## Facts

- A former employee (Edde) alleged he was induced to leave California to work for Sheikh Al-Ibrahim and became his constant companion.
- Edde alleged the Sheikh, a high-stakes gambler, required him to accompany casino visits and to sign documents attributing the Sheikh’s gambling winnings to Edde for reporting purposes.
- Edde admitted he signed for the winnings on forms submitted to the IRS, understood the arrangement was illegal, and claimed he believed refusal would result in discharge.
- The arrangement allegedly enabled the Sheikh to retain the winnings while avoiding U.S. taxes, with tax liability reported in Edde’s name.
- In 1991, Edde resigned amid exhaustion, marital strain, and IRS contacts about unpaid taxes on the reported winnings.
- Edde entered an IRS payment arrangement and paid roughly $400,000 in taxes without informing the IRS that the winnings belonged to the Sheikh.
- Edde asserted an oral promise by the Sheikh to reimburse him for tax liability arising from the false reporting.
- Edde counterclaimed for breach of the alleged reimbursement agreement, restitution, fraud (false promise to reimburse), and intentional infliction of emotional distress (IIED).
- The Sheikh moved to dismiss the counterclaim under Rule 12(b)(6).

## Issues

1. Whether an alleged oral agreement to reimburse taxes incurred as part of a deliberate tax-evasion arrangement is void as illegal and against public policy, barring contract recovery.
2. Whether restitution is available to a voluntary participant in the illegal scheme under any exception to the in pari delicto bar.
3. Whether a fraud claim based on an alleged promise to reimburse is barred where damages would effectively shift the consequences of the plaintiff’s admitted illegality.
4. Whether the alleged conduct satisfies the “extreme and outrageous” requirement for IIED under District of Columbia law, and whether participation in illegality independently bars relief.

## Decision

- The court granted the motion to dismiss and dismissed the counterclaim in full.
- The alleged reimbursement agreement was illegal and unenforceable because it was integral to a scheme to defraud the IRS.
- Restitution was denied because Edde knowingly and voluntarily participated in the illegality and did not fall within narrow exceptions permitting recovery.
- The fraud claim was dismissed because Edde’s admitted wrongdoing and unclean hands barred relief, even assuming the elements of fraud were otherwise pled.
- The IIED claim was dismissed because the alleged conduct was not extreme and outrageous as a matter of law and was also barred by Edde’s participation in the unlawful scheme.

## Legal Principles

- Courts will not enforce contracts that require or facilitate illegal conduct; agreements integral to fraud on the government are void as against public policy.
- A participant in an illegal bargain is generally barred from contract or restitutionary recovery under in pari delicto; exceptions are limited and require materially lesser fault or protected-class status.
- Unclean hands and related public-policy limits can bar tort recovery, including fraud, when the plaintiff seeks damages that depend on or compensate the plaintiff’s own illegal conduct.
- Under District of Columbia law, IIED requires conduct so extreme and outrageous that it exceeds all possible bounds of decency; demanding or exploitative conduct and refusal to reimburse, without more, is insufficient.

## Conclusion

The court refused to provide civil relief that would reallocate the financial consequences of an admitted tax-evasion scheme, holding the reimbursement arrangement unenforceable, barring restitution and fraud on illegality and unclean-hands grounds, and finding the alleged facts inadequate to state an IIED claim.


Al-Ibrahim v. Edde, 897 F. Supp. 620 (D.D.C. 1995)