7 YEARS OF HELL AT HANDS OF IRS
This is America. This is how IRS witnesses have to testify in America.
IRS Hearings Highlight IRS Abuses
"The committee has for the most part kept the latest witness list under wraps. None of those scheduled to testify are expected to use voice distorters or sit behind screens as witnesses did in the September hearings."
This is not normal for a vibrant Constitutional Republic. It is normal for a vibrant Communist totalitarian Banana republic where the rule of law has completely broken down.
IRS chief testifies at hearings
"The committee heard tales of armed IRS criminal inspectors raiding businesses whose owners didn't pose a violent threat, and then failing to bring criminal charges. Several IRS agents testified they faced retaliation from managers after attempting to blow the whistle on misconduct.
Charges of racial discrimination and sexual harassment were aired, as were allegations that corporations received multimillion-dollar breaks in tax disputes. And, most surprising, three witnesses described an aborted plot by a renegade agent in Tennessee to bring phony money-laundering and bribery charges against former Sen. Howard Baker, R-Tenn., in order to enhance the agent's career."
...Sen. Phil Gramm, R-Texas, and others pressed Rossotti about how many IRS workers have been fired as a result of alleged abuses publicized in last fall's hearings. ``I think that firing about 50 of these people who clearly abuse the system would be a good thing'' for worker morale, Gramm said.
Rossotti didn't respond directly, but instead explained how difficult it is to fire federal workers. In most cases, employees resign or retire when faced with allegations of misconduct."
IRS Nightmares Get Senate Hearing
"As of late we seem to be auditing only poor people," said IRS agent Jennifer Long. "The current IRS management does not believe anyone in this country can possibly live on less than $20,000 a year, insisting that anyone below that level must be cheating by understating their true income.
"Currently, in a typical case assigned for audit, there are no assets, no signs of wealth, no evidence that would support a suspicion of higher unreported income. So when the IRS does initiate an audit on these people, these individuals were already only one short step away from being on the street," Long continued.
"I can personally attest to the use of egregious tactics used by IRS revenue agents which are encouraged by members of the IRS management," Long said. "These tactics, which appear nowhere in the IRS manual, are used to extract unfairly assessed taxes from taxpayers, literally ruining families lives and businesses, all unnecessarily and sometimes illegally."
IRS Boss Snagged Clinton Waiver
Charles Rossotti held on to millions of dollars of stock in AMS, which has huge contracts with the IRS, but got a midnight waiver of conflict-of-interest rules from the Clinton team.
Two weeks ago when Insight was reporting potential conflicts of interest involving IRS Commissioner Charles O. Rossottis large holdings in a company that does millions of dollars worth of business with his own agency (see A Taxing Dilemma, April 23), the IRS said not to worry. Rossotti is recused from dealing with the huge government contracts of American Management Systems (AMS), the company that he cofounded and of which he remains the major shareholder, said Frank Keith, the IRS national director of communications. The commissioner has executed a viable and rigorous recusal pro-cess to separate himself from any dealings with AMS, Keith insisted.
Now Insight has learned that in December 2000 the Clinton administration blew a very large hole in the wall that is supposed to separate Rossotti, whom Clinton appointed as commissioner in 1997, from dealing with his old company. Along with the last-minute pardons and midnight regulations that the administration rushed through in its last two months, it also issued a waiver of conflict-of-interest rules that allows Rossotti to participate in decisions that directly could affect the AMS bottom line.
Insight has obtained a copy of that waiver.
Signed on Dec. 11, 2000, by Clintons deputy Treasury secretary, Stuart Eizenstat, the waiver allows Rossotti to join in discussions and decisions about the IRS Custodial Accounting Project, which uses an automated financial-management system and software provided by AMS. I have determined that your disqualifying financial interest in the Custodial Accounting Project [CAP], which arises from your ownership interest in American Management Systems Inc. [AMS], is not so substantial as to be deemed likely to affect the integrity of the services that the government may expect to receive from you with respect to the CAP, Eizenstat wrote. Clintons man noted that, without this waiver, federal law would preclude [Rossotti] from participating in the CAP because certain decisions would have a direct and predictable effect on your financial interest in AMS.
Eizenstat, now a partner at the hugely powerful Washington law firm of Covington & Burling, did not return Insights telephone calls asking why the waiver was necessary.
The conflict-of-interest waiver allows Rossotti to participate in budget and resource-allocation issues, the prioritization of the CAP and high-level design and architecture issues. It gives him the power to decide how much money will go to the project and, indirectly, to AMS, say experts.
At press time, the IRS had not returned Insights telephone calls for comment about the newly revealed waiver and other issues that have surfaced.
And this is no minor matter, say ethics specialists. Rossotti called the Custodial Accounting Project critical to IRS ongoing computer-system modernization in testimony to a House subcommittee on April 4. The IRS has asked Congress for $50 million for the project in fiscal 2002 alone. Overall, the Bush administrations budget gives the IRS an 8 percent funding increase in 2002, double the 4 percent average re-quested for all agencies. The additional funds reflect the computer modernization.
