Now, about those other cases I mentioned. When Holder told ABC News that he didn’t have any respect for Congress, I wasn’t the only one outraged. Chuck Grassley from Iowa, a senior and respected senator, told the Washington Post that Holder’s attitude “may have also led to people in this Administration thinking they can go after conservatives and conservative groups,” a reference to the IRS scandal.
No doubt.
Chapter 7
Lying to Congress
For many decades, Charles and David Koch of Koch Industries, one of the largest privately owned companies in the world, had advocated policies that could be best described as libertarian-oriented, free-market economics. They helped found the Cato Institute—a think tank—and a host of other free-market groups, including Americans for Prosperity. It is a pretty safe assumption that they would contribute money to various Tea Party groups, which aligned with them on most policies.
And so it was that a little-noticed, initially anonymous quote emerged from a press briefing August 27, 2010, by Austan Goolsbee, a senior White House official who chaired the president’s Economic Recovery Advisory Board. Said the “official”:
So in this country we have partnerships, we have S corps, we have LLCs, we have a series of entities that do not pay corporate income tax. Some of which are really giant firms, you know Koch Industries is a [sic] multibillion dollar businesses. So that creates a narrower base because we literally got something like 50 percent of the business income in the U.S. is going to businesses that don’t pay any corporate income tax.
Alarming. How would the White House know or even surmise what income tax Koch Industries did or did not pay unless the White House had examined their tax returns? Which, obviously, would have been illegal.
Mark Holden, chief legal counsel for Koch, told the Weekly Standard, “We are concerned where this [tax] information would have been obtained from.” Representative Devin Nunes issued a statement asking the House Ways and Means Committee to look into whether the White House misused confidential tax information.
Thus began an IRS scandal that was, arguably, the most serious one in the agency’s history. And let me be explicit about what constitutes serious: Americans must have a certain degree of faith in their government. Our faith in the rule of law and our government institutions is what separates us from the average banana republic. It is this faith that underlies and supports our democracy, our elections, our economic stability, and our currency.
By 2013, a Gallup poll showed only 27 percent of Americans thought the IRS was doing a “good” job. It was the lowest-ranking federal agency. (The Centers for Disease Control was ranked the highest at 60 percent.) The fact is that the Internal Revenue Service is the federal agency Americans fear more than any other.
The IRS is quite proud of this:
On July 1, 1919, the IRS Commissioner created the Intelligence Unit to investigate widespread allegations of tax fraud. To establish the Intelligence Unit, six United States Post Office Inspectors were transferred to the Bureau of Internal Revenue to become the first special agents in charge of the organization that would one day become Criminal Investigation. They formed the nucleus that built the Intelligence Unit into an elite group of highly trained, dedicated professionals, who are recognized as the finest financial investigators in the world.
The Intelligence Unit quickly became renowned for the financial investigative skill of its special agents. It attained national prominence in the thirties for the conviction of public enemy number one, Al Capone, for income tax evasion, and its role in solving the Lindbergh kidnapping. From these promising beginnings the Intelligence Unit expanded over the intervening decades, investigating tax evasion by ordinary citizens, prominent businesspersons, government officials, and notorious criminals.
In July 1978, the Intelligence Unit changed its name to Criminal Investigation (CI). Over the years CI’s statutory jurisdiction expanded to include money laundering and currency violations in addition to its traditional role in investigating tax violations. However, Criminal Investigation’s core mission remains unchanged. It continues to fulfill the important role of helping to ensure the integrity and fairness of our nation’s tax system.
Since CI’s inception in 1919 to the present, the conviction rate for Federal tax prosecutions has never fallen below 90 percent. This is a record of success that is unmatched in Federal law enforcement.
The IRS actively encourages citizens to report anyone they might know and suspect of not reporting income or exaggerating deductions. On their website, the IRS also opines a bit on antitaxation groups and their viewpoints, disparaging them:
Complicated arguments against the American tax system are built by stringing together unrelated ideas plucked from widely conflicting court rulings, dictionary definitions, government regulations and other sources.
They also call out certain groups and their leaders who argue against taxation:
Though the leadership of these movements used different arguments to gain followers, they all share one thing in common; they received substantial sentences in a federal prison for their activities.
Now, I am not opposed to paying my fair share of taxes, or to laws requiring all citizens to do the same. But consider the weight of those words from a federal agency that has the right to potentially put you in prison. That is pretty strong and intimidating language. Elected officials, including Senator Ted Cruz, have called for abolishing the IRS. Should Senator Cruz be sent to prison for that opinion?
The problem with the IRS goes beyond the political misuse of a government agency. As you’ll soon see, it was covered up, the perpetrators received paid leave and cushy retirements, the DOJ failed to punish anyone, and Congress was blocked from seeing key evidence. On top of that, though, they added a new twist: lying to Congress with impunity.
