. He spent $54 million fighting that tax. The effort was a success and the increase went down in defeat.
That campaign spending was worth it for Griffin. Based on his past income, the increase could have cost him as much as $80 million in a year. (Subsequently, Griffin moved from Illinois to Florida, which has no state income tax.)
In another series about the IRS, this one in 2018, ProPublica highlighted how the agency was gutted. Congress, driven by Republicans after the Tea Party wave election in 2010, repeatedly cut the IRS budget, resulting in a loss of billions of dollars of funding. Tens of thousands of IRS employees left. Audits, particularly of the wealthiest Americans and the largest corporations, plummeted. Criminal investigations of tax evasion fell dramatically.
During the years of budget cuts, IRS commissioners repeatedly pleaded with Congress for increased funding. This year, as part of the Inflation Reduction Act, Congress allocated $80 billion over ten years to the agency to rebuild its systems and hire staff.
Federal regulators have issued warnings repeatedly over the life of the Keystone Pipeline that operators aren’t doing enough to prevent corrosion and don’t follow proper construction procedures. But despite a history of warnings and large spills, the Keystone Pipeline failed again last week, dumping 14,000 barrels — or 588,000 gallons — of oil in northern […]
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