Politics & Policy

The Missing Koch Report

Treasury won’t let the conservative donors see the results of an inspector general’s investigation.

In late September 2010, Iowa senator Chuck Grassley and six of his colleagues grew suspicious that a senior Obama administration official had improperly accessed the tax information of industrial behemoth Koch Industries. After Austan Goolsbee, then-chairman of the president’s Council of Economic Advisers, made an erroneous statement that implied direct knowledge of the company’s confidential tax status, the senators demanded that the Treasury Department inspector general for tax administration (TIGTA) investigate. Now, more than two years since the completion of that investigation, and despite repeated requests from Koch Industries and Senator Grassley himself, the results have yet to see the light of day.

Ironically, federal law is designed to keep that information from public view. Asked how taxpayers might discover whether their information has been accessed improperly, a spokeswoman for the House Ways and Means Committee tells National Review Online that, in most cases, “They won’t.”

In order for Koch Industries or the general public to see the TIGTA report, the IG’s office must refer the case to the Department of Justice for prosecution. If Justice declines to prosecute, all the relevant information remains under lock and key. Critics worry that a highly politicized Justice Department is  unlikely to take up cases that have the potential to damage the Obama administration.

Koch Industries’ tax returns became the subject of controversy when, in an August 2010 briefing with reporters on a newly released tax-reform report, Goolsbee claimed that the company paid no corporate-income taxes. “We have a series of entities that do not pay corporate income tax,” he said, “some of which are really giant firms — you know, Koch Industries, I think, is one, is a multibillion-dollar business…”

Goolsbee’s assertion raised the eyebrows of a half-dozen GOP lawmakers, who subsequently called on Treasury Department inspector general J. Russell George to investigate whether Goolsbee had accessed the company’s tax returns in violation of federal law. In a letter to George, Grassley and his colleagues said they were “very concerned” by Goolsbee’s remarks. “The statement that Koch is a pass-through entity implies direct knowledge of Koch’s legal and tax status, which would appear to be a violation of section 6103,” they wrote, referring to the section of the Internal Revenue Code that protects the confidentiality of tax returns and all related information. George agreed to investigate.

Goolsbee tells National Review Online that his statement was nothing more than a slip of the tongue. He readily concedes that the company pays corporate taxes. “I certainly never saw any private information about their tax returns,” he says. “That I was in error ought to make that particularly obvious.”  

George’s investigation concluded in August 2011. Since then, Koch Industries senior vice president and general counsel Mark Holden has repeatedly requested a report summarizing the agency’s findings from multiple federal agencies but has been summarily denied by all of them. “TIGTA sent me to the IRS, the IRS sent me back to TIGTA, but none of them would release the report or any information about the investigation,” Holden says. 

It has been a Kafkaesque march through the federal bureaucracy. In August 2011 a TIGTA special agent told Holden in an e-mail that “the final report relative to the investigation of Austan Goolsbee’s press conference remark is completed, has gone through the approval process, and would now be available through a FOIA request.” Holden’s request, however, was denied. “Because your request is for law enforcement records concerning a third party, TIGTA can neither admit nor deny the existence of responsive records,” the agency wrote him.  He was instead referred to the Internal Revenue Service. After lodging a request there, he was sent back to TIGTA, only to be told, “Our previous response . . . also responds to this request” and “we are closing our file in this matter.”

Asked why the potential victim of a crime is prohibited from viewing TIGTA’s findings, TIGTA communications director Karen Kraushaar declined to go into detail, telling me only that “federal confidentiality law, including Section 6103 of the Internal Revenue Code, prohibits us from disclosing any information concerning our review of such allegations. Therefore, we regret that we cannot provide you with any further information.”

The agency divulged no more information to Senator Grassley. On requesting the report, he was told by George in a letter that, owing to the confidentiality provisions affecting individual tax records, “TIGTA could not provide information regarding action, if any, TIGTA might have taken beyond its review of the allegations.” As a result, George said, he was “unable to respond to any of the questions” Grassley posed about the investigation’s findings.

Oddly, the results of investigations conducted by the Treasury Department inspector general are considered the confidential tax information of the alleged perpetrator. So, as a Ways and Means Committee  spokeswoman explains, the IG report is filed in the tax records of “the person who allegedly committed the violation” and its disclosure is considered tantamount to the release of the individual’s tax returns, a violation of section 6103.

The chairmen of the House Ways and Means Committee and the Senate Finance Committee have, in Congress, the unique power to view confidential tax information, including the TIGTA report that concerns the Koch brothers. In this case, Max Baucus, chairman of the Senate Finance Committee, whose colleagues prompted the investigation, has declined to request the report. “I share your concern that the law prohibits me from disclosing to you the information that you have requested,” George conceded.

Grassley’s concern is that  the law as it stands — section 6103 in particular — is being used to skirt transparency. “Taxpayer confidentiality laws are important,” the senator tells National Review Online, “but the purpose of those laws is to prevent and deter inappropriate uses of taxpayer information, not to prevent public scrutiny if or when that confidentiality has been breached or keep the victim in the dark. A taxpayer should be able to know whether someone breached his or her confidentiality, whether any investigation resulted, and the outcome of that investigation. The taxpayer shouldn’t get the runaround from TIGTA.”

That’s exactly what the Kochs have gotten.

— Eliana Johnson is media editor of National Review Online.

EDITOR’S NOTE: This piece has been modified from its original version. It incorrectly quoted Austan Goolsbee’s remarks to reporters in 2010 and has been updated accordingly. 


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