                                T.C. Memo. 2018-118



                         UNITED STATES TAX COURT



               WHISTLEBLOWER 7208-17W, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 7208-17W.                           Filed July 31, 2018.



      Sealed, for petitioner.

      Elizabeth Mourges, Kevin Gillin, and Nancy Gilmore, for respondent.



                            MEMORANDUM OPINION


      LEYDEN, Special Trial Judge: Petitioner brought this action pursuant to

section 7623(b)(4)1 for the Court to review the Internal Revenue Service (IRS)


      1
        Unless otherwise indicated, all section references are to the Internal
Revenue Code, as amended, in effect at all relevant times, and all Rule references
are to the Tax Court Rules of Practice and Procedure. The Court uses male-gender
                                                                         (continued...)
                                        -2-

[*2] Whistleblower Office’s (Whistleblower Office) denial of his claims for a

whistleblower award. This matter is before the Court on petitioner’s motion to

proceed anonymously (motion), filed March 30, 2017, pursuant to Rule 345(a).

Respondent objects to petitioner’s motion. For the reasons stated herein,

petitioner has not satisfied his burden of showing that the risk of harm to him

outweighs the public’s right to know who is using the Court. The Court will deny

petitioner’s motion.2

                                    Background

I.    Petitioner’s Careers

      Petitioner received a master’s degree for which he wrote a thesis on a

financial trading strategy (trading strategy) he developed. After graduating in

1991, petitioner worked as a floor trader on Wall Street for about six months. For

the next five years petitioner traded remotely from a home office, but he returned



      1
       (...continued)
personal pronouns to refer to petitioner for convenience and without intention to
identify petitioner’s actual gender.
      2
        Nevertheless, the Court has changed the caption of the case to accord
petitioner anonymity in case he wishes to appeal the Court’s denial of the motion.
See Whistleblower 14377-16W v. Commissioner, 148 T.C.             ,   (slip op. at 3
n.2) (June 28, 2017). If within 30 days of the Court’s issuing its order denying the
motion petitioner does not file with the Clerk of the Court a notice of appeal, the
Court will change the caption back to reflect the petition as filed.
                                         -3-

[*3] to floor trading in 1997. Sometime in 2000 petitioner became a desk trader at

an investment banking, securities, and investment management firm. According to

petitioner, he was hired because the senior and managing directors of the firm

were very impressed with an executive summary he had written about his trading

strategy.

      During 2000 American Stock Exchange (AMEX) began an investigation

and identified petitioner as a witness in that investigation. Shortly after September

11, 2001, petitioner was laid off from his job as a desk trader. After being laid off,

petitioner decided to spend time perfecting his trading strategy to engage private

wealth clients.

      In 2004 petitioner became a subject of, rather than a witness in, the AMEX

investigation and was charged with a fine and penalties for violating exchange

rules. Petitioner, as a registered representative, was required to disclose that he

was the subject of this investigation each time he filed a Form U4, Uniform

Application for Securities Industry Registration or Transfer, with the Financial
                                         -4-

[*4] Industry Regulatory Authority (FINRA).3 This made it difficult for petitioner

to obtain employment as a trader.

      However, AMEX withdrew the charges within 12 months of filing them, but

the charges continued to be reported by FINRA. Starting in 2005 petitioner acted

to get the charges expunged by FINRA.

      Sometime in 2008 FINRA removed the charges, after which petitioner

began looking for trader positions on Wall Street. He secured a day-trading

position with a firm but left that position in less than 90 days. He secured another

day-trading position but also left that position within 90 days. He was not able to

hold a job for more than a few months.

      After working at these two day-trading positions, petitioner decided to start

his own fund using his trading strategy. In 2008 or 2009 petitioner signed an

investment advisory agreement with a family office that used petitioner’s trading

strategy as the sole business strategy for its fund. According to petitioner, in 2010

      3
        FINRA is “a quasi-governmental agency responsible for overseeing the
securities brokerage industry.” McCune v. SEC, 672 F. App’x 865, 866 (10th Cir.
2016) (quoting ACAP Fin., Inc. v. SEC, 783 F.3d 763, 765 (10th Cir. 2015)).
FINRA requires any person who works in the investment banking or securities
business of a FINRA member firm to register as a securities representative or
principal, among other categories. Mathis v. SEC, 671 F.3d 210, 211 (2d Cir.
2012). To register, applicants must complete a Form U4, in which they provide
detailed information about their personal, employment, disciplinary, and financial
background. Id.
                                         -5-

[*5] the trading strategy did so well it “[a]bsolutely knocked the cover off the

ball”. Petitioner, through the family office, met with a private wealth hedge fund

to seek a $50 million investment in his trading strategy. The private wealth hedge

fund offered to buy petitioner’s trading strategy for $5 million, but petitioner

believed it was worth $20 million and declined the offer. Petitioner subsequently

parted ways with the family office, citing conflict as one of the reasons for his

departure.

