TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Monday, July 4, 2016

The IRS Scandal, Day 1152

IntimidationABC News, Book Excerpt: Kimberley Strassel's 'The Intimidation Game':

Excerpted from The Intimidation Game: How the Left Is Silencing Free Speech, by Kimberley Strassel by arrangement with Twelve, an imprint of Grand Central Publishing, Copyright © Kimberley Strassel 2016.

Cleta Mitchell was sitting in front of her computer in Pinehurst, North Carolina. Mitchell is one of Washington’s most hard-working conservative lawyers, so she spirits off to her home there any chance she gets, for a change of scenery. It was a Friday, May 10, 2013, and she was clearing off the last to-do items, looking forward to a quiet weekend. Instead, her laptop started pinging like mad, notes flooding in from Republican and Democratic colleagues alike. “They all said the same thing: ‘Cleta, did you see? Did you? Lerner admitted it! She admitted the targeting. She apologized. You weren’t nuts after all!’” recalls the lawyer in an amused voice.

The e-mails came within minutes of Lois Lerner's confession. And that was much to the IRS's chagrin. The agency had carefully strategized the moment, choosing an obscure tax meeting as the place where Lerner would let slip the news that her IRS unit had spent three years harassing and silencing conservative groups. Lerner had hoped the little-noticed forum, and the Friday timing, would help skate the moment past the press. Instead, Washington exploded. “I don’t go to those ABA events—they are all communists,” says Mitchell (only half kidding). “But a lot of my Washington colleagues and lawyers were present, and they’d been following this, and they knew exactly what a bomb this was. The IRS was idiotic to think this wouldn’t blow up.”

Mitchell certainly wasn’t surprised. She’d been ferrying—or rather attempting to ferry—several of her clients through the IRS’s tax-exempt program for three years. She’d known there was something rotten on Constitution Avenue since at least 2010, as her applications sat on hold.

What did surprise her was Lerner’s description of events. The head of the IRS’s Exempt Organizations unit assured the ABA audience that this was just a little low-level slipup. Some “line people in Cincinnati” had “centralized” and delayed tax-exempt applications in a way that was “wrong.” They also sent out some letters that “were far too broad,” asking questions that “weren’t really necessary.” Luckily, crowed Lerner, the Washington IRS office was on hand to make it better. All better.

Mitchell couldn’t believe what she was reading. “When I heard her blaming this all on Cincinnati—when I’d been dealing with the Washington office from day one—well...I was rips---.” ...

Lerner’s confession at that conference did contain one small truth. The IRS targeting scandal did indeed start in “Cincy”—as D.C. headquarters refers to that outpost. On a cold late February day in 2010, a Cincinnati screener named Jack Koester found himself focused on an application from a local Tea Party group.

The IRS is a vast organization, employing ninety-five thousand people, who enforce a code 3.7 million words long that oversees taxes on everything from income to corporations to employment to estates to gifts to excises. It’s home to agents and auditors and specialists and examiners and investigators and lots and lots and lots of lawyers. It also oversees organizations that are “exempt” from paying taxes. The Exempt Organizations unit at the IRS is in fact a big operation; on any given day it oversees a universe of 1.5 million recognized tax-exempt organizations.

Precisely because the IRS handles so many nonprofit groups, it maintains a dedicated unit in Cincinnati—known as the Determinations unit—that processes initial tax-exempt applications. The Cincy Determinations unit in turn is divided into thirteen groups, one of which handles the initial “screens” of applications. The typical screener spends fifteen to thirty minutes on an application, and completes twenty to thirty a day.

Koester’s eye nonetheless settled for more than a few beats on the Tea Party application in front of him. He forwarded the application to his supervisor, noting, “Recent media attention to this type of organization indicates to me that this is a ‘high profile’ case.” His alert worked its way up the chain, all the way to Cincinnati’s boss of exempt operations, Cindy Thomas. She in turn forwarded it to one of Washington’s senior officials, Holly Paz, asking “whether [Washington] wants this case because of recent media attention.” Paz took less than a day to respond: “I think sending it up here is a good idea given the potential for media interest.”

So Lerner, the IRS, Obama—they were all correct that the targeting fiasco started with a “line agent” in Cincinnati. They just neglected to mention that within twenty-four hours of that agent’s alert—and every minute thereafter—it was political types in Washington running the show.

When Koester talked about “media interest,” he was undoubtedly referring to the wall-to-wall coverage that had just followed the Citizens United decision. He’d likely seen the White House’s furious reaction to the Court’s decision to free up speech rights, and Obama’s dressing-down of the Supremes. He’d likely seen the Democratic Party and its media allies bang on daily about the evils of conservative “nonprofits.” He’d likely taken in the nonstop stories about the Tea Party gearing up in opposition to Obama, and how they were rushing into the (c)(4) realm. And he likely knew those groups were having an effect. Only a month earlier, Scott Brown had won that Senate race, against all odds. Koester was a prime example of how an executive branch—and a political party—can drive a story and make the bureaucracy take notice.

We know that one person in particular took notice: an ambitious partisan by the name of Lois Lerner. ...

Congressman Jim Jordan was in his Ohio district, on the way to a speech, when Lerner spilled her beans. He’d known something was coming; TIGTA had given his office a heads-up that his IRS audit would go public soon, though Jordan didn’t know what was in it. He saw the name of his chief counsel, Chris Hixon, show up on the phone. “I hit the button and all he said was, ‘S---, it’s true.’”

