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Agrama v. Internal Revenue Service

United States District Court, District of Columbia

October 20, 2017

JEHAN AGRAMA, Plaintiff,
v.
INTERNAL REVENUE SERVICE, Defendant.

          MEMORANDUM OPINION

          ROSEMARY M. COLLYER United States District Judge.

         Jehan Agrama is facing a $900, 000 tax penalty from the Internal Revenue Service, allegedly based on an expert report prepared by an Italian criminal prosecutor concerning her foreign income. Ms. Agrama wants to know how IRS received the report so that she can convince the Service that Italy violated her rights and the report is inadmissible in the United States. Thus, she submitted a FOIA request asking, in part, for records from any country outside the U.S. contained in her IRS file. None of the records produced by IRS provides a paper trail indicating how IRS agents in this country received the Italian report. Ms. Agrama sues, arguing that IRS conducted an inadequate search.

         Both IRS and Ms. Agrama have moved for summary judgment, contesting whether IRS fulfilled its FOIA obligations. Upon review of the entire record, the Court will grant judgment in favor of IRS.

         I. BACKGROUND FACTS

         A. Ms. Agrama's FOIA Request

On October 28, 2015, the IRS issued two (2) letters to [Jehan Agrama] entitled “Failure to File Form 5471.” These letters claim [she] had an obligation to file Forms 5471 regarding a foreign corporation, Byram Enterprises Limited[, ] for the years 1982 through 2004. Moreover, these letters propose continuation delinquency penalties . . . if the subject returns are not filed . . . .
. . .
[Ms. Agrama] does not have an ownership interest in Byram Enterprises Limited that would obligate her to file Forms 5471.

Complaint [Dkt 1] ¶¶ 5, 8.

         A sensible woman, Ms. Agrama would prefer to persuade IRS to withdraw its intention to penalize her for unpaid taxes rather than be required to pay the penalty and late taxes and sue to recover her money. To this end, she submitted a request on February 16, 2016 under the Freedom of Information Act, 5 U.S.C. § 552 et seq., (2012) asking IRS to release to her “each and every document (exclusive of the filed tax [sic] income tax returns) contained in the administrative files of the Internal Revenue Service relating to Form 5471 proposed penalty liabilities of Jehan Agrama . . . for taxable years 1982-2004.” Compl. Ex. C, FOIA Disclosure Request (FOIA Request) [Dkt. 1-3] at 1. The Request specifically sought records received “from any jurisdiction, country, principality or other entity outside the United States.” Id. ¶ 2. IRS received the Request on February 18, 2016. Def.'s Mot. Summ. J. (IRS MSJ) Ex. C, Declaration of Karen Coen (Coen Decl.) [Dkt. 10-3] ¶ 6.

         Over the course of the administrative processing of Ms. Agrama's FOIA request and this litigation, IRS has conducted multiple searches for responsive records.

• First, IRS Disclosure Specialist Karen Coen searched the IRS Integrated Data Retrieval System (IDRS), a database allowing access to data retrieved from IRS's Master File, the nationwide electronic information system containing taxpayer account information. Id. ¶¶ 8, 9. Ms. Coen used Ms. Agrama's unique taxpayer identification number (TIN), provided by Ms. Agrama, to conduct this search. Id. ¶¶ 10, 11. This initial search yielded a single possible examination activity from 2002. Id. ¶ 12. Inasmuch as this activity had occurred more than ten years earlier, any records would have been destroyed under the IRS record retention policy. Id. Because Ms. Coen found no other entries related to Ms. Agrama's TIN in the IDRS system, she determined that IRS had no records responsive to Ms. Agrama's FOIA request, and informed Ms. Agrama of that fact by letter on February 25, 2016. Id. ¶¶ 12-13.
• Ms. Coen's letter prompted counsel for Ms. Agrama to contact Ms. Coen on March 2, 2016, to inform her that Ms. Agrama had already been contacted by two IRS Revenue Agents from Los Angeles, California, Bernard Trapp and James Pack, concerning the tax penalty. Id. ¶ 14. Upon Ms. Coen's request, these two agents searched for records that might be responsive to Ms. Agrama's FOIA request. Id. They forwarded the records they located to Ms. Coen, who determined that 89 pages of records were responsive to Ms. Agrama's request. Id. ¶¶ 15-16. Of those records, Ms. Coen determined that three pages could be released to Ms. Agrama and the remaining 86 pages needed to be withheld in full. Id. ¶ 16. Ms. Coen so informed Ms. Agrama of this assessment on March 7, 2016. Id. ¶ 18. This decision was upheld on administrative appeal. Compl. Ex. G, IRS FOIA Appeals Response [Dkt. 1-7].
• When Ms. Agrama filed the immediate Complaint in April 2016, Attorney Christopher Valvardi of the IRS Office of Chief Counsel was assigned as agency counsel to work with the Department of Justice on the case. IRS MSJ Ex. 4, Declaration of Christopher Valvardi (Valvardi Decl.) [Dkt. 10-5] ¶ 5. His DOJ colleague told Mr. Valvardi on August 25, 2016, presumably based on information from Ms. Agrama's counsel, that Ms. Agrama had possession of an 83-page document known as the “Chersicla Report, ” described by Ms. Agrama as “a ‘rough translation' of a non-public Italian expert witness report, ” Pl.'s Am. Reply [Dkt. 26] at 1, of Italian origin for apparent use in Italian courts. Upon inquiry by Mr. Valvardi, Revenue Agent Pack and Supervisory Revenue Agent Steven Lepore confirmed that they had provided the Chersicla Report to Ms. Agrama. Valvardi Decl. ¶ 8. When Mr. Valvardi received Ms. Agrama's copy of the Chersicla Report, he determined that it was substantively identical to 83 pages of the 86 pages that Ms. Coen had earlier withheld from release to Ms. Agrama. Id. IRS then withdrew its reliance on any FOIA exemption to withhold those 83 pages and disclosed its version of the Chersicla Report to Ms. Agrama on September 16, 2016. Id. ¶¶ 9-10.
• Perhaps informed by this experience, Mr. Valvardi undertook an independent review of the records that had been provided by Agents Trapp and Pack to Ms. Coen. Id. ¶ 11. That review demonstrated that some of the records were incomplete. Agent Pack was queried and explained that some of the responsive records were commingled in a larger file of records that was being reviewed as part of an investigation into another taxpayer. Id.
• Mr. Valvardi asked Agent Pack to search the larger file manually to identify fully any responsive records, which he did. Id. Agent Pack sent 27 additional potentially-responsive pages to Mr. Valvardi. Id. ¶ 12. After review on September 6, 2016, Mr. Valvardi determined that the additional pages were responsive to Ms. Agrama's request, but were all exempt from disclosure.

         In sum, IRS identified a total of 116 pages of responsive records. Of those pages, 86 have been released to Ms. Agrama in whole. The remaining 30 pages, constituting four separate documents, have been withheld in their entirety. IRS relies on FOIA Exemptions 7(A) and 3 to assert that these records ...


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