Politics & Policy

Stop Blaming the ‘Rogue Agents’

The myth is debunked, and key IRS officials in D.C. are quietly retiring just in time.

We can officially dispense with the notion that the targeting of tea-party groups began when a couple of rogue agents in the Internal Revenue Service’s Cincinnati office set out to streamline their work.

The heart of the effort to target tea-party and other conservative groups, we are learning, occurred in Washington, and that is likely why five D.C.-based IRS officials who are connected to the targeting have retired, resigned, been replaced, or been put on administrative leave, since news of the scandal broke in mid May. They include Holly Paz, who last week, according to an IRS source, was replaced as director of Rulings and Agreements, the division that oversaw the targeting of conservative groups; Washington lawyer Carter Hull, who is accused of micromanaging the processing of tea-party cases, and who, according to IRS sources, requested his retirement package on March 12; the commissioner of the agency’s Tax Exempt and Government Entities division, Joseph Grant, who retired on June 3; former IRS commissioner Steven Miller, who resigned days after news of the scandal broke; and the director of the IRS’s Exempt Organizations division, Lois Lerner, who was placed on administrative leave only after refusing to tender her resignation, according to Iowa’s Chuck Grassley. All five are or were based in the IRS’s headquarters on Constitution Avenue in Washington, D.C.

The testimony of Cincinnati-based IRS employees released last week by the House Oversight Committee helps explain why so many employees in D.C. who are associated with the current scandal are quietly departing the scene. We have learned that the controversial and inappropriate “lookout” list created in the Cincinnati office was probably compiled as a response to requests from Washington for tea-party files. One Cincinnati employee, Gary Muthert, told the committee that he began singling out tea-party applications at the request of a supervisor who told him that “Washington, D.C., wanted some cases.” Muthert, sources say, was a member of the group that screened all applications for tax exemptions and passed those identified as tea-party applications along to specialists for extra scrutiny. He sent seven tea-party applications to Washington in May 2010, according to interview transcripts, because his manager told him that “Washington, D.C., wanted seven.”

Thus, it was IRS employees in Washington, according to Muthert, who ordered agents in the Cincinnati office to focus their attention on the applications of tea-party groups. That would explain why those Cincinnati employees devised a way to screen such applications, and why they added keywords to a “Be on the Lookout List,” for which Cincinnati employees have been pilloried by the inspector general, their bosses in D.C., and the Obama administration.

This, however, is not what we are hearing from officials in Washington, who continue to pin the blame for an organized effort to discriminate against tea-party groups on a couple of rogue agents in the Midwest. The recently retired Grant told the House Ways and Means Committee that “front-line career employees” in Cincinnati were to blame, while Lerner pointed to “our line people in Cincinnati” and “the way they did the centralization,” which was “not so fine.” Inspector general J. Russell George in his report faulted “insufficient oversight,” specifically by “first-line management in Cincinnati, Ohio,” who “approved references to the Tea Party in the Be On The Lookout listing criteria.”

Democratic politicians have had their say, too, from the White House on down. The president’s press secretary, Jay Carney, told reporters on May 20 that “there were line employees at the IRS who improperly targeted conservative groups.” Washington representative Jim McDermott explained: “This small group of people in the Cincinnati office screwed up.” Ohio representative Marcy Kaptur went so far as to charge that the real victims in all of this are not the tea-party groups, but the agents in Cincinnati, who have been wrongly accused. “There might have been some smart people working who were concerned that there were a lot of new 501(c)(4) filings in this country,” she said in a hearing of the House Appropriations Committee. “Maybe somebody over there at IRS was actually doing their job.”

Muthert’s account corroborates the timeline appended to the Treasury Department inspector general’s report, which indicates that in May 2010 — when Muthert sent tea-party applications to Washington — tax lawyers in the “Technical Unit,” including the recently retired Carter Hull, “began reviewing additional information-request letters prepared by the Determinations Unit” in Cincinnati. Washington lawyers closely monitored the processing of tea-party applications for tax exemptions and, as National Review Online has reported, not only approved the letters containing the intrusive questionnaires sent to tea-party groups but also wrote many of the questions in them. It was the oversight by these lawyers that contributed to the backlog in the processing of tea-party applications. At one point, the inspector general’s report notes, a Cincinnati employee “did not work on the [tea-party] cases while waiting for guidance from the Technical Unit.”

Around the same time that Muthert sent applications to Washington, Liz Hofacre began managing a group of specialists who were handling tea-party cases. “I was taking all my direction from EO Technical,” she told the Oversight Committee, “I had no autonomy or no authority to act on [applications] without Carter Hull’s influence or input.” So upset did she become with Washington’s micromanagement that she began looking for another job in July 2010. “It was something that I didn’t want to be associated with,” Hofacre told the Oversight Committee. “I didn’t want my name in the paper for being this rogue agent for a project I had no control over.”

Hull was not the only D.C. lawyer charged with overseeing tea-party cases. Though sources say he was the first lawyer in Washington’s Technical Unit to begin handling the applications of tea-party groups, others also took part. And they had managers: When Hull first began work on tea-party applications, he was operating under the acting manager of the Exempt Organizations’ Technical Unit in Washington, Steve Grodnitzky, who, according to sources, served in that capacity from March 2010 to October 2010; Grodnitzky was succeeded by Holly Paz, who served as the manager of the Technical Unit from October 2010 to January 2011, and then by Michael Seto, who remains in the position today. Paz was later promoted and served as the director of the Rulings and Agreements office until last week. Until Lois Lerner’s inauspicious departure, Paz reported directly to Lerner.

The focus of congressional inquiry into this scandal has been on the list that directed Cincinnati employees to target conservative groups with names that contained the terms “9/12 Project,” “Tea Party,” “Patriots,” and “make America a better place to live.” Given the testimony offered by Muthert and Hofacre, the attention of investigators should now turn to why such a list was necessary in the first place. If we believe Muthert, Cincinnati agents only needed to “centralize” and “streamline” their work on the applications of tea-party groups because a lot of people in Washington, D.C. wanted to take a look at them. Perhaps the next person to announce his retirement will be the Washington employee who asked Cincinnati for those tea-party applications in the first place.

— Eliana Johnson is media editor of National Review Online.

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