Stonehill v. U.S. Dep't of Justice Tax Div.
| Decision Date | 10 February 2022 |
| Docket Number | Civil Action 1:19-cv-03770 |
| Parties | PAULINE DALE STONEHILL, Plaintiff, v. U.S. DEPARTMENT OF JUSTICE TAX DIVISION, Defendant. |
| Court | U.S. District Court — District of Columbia |
Re Document 15, 16, 30, 36, 39
In 1962, Henry Stonehill's business enterprises in the Philippines were raided by the Philippine National Bureau of Investigation (“NBI”), purportedly at the direction of the U.S. Government. First Am. Compl. (“Compl.”) ¶ 8, ECF No. 8. The evidence seized in those raids, which was provided by the NBI to the United States, was used to pursue both civil and criminal tax cases against Mr. Stonehill, id. at ¶ 15, and eventually resulted in a $17.6 million tax judgment against Mr. Stonehill and his business associate, see Def.'s Statement of Undisputed Material Facts (“Def. St. Facts”) at ¶ 1, ECF No. 16-2.
The three Freedom of Information Act (“FOIA”) requests at issue in this case are the most recent chapter in what is now over a half-century's worth of litigation as Mr. Stonehill, and Ms. Stonehill on behalf of his estate, have sought to uncover the full extent of U.S. government involvement and conduct in those raids and the subsequent litigation. Pending before the Court are the Tax Division's Motion for Leave to Amend its Answer, its Motion for Summary Judgment, and Motion for an Order Allowing a Sampling Vaughn Index, along with Ms. Stonehill's Cross-Motion for Partial Summary Judgment and Motion to Compel a Vaughn Index.
The full background to the present case is extensive; it “has spanned several decades and involves events on multiple continents.” Stonehill v. Internal Revenue Serv., No. 19-cv-3644, 2021 WL 1092166, at *1 (D.D.C. Mar. 22, 2021) (). Mr. Stonehill and his business associate were once tremendously successful and influential figures in the Philippines, owning sixteen corporations there, including U.S. Tobacco, in the mid-1900s. United States v. Est. of Stonehill, 660 F.3d 415, 418 (9th Cir. 2011). The U.S. government began to investigate Stonehill and his business operations in the early 1950s, and eventually in 1962 the Philippine NBI conducted a massive raid on all of Stonehill's businesses in the Philippines, the fruits of which were shared with the U.S. government and eventually resulted in a multi-million dollar tax judgment. Id. at 418-19.
Mr. Stonehill's first FOIA request was directed to the Department of Justice Criminal Division and referred to the Tax Division in 1979. Compl. ¶ 23; Ex. 1(a) of Am. Compl. Mot., ECF No. 7;[1] Def. St. Facts ¶ 6; Pl. Opp'n to Def. Mot. Summ. J. & Cross Mot. Partial Summ. J. (“Pl. MSJ”) at 12, ECF No. 26.[2] There is some ambiguity about the exact scope of that request, but Exhibit 1(a) to the Complaint-which parties agree is a copy of the original request-appears to generally request DOJ Records relating to Mr. Stonehill and the tax cases pending against him at that time. Ex. 1(a) of Am. Compl. Mot. at 4. In 1985, the Tax Division responded to that request by releasing 1, 145 documents, partially withholding 151 documents, and fully withholding 103 documents. Ex. 1(b) of Am. Compl. Mot.; Compl. ¶ 27; Def.'s Am. Answer (“Answer”) ¶ 27, ECF No. 15-1. Additional FOIA requests to the Tax Division and other federal agencies followed in the subsequent years, as well as a lengthy 60(b) motion to vacate the 1985 tax judgment and related discovery. Compl. ¶¶ 28-29, 36; Def. St. Facts ¶¶ 3-4; see also Stonehill v. Internal Revenue Serv., 534 F.Supp.2d 1, 2-3 (D.D.C. 2008), aff'd, 558 F.3d 534 (D.C. Cir. 2009) (summarizing related FOIA and 60(b) litigation).