      After his departure petitioner obtained a management position at a hedge

fund. The hedge fund accepted his “full record, which was now audited as

exemplary”. A partner that managed the technology for the hedge fund promised

to help petitioner automate his trading strategy but, according to petitioner, “they

actually didn’t know as much as” he did. Petitioner was fired from that position

after about 13 to 14 months because he “had no desire to work for * * * [a]

particular senior partner” and was critical of the hedge fund.

      By then petitioner had registered an entity through which he could develop

a fund to use his trading strategy (investment entity). Petitioner began efforts to

raise $50 million for his investment entity. During that time petitioner engaged a

foreign exchange algorithmic trading strategy developer (first service provider),

which automated his trading strategy in 12 months.
                                          -6-

[*6] During those 12 months petitioner considered using real estate as another

asset class for his trading strategy. Petitioner, through an intermediary, presented

his trading strategy to a potential investor he described as a “subprime billionaire

who invests heavily in real estate.” According to petitioner, the potential investor

liked his trading strategy but later decided not to invest in it.

      In 2014 petitioner engaged another algorithmic trading strategy developer

(second service provider) because he wanted to include real estate assets in the

automation of his trading strategy, a function the first service provider could not

support. Petitioner’s goal was to add real estate to the asset class group in order to

seek an investment from a firm that had over $100 billion in assets. Petitioner met

with a principal of the second service provider. Petitioner disclosed to this

principal his status as a whistleblower. See infra pp. 9-12. According to

petitioner, the principal “felt there was a strong upside to * * * [the] particular

[trading] strategy and initially offered to both help with the technology and then

also potentially provide introductions [to investors].” Petitioner’s relationship

with the second service provider subsequently ended.

      In the summer of 2015 petitioner met with another potential investor at a

family event. This potential investor was a longtime friend of petitioner’s cousin

and a principal at a private equity real estate firm. Petitioner also disclosed to this
                                           -7-

[*7] principal his status as a whistleblower. See infra pp. 12-13. According to

petitioner, this principal “runs one of the best * * * funds for real estate in the

world” and was willing to talk about a possible investment in petitioner’s trading

strategy but wanted to hear more about it. The principal ultimately decided not to

invest in petitioner’s trading strategy.

      Unable to find investors for his trading strategy, petitioner deregistered his

investment entity and decided to switch careers. He is currently a graduate student

pursuing a master’s degree in real estate investment to become a real estate

consultant and adviser. Petitioner does not have any plans to return to his prior

career as a trader or to use his trading strategy in his capacity as a real estate

consultant and adviser. Petitioner will not engage in trading or financing real

estate as a real estate consultant and adviser.

II.   Petitioner’s Awareness of Targets and Information Underlying
      Whistleblower Claims

      Petitioner became aware of the information underlying the whistleblower

claims sometime before 2007 when he was solicited as a potential client for an

investment promoted by various entities (targets).4 Initially, petitioner deposited


      4
      In the motion petitioner asserts that he “obtained much of the information
forming [p]etitioner’s section 7623(b) claim during the course of [p]etitioner’s
employment”. However, petitioner was never employed by the targets.
                                         -8-

[*8] money to purchase an interest in the promoted investment. After conducting

further research and due diligence, petitioner concluded that the investment lacked

economic substance and was likely fraudulent. Shortly thereafter petitioner

withdrew the deposit and did not purchase the promoted investment. Petitioner

did not have any other relationship with the targets.

      Sometime thereafter petitioner was contacted by the IRS, which was

investigating the investment promoted by the targets. The IRS contacted

petitioner because it had identified him as someone who had initially made a

deposit to purchase the promoted investment but who did not purchase it.

Petitioner met with several IRS employees who asked questions aimed at

determining how he learned about the promoted investment, why he withdrew the

deposit, and why he did not go through with the promoted investment. Petitioner

volunteered his opinion that on the basis of his professional background he

thought the strategies used in the promoted investment were not appropriate for

options or derivatives and that he thought the promoted investment constituted

fraud. Petitioner did not, at that time, file a whistleblower claim but did consult

with an attorney about doing so. Petitioner was never engaged or called as a

witness by the IRS or the Department of Justice in subsequent criminal

proceedings against individuals associated with the targets.
                                         -9-

[*9] According to petitioner, from 2007 until 2014 he followed public press

releases for a criminal proceeding against an individual associated with one of the

targets. In 2014 that individual was convicted and sentenced, after which

petitioner decided to file his whistleblower claims with the Whistleblower Office.

On June 25, 2015, petitioner filed a Form 211, Application for Award for Original

Information, with the Whistleblower Office to seek an award for the information

he had volunteered to the IRS about the targets in 2007.

III.   Petitioner’s Disclosures About His Whistleblower Claims

       Petitioner disclosed to at least three individuals that he had been contacted

by the IRS concerning the investment promoted by the targets and that he was

either thinking of filing or had filed whistleblower claims against the targets.

