Lois Lerner’s Hard Drive Is Central as Issa Investigates IRS

June 23 (Bloomberg) -- A special prosecutor should probe the loss of Internal Revenue Service e-mails that may contain facts about its scrutiny of Tea Party groups seeking tax-exempt status, the House Ways and Means Committee chairman said. Bloomberg’s Yang Yang reports on “Bottom Line.” (Source: Bloomberg)

A central character in the 14-month dispute in Congress over the U.S. Internal Revenue Service’s scrutiny of Tea Party groups is a computer hard drive.

The device in question belonged to Lois Lerner, the former IRS official accused by Republicans of giving extra scrutiny to small-government groups seeking tax-exempt status. The IRS says a catastrophic failure -- the crash of her computer hard drive followed by the recycling of backup tapes -- means two years’ worth of her e-mails were wiped out.

Republicans don’t buy it. They argue that in an age where it seems like every keystroke lives forever, it’s too much to believe that these particular e-mails, from this particular person, simply vanished.

They criticized IRS Commissioner John Koskinen for saying in March that the agency would produce all of Lerner’s e-mails.

“Transparency clearly did not compel the IRS to tell the truth,” Representative Darrell Issa, chairman of the House Oversight and Government Reform Committee, said to Koskinen during a hearing tonight. “I’m sick and tired of your game-playing in response to congressional oversight.”

Koskinen is testifying before lawmakers today for the second time in four days.

In his prepared testimony for the hearing, Koskinen blamed the “aged equipment” that the IRS uses because of budget constraints and said that so far this year, 2,000 IRS employees out of about 90,000 have suffered hard-drive crashes.

Photographer: Pete Marovich/Bloomberg

Lois Lerner, then the director of the Internal Revenue Service's exempt organizations office, during a House Oversight and Government Reform Committee hearing in Washington, D.C., on May 22, 2013. Close

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Photographer: Pete Marovich/Bloomberg

Lois Lerner, then the director of the Internal Revenue Service's exempt organizations office, during a House Oversight and Government Reform Committee hearing in Washington, D.C., on May 22, 2013.

67,000 E-Mails

The tax agency said last week that the computer failure meant it couldn’t recover many of Lerner’s e-mails from 2009 to 2011, though it is providing lawmakers with 67,000. Lerner, who retired last year, oversaw employees who determined whether groups seeking nonprofit status were too political.

Issa sent Koskinen a list of questions yesterday about the technology failures and when Koskinen learned about them. The commissioner, who took over the IRS last year, said earlier this year that the agency would produce all of Lerner’s e-mails.

The IRS has produced thousands of her e-mails, including some from the two-year period in question, by retrieving them from other people on the messages.

After her hard drive crashed, Lerner tried to retrieve data on there that she said was irreplaceable, according to e-mails released by the IRS and highlighted by Democrats.

In his prepared testimony, Koskinen said that the hard drive crash occurred before any investigations started and that the agency’s inspector general is examining the matter.

Private Companies

“It’s feasible that she loses her hard drive,” said Karen Evans, administrator for information technology at the Office of Management and Budget from 2003 to 2009. “It is feasible that the server would be cycled through.”

Retrieving e-mail is an important function that private-sector companies have fallen short on, too, Evans said.

“Most operations people have plans in place that you can recover e-mail because you don’t want everybody screaming and yelling at you,” she said. “It’s a thing that you try to avoid.”

There may still be a way to find more of Lerner’s e-mails if the IRS has retained e-mail transfer data showing the header information, Evans said. That would allow the tax agency to know who Lerner was corresponding with.

Starting in 2010, the IRS gave Tea Party groups seeking tax-exempt status extra scrutiny based solely on their names, causing the groups to experience delays.

Agency officials have acknowledged those actions while insisting the IRS didn’t do so for political reasons.

Social Welfare

Groups organized under section 501(c)(4) of the tax code, which are allowed to keep their donors secret, are required to operate “exclusively” for the promotion of social welfare. The IRS has interpreted that to mean they can’t have politics as their primary purpose, a rule that has led to disputes about the meaning of “politics” and “primary.”

So far, the investigations have found little, if any, direct evidence of political motivation or involvement from officials outside the IRS.

Instead, documents released so far show that lower-level workers were confused about what criteria they should use to sort and assess applications. They show that IRS executives tried to respond to concerns from Democratic lawmakers, among others, that groups were using 501(c)(4) status to circumvent campaign-finance disclosure laws.

Issa’s committee plans to continue its hearing tomorrow. In a statement today, he said the panel issued a subpoena to Jennifer O’Connor, a former IRS official now on the White House counsel’s staff, for her testimony at tomorrow’s hearing.

‘Substantial Information’

Issa released a letter from White House Counsel W. Neil Eggleston that said the panel was getting “substantial information” from Koskinen and others that should address the information it was seeking from O’Connor.

The panel’s ranking Democrat, Representative Elijah Cummings of Maryland, said in an e-mailed statement that Issa’s request that O’Connor appear before the committee “has less to do with her previous work at the IRS and more to do with seeking headlines about her current position at the White House.”

At a June 20 hearing by the House Ways and Means Committee, Representative Paul Ryan challenged Koskinen’s credibility about the missing e-mails.

“I don’t believe you,” said Ryan, a Wisconsin Republican. “This is incredible.”

“I have a long career; that’s the first time anybody has said they do not believe me,” Koskinen responded.

“I don’t believe you,” Ryan said.

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

To contact the editors responsible for this story: Jodi Schneider at jschneider50@bloomberg.net Justin Blum, Michael Shepard

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