Issa Sees Washington IRS Connection in Employee Interview

Photographer: Andrew Harrer/Bloomberg

The U.S. Internal Revenue Service is facing inquiries from six congressional committees and a criminal probe by the Justice Department concerning its review of potential tax-exempt groups. Close

The U.S. Internal Revenue Service is facing inquiries from six congressional committees... Read More

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Photographer: Andrew Harrer/Bloomberg

The U.S. Internal Revenue Service is facing inquiries from six congressional committees and a criminal probe by the Justice Department concerning its review of potential tax-exempt groups.

The tougher scrutiny given to Tea Party groups by the Internal Revenue Service was “coordinated in all likelihood” from Washington, the chairman of the House Oversight and Government Reform Committee alleged, bolstering his case with excerpts of interviews with agency employees.

“The administration’s still trying to say there’s a few rogue agents in Cincinnati when in fact the indication is they were directly being ordered from Washington,” Representative Darrell Issa, a California Republican, said yesterday on CNN’s “State of the Union.”

In the interviews, one employee, described as “more senior,” said it was understood that the purpose was to single out conservative and Republican groups and that some officials in Washington were involved.

“I mean, rogue agent?” the employee said, according to a partial transcript released by Issa’s office. “Even though I was taking all my direction from” technical experts in Washington, “I didn’t want my name in the paper for being this rogue agent for a project I had no control over.”

The panel didn’t disclose which employees were being quoted, what else they said or who in Washington was thought to be involved. Working with other panels, the oversight committee has said it was interviewing John Shafer, Gary Muthert, Liz Hofacre and Joseph Herr, all of whom worked in the Cincinnati office, where the applications were processed. Issa said the committee staff has 18 more interviews to do.

Tax Exempt

Previous public reports on the IRS’s scrutiny of Tea Party groups applying for tax-exempt status, which started in 2010, have shown that some officials in Washington were aware of how the applications were being handled before a June 2011 meeting. At the time Lois Lerner, then director of exempt organizations, learned about what was happening and ordered it changed.

Nothing released yesterday directly undercuts that timeline or shows that Lerner or anyone above her was aware of the selective scrutiny earlier than stated.

Representative Elijah Cummings of Maryland, the top Democrat on Issa’s committee, said in a statement yesterday that no witnesses have identified Washington IRS workers as ordering the use of “Tea Party” to screen applications.

“Rather than lobbing unsubstantiated conclusions on national television for political reasons, we need to work in a bipartisan way to follow the facts where they lead,” he said.

Three Executives

The revelation last month that the IRS applied extra scrutiny to small-government groups has led to six congressional inquiries, a criminal probe and three IRS executives, including Lerner, being pushed out of their jobs early or temporarily.

Danny Werfel, the acting IRS commissioner, is scheduled to make his first appearance at a congressional hearing today since taking over May 22.

Werfel announced several personnel moves today. He selected Heather Maloy, who had been overseeing large businesses, as deputy commissioner for services and enforcement, taking the place of Steve Miller, who was acting commissioner before he was forced out.

W. Todd Grams, the chief financial officer at the Department of Veterans Affairs, will be Werfel’s chief of staff, rejoining the IRS, where he was chief information officer and chief financial officer. Jennifer O’Connor, who was a partner at the WilmerHale law firm in Washington, will be counselor to Werfel and Chief Counsel William Wilkins.

Hearing Tomorrow

The House Ways and Means panel plans tomorrow to hear from groups seeking tax-exempt status that say they were singled out for added scrutiny. Representatives from groups in South Carolina, Alabama, California and Tennessee are set to testify.

The panel will hear from the chairman of the National Organization for Marriage, a group whose confidential information was released, and from the Coalition for Life of Iowa, which said it was asked to agree not to protest at Planned Parenthood Foundation of America to receive its tax-exempt status.

An inspector general’s audit and testimony from IRS executives at congressional hearings haven’t established who first started sorting applications based on whether they contained “Tea Party” or “patriot” in their names or why they did it.

Issa also is pressing the IRS on a second front -- the approximately $50 million it spent on 220 conferences for employees from 2010 to 2012.

Conference Costs

The cost of IRS conferences was released by Issa’s committee, which is scheduled to hold a hearing on the subject June 6. In one case, the IRS spent $4 million for an Anaheim, California, conference in 2010, including $135,000 for speakers such as a $17,000 lecture on “leadership through art.”

Issa said the agency didn’t negotiate the cost of hotel rooms, instead receiving perks such as game tickets or free drinks, which he called kickbacks. Some agency employees stayed in rooms costing $1,500 to $3,500 a night, according to Issa’s committee.

“The culture of the federal workforce is one where I don’t think you can underestimate that if you don’t keep reminding the voters but also the federal workers that we’re watching, this will happen again,” Issa, a California Republican, said on CNN yesterday.

Mind Reader

The General Services Administration was the subject of similar scrutiny last year for money it paid for employee conferences, including $823,000 on a Las Vegas event featuring a clown, a mind reader and a $75,000 bicycle building exercise.

Members of Congress returning from a one-week recess are poised to focus on the IRS. The Treasury Inspector General for Tax Administration is expected to issue a report tomorrow about IRS spending on events, two days before the hearing in Issa’s committee on the subject.

The inspector general’s report pays particular attention to the Anaheim conference, according to the Washington Post, which cited unidentified congressional aides.

That gathering, for workers overseeing small businesses and self-employed taxpayers, featured an IRS-produced video parody of Star Trek. Agency employees also participated in a “dance party” video that mentioned plans for the conference.

Werfel said in a statement last week that the event was “an unfortunate vestige from a prior era” and the agency has since cut training and travel expenses.

‘Take Comfort’

“Taxpayers should take comfort that a conference like this would not take place today,” Werfel said in a statement. “Sweeping new spending restrictions have been put in place at the IRS, and travel and training expenses have dropped more than 80 percent since 2010 and similar large-scale meetings did not take place in 2011, 2012 or 2013.”

Some details of the Anaheim event were already known. The Star Trek video became public earlier this year. The dance party video, which shows employees being instructed in line dancing ahead of the conference, was released by the House Ways and Means Committee on May 31.

The IRS said in a statement that the video was “unacceptable and an inappropriate use of government funds.” The agency said it and the entire government have “strict new policies” to ensure taxpayer funds are used properly.

To contact the reporters on this story: Richard Rubin in Washington at rrubin12@bloomberg.net; William Selway in Washington at wselway@bloomberg.net

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

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