Weaponizing the IRS
Nothing should scare us more than the use of agencies like the Internal Revenue Service and Department of Justice to retaliate against those whose political views run counter to the president’s. The breaching of the wall between the political and the administrative agendas of federal agencies has far-reaching implications for every single American. I wish I could say we had fixed it. But nothing has been fixed. President Trump could engage in the same activities tomorrow and there would be no law to stop him. The only difference is that perhaps this time the left would recognize the significance of the threat.
The seeds for the Obama administration’s blatant misuse of the government’s tax collection authority were planted with a landmark January 21, 2010, U.S. Supreme Court ruling. In a 5–4 decision, the Court held that the free speech clause of the First Amendment prohibits the government from restricting independent expenditures for communications, meaning advertising, from nonprofit corporations, for-profit corporations, labor unions, and associations. The Citizens United case allowed everyone to contribute money to political campaigns.
To the extreme left, the sky fell. The hyperbole, passion, and intensity that greeted this Supreme Court decision continues today, but in 2010 you would have thought a nuclear bomb had destroyed the integrity of the American election systems.
A year before the Supreme Court decision, a newly inaugurated President Obama was pushing the American Recovery and Reinvestment Act, a package costing close to $1 trillion. CNBC personality Rick Santelli took to the airwaves from the floor of the Chicago Mercantile Exchange to rail against the act as floor traders began to vocally boo the government’s policies. Santelli said, “We’re thinking of having a Chicago Tea Party in July!”
Most observers would call that the beginning of the modern-day Tea Party, a movement critical of both Republicans and Democrats who for too long rubber-stamped ballooning debt, government overspending, and government intrusion into everyday Americans’ lives.
The Citizens United decision freed up groups and associations to spend money on elections. So . . . the backstory.
We all remember what happened next. In 2013, the IRS revealed
that its staffers had singled out conservative groups with names like “tea party” or “patriots” that were seeking tax-exempt status. They asked these groups about their members and donors and subjected them to scrutiny that was completely different than other groups. The IRS developed a spreadsheet called “BOLO”—“Be On the Look Out”—for applications from Tea Party–supporting groups. The IRS went through several commissioners, one of whom, Steven Miller, was forced to resign after just six months by Treasury secretary Jack Lew after it was revealed he knew about the targeting.
And, of course, our old friends at the Department of Justice opened a criminal investigation into whether IRS employees broke the law when they targeted the groups. (Try and guess where that investigation went!)
Despite the DOJ’s reckless failure to hold anyone accountable, the facts are not in dispute. A 2013 report by the Treasury Inspector General for Tax Administration (TIGTA) described in detail the use of “inappropriate criteria” to screen political advocacy groups. Altogether, 296 such groups were subjected to higher scrutiny.
IRS officials told the inspector general that they had used the keywords of “tea party” and “patriots” as shorthand to efficiently manage a deluge of new political advocacy groups, but that explanation was rejected by the inspector general’s office.
“Developing and using criteria that focuses on organization names and policy positions instead of the activities does not promote public confidence that tax-exempt laws are being adhered to impartially,” said the report, which Inspector General J. Russell George issued.
President Obama, in a fit of faux outrage, called the report’s findings “intolerable and inexcusable.” He directed Secretary Lew “to hold those responsible for these failures accountable, and to make sure that each of the Inspector General’s recommendations are implemented quickly, so that such conduct never happens again.” That was the last America heard from him on that topic.
The Good Luck of Lois Lerner
Despite the fact that there were at one point five different investigations of IRS misconduct taking place, Lois Lerner would somehow escape virtually unscathed. On June 3, 2011, the then chairman of the House Committee on Ways and Means, David Camp, Republican of Michigan, sent a letter to the IRS commissioner at the time, Douglas Shulman, stating that “the IRS appears to have selectively targeted certain taxpayers who are engaged in political speech.” Just ten days later the IRS’s director of exempt organizations, Lois Lerner, told her IT department that her computer was inoperable. What a lucky break for her. The IRS never was able to recover her hard drive.
Soon after she would tell the House Oversight Committee, “I have not done anything wrong.”
But she had. Lerner’s group was in charge of processing, then approving or disapproving an organization’s applications for tax-exempt status—and applications had flooded in between 2010 and 2012, nearly doubling each year. The Department of Justice has since settled with the targeted entities, openly admitting the political targeting, which Lerner had overseen.
In her May 22, 2013, testimony before the House Oversight Committee, Lerner referenced George’s TIGTA report in her opening statement and went on to say, “the Department of Justice launched an investigation into the matters described in the Inspector General’s report. In addition, members of this Committee have accused me of providing false information when I responded to questions about the IRS processing of applications for tax exemption.” Looking up from her written document, she forcefully declared, “I have not done anything wrong.” She concluded her remarks saying that “while I would very much like to answer the committee’s questions today, I have been advised by my counsel to assert my constitutional right not to testify or answer questions related to the subject matter of this hearing. After very careful consideration I have decided to follow my counsel’s advice.” That she did, and the following day she was put on paid administrative leave.
Several important events in this scandal unfolded over the next few months after Lerner’s testimony and contributed to her good fortunes. The Deep State always protects its own.