       A.    Disclosure to Principal at Second Service Provider

       During preliminary conversations with the principal at the second service

provider, see supra p. 6, petitioner disclosed his whistleblower status and that his

whistleblower claims involved a promoted investment with a foreign exchange

product. His disclosure, however, came before petitioner filed his whistleblower

claims with the Whistleblower Office. When asked why he made the disclosure,

petitioner testified that the principal “is notable in the press for having uncovered,

mathematically, that the Madoff returns were fraudulent”. Petitioner considered
                                        - 10 -

[*10] the principal to be “an upstander in the marketplace” whose “reputation is

gold”. Petitioner testified that “once you have a golden reputation on Wall Street,

everyone can trust you.” Petitioner believed that the principal could provide him

with guidance on what next steps to take and the best practices for filing a

whistleblower claim because petitioner was frustrated that the attorney he had met

with about his whistleblower claims was taking too long.

      Specifically, petitioner asked whether the principal had any understanding

of what expertise would be needed in a case involving the promoted investment

“because the principal had written a book and articles on tax structures and tax-

efficient strategies.” Petitioner did not disclose to the principal the name of the

targets at that time. The principal indicated that he did not have the necessary

expertise and recommended that petitioner speak to an individual in the foreign

exchange area. Petitioner never pursued that recommendation.

      Following the disclosure, the second service provider worked with

petitioner on how to pitch his trading strategy to potential clients and was willing

to have him publicly refer to it as his selective quantitative provider. Petitioner

testified that he was “excited that one of the world’s best, most renowned

quantitative experts was willing to support” his trading strategy.
                                        - 11 -

[*11] The second service provider invited petitioner to some of its academic and

client seminars. It was at one of those seminars in the summer of 2015, after he

had filed his whistleblower claims with the Whistleblower Office, that petitioner

disclosed to the principal the name of one of the targets. Petitioner testified that

he was at an informal gathering after the seminar and was talking to his accountant

and to the principal. Petitioner was openly discussing his then-filed whistleblower

claims with his accountant5 and mentioned the name of one of the targets. In

particular, petitioner was discussing the public news about the various ongoing

criminal investigations in which at least one of the targets or persons affiliated

with at least one of the targets was involved and a public report that had been

issued relating to that target’s abusive options strategies. According to petitioner,

when the principal heard the target’s name he “shushed” petitioner because the

target was represented at the seminar. Petitioner inferred that the target was a

client of the second service provider but did not confirm that. Petitioner testified

that after that conversation, the relationship with the second service provider




      5
       Petitioner testified that he had disclosed the contents of the whistleblower
claims to the accountant sometime in 2014. The record on petitioner’s motion
does not show the circumstances under which he made the disclosure to his
accountant.
                                         - 12 -

[*12] dissipated. The second service provider did not mention petitioner’s

whistleblower claims as a reason for not continuing the relationship.

      B.     Disclosure to Principal at Private Equity Real Estate Firm

      Petitioner also disclosed his whistleblower claims to his cousin’s friend, the

principal at the private equity real estate firm. See supra p. 7. Petitioner testified

that before meeting with the principal “my cousins said that they have known * * *

[the principal] all their life, and he is as much family as I am, and that they wanted

the full disclosure. And I agreed.”6 At the meeting with the principal, petitioner

discussed the whistleblower claims. Petitioner testified that he told the principal

that the information was “highly confidential”. When asked why he felt the need

to disclose the whistleblower claims to the principal, petitioner testified that in

part it was due to the principal’s being “quietly known as somebody who also

prevented a Boston charity in investing in a Madoff fund.” Petitioner further

testified that this principal was an “upstander” with “a fantastic reputation.”

      Petitioner also discussed his trading strategy at that meeting and believed it

was one of the best meetings he ever had. Petitioner testified that the principal

said that he was happy to help him with his trading strategy and that the principal


      6
        The record on the motion does not show the context under which petitioner
initially disclosed the details of the whistleblower claims to his cousins.
                                        - 13 -

[*13] had a friend at an institution that would be interested in helping petitioner

with it. After that meeting, petitioner sent the principal a full presentation and

information about his trading strategy. Petitioner also sent the principal a copy of

the whistleblower claims that he had filed with the Whistleblower Office.

      Petitioner testified that he received one email from the principal but that

there was never any other followup after that. Petitioner supplemented his

declaration in support of his motion with that email, which states:

      Great to meet you as well. Read through all of your information.
      While the parabolic trading concept seems like an interesting way for
      holder of illiquid assets to take advantage of the market vol [sic], it
      really doesn’t fit well with anything we do. There must be someone
      out there with the time and attention span to look at it seriously!
      The whistleblower suit--not our kind of thing--is, well, fascinating! I
      don’t have any idea of its likelihood of success, but it is one king
      sized bit of optionality!!

