IRS’s Lerner May Have Waived Rights at Hearing, Issa Says

May 22 (Bloomberg) -- Lois Lerner, the mid-level Internal Revenue Service official at the center of a controversy over treatment of small government groups, invoked her right not to testify after reading a statement denying that she had committed any crimes. Lois, the director of exempt organizations at the IRS, read her statement before the House Oversight and Government Reform Committee today in Washington. (This is an excerpt from the hearing. Source: Bloomberg)

A U.S. House committee chairman said the Internal Revenue Service official who refused to answer his panel’s questions today about her involvement in scrutinizing small-government groups may have waived her right to avoid testimony and might have to return.

Lois Lerner, a mid-level official at the center of the controversy over IRS treatment of small-government groups, invoked her constitutional right not to testify after reading a statement denying that she had committed any crimes.

Graphic: Who Knew What & When?

Representative Darrell Issa, chairman of the House Oversight and Government Reform Committee, said Lerner might have waived her constitutional right against self-incrimination by making a substantive opening statement.

“I am very proud of the work that I have done in government,” Lerner said today, reading a statement to committee members. “I have not done anything wrong. I have not broken any laws.”

The U.S. Constitution’s Fifth Amendment allows people to stay silent to avoid incriminating themselves.

Representative Elijah Cummings of Maryland, the panel’s top Democrat, said he didn’t think Lerner waived her rights. “We should give her the benefit of the doubt,” he told reporters.

Photographer: Chip Somodevilla/Getty Images

U.S. Treasury Inspector General for Tax Administration J. Russell George, left, former IRS Commissioner Douglas Shulman, center, and Internal Revenue Service Director of Exempt Organizations Lois Lerner are sworn in before testifying to the House Oversight and Government Reform Committee on May 22, 2013 in Washington, DC. Close

U.S. Treasury Inspector General for Tax Administration J. Russell George, left, former... Read More

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Photographer: Chip Somodevilla/Getty Images

U.S. Treasury Inspector General for Tax Administration J. Russell George, left, former IRS Commissioner Douglas Shulman, center, and Internal Revenue Service Director of Exempt Organizations Lois Lerner are sworn in before testifying to the House Oversight and Government Reform Committee on May 22, 2013 in Washington, DC.

Tea Party

The actions of employees who worked for Lerner erupted into a scandal at the tax agency that has cost two people their jobs and prompted four congressional inquiries and a criminal probe. Small-government groups seeking tax-exempt status, particularly those with “Tea Party” or “patriot” in their names, were subjected to extra scrutiny, and IRS officials were unable to stop the selective screening for 18 months.

Issa and other lawmakers have accused Lerner of making false statements to Congress, which would be a crime. Lerner, who apologized for the IRS screening practices at a May 10 industry conference, said she had done no such thing.

Several criminal-procedure specialists questioned whether Lerner had said enough to waive her constitutional right against self-incrimination.

Previous congressional witnesses, including former World Com Inc. Chief Executive Officer Bernard Ebbers, made similar statements without forfeiting their Fifth Amendment rights, said Stanley Brand, a Washington criminal defense attorney who was House general counsel from 1976 to 1983.

Statement ‘Puffing’

Lerner’s opening statement was “puffing,” Brand said. “She’s not talking about the substance. She’s not answering questions, and she’s not giving an account of what happened. She’s saying, ‘I’m innocent.’”

Photographer: Andrew Harrer/Bloomberg

J. Russell George, U.S. Treasury inspector general for tax administration, left, looks on as Steven Miller, who was forced out as acting commissioner of the Internal Revenue Service (IRS), speaks during a House Ways and Means Committee hearing in Washington, D.C., on May 17, 2013. Close

J. Russell George, U.S. Treasury inspector general for tax administration, left, looks... Read More

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Photographer: Andrew Harrer/Bloomberg

J. Russell George, U.S. Treasury inspector general for tax administration, left, looks on as Steven Miller, who was forced out as acting commissioner of the Internal Revenue Service (IRS), speaks during a House Ways and Means Committee hearing in Washington, D.C., on May 17, 2013.