The same day Lerner testified, it appeared the noose was beginning to tighten. The IRS’s chief technology officer issued a preservation notice, or “non-destruction order,” so that no information would be destroyed. On August 2 the first subpoenas were issued for IRS materials. That created a legal obligation to preserve and produce Lerner’s emails. In June the use of those BOLO lists was officially suspended. But Lerner’s luck was about to improve.
On June 20 the news was made public that, despite having to furlough its employees for several days that year due to budget cuts, the IRS was going to pay out $70 million in employee bonuses. Among those employees was Lerner, who got $42,000, and former acting commissioner Steven Miller, who had to resign due to the targeting scandal. Miller got $100,000. Meanwhile, Congress threatened to slash the IRS budget even more as punishment for the scandal. Then, just before Christmas, the IRS got a new boss on December 23 when John Koskinen was sworn in as commissioner. Koskinen’s subsequent actions would prove very helpful to Lerner.
On Super Bowl Sunday, February 2, 2014, while much of the world was focused on the clash between the Seattle Seahawks and Denver Broncos, two significant events in the IRS investigation took place, both of which would be good for Lerner.
The first was Fox News’ Bill O’Reilly’s ten-minute interview with President Barack Obama. On this date, there were no fewer than those five open investigations into the IRS targeting of conservative nonprofits. Those included:
House Oversight Committee
House Ways and Means Committee
Senate Judiciary Committee
Senate Finance Committee
Inspector General (TIGTA)
Despite those five open investigations, the president stated on national television that the IRS scandal had “not even mass corruption—not even a smidgen of corruption.” Obama then admitted that while records show that the former IRS commissioner Douglas Shulman had visited the White House more than one hundred times, Obama couldn’t recall speaking to him on any of those occasions.
The second event involved a woman named Catherine (Kate) Duval. Kate Duval was an attorney who had been inexplicably reassigned from the Treasury Department to the IRS. Her job was specifically to handle document production to Congress. She was also a counselor to IRS commissioner Koskinen. Oddly enough, Super Bowl Sunday found her in her office, where, she later told the committee, she suddenly noticed there were all these missing documents. Among those documents were Lois Lerner’s emails. Those documents were covered by a preservation order and a subpoena.
As of that Super Bowl Sunday, those documents still existed on backup tapes. Duval made no effort to retrieve them. Just a month later, on March 4, 2014, more than 400 backup tapes were destroyed. It’s likely that those tapes contained up to 24,000 of Lois Lerner’s emails from the critical period in 2011.
I summarized for the committee on May 24, 2016, the extraordinary series of events that led to the mysterious disappearance of Lerner’s emails.
On February 2, 2014, Kate Duval realized some of Lerner’s emails were missing from what the IRS sent Congress. The next day, Duval told her colleagues at the IRS about the problems she had found: IT, the Office of Chief Counsel, and deputy associate chief counsel, Thomas Kane.
Many of her emails were missing because her hard drive had crashed in 2011. The IRS knew in early February that there was a problem with the emails.
Koskinen testified that he knew in February. This is what he said at the July 23, 2014, hearing before the House Oversight and Government Reform Subcommittee. “What I was advised and knew in February, was that when you look at the emails that had already been provided to the committee in other investigations, and instead of looking by search terms, looked at them by date, it was clear that there were fewer emails in the period through 2011 and subsequently. There was also, I was told, there had been a problem with
Ms. Lerner’s computer.”
What did Koskinen do about it? He had just learned that the most crucial evidence covered by the subpoena was missing. You’d expect him to spring into action.
According to the inspector general, he failed to look in five of the six places Lerner’s emails could have existed—the backup tapes, her BlackBerry, the server, the backup server, and the loaner laptop. In fact, the IRS barely looked for the missing emails at all, according to the IG. Lois Lerner herself could not have scripted it better.
In April, Koskinen’s agency notified the Treasury Department and the White House that Lerner’s emails were missing. Then they told Congress in June by burying a couple of sentences in the fifth page of an attachment in a letter to the Senate Finance Committee. Koskinen came up to Congress to explain what he said. Then he lied.
On June 20, 2014, Koskinen appeared before the House Ways and Means Committee and stated, “since the start of this investigation every email has been preserved, nothing has been lost, nothing has been destroyed.”
We now know that to have been patently false. When he testified before the Oversight Committee on June 25, 2015, Timothy Camus, the deputy inspector general for investigations, told us that the employees in Martinsburg, West Virginia, who destroyed the tapes said no one had ever attempted to retrieve them. No one had even communicated the existence of a preservation order or a subpoena for them. Unbelievable.
“The destruction that we’re talking about required the employees involved to actually pick up tapes and place them into a machine, turn the machine on to magnetically destroy and obliterate the data,” stated Camus. “Our investigation has shown that the two employees who physically put those tapes in that machine are lower-grade employees. . . . They did not stop erasing media . . . until June of 2014. When interviewed, those employees said our job is to put these pieces of plastic into that machine and magnetically obliterate them. We had no idea there was any kind of preservation [order].”
The Deep State Page 8