      C.     Disclosure to CFO of Real Estate Firm

      Most recently, as part of a group project as a graduate student, petitioner

met with a chief financial officer (CFO) of a real estate firm. The CFO took

interest in an investment executive summary that petitioner wrote for the group

project. According to petitioner, they developed “a very quick and full disclosure-

type relationship”. Petitioner discussed with the CFO his interest in developing
                                        - 14 -

[*14] his trading strategy for real estate and sent the CFO background on his

trading strategy.

      Petitioner testified that the CFO “loved it”, and they discussed forming a

partnership in which the CFO would be the managing member. The two

exchanged documents and had a lunch meeting, during which petitioner disclosed

to the CFO his whistleblower claims. When asked why he made the disclosure,

petitioner testified that the CFO intended to seek a direct investment from the

CFO’s firm as seed capital. Petitioner further testified that in determining whether

to invest the CFO or the firm might discover petitioner’s whistleblower claims

while conducting its due diligence. The CFO and petitioner did not pursue a

professional relationship.

IV.   Petitioner’s Motion

      On March 30, 2017, petitioner timely filed a petition with the Court for

review of the final determination pursuant to section 7623(b)(4) and Rule 341(b).

On that same day, petitioner filed his motion. On April 6, 2017, the Court

temporarily sealed this case pending resolution of petitioner’s motion. On May 2,

2017, petitioner filed a declaration in support of his motion.

      On September 20, 2017, respondent filed a response objecting to

petitioner’s motion (objection). On October 25, 2017, petitioner filed a reply to
                                        - 15 -

[*15] respondent’s objection. On January 22, 2018, respondent filed a sur-reply to

petitioner’s reply.

      The Court conducted a hearing on petitioner’s motion on February 21, 2018.

Petitioner testified at the hearing. After the hearing, the Court issued an order

directing petitioner to supplement his previously submitted declaration to include

the email that petitioner had testified to during the hearing. The Court also

ordered petitioner and respondent to file simultaneous memorandums of law to

address whether the societal interest in the public’s right to know who is using the

Court was outweighed by petitioner’s alleged future economic harm and why

redactions of the targets’ names, as provided by Rule 345(b), would not be

sufficient to prevent future economic harm to petitioner.

                                     Discussion

      Rule 345(a) allows petitioners in whistleblower actions to move the Court

for permission to proceed anonymously. The movant must set forth a sufficient,

fact-specific basis for anonymity. Id. The Court will permit a whistleblower to

proceed anonymously if the whistleblower presents a sufficient showing of

potential harm that outweighs the competing societal interest of the public’s right

to know who is using the Court. See Whistleblower 12568-16W v. Commissioner,

148 T.C. __, __ (slip op. at 4-5) (Mar. 22, 2017); Whistleblower 14106-10W v.
                                        - 16 -

[*16] Commissioner, 137 T.C. 183, 205 (2011); Anonymous v. Commissioner,

127 T.C. 89, 94 (2006). The decision whether to allow a party to proceed

anonymously rests within the sound discretion of the trial court. Whistleblower

14106-10W v. Commissioner, 137 T.C. at 192; Anonymous v. Commissioner, 127

T.C. at 94. The Court must decide whether the risk of harm to petitioner

outweighs the competing societal interest at stake.

I.    Parties’ Arguments

      In petitioner’s motion he alleges that disclosing his identity will result in the

risk of retaliation, physical harm, social and professional stigma, and economic

duress, harms that go beyond mere embarrassment and annoyance. Petitioner

generally alleges that disclosure of his identity may adversely affect his ability to

obtain or maintain employment or reduce the amount of employment. Petitioner

also generally alleges that revealing his identity has the potential to severely

damage his standing in the professional community that provides his customary

source of employment. The motion does not provide any specific examples to

support the alleged risks of harm.

      In the declaration petitioner asserts that he had a successful career in the

finance industry before he provided information to the IRS. Petitioner references

making several disclosures of his whistleblower claims. For instance petitioner
                                        - 17 -

[*17] states: “Time after time, when I revealed my whistleblowing activities

irrespective of the initial in-person or follow up request, the business prospects

went radio silent. Repeatedly, once my actions were known, conversations ceased

and doors closed.” Petitioner asserts that failure to protect his identity moving

forward will cause him more harm and make it impossible for him to engage

investment professionals. The declaration does not provide any specific examples

to support the alleged risk of economic harm to petitioner either as a student or in

his future career as a real estate consultant and adviser. Petitioner does not assert

in the declaration that he has changed careers.

      In the declaration petitioner also alleges that he “expect[s] severe

retaliation” and that “the danger of potential physical harm to me [petitioner]

remains of paramount concern.” Petitioner alleges a risk of potential physical

harm on the basis of “various verbal confrontations or threats directly from key

criminals over the years in this massive/lengthy criminal case.” The declaration

does not provide any specific examples or identify particular individuals related to

the targets to support petitioner’s alleged risk of retaliation or physical harm.