Jordan’s first emotion: anger, and on a lot of levels. He’d won Ohio’s 4th Congressional District in 2006, and has a strong affinity for the Tea Party groups and their beliefs. He’d been tight with groups like the Sidney Shelby County Liberty Group, and highly visible conservative leaders like Tom Zawistowski, who ran the Portage County TEA Party. Those groups and others flooded Jordan’s phone lines in the wake of their February 2012 IRS letters. The congressman was concerned, but also unsure of what to make of the interrogatories. “Was it just some mistake at the IRS, was it illegal, was it something in between?” he remembers. “At the time, it was hard to know.”

Now he had heard from Lerner herself that it was far worse than anyone could have guessed. It had been a vast and orchestrated targeting campaign. That made Jordan boil.

“There’s plenty to be unhappy about with government. But this—this is the most fundamental right we have,” says Jordan, who in an interview two years later still looks dangerous even talking about it. “I don’t mean for this to sound apple pie, but this is the First Amendment—it is freedom of religion, freedom of assembly, and freedom of association. But of all those, the one the Founders stressed most was freedom of speech—and of that, political speech is the most important. It’s your most fundamental right to criticize your government. It does not get more basic than that.”

Jordan’s a former NCAA wrestling champion and Division I wrestling coach, and still looks like one. He’s sat on the House Oversight Committee since he was first elected, and is intense about his duty to oversee the executive branch. And that’s also what “frosted” him about the Lerner admission. Jordan hadn’t known what to make of those first, February complaints, but he’d taken them seriously. Within a few weeks he’d called Lerner in front of his staff to answer questions. Jordan’s team peppered many more IRS officials with questions in the eighteen months that followed. Every bureaucrat, on every occasion, insisted that there was nothing funny going on. Hixon’s call set Jordan to remembering all of them.

“When she gave that speech, a lot of Washington was wrapping its head around the fact that this had happened. But I’d already had all this interaction. So I was sitting in Ohio thinking, ‘They lied about this.’ And I thought, ‘Game on.’”

Democrats also shouldn’t have been surprised by the news. They’d inspired the targeting. They knew that a Democratic administration and Democratic Senate and Democratic House members had called on an IRS staffed with Democratic appointees to go after conservative groups.

They now knew that the IRS had done just that. They knew the nation was outraged. They knew Republicans and the media were asking whether Obama had ordered this, whether we had a new Nixon-era level of political targeting going on. And they knew that this was no time for excuses or partisanship. So Democrats joined Republicans in expressing outrage.

Obama labeled the IRS’s actions “inexcusable” and vowed to work “hand in hand” with Congress as it investigated the affair. The president was at pains to say he’d only learned about the targeting from “the same news reports” as the rest of America. White House press spokesman Jay Carney was at even greater pains to note that while the White House had been informed almost a month earlier that something was amiss at the IRS, the president had never been told.

In the Senate, Max Baucus wasn’t the only Democrat who had written to demand that the IRS take action against (c)(4) groups, but who now claimed to be outraged that it had done so. There was Oregon’s Jeff Merkley, who insisted that “what the IRS did was wrong” and that those “responsible” must be “punished.” There was New Hampshire’s Jeanne Shaheen, who claimed that the IRS actions were “completely unacceptable.” And there was New York’s Chuck Schumer, who maintained that “heads should roll at the agency.” Democrats in red and purple states, many of them up for reelection in eighteen months, nearly climbed over each other to produce appropriate levels of outrage.

And the administration at least put on the appearance of a swift response. Four days after the Lerner event, the Justice Department unveiled a criminal investigation. Five days after the event, the IRS announced that Miller was on his way out as acting commissioner. Six days after the event, Obama appointed Office of Management and Budget controller Danny Werfel to lead the IRS, promising he’d “restore confidence and trust.” Thirteen days after the event, Lerner was placed on administrative leave, having refused to testify before Congress or retire.

And yet it was all a sham.

Democrats created the environment that pressured the IRS to act. The Justice Department investigation never went anywhere. Werfel delayed the congressional probe, and instituted policies designed to further hamper nonprofit activity. Lerner was never fired, prosecuted, or even reprimanded.

Instead, from the moment the scandal broke, the IRS and White House were spinning a yarn—setting a false narrative and minimizing the misdeeds. Just one week after Lerner’s confession, Washington Democratic representative Jim McDermott used his opening statement at a Ways and Means hearing to declare, “There is a difference between stupid mistakes and malicious mistakes,” and all that had happened at the IRS was that a “small group of people in the Cincinnati office screwed up.” Press Secretary Jay Carney ten days after the scandal broke marked it all down to “line employees at the IRS who improperly targeted conservative groups.” Of course, even this Democratic telling of the scandal should have caused alarm. The idea that some “rogue” agents in Cincinnati could silence the speech of tens of thousands of Americans—and nobody noticed—is a damning criticism in and of itself.

This early slant would nonetheless prove remarkably effective. Millions of Americans would come to believe the following: that the United States has confusing tax-exempt laws (not true); that a flood of social-welfare and charitable applications overwhelmed that system (not true); that “low-level” and “rogue” agents had stepped out of bounds (not true); and that even liberal groups had been swept up in the harassment (definitely not true). It would take Jordan and other congressional investigators close to two years to unravel what had really happened. By then, not a lot of Americans were paying attention anymore.

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Comments

...and the mainstream media is still not the least bit interested.

Posted by: VoteOutIncumbents | Jul 4, 2016 10:13:22 AM

Crooked Hillary and Crooked Obama are a match made in...

Posted by: wodun | Jul 4, 2016 12:34:48 PM