Because so much of this money could flow to AMS scheduled to be paid more than $17 million this year by the IRS, according to IRS spokesman Keith some have expressed concern. I always want to be certain that government officials are avoiding conflicts of interests, but I wont jump to any conclusions, Rep. Ernest Istook Jr., R-Okla., chairman of the House Appropriations subcommittee that oversees IRS funding, tells Insight through a spokeswoman.
Officials of some of the watchdog groups that insisted Treasury Secretary Paul ONeill divest his $100 million worth of Alcoa stock (see The $100 Million Misunderstanding, April 2-9) now say that Rossottis situation is more serious than ONeills would have been had he not agreed to sell the stock. The point there [with Alcoa] was that there was very little the Treasury Department could do that would not impact Alcoa, and I think eventually Secretary ONeill came around to that conclusion, says Larry Noble, executive director of the Washington-based Center for Responsive Politics. I think the same principles apply [to Rossotti], a little bit more directly here in the sense that the IRS is doing business with AMS.
Charles Lewis, the executive director and founder of the Center for Public Integrity who called strongly for ONeill to divest, says Rossotti should follow ONeills lead. If ONeill should have divested, then clearly this guy should divest, Lewis tells Insight. The ONeill stuff that came up about Alcoa was really speculative about things that might involve Alcoa. This is an instance with Rossotti where the company has direct dealings with the government [agency], and its headed by their former chairman. ... This is much more specific, much more real, because this is a direct vendor with the agency, and hes not taken any of the various steps one would take to create an arms-length distance.
Lewis also is disturbed that the Clinton-Eizenstat waiver could make the potential for conflict even greater. Rossotti has gotten a waiver and can in fact be involved in conversations about his old company, he says. He clearly has a problem.
The founder of the Center for Public Integrity worries that there could be the perception that this company is flourishing because their former chairman is the head of the IRS and that theyre getting favorable treatment inside the IRS. Lewis also is concerned that Rossottis large holdings might tilt IRS employees to favor AMS. They all know about his association and substantial source of his personal wealth, and thats not a fact lost on bureaucrats whose job it is to survive and know these things.
And apparently AMS hasnt hesitated to throw its weight around the agency. According to Tax Notes, a well-respected weekly journal that covers tax policy, AMS Chairman and then-CEO Paul Brands and other AMS executives met with IRS officials in May and expressed concern that the IRS was reluctant to procure upgrades and new releases of AMS financial software. The AMS executives accused the IRS officials of being slow to make decisions about purchases of AMS products because Rossotti was commissioner, but did not provide any specific instances of such actions by IRS personnel, according to the article written by veteran tax reporter George Guttman.
AMS has not returned Insights many phone calls about the Tax Notes article or other matters related to potential or alleged conflicts of interest in these matters.
Lewis admits its possible that AMS actually could be getting less-favorable treatment than other IRS vendors because of Rossottis millions of dollars worth of holdings, but he thinks thats unlikely. I dont have any evidence of heartrending hardships brought on companies whose executives joined the administration of whichever party, Lewis says.
Some see the extensions AMS keeps getting to a contract from the late 1980s to provide the IRS with an automated financial system as evidence that it may have been getting special treatment from the agency. The IRS had stressed that the $17 million in one-year contracts the agency signed with AMS last year were add-ons to the existing contract and did not violate Rossottis pledge to divest if AMS pursued new business with the IRS. But insiders wonder why the IRS keeps buying these add-ons without taking new bids or offers from AMS competitors.
It could be that what theyre doing is extending contracts as a way to get around the problem of issuing new contracts or going out for bids, says Noble of the Center for Responsive Politics.
Meredith McGehee, senior vice-president of the government-ethics advocacy group Common Cause, says these appearance issues will continue to haunt Rossotti as long as he refuses to divest. When you have the commissioner of a very high-profile agency holding stock in a company thats doing business with that agency, obviously it raises concerns, McGehee tells Insight. Mentioning the allegations of IRS hiring of state tax chiefs as a reward for steering business to AMS, McGehee says, I would not ever be able to tell what the truth is. But the point is the questions are being raised, and having the questions raised is part of what damages the public confidence here.
Insight meanwhile has learned that John LaFaver, the Kansas secretary of revenue who contracted with AMS and then was hired by Rossotti as the IRS deputy commissioner of modernization, has left for the private sector. He recently became vice president for state and local solutions at AMS, which had used his favorable comments about the company in a marketing brochure while noting his status at the IRS. Reached at AMS headquarters in Fairfax, Va., LaFaver tells Insight, I dont think Im going to comment. He says he doesnt remember whether he made the endorsement of AMS as Kansas revenue secretary or IRS deputy commissioner.
As Insight previously reported, Karla Pierce, LaFavers successor who defended AMS when lawmakers were blaming the company for a rash of late tax refunds and erroneous delinquent notices, recently was hired as director of organizational transformation for the IRS modernization project by the agencys lead contractor, Computer Science Corp. (CSC). After the deadline for Insights first article, CSC sent a statement saying that CSC was impressed by her significant accomplishments as secretary of revenue in Kansas. But nowhere did the statement deny allegations that Rossotti used input or influence to get Pierce the job.
IRS agents testify behind screen to
protect thier identities.