      Respondent in his objection contends that petitioner had already disclosed

his status as a whistleblower to multiple individuals, including other professionals

in his field; was not employed by the targets; had not identified any specific
                                         - 18 -

[*18] persons who could cause him harm if his identity were known; and had not

set forth a sufficient, fact-specific basis that demonstrated a risk of harm to

proceed anonymously.

      Petitioner in his reply argues that “[t]he fact that petitioner has made a

limited disclosure of his status as a whistleblower is not dispositive.” Further,

petitioner argues that it is “beside the point” that he experienced prior economic

harm due to a loss of business opportunities resulting from his own disclosures

because he sought to prevent future harm by requesting anonymity. In

respondent’s sur-reply, respondent again contends that the grant of anonymity

would not “undo any of the alleged damage caused by petitioner’s own self-

disclosure”.

      Petitioner in his memorandum of law asserts that academic research and

studies show “that whistleblowers have significantly worse career trajectories as

compared to similar employees who do not engage in whistleblowing.” Petitioner

argues that his past experiences of economic harm after his disclosures

“reasonably ‘preview’ the future economic harm that could result from disclosing

* * * [petitioner’s] identity as the petitioner in this proceeding.”

      Respondent in his memorandum of law contends that petitioner has not

proven that petitioner’s failure to obtain funding for his trading strategy was due
                                         - 19 -

[*19] to his disclosures about his status as a whistleblower. Instead, respondent

contends that the failure to obtain funding was just as likely to be due to the

investors not being interested in the trading strategy and that none of the potential

investors indicated that they decided not to invest because petitioner was a

whistleblower. Respondent also contends that petitioner made the choice to

change careers and that he has not shown any specific economic harm that would

result in his new career from a disclosure of his identity in this proceeding.

II.    Risks of Harm

       In the motion petitioner alleges that disclosing his identity will result in the

risk of retaliation, physical harm, social and professional stigma, and economic

duress. However, at the hearing and in the memorandum of law petitioner asserts

that the primary factor to weigh is the risk of future economic harm and that the

factors of social and professional stigma and economic duress are assumed by this

factor.7

       The Court has addressed a whistleblower’s motion to proceed anonymously

in six reports, five of which granted the whistleblower anonymity and one which

denied anonymity. In Whistleblower 14106-10W v. Commissioner, 137 T.C. at

       7
       Although petitioner testified about an aspect of his medical history, he did
not assert that his case involves highly sensitive or personal information that
should not be disclosed.
                                        - 20 -

[*20] 185, the whistleblower became aware of an alleged tax underpayment while

employed by the noncompliant taxpayer. After filing a Form 211 with the

Whistleblower Office, the whistleblower obtained similar new employment

outside of the noncompliant taxpayer. Id. In granting anonymity the Court found,

in part, that the whistleblower had demonstrated in an affidavit a sufficiently

severe risk of professional stigma, retaliation, and economic duress. The Court

reasoned that disclosing the whistleblower’s identity would likely cause severe

damage to the whistleblower’s standing in the professional community and

jeopardize the whistleblower’s current and future employment because the

whistleblower acquired the information in the normal course of employment for

the noncompliant taxpayer and was privy to internal deliberations and

communications regarding the events that gave rise to the noncompliant taxpayer’s

underpayment. Id. at 203-204. The Court found that the whistleblower’s future

employability could be affected because a future employer could ask for a list of

previous employers, which would include the noncompliant taxpayer, and the

whistleblower could someday seek reemployment with the noncompliant taxpayer

only to face retaliation. Id. at 204.

      In Whistleblower 13412-12W v. Commissioner, T.C. Memo. 2014-93, at

*4-*6, the Court granted the whistleblower’s motion to proceed anonymously on
                                         - 21 -

[*21] the basis of the facts alleged in the petition and a declaration that

demonstrated that disclosure of the whistleblower’s identity could result in the risk

of retaliation, social and professional stigma, and economic duress. In that case

the whistleblower reported tax violations of a former employer, the noncompliant

taxpayer. Id. at *2. The whistleblower was retired but received retirement

benefits from the noncompliant taxpayer. Id. The Court accepted the

whistleblower’s assertions that the noncompliant taxpayer could possibly withhold

or terminate the retirement benefits, which the whistleblower relied upon and

without which the whistleblower would be forced to seek future employment. Id.

at *5-*6. The Court also found that the whistleblower could face professional

ostracism and difficulty securing future employment. Id. at *6.

      In Whistleblower 11332-13W v. Commissioner, T.C. Memo. 2014-92,

at *2, and Whistleblower 10949-13W v. Commissioner, T.C. Memo. 2014-94, at

*6, the Court held that the whistleblowers’ asserted facts in the petitions and

affidavits demonstrated that proceeding anonymously was necessary to protect

their professional reputation, economic interests, and personal safety. The

whistleblowers reported a tax fraud scheme they had discovered during the course

of their employment that involved their employer and several related entities and

subsidiary companies related to their employer, the noncompliant taxpayers.
                                       - 22 -

[*22] Whistleblower 10949-13W v. Commissioner, T.C. Memo. 2014-94, at *2;

Whistleblower 11332-13W v. Commissioner, T.C. Memo. 2014-92, at*2. The

noncompliant taxpayers were alleged to have ties to terrorist organizations, had

already used armed men to raid the whistleblowers’ offices, and had previously

threatened the whistleblowers’ lives. Whistleblower 10949-13W v.