Jeffrey Fisher, who teaches at Stanford Law School and argued a case on self-incrimination at the Supreme Court last month, said the contention that Lerner had waived her Fifth Amendment rights was “baseless.”

He pointed to Supreme Court cases permitting the selective exercise of the right to remain silent in congressional testimony and other contexts.

Brand said that as a practical matter, congressional Republicans can test Lerner’s assertion only by holding her in contempt and referring her case to the Justice Department for prosecution -- a process that could take two years.

“By then, we’ll be in a new Congress,” he said.

Inspector General

Issa also said today that the inspector general who examined the matter “failed” to inform Congress after learning what had happened.

Issa, as he opened the third congressional hearing on the IRS, criticized the agency for not telling lawmakers what it knew after senior officials learned about its actions in May 2012.

“Congress was misled,” Issa said. “The American people were misled.”

The Treasury inspector general for tax administration, Russell George, released a May 14 report showing that the IRS had more closely examined tax-exempt groups whose names included words such as “Tea Party” and “patriot.”

Photographer: Joshua Roberts/Bloomberg

U.S. Representative Darrell Issa, a Republican from California and chairman of the House Oversight and Government Reform Committee, criticized the Internal Revenue Service for not informing lawmakers what it knew after senior officials learned about its actions in May 2012. Close

U.S. Representative Darrell Issa, a Republican from California and chairman of the... Read More

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Photographer: Joshua Roberts/Bloomberg

U.S. Representative Darrell Issa, a Republican from California and chairman of the House Oversight and Government Reform Committee, criticized the Internal Revenue Service for not informing lawmakers what it knew after senior officials learned about its actions in May 2012.

George said he hasn’t been able to determine who came up with those criteria.

“We have had some difficulty in terms of getting clarity from some of the employees we’ve interviewed,” he said, adding that further inquiries could make those employees more forthcoming.

George said today that he waited to ensure the report would be fair and that the IRS could respond to allegations.

‘Partial Information’

“It would be impractical for us to give you partial information which may not be accurate,” he said.

Issa requested the report last year after Tea Party groups complained about the questionnaires they were receiving from the IRS. He said inspectors general are required to inform lawmakers of significant issues and that he had specifically asked for such an update in August 2012.

Douglas Shulman, who was commissioner of the IRS until November, had told lawmakers in March 2012 that there was “absolutely” no targeting.

Testifying today, Shulman said he stands by his decision not to tell Congress what he knew, partly because the activity had been stopped by then and he knew that the inspector general was investigating.

“I didn’t have anything concrete,” he said. “I didn’t have a full set of facts to come back to Congress or the committee with.”

At a hearing yesterday before the Senate Finance Committee, Shulman refused to apologize. Today, he said, “I’m very sorry that this happened while I was at the Internal Revenue Service.”

‘Gross Incompetence’

Cummings criticized “gross incompetence and mismanagement” at the IRS for failing to have clear rules for how to review applications for tax-exempt status.

Organizations seeking tax-exempt status under section 501(c)(4) of the U.S. tax code don’t have to disclose their donors. Under Treasury rules, such groups can’t have politics as their primary purpose.

Oversight committee staff members yesterday interviewed Holly Paz, a mid-level IRS official.

The committee also released internal IRS e-mails that back up part of the IRS’s story that lower-level employees came up with the criteria as a shortcut to centralize cases involving potential impermissible political activity.

In an e-mail on June 2, 2011, Cindy Thomas of the tax-exempt division wrote to Paz, who supervised legal guidance on issues involving the groups.

Screening Criteria

Thomas described the screening criteria, which captured “Tea Party” groups, as something the “screening group came up with based on cases they were seeing” as applications came in.

“If we don’t want the screening group to include all of these type issues as ‘tea party cases,’ they would have no problem including or excluding certain cases,” Thomas wrote in a plea for a consistent rule.

“What I am trying to say is that it doesn’t matter what the cases are called or how they are grouped,” she wrote.

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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