The ‘Very Serious’ Tradition of the Internal Revenue Service

by Jim Geraghty
Our tax-collecting agency has been called “an invitation to corruption” for decades.

In light of its recent admission that conservative groups were improperly targeted for special scrutiny in applications for tax-exempt status, and the release of a conservative group’s private tax information to liberal organizations, the Internal Revenue Service wants you to know it takes all allegations of wrongdoing by its workers very seriously.

“Very seriously.”

Back in 2012, when the National Organization for Marriage’s (NOM) tax files were published by the Human Rights Campaign (HRC), and the NOM accused the Internal Revenue Service of leaking the information, the agency’s written statement laid down the law:

“IRS takes this confidentiality of return information very seriously. Any allegations of improper disclosures of taxpayer information are investigated by the Treasury Inspector General,” IRS spokesman Dean Patterson said in a statement.

That’s not the only thing the IRS takes “very seriously.” In 2011, after the treasury inspector general for tax administration, J. Russell George, concluded that 2,200 databases used by the IRS to manage and process taxpayer information were not secure, the IRS management issued a statement in response that they “take the security of our databases very seriously.”

“Very seriously.” 

They took it just as seriously as they had in 2008, when an IRS employee was caught snooping in the tax records of more than 200 friends and celebrities.

“TIGTA and the IRS take the security of taxpayer data very seriously. TIGTA uses a computer-based detection program that analyzes access to tax accounts, and identifies those with potential unauthorized access (UNAX) issues,” said George.

“Very seriously.”

The IRS took that 2008 case just as seriously as they had in 1997, when hundreds of employees were caught doing the same thing:

The Internal Revenue Service fired 23 employees, disciplined 349 and counseled 472 after agency audits found that government computers were still being used to browse tax records of friends, relatives and celebrities.

A document, released yesterday and covering fiscal 1994 and 1995, listed 1,515 cases where employees were accused of misusing computers. After accounting for the employees who were fired, disciplined or counseled, 33 percent of the cases were closed without any action, and the remaining 12 percent of accused employees took retirement or were cleared.

Still, some might have wondered about the effectiveness of the earlier very serious declaration of a very serious “zero tolerance policy,” instituted after “a probe in 1993 and 1994 turned up more than 1,300 employees suspected of using government computers to browse tax files.”

Certainly, the IRS took the 1997 case at least as seriously as the mid-1990s revelation that “a snooper in the IRS’s Boston office turned out to have been a member of white supremacist groups, and a witness testified that the worker said he planned to use the tax data to build dossiers on people.”

The more you look at past wrongdoing and criminal activity at the IRS, the more you see those words “very seriously.” In fact, a cynical mind might conclude it was a meaningless phrase that was automatically rolled out to create the impression of severe consequences and an atmosphere of responsibility and accountability.

For example, back in 2011:

More than 100 employees of the Internal Revenue Service cheated the government by fraudulently claiming a first-time homebuyer tax credit included in the 2008 and 2009 economic stimulus packages, according to federal investigators.

The Treasury Department’s inspector general for tax administration, in several reports over the past few years, has identified a total of 128 IRS employees who claimed the credit but who also made other claims that showed they either weren’t first-time buyers or bought their homes outside the eligibility period for the credit, which was worth up to $8,000. . . . 

Instead of answering the questions, spokesman Grant William issued a general statement saying the agency takes compliance with tax laws “very seriously” and promised “strong action, including dismissal” when it finds that an erroneous claim has been made.

“Very seriously.”

In the aftermath of that very serious response to the inspector general’s report, a New Hampshire IRS agent was indicted for tax fraud for improperly claiming the tax credit. And while there’s no press release to go with it, we can safely assume the IRS took equally seriously the 2010 case in St. Paul, Minn., when an agent pleaded guilty to soliciting and receiving a $9,700 bribe; and the 2010 case of the former supervisory special agent in the Orlando office of the IRS criminal-investigation division,  who pleaded guilty to failing to report income from a tattoo parlor he co-owned.

With all of this very serious focus on wrongdoing among current employees, the IRS hasn’t been able to be quite as serious about the trend of former employees helping people commit tax fraud.

To take just one example, in 2012 a former IRS agent pleaded guilty in Connecticut, “moments after a federal prosecutor accused him in an opening statement to jurors of claiming deductions that included the price of treats for his dog and a ring he was stuck with after a broken engagement.”

There’s also the 2012 case in California of a former IRS agent who “was sentenced to nearly three years in federal prison for his role in a securities fraud scheme that bilked hundreds of people across the U.S. out of more than $8 million.”

That case was separate from another 2012 California case, in which a “former Internal Revenue Service agent and tax preparer pleaded guilty to a dozen felonies . . . in connection with a plot to kill four witnesses against him in a criminal fraud case.” Is tax fraud a gateway crime to hiring a hit man?