Commissioner, T.C. Memo. 2014-94, at *6; Whistleblower 11332-13W v.

Commissioner, T.C. Memo. 2014-92, at *12.

      In Whistleblower 12568-16W v. Commissioner, 148 T.C. at __ (slip op. at

3), the whistleblower was previously employed by an entity related to the

noncompliant taxpayer and learned about the violations in the normal course of

the whistleblower’s employment. In a declaration, the whistleblower alleged a

risk of retaliation, physical harm, social and professional stigma, and economic

duress. Id. at    (slip op. at 3). The Court found that the whistleblower had a

well-founded concern and had made a sufficient showing that disclosure of the

whistleblower’s identity would cause the noncompliant taxpayer to retaliate

against the whistleblower and the whistleblower’s family, which would result in

professional and personal ostracism, economic loss, and threats to the safety of the

whistleblower’s family. Id. at    ,    (slip op. at 3, 8).
                                        - 23 -

[*23] In only one report has the Court denied a whistleblower’s request to proceed

anonymously. See Whistleblower 14377-16W v. Commissioner, 148 T.C.

(June 28, 2017). The Court found that the whistleblower had not established a

sufficient fact-specific basis for proceeding anonymously. Id. at       (slip op. at

13). The whistleblower’s discovery of the information leading to the

whistleblower claims derived from public information. Id. at        (slip op. at 7).

The whistleblower did not have an employment or fiduciary relationship to any of

the noncompliant taxpayers. The whistleblower did not identify any current or

prospective clients. Id. The whistleblower did not identify any noncompliant

taxpayer who would have the power to, and might be expected to, retaliate against

the whistleblower. Id. at     (slip op. at 12). The whistleblower mentioned no

specific risk but relied on generalized claims to support an alleged risk of being

blacklisted. Id. at    (slip op. at 7-8). The Court acknowledged that despite the

whistleblower’s weak fact-specific basis for anonymity it might have otherwise

been inclined “to weigh the people’s interest in knowing who is using the courts as

so weak as to give petitioner the benefit of the doubt”. Id. at     (slip op. at 13).

However, the whistleblower was a serial whistleblower filer, and the Court

ultimately held that the public’s interest in knowing who was using the Court to

bring serial whistleblower claims prevailed. Id. at     (slip op. at 16).
                                         - 24 -

[*24] A.     No Credible Risk of Future Economic Harm

      Unlike the whistleblowers in the cases where the Court granted anonymity,

petitioner is not now and never was employed by any of the targets. Petitioner did

not express any intent to seek future employment with any of the targets.

Petitioner did not obtain the information underlying the whistleblower claims

through any confidential internal deliberations and communications in the course

of his employment. None of the targets provides petitioner any employment-

related benefits he could be at risk of losing. Petitioner did not hold any fiduciary

position with respect to any of the targets. Other than being solicited as a potential

client for the promoted investment, in which he ultimately chose not to invest,

petitioner had no other relationship to any of the targets.

      Petitioner argues that his identity should be protected because

whistleblowers are generally perceived negatively, ostracized, and retaliated

against. Petitioner asserts that “research has shown, individuals, on the whole,

perceive whistleblowing negatively” and refers to a recent academic study that

“found empirical evidence that, individuals who reported lies (i.e., whistleblowers)

were ostracized and excluded from groups even by individuals who act honestly.”

Petitioner further asserts that “[t]his study explains prior research finding that

whistleblowers have significantly worse career trajectories as compared to similar
                                       - 25 -

[*25] employees who did not engage in whistleblowing.” According to petitioner,

“there can be no doubt that, measured in the aggregate, whistleblowers’ careers

measurably suffer after their whistleblowing activities become a matter of public

record.” Petitioner also argues that “a recent survey by the Federal Judicial Center

found a high rate of retaliation against cooperating witnesses.”

      The Court has addressed broad and generalized claims for anonymity such

as petitioner’s and rejected them in Whistleblower 14106-10W v. Commissioner,

137 T.C. 183. In a footnote the Court explained: “We do not mean to suggest that

this balancing test would or should necessarily result in anonymity for all tax

whistleblowers in this Court. Ultimately, absent any legislative directive to the

contrary, each request to proceed anonymously must stand upon its own.” Id. at

206 n.29; see also id. at 208 (Halpern, J., concurring) (“I have concurred in the

result in this case because I think that we should give whistleblowers

contemplating a section 7623(b)(4) action fair notice that we will not

automatically grant anonymity upon a claim of possible employment

discrimination.”). Although petitioner’s observations regarding general

perceptions about whistleblowers may be valid, his request to proceed

anonymously stands upon its own. Petitioner, as the movant, must set forth a

sufficient, fact-specific basis for anonymity. See Rule 345(a).
                                       - 26 -

