WASHINGTON (CN) - The IRS and Treasury Department must reconsider their denials of a philanthropist's son's requests for records he hoped would uncover the mishandling of his father's trusts and estate, a federal judge ruled.
In 2013, Richard Goldstein filed a Freedom of Information Act (FOIA) request with the Internal Revenue Service, looking for tax returns and other documents related to the estate and trust of his father, Samuel Goldstein, a prominent philanthropist.
Samuel Goldstein, who created a multibillion dollar company out of a small oil trading venture, died in 2000, leaving behind a "substantial" estate, according to an opinion filed Friday in Washington, D.C., Federal Court.
After his father's death, Richard Goldstein became suspicious that his sister, his father's lawyer and others were making fraudulent transfers from Samuel Goldstein's trusts and estate in order to avoid paying taxes on $4.6 million in capital gains that belonged to the estate, according to court records.
In 2006, Goldstein sent his lawyer, David Capes, to the Criminal Investigations Division of the IRS in St. Louis to tip the agency off to his suspicions.
What Capes gave the IRS, and whether the agency investigated his claims, eventually became one point in the nine-part FOIA request Goldstein sent to the IRS looking for tax documents for his father's estate and trusts.
In addition to the Capes documents, Goldstein wanted to see the administrative file for the audit of his father's estate, tax returns and fiduciary income returns for the estate and trusts, audit files and tax returns for the family's limited partnership, SRG Investment, as well as two sets of documents from Bank of America.
The IRS responded to Goldstein's July 2013 request, telling him that, while it found more than 4,000 documents responsive to his request, it could only turn over 2,248 of them in full. The agency held on to more than 1,700 of the documents in full and 89 in part, citing various privileges and protections, court records show.
For the SRG Investment audit files, the IRS entered a so-called Glomar response, neither confirming nor denying the records existed. It withheld the Capes files, claiming it had to protect the identity of a confidential source, according to Friday's ruling.
After he failed on appeal, Goldstein filed a FOIA request with the Treasury Inspector General for Tax Administration, looking for files related to Capes' meetings with the agency.
Goldstein eventually filed lawsuits against the IRS and the Treasury Inspector General, claiming they wrongfully withheld documents he had a right to see.
U.S. District Judge Amit Mehta largely agreed with Goldstein in two opinions filed Friday, and ordered the agencies to reconsider their denials.
While the IRS claimed it could withhold the estate's tax examination file from Goldstein because he did not show he had a "material interest" in the records, Mehta noted it never gave Goldstein a chance to change his FOIA request to state one.
"Instead the IRS unilaterally assumed Plaintiff's material interest in seeking the estate's tax records," Mehta wrote in a 29-page ruling. "The IRS cannot now claim that plaintiff failed to perfect his request when, according to its own regulations, it denied him the opportunity to do so." (Emphasis in original).