Source: http://federaltaxcrimes.blogspot.com/2016/05/wrongful-disclosure-counterclaim-in.html
Timestamp: 2019-04-23 02:19:35+00:00

Document:
7. In November 1989, Paul G. Garrity, Sr., established the Lion Rock Foundation, a Liechtenstein Shiftung. Paul G. Garrity, Sr., was the primary beneficiary of the Lion Rock Foundation from the time it was founded until his death in 2008.
8. In November 1989, Paul G. Garrity, Sr., opened an account in the name of Lion Rock Foundation with LGT Bank, a bank located in Liechtenstein, having a number ending in 718 (“Account”). The Account continued in existence until after the death of Paul G. Garrity, Sr. After his death, in 2009, the funds held in the account were distributed equally to each of his three sons, Kevin S. Garrity, Paul G. Garrity, Jr., and Sean R. Garrity.
9. On or about the time the Account was opened, Paul G. Garrity, Sr., entered into an Agency Agreement with BIL Treuhand AG (“BIL Treuhand”) to appoint members of the Lion Rock Foundation Board. The agreement required BIL Treuhand “as well as the person(s) appointed by [it] . . . to act in accordance with the Instructions imparted by [Paul G. Garrity, Sr.,] or persons empowered to act on behalf of [Paul G. Garrity, Sr.]” At all times relevant to this matter, Paul G. Garrity, Sr., exercised complete control over the Lion Rock Foundation.
14. At various times, an entity known as Tamino Trading, Ltd., and Grant Thornton International, Ltd., both also deposited monies into the Account.
16. Paul G. Garrity, Sr., did not report any income or loss from the Account, or otherwise disclose the existence of the Account to the IRS, on his 2005 federal income tax return, or at any other time. Moreover, Paul G. Garrity, Sr., did not advise the accountant who prepared his 2005 federal income tax return of the existence of the Account at any time.
Sr., for the 2005 taxable year. In connection with that audit, the IRS was investigating matters related to the Account.
19. On October 14, 2009, Diane M. Garrity, a representative of the estate of Paul G. Garrity, Sr., deceased, filed Treasury Forms TD-F 90-22.1, Report of Foreign Bank and Financial Accounts (“FBAR”), for the 2003 through 2008 calendar years with the IRS. The FBAR filed for the 2005 calendar year indicates that the maximum amount held in the Account during that year was $1,873,382.00.
26. As of June 30, 2006, the balance of the Account was at least $1,873,382.00.
27. On February 26, 2013, in accordance with 31 U.S.C. § 5321(a)(5)(C)(i), a delegate of the Secretary of the Treasury assessed a civil penalty against the estate of Paul G. Garrity, Sr., deceased, in the amount of $936,691.00, due to the willful failure of Paul G. Garrity, Sr., to disclose the Account to the IRS (“FBAR Penalty”).
30. In addition to the FBAR Penalty, the estate of Paul G. Garrity, Sr., deceased, owes a late-payment penalty pursuant to 31 U.S.C. § 3717(c)(2) and 31 C.F.R. § 5.5(a) in the amount of $106,705.79, as of February 20, 2015.
31. In addition to the FBAR Penalty, and the late-payment penalty described in the previous paragraph, the estate of Paul G. Garrity, Sr., deceased, owes accrued interest in the amount of $17,784.30 as of February 20, 2015.
32. The estate of Paul G. Garrity, Sr., deceased, is liable to the United States of America for the FBAR Penalty, as well as associated penalties and interest, in the total amount of $1,061,181.09 as of February 20, 2015, plus statutory accruals from that date until the liability is paid in full.
Defendants have now filed a motion to amend the scheduling order to extend the deadline to amend pleadings and allow them to file an amended answer and assert a counterclaim. (ECF No. 40 at 4.) In their proposed counterclaim, Defendants allege that the Government violated 26 U.S.C. § 6103(a) by disclosing the Case Study Materials to IRS agents not directly concerned with the investigation and the law firm, which disclosed the information to the public through its website. n1 (ECF No. 40-2 at 15-16.) Section 6103(a)(1) provides, in relevant part, that "no officer or employee of the United States . . . shall disclose any return or return information obtained by him in any manner in connection with his service as such an officer or an employee or otherwise or under the provisions of this section." Section 7431(a) provides a private right of action for damages against the Government for such unauthorized disclosures.
Given the clear text of the statute and the strict construction of waivers of sovereign immunity, this Court agrees that the private cause of action in Section 7431 is limited to claims brought by taxpayers whose return information has been disclosed. Here, the allegations in the counterclaim make clear that the "taxpayer" whose "return information" was disclosed was Paul G. Garrity, Sr., and not the Estate. Therefore, the plain reading and the one consistent with construing waivers of sovereign immunity narrowly is that the Estate is not "such taxpayer" and may not bring suit.
n5 It is worth noting that, at common law, no right of action for invasion of personal privacy, and thus no property right in such an action, could have accrued to Paul G. Garrity, Sr., after his death. A dead person has no cognizable right of action when his privacy is invaded. See Restatement (Second) of Torts § 652I, cmt. b. ("In the absence of statute, the action for the invasion of privacy cannot be maintained after the death of the individual whose privacy is invaded.").
1. It is interesting that the defendants' counsel learned of the possible disclosure by studying the FOIA materials posted by Dennis Brager. I discussed those disclosures earlier at IRS Documents On OVDI/P From FOIA Request (Federal Tax Crimes Blog 11/17/14), here. Thanks, Dennis.
3. I am reminded of a case I handled while with the DOJ Tax Division was back in Estate of John Morris v. Commissioner, 454 F.2d 208 (4th Cir. 1972), here, affirming 55 T.C. 636 (1971) (Tax Court Reviewed Decision). In that case, the IRS asserted that a testamentary estate of the deceased taxpayer who had suffered the involuntary conversion could not replace the property and thereby qualify the deceased taxpayer for tax exemption under § 1033. The taxpayer won in the Tax Court. DOJ Tax appealed. I was assigned to brief the appeal. My argument was the same as the IRS asserted in the Tax Court. In the Fourth Circuit, at oral argument, Judge Sobeloff (then very senior) asked me how many judges were in the Tax Court. I said I was not sure, but my opposing counsel said that it was some number like 15 or 17 (I can't remember what exactly he said). It was not clear from the opinion how many judges agreed with the majority holding but it was clear that only 4 judges dissented. Thus, Judge Sobeloff silently made a quick math calculation and decided that, whatever the number, the Tax Court was overwhelmingly against the IRS's position which I was dutifully asserting. His next comment was something to the effect, "Well, isn't that the end of it." Of course he knew that merely affirming a majority in the Tax Court because the majority was the majority was not the role he served. But he was signaling that I needed a powerful argument to win and that I had not made that argument. And, as they say, the rest is history.
4. But the equitable basis for the Morris decision does have overtones of the argument the defendants asserted in Garrity. The decedent's death precluded him from pursuing the benefit clearly conferred by Congress - in Morris, exemption of the gain, and in Garrity, the wrongful disclosure suit. Should there be a different result in Garrity? There are many downsides to death, but should denial of the wrongful disclosure action be one of them?

References: § 5321
 § 3717
 § 5
 § 6103
 § 652
 v. 
 § 1033