For the past eight months, the IRS has been blocking roughly $125 million owed to Virginia as part of a Medicaid fraud settlement. Virginia earned this money by leading a massive health-care fraud investigation into Abbott Laboratories, a pharmaceutical company that illegally marketed products for unapproved purposes. The investigation was led by Virginia’s nationally renowned Medicaid Fraud Control Unit (MFCU), part of the office of Virginia’s Attorney General. The case was enormously important for MFCU, which spent four years on the case, recording over 38,000 man-hours and doing 80 percent of the work. The resulting settlement cost Abbott $1.5 billion, making it the second largest Medicaid fraud case in history at the time.
That was last October. Since then, the Treasury Department has been sitting on $200 million of forfeiture money, while Virginia has not received one cent of the $125 million it is owed. Virginia attorney general Ken Cuccinelli has tried for months to get the money, working closely with the Treasury Executive Office for Asset Forfeiture (TEOAF), the office responsible for dividing up the forfeiture between the various agencies involved with the investigation.
Eventually, Cuccinelli received an explanation for the delay – the IRS was refusing to fill out two pages of paperwork.
Yesterday, tired of waiting months without cooperation, Cuccinelli issued a press release to put public pressure on the Treasury Department to expedite the process.
The press release carefully detailed every delay and excuse Cuccinelli had received over the past eight months, and explained how the IRS has blocked the transfer.
Now the hold-up is the IRS, which, according to the Treasury Department, refuses to complete its paperwork so the money can be properly distributed. The exact amount of the forfeiture was known since September 2011 and finalized in a May 2012 plea agreement. It doesn’t take a year to complete the paperwork.
Just a few hours later, Cuccinelli finally received an e-mail from the Treasury Department, promising to cut Virginia a check for approximately $115 million .
In an interview with National Review Online, Cuccinelli explained that the IRS’s delay is absolutely unprecedented. “We have never seen them do this to us or to any other attorney general,” said Cuccinelli.
Cuccinelli has called for meeting after meeting with the IRS, but a few months ago it became clear that the IRS was not interested in cooperating. “This was not just an eight-month journey,” said Cuccinelli. “This was a 21 month journey. The IRS has known the forfeiture amount since September 2011. Why then haven’t they divided up the money yet?”
Cuccinelli’s office worked carefully to follow every step of Treasury Department protocol, meticulously recording and sending their work to TEOAF for review, while waiting for the IRS to do the same. “We submitted our materials in July of 2012 before the court order was entered. Throughout this entire process, the IRS has been singularly useless. They failed to gather the most basic material necessary for TEOAF.”
Blocking this money has come at a real cost for Virginia’s public safety. Cuccinelli had designated that money for bullet-proof vests, vehicles, and other law-enforcement needs, all of which has been delayed indefinitely by the IRS’s inaction.
The IRS has so far been under investigation for unfairly targeting conservative groups, but Cuccinelli’s experience suggests that perhaps even states have been targeted. “At a certain point, the level of incompetence is so enormous as to be inexplicable, and I think this may fall in that category. If it’s not incompetence, it’s malevolence.”
Cuccinelli emphasized that it was not IRS prosecutors who were responsible, and blamed the failure solely on the agency’s leadership. “As investigative partners, the IRS was great,” he says. ”But the leadership and administration has been behaving in a way that’s absolutely shocking. Several months ago, they started refusing to even talk to us. That was the first sign that this might be going from incompetence to malevolence.”
Since being elected Virginia’s attorney general in 2009, Cuccinelli has been one of the most vocal constitutional critics of the Obama administration, leading numerous lawsuits against Obamacare, immigration, and other signature White House initiatives. He is also the Republican candidate for governor of Virginia, where he could potentially emerge as a national leader of the Republican party.
Cuccinelli fears that he is being singled out for his criticism of the White House, commenting that the IRS targeting isn’t just being done on a partisan basis. “Their targeting isn’t just right versus left. It seems that they go after any non-profit group that opposes the president,” he tells me. ”My concern is that we’re being treated differently for intentional reasons.”
Though Cuccinelli finally received confirmation that Virginia will receive $115 million of forfeiture funds, he has been told nothing about when to expect the money. “I just don’t understand this. They don’t even need to write a check,” he says. ”This is a simple wire transfer, it’s the easiest thing in the world.” But having waited eight months so far, Cuccinelli isn’t holding his breath.