But those examples from last year shouldn’t be confused with a 2011 California case of “a former Internal Revenue Service agent filing fraudulent tax returns for himself and unsuspecting relatives . . . from 2003 to 2007,” who was ultimately sentenced to three years in federal prison.

Then there was the 2011 Iowa case of a former IRS criminal-investigative agent who was barred from preparing tax returns for others after claiming $21 million in fraudulent deductions.

And there’s the 2011 case in Delaware of a former IRS agent who pleaded guilty to helping to prepare a fraudulent tax return; prosecutors alleged the former agent “routinely included false deductions and credits on his clients’ tax forms.”

And the 2011 case in Reno of a man “using his IRS agent status to recruit young women into illegal prostitution.”

And in 2009, “a retired Internal Revenue Service agent, Thomas W. Steelman, 72, of Blue Springs” was “sentenced to 46 months in federal prison for his role in a tax fraud scheme.”

That followed a case in 2008, when a 25-year veteran of the IRS pleaded guilty to tax evasion.

Which is not to be confused with the time an IRS employee was caught taking stolen property in 2007:

Robert O. Steven and his wife Patricia were charged with receipt of stolen property in connection with a scheme allegedly run by Harriette Walters of the District of Columbia’s Office of Tax and Revenue. Walters and several of her co-workers and relatives have been accused of awarding at least $20 million of bogus property tax refunds that they used to purchase homes, cars and luxury goods.

Steven and his wife allegedly deposited at least 11 checks totaling over $2.8 million into an account they had opened. The now-separated couple are accused of using some of the money to purchase four Jaguar cars for a total of $257,866.

Which is separate from the 2007 case of a former IRS agent in Oklahoma pleading guilty to wire fraud and money laundering. Or the 2006 conviction of a former IRS agent in California on charges of conspiracy to commit tax fraud, or the 2003 conviction of a former IRS investigator who became a mob accountant in Cicero, Ill.

The Internal Revenue Service would be quick to emphasize that they can’t control the actions of their former employees. But there does seem to be a strange, widespread pattern of former employees’ accumulating extensive knowledge of how tax investigations work, then leaving and using that knowledge to help criminals. It’s almost as if the culture of the organization were somehow insufficient in demonstrating the consequences of abusing power or the public’s trust. For all of the assurances to the public that the organization’s management takes all of these matters “very seriously,” these employees and former employees certainly didn’t seem to behave as if that were the case.

Back in 1992, experts in the IRS’s culture and methods concluded that a combination of enormous power and limited oversight made an irresistible formula for abuse of power:

“The IRS is an invitation to corruption. It is a continuing problem in every big bureaucracy, particularly the IRS, and it’s ignored,” says David Burnham, a former New York Times reporter whose late-1980s investigations of the IRS turned up substantial corruption at senior-management levels.

In his 1989 book, A Law Unto Itself: The IRS and the Abuse of Power,” Mr. Burnham argued that corruption is a more continuing problem than the IRS admits. Each case of corruption, he writes, “is also prima facie evidence of pervasive poor management.”

Way back in 1989, former congressman Edward Mezvinsky (D., Iowa) warned in the New York Times about a pattern of abuse and corruption at the IRS.  (Irony alert: In 2003, Mezvinsky was sentenced to six-and-a-half years in federal prison for defrauding business associates, friends, and family members of millions of dollars.)

Mezvinsky’s warning:

Something unsettling has happened in the Internal Revenue Service. A dangerous brew of power with virtually no checks has washed through the agency, permitting unscrupulous I.R.S. agents to use their enormous authority in unsavory pursuits — blackmail, bribery, granting special favors to friends and receiving favors in return. . . . 

There are reports that starting in 1985, senior I.R.S. officials in Los Angeles acted as sword and shield for executives of a well-known California apparel manufacturer. As a sword, these officials harassed a competitor of that apparel company by initiating a tax investigation. (No tax violation charges were ever filed against the competitor.) An I.R.S. official was subsequently rewarded with a job at the favored apparel company. At the same time, acting as a shield, the I.R.S. thwarted a tax investigation against the same apparel company.

There are also reports of I.R.S. agents around the country blackmailing companies and accepting kickbacks and bribes. In 1984, allegations were made that the assistant regional inspector in the Chicago office traded confidential tax information to a company controlled by organized crime in exchange for theater tickets and free dinners.

Disturbingly, there are reports of I.R.S. offices trying to cover up malfeasance by agents. Whistle-blowers who have tried to call attention to corruption have been transferred, demoted and audited. . . . 

That being the case, some influential members of Congress oppose any public revelations of abuses, just because they think public examination may reduce taxpayers’ confidence in the I.R.S. And as you can imagine, the I.R.S. itself would prefer that these hearings just go away, and may not, in fact, be fully cooperating with the investigation.

So much has changed since 1989, hasn’t it? After all, now we know that the IRS takes these sorts of corruption, abuses, and cover-ups “very seriously.”

— Jim Geraghty writes the Campaign Spot on NRO.