Magazine | July 1, 2013, Issue

The Cincinnati Myth

(Roman Genn)
IRS discrimination wasn’t just the work of rogue agents

When news broke that the Internal Revenue Service had, over the course of nearly two years, actively discriminated against conservative groups applying for tax exemption, subjecting them to intrusive questions and extraordinary delays in processing their applications, top officials in Washington were quick to offer an explanation. A couple of rogue agents in the IRS’s Cincinnati office, you see, had somehow managed to pull off a highly orchestrated effort to fetter tea-party groups in advance of the 2012 presidential election.

This explanation, intended to let the agency’s top brass and the Obama administration off the hook, has never passed muster. IRS officials in Washington became aware of the discrimination against conservative groups long before the Treasury Department inspector general’s report made it public. The IRS itself conducted an internal investigation that reached similar conclusions in May 2012, after which top officials failed to inform Congress of the investigation’s findings. The lawyers in the office of the agency’s chief counsel, according to the inspector general’s report, were briefed on the matter in August 2011; White House press secretary Jay Carney claims they did not inform the chief counsel himself, William Wilkins, one of two political appointees at the IRS. Somehow, while many top IRS officials knew about the targeting of conservative groups, it continued unabated until the inspector general’s report was published in mid May — at which point those very officials pointed the finger at a couple of folks in the Midwest.

Straight out of the gate, the inspector general, J. Russell George, fingered “first-line management in Cincinnati, Ohio”; they were guilty of “insufficient oversight” because they had devised a special set of screening criteria that included “references to the Tea Party.” Before the IRS’s director of exempt organizations, Lois Lerner, invoked her Fifth Amendment right not to testify before Congress, she cast the blame on “our line people in Cincinnati,” who had made a “not so fine” effort to streamline a supposed influx of tea-party applications.

Democratic politicians, too, from the Obama administration on down, have taken this line. Carney told reporters, “There were line employees at the IRS who improperly targeted conservative groups.” Washington congressman Jim McDermott explained, “This small group of people in the Cincinnati office screwed up.”

But it was Representative Marcy Kaptur who took the cake. The Ohio congresswoman, in a hearing of the House Appropriations Committee, went so far as to suggest that the victims were not the tea-party groups that had been unfairly scrutinized, but the IRS itself, which had been falsely 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. “Maybe somebody over there at IRS was actually doing their job.”

One Democratic congressman is satisfied with what we know already about the origins of the discrimination against conservative groups — that is, very little. Maryland’s Elijah Cummings, the top Democrat on the Oversight Committee, told CNN’s Candy Crowley, “Based upon everything I’ve seen, the case is solved. If it were me, I would wrap this case up and move on, to be frank with you.” He added, “I think we’re in great shape.”

The House Oversight Committee is conducting a full-fledged investigation to discover where the orders to target conservative groups originated, and committee investigators are interviewing IRS employees based in both Cincinnati and Washington. Cummings, who has been present at interviews conducted thus far, also claims, “No witnesses who have appeared before the committee have identified any IRS official in Washington, D.C., who directed employees in Cincinnati to use ‘tea party’ or similar terms to screen applicants for extra scrutiny.”

Cummings chose his words carefully. The testimony of the Cincinnati-based employees indicates that the inappropriate “lookout” list created in their office, which included the terms “Tea Party,” “9/12 Project,” “Patriot,” and “make America a better place to live,” was likely drawn up in response to requests for tea-party files coming from Washington, D.C.

Two Cincinnati employees have told the Oversight Committee that they were taking orders from Washington. One of those employees, Gary Muthert, told the committee he began singling out tea-party applications at the request of a supervisor who told him “Washington, D.C., wanted some cases.” Muthert, sources say, was a member of the group that screened all applications for tax exemption 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 “Washington, D.C., wanted seven.”

#page#If employees in Washington ordered agents in Cincinnati to flag the applications of tea-party groups, that would explain the need for those Cincinnati employees to devise a means of screening for such applications, and the subsequent screening for the objectionable keywords. It is the means of screening for which Cincinnati employees have been pilloried by the inspector general, their bosses in D.C., and the Obama administration alike. The focus should instead be on the initial request for tea-party applications that necessitated those means, and the testimony of the IRS employees indicates that this request — and further oversight — came from Washington, D.C..

Around the same time that Muthert sent applications to Washington, another Cincinnati employee, Liz Hofacre, began managing a group of specialists handling tea-party cases. “I was taking all my direction from EO Technical,” she told the Oversight Committee, referring to the group of tax lawyers who closely monitored Cincinnati’s handling of the tea-party cases. 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,” she testified. “I didn’t want my name in the paper for being this rogue agent for a project I had no control over.”

It was also Washington’s involvement, according to the inspector general’s report, that caused the delays in the processing of tea-party applications. The timeline appended to the report indicates that in May 2010 — when Muthert sent tea-party applications to Washington — tax lawyers in D.C. “began reviewing additional information request letters prepared by agents in Cincinnati.” Washington not only approved the letters containing the intrusive questionnaires sent to tea-party groups, but also wrote many of the questions. It was apparently a slow process: 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.”

Cleta Mitchell, a Washington-based attorney who represents several tea-party groups that have been the subject of the IRS’s discrimination, says that her clients suffered the consequences of the bottleneck that occurred when tea-party cases piled up in Washington. She tells me that one of her clients has been waiting for the IRS to approve an application for tax exemption for over three years. “We never knew who in D.C. was calling the shots,” she says, but she was told by an IRS agent that “the application was being reviewed in Washington.” 

So 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 testimonies offered by Muthert, Hofacre, and Mitchell perhaps help to explain why the five IRS officials to leave the agency or lose their positions in the wake of the scandal are all based in Washington, D.C.

There is tax lawyer Carter Hull, who is accused of micromanaging the processing of tea-party cases, and who, according to IRS sources, requested his retirement package in March.

There is Joseph Grant, the man who oversaw the agency’s entire Tax Exempt and Government Entities division, in which the targeting of conservative groups occurred, who retired in early June — eight days after he was promoted.

There is former acting IRS commissioner Steven Miller, who resigned days after news of the scandal broke in mid May. President Obama has claimed that he asked for Miller’s resignation. In a note to colleagues, though, Miller told a different story, explaining that he was departing the agency “with regret” because his “acting assignment ends in early June.”

There is Holly Paz, the director of rulings and agreements, who was replaced. According to an IRS source, the memo announcing her replacement gave no word on whether Paz was transferred to another position, put on leave, or fired.

Finally, there is Lois Lerner, the director of the IRS’s Exempt Organizations division and the Washington official most closely connected with the scandal. Lerner was placed on something of a vacation — administrative leave with pay and full benefits — after refusing to tender her resignation.

Having exploded the myth that rogue employees at the IRS’s Cincinnati outpost orchestrated the discrimination against conservative groups, congressional investigators should now zero in on the real source of the targeting. Perhaps the next IRS agent to announce his retirement will be the one who asked Cincinnati for those tea-party applications in the first place.

In This Issue

Articles

Politics & Policy

The Cincinnati Myth

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One-Party Taxmen

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Men’s Rising Earnings

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Epic of a Nation

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Genius for Friendship

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No Green Light

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Letters

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The Week

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The Long View

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