[*26] Petitioner argues that providing proof of future harm is inherently

speculative and that requiring whistleblowers seeking to proceed anonymously

under Rule 345(a) to identify in every case concrete facts of future harm that will

occur places an unreasonably high burden on whistleblowers. Petitioner’s asserted

standard under Rule 345(a) for determining whether a whistleblower should

proceed anonymously is far more burdensome than the Court has applied in the

cases where it has permitted a whistleblower to proceed anonymously on the basis

of, among other things, risk of future economic harm. See Whistleblower 14106-

10W v. Commissioner, 137 T.C. at 203-204 (considering not only the

whistleblower’s current employment but also future employability). The Court

has acknowledged that “fears of such harm befalling a confidential informant are

reasonable although necessarily difficult to prove.” Id. at 203. Nevertheless, each

request to proceed anonymously stands upon its own, see id. at 206 n.29, and

petitioner must provide some factual basis sufficient and specific enough to allow

the Court to determine whether the severity of the asserted risk of harm amounts to

more than mere embarrassment or annoyance and outweighs the societal interest

of the public’s right to know who is using the Court. Otherwise the grant of

anonymity would be automatic in every whistleblower case.
                                        - 27 -

[*27] Petitioner argues that the specific economic harm he has already suffered

following his disclosures about his whistleblower claims demonstrates that he

could reasonably suffer future economic harm. Petitioner blames his disclosures

about his whistleblower claims for the lack of interest by the principals and CFO

in his trading strategy. However, the Court is not convinced that a connection

exists, especially considering the context in which petitioner made the voluntary

disclosures about his whistleblower claims.

      Petitioner testified that, in contrast to the field of trading where disclosure

was mandatory, the hedge fund lawyers he had spoken to “felt that full disclosure

was best practice”. According to petitioner, he was advised that disclosure of his

whistleblower claims was a material disclosure if, as a legal matter, it interfered

with his ability to perform his day-to-day employment duties or if it led to a

conflict of interest with a current client. However, petitioner’s testimony suggests

that in making the disclosures he was motivated by a desire to be seen as an

“upstander” rather than by a need to make a material disclosure and that by

disclosing he stood to enhance, not discredit, his reputation.

      For instance, petitioner testified:

      So when I made these conversations, part and parcel to the
      outlook on the professional that I’m across the table is are they
      an upstander, have they done something in the marketplace that
                                         - 28 -

[*28] denotes highly ethical behavior. And * * * [the principal of the
      second service provider] is famous for that. He won awards for
      it. And * * * [the principal of the private equity real estate
      firm] is similarly situated as someone who has a fantastic
      reputation.

Petitioner testified that in making the whistleblower claims he believed he was

also being an “upstander”.

      Contrary to petitioner’s testimony, the email from the principal of the

private equity real estate firm indicates that the principal declined to invest in his

trading strategy for a business purpose and that he was intrigued, not alienated, by

the whistleblower claims. Although he attributes the lack of interest by these

investors in his trading strategy to his status as a whistleblower, petitioner was

generally unable to secure other investors to fund his trading strategy even without

disclosing his status as a whistleblower.

      Moreover, petitioner has abandoned his previous career and is pursuing a

new one. Petitioner testified that his investment entity has been deregistered and

is no longer a going concern and that he does not intend to return to his prior

career as a trader. Instead, petitioner plans to be a consultant and adviser on

private wealth real estate after graduating from his current master’s degree

program. Petitioner testified that as a consultant and adviser he would have no

need to disclose his whistleblower claims because he would have no fiduciary
                                          - 29 -

[*29] responsibility to do so. Petitioner also testified that if he is being paid for

services as an adviser, a due diligence inquiry, which would require disclosure of

his whistleblower claims, would not be needed because he would not be advising

on financial matters. Petitioner has not identified any specific way in which

disclosure of his identity in this case would affect either his standing as a graduate

student or his future career as an adviser and consultant in private wealth real

estate.

          B.    No Credible Risk of Physical Harm

          Although petitioner relies primarily on the economic risk factor, he also

asserted that he faces a risk of physical harm. However, petitioner has not

demonstrated any credible risk of physical harm to support the vague and general

allegations in his motion and declaration. When asked to explain the allegation of

potential physical harm on the basis of “various verbal confrontations or threats

directly from key criminals over the years in this massive/lengthy criminal case”,

petitioner testified that he “had a two minute back-and-forth” with an individual

related to one of the targets during the time when he was considering whether to

invest in the promoted investment. He also testified that when he decided not to

invest another individual related to one of the targets asked him to reconsider; he

said no, and his refusal was followed by “some pretty colorful language”.
                                       - 30 -

[*30] Petitioner acknowledged that he was not confronted verbally or physically

by anyone related to the targets after he decided not engage in the proposed

investment with the targets. Although he testified that his vehicle was totaled at

some point, petitioner had no idea how it happened or whether this was linked to

any of the targets.