Of particular relevance to the present action, Mr. Stonehill filed a request to the DOJ Tax Division on February 22, 2000 that requested “all records . . . pertaining to Harry S. Stonehill and the United States Tobacco Company, during the period January, 1952 through December, 1976 . . . .” Ex. 4 of Am. Compl. Mot.; Def. St. Facts ¶ 7; Compl. ¶ 54. At least part of the motivation for this request appears to be that Mr. Stonehill's current attorney could not access the files released pursuant to the 1979 request. Ex. 6(d) of Am. Compl. Mot. at 2 ().
In August 2000, Mr. Stonehill filed a FOIA complaint in this district related to the 2000 request. Compl. ¶ 60; Answer ¶ 60; Def. St. Facts ¶ 8 (citing Heggestad v. FBI, et. al, No. 1:00-cv-1960 (D.D.C.)). In a series of letters, Mr. Stonehill and the Tax Division reached a settlement agreement to resolve the litigation in October 2000 and stipulated to a dismissal with prejudice in December 2000. Compl. 62; Answer ¶ 62; Def. St. Facts ¶ 9; Ex. 3 of Def. Mot. Summ. J. (“Def. MSJ”), ECF No. 16. In that agreement, the Tax Division agreed[3] to release all documents contained in the Department of Justice file in United States v. Stonehill, et al., No. 65-cv-127, that were previously released following Mr. Stonehill's 1979 request, review the 254 documents which had been partially or entirely withheld from the 1979 request, release any additional documents if possible, and provide a Vaughn index for records it continued to withhold. Def. St. Facts ¶ 9; Ex. 5(b) of Am. Compl. Mot. ¶¶ 3-4, 6 (). For his part, Mr. Stonehill agreed to:
[D]ismiss the present FOIA lawsuit against the Tax Division with prejudice. You agree not to challenge the exemption decisions in this FOIA lawsuit. Further, you and your clients agree not to file any further FOIA or Privacy Act requests for documents in the Stonehill case files, in your own names or through agents or surrogates for seven years. This agreement does not prejudice your right, where appropriate, to seek these documents in discovery in another action nor does it waive the rights of the Tax Division or the United States to raise any applicable defenses to such a discovery request.
Id. ¶ 7. In a later settlement of a FOIA request for a specific deposition transcript, Ms. Stonehill again extended that prohibition by agreeing not to “file any FOIA request with the Tax Division and the Internal Revenue Service related in any way to Harry Stonehill or Robert Brooks” for another seven-year period. Ex. 7(b) of Am. Compl. Mot. ¶ 2 (2006 settlement agreement); Compl. ¶¶ 96-97.
Mr. Stonehill passed away in 2002. Compl. ¶ 85. After his death and the Ninth Circuit remand of his 60(b) case, Compl. ¶ 88, Answer ¶ 88, Ms. Stonehill eventually obtained documents shedding new light on the government's actions leading up to the 1962 raid, Compl. ¶¶ 89-93. Although the Ninth Circuit ultimately rejected the Stonehills' fraud-on-the-court argument and 60(b) motion, it acknowledged U.S. government misconduct before and after the raids, including that the government's attorney, John McCarthy, “was not entirely forthright in his representations to this court” in the original proceedings. Est. of Stonehill, 660 F.3d at 446. McCarthy was also hired by the Government as a consultant for the 60(b) proceedings, and his involvement in those later proceedings is the focus of one of the three requests at issue in the present action. See Pl. MSJ at 31-32.
In 2014 and 2015, a member of the news media named Bethany McLean submitted a series of FOIA requests relating to Mr. Stonehill. Compl. ¶¶ 107, 123, 128; Answer ¶¶ 107, 123, 128; Ex. 8(a) of Am. Compl. Mot. Those requests are relevant because they roughly correspond to the three requests at issue in this action, which themselves referenced the McLean requests and were submitted in September 2018:
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