       The Court understands that petitioner may suffer some embarrassment or

annoyance if the motion is denied, but he has not provided the Court with a

sufficient, fact-specific justification for proceeding anonymously.

III.   Societal Interest in Open Courtrooms

       Petitioner’s weak fact-specific basis for anonymity must be balanced against

the competing societal interest. See Whistleblower 12568-16W v. Commissioner,

148 T.C. at __ (slip op. at 4-5); Whistleblower 14106-10W v. Commissioner, 137

T.C. at 205. The Court must balance the competing social interest of protecting

the identity of a whistleblower as a confidential informant with the societal

interest of the public’s right to know who is using the Court. See Whistleblower

12568-16W v. Commissioner, 148 T.C. at          (slip op. at 4-5); Whistleblower

14106-10W v. Commissioner, 137 T.C. at 205.

       There is generally a presumption of open judicial proceedings and public

access to court records. See Whistleblower 14106-10W v. Commissioner, 137
                                           - 31 -

[*31] T.C. at 189-190 (and cases cited thereat); see also sec. 7458 (providing that

hearings before the Court shall be open to the public); sec. 7461(a) (providing that

all reports of and evidence before the Court shall be public records open to the

inspection of the public). However, the Court is authorized under section

7461(b)(1) to make any provision necessary to prevent the disclosure of trade

secrets or other confidential information, including a provision that any document

or information placed under seal be opened only as directed by the Court. Rule

345 concerns itself with privacy protections for filing whistleblower actions in this

Court.

         Petitioner argues that the public’s interest in knowing his identity is

negligible. Petitioner further argues that the right to open judicial proceedings is

not absolute and does not apply to documents that have traditionally been kept

secret for important policy reasons, such as whistleblower claims at the

administrative level. Petitioner generally argues that “[t]he public does not have

as strong a right to know who confidential informants and whistleblowers are, as

they do ordinary litigants” and that “potential whistleblower petitioners must be

assured that they will be reasonably protected from the harms that could result

from their participation in the whistleblower program being made public.”
                                        - 32 -

[*32] However, petitioner’s arguments ignore the presumption that proceedings

before this Court are open to the public. See sec. 7458. To overcome that

presumption petitioner must set forth a sufficient, fact-specific basis for

anonymity, which he has not done. The Court recognizes that the Whistleblower

Office has thus far kept petitioner’s identity confidential, but petitioner has made

voluntary disclosures in the past motivated, at least in part, by his desire to be seen

as an “upstander”.

      Petitioner argues that the public’s interest in knowing his identity is weak

because this case is still in the early stages of the proceedings and no factual or

legal disputes have been raised. In Whistleblower 14106-10W v. Commissioner,

137 T.C. at 205, the Court, in weighing the societal interests at stake, found that

the public’s interest in knowing the whistleblower’s identity was relatively weak

because it had just held that the Commissioner was entitled to summary judgment

on a threshold legal issue that did not depend on the whistleblower’s identity.

      Petitioner’s case is distinguishable from the whistleblower in

Whistleblower 14106-10W. This case is not before the Court on a motion for

summary judgment or other dispositive motion. As the Court noted in

Whistleblower 12568-16W v. Commissioner, 148 T.C. at            (slip. op. at 5-6),

“[t]he implication, of course is that, if we had not disposed of the action at the
                                        - 33 -

[*33] beginning of the case on Commissioner’s motion for summary judgment, the

strength of the public’s interest might, as the case progressed, have appeared

stronger.” More importantly, however, in Whistleblower 14106-10W v.

Commissioner, 137 T.C. at 204, the Court found that the whistleblower had

sufficiently demonstrated a risk of harm severe enough to justify granting the

whistleblower anonymity. Petitioner has not sufficiently demonstrated a risk of

harm here to overcome the presumption of open proceedings and to weigh in favor

of granting anonymity.

      Petitioner seeks to distinguish Whistleblower 14377-16W from his case by

arguing that he is not a serial whistleblower filer. However, like the whistleblower

in that case, petitioner’s whistleblower claims are based on publicly obtained

information--information he obtained while being sought out as a potential

investor by the targets and on public information about the criminal proceeding

against an individual associated with one or more of the targets. Petitioner’s

whistleblower claims are not based on information he obtained as an employee or

in a fiduciary capacity. The public has an interest in knowing who is using public

information in litigating a case before the Court, especially in a case like this

where petitioner’s weak fact-specific basis for anonymity does not outweigh the

presumption of open proceedings.
                                         - 34 -

[*34]                                 Conclusion

        On the basis of the facts before the Court, mindful of our legal system’s

general solicitude for confidential informants, the Court finds that petitioner’s

weak fact-specific basis for anonymity does not outweigh the public’s right to

know who is using the Court.

        Accordingly, the Court will deny petitioner’s motion.


                                                  An appropriate order will be issued.
