-CFPB Website

“Keep your calendar entries brief and general. If possible, avoid annotating entries with agendas, detail discussions, etc.

Minimize attachments to your calendar appointments. Consider using email to send related attachments.”

-CFPB FOIA Team to CFPB employees

CFPB employees have been advised by its FOIA staff to keep their work calendars “brief and general” and to remove meetings to which they “were invited but did not attend,” according to a list of calendar tips obtained by Cause of Action.

These “Recommended Calendar DOs and DON’Ts” further suggest that employees “avoid annotating entries with agendas, detailed discussions,” and “minimize attachments to your calendar appointments.”  Consistent with such advice, the leadership calendars posted (and touted) by CFPB are noticeably devoid of details.

These calendar tips undoubtedly make it easier for the bureau’s FOIA staff to process any requested calendars.  However, they also undermine the Administration’s asserted commitment to creating “an unprecedented level of openness in Government.”  Additionally, this behind-the-scenes advice indicates that transparency at CFPB is not actually a “key mission,” as claimed.  Rather than full disclosure, the name of the game at CFPB obviously is partial disclosure lite.

Related: FOIA requests have found that the IRS and the DOJ are more concerned with their public image than they are with completing FOIA requests in accordance with the law.

June 17, 2013                                                                                       Jamie Morris, 202-499-2425

Lack of IRS Oversight Lead to

 Fraud, Money Laundering, and Abuse by Tax-Exempt Groups

Cause of Action releases investigative report on fiscal sponsorship: “Conprofit: How the IRS’s Failed Oversight Allows Nonprofit Money Laundering”

WASHINGTON – Cause of Action (CoA), a government accountability organization, today released “Conprofit: How the IRS’s Failed Oversight Allows Nonprofit Money Laundering,” a comprehensive report revealing significant loopholes in the tax code which allow nonprofits to engage in corruption, fraud, and money laundering—in some cases with federal funds. In light of these findings, Cause of Action filed a petition for rulemaking with the IRS, asking them to define and set clear parameters for the practice of fiscal sponsorship.

CoA’s fifteen-month long investigation demonstrates how the Internal Revenue Service (IRS)  has consistently lacked oversight and enforcement of its Tax Exempt and Government Entities Division, the same division that has recently come under public, Congressional, and legal scrutiny for allegedly targeting applicants for 501(c)(4) status that hold specific political beliefs. The report reveals how the International Humanities Center (IHC), Christian Community, Inc. (CCI), and Help Is Here, Inc. (HIH), as well as other nonprofits, routinely used the practice of fiscal sponsorship to abuse their tax-exempt status, and in some cases even commit fraud.

“Conprofit: How the IRS’s Failed Enforcement Allows Nonprofit Money Laundering” exposes how these groups subverted the original intent of fiscal sponsorship, which is to create opportunities for charitable projects to start their endeavors under existing nonprofit groups. Instead, “Conprofit: How the IRS’s Failed Oversight Allows Nonprofit Money Laundering” documents fraud, corruption, and money laundering happening under the guise of fiscal sponsorship.

Some of the most egregious examples of fiscal sponsorship abuse:

• IHC sponsored over 200 projects as a fiscal sponsor then collapsed after funneling almost $1 million in project funding toward its own mismanaged debts.
• HIH preyed upon projects, improperly seizing funds, refusing to disburse funding to projects, and attempting to wrest control over projects which attempted to leave.
• CCI posed as a fiscal sponsor for twenty years.  Tax documents, audits, and bank statements were fabricated and over $400,000 in project funding was lost.

Cause of Action’s Executive Director Dan Epstein explained the consequences of these findings:

“Cause of Action has exposed yet another layer of mismanagement and lack of oversight at the IRS.  This report exposes how the IRS engaged in selective enforcement, targeting certain 501(c)(3) applicants with additional scrutiny while it has approved the tax-exempt status of charities that have engaged in money laundering and fraud.

Significant loopholes in the tax code have opened the door to abuse for organizations to funnel money, fabricate tax documents, and destroy charities by abusing fiscal sponsorship. We now turn to Congress and the IRS to define fiscal sponsorship and remove the ambiguities which have allowed groups such as IHC, CCI, and HIH to exploit and defraud American taxpayers.”

Click here to read a full copy of the report.

About Cause of Action:

Cause of Action is a nonprofit, nonpartisan organization that uses investigative, legal, and communications tools to educate the public on how government accountability and transparency protects taxpayer interests and economic opportunity. For more information, visit www.causeofaction.org.

To schedule an interview with Cause of Action’s Executive Director Dan Epstein, contact Jamie Morris, jamie.morris@causeofaction.org.

###

By Dan Epstein     June 11, 2013, 5 a.m.

Three congressional committees were authorized to (and seemingly did) begin investigations in 2010 of the IRS’ political targeting, yet none of them were able to reveal what the Treasury Inspector General for Tax Administration reported last month.

Even though TIGTA head J. Russell George has now appeared before multiple committees, no one has questioned why TIGTA chose to examine the IRS’ politicization through an audit instead of an investigation. The Inspector General Act authorizes TIGTA to obtain the production of documentary evidence by subpoenas, yet TIGTA issued none. Item 2 of Treasury Order 115-01 authorizes TIGTA to conduct investigations, issue subpoenas, bring criminal enforcement actions and make referrals to the attorney general for prosecution. Yet none of this happened.

The much-publicized House Oversight and Government Reform Committee hearing on the subject revealed that former IRS Exempt Organizations Director Lois Lerner may have improperly received immunity by taking the Fifth only after pleading her innocence in an opening statement. The White House has claimed executive privilege, refusing to provide information to congressional oversight committees — and without independent prosecutorial authority, Congress can do little other than issue contempt charges, which this administration views as little more than a slap on the wrist. When Attorney General Eric H. Holder Jr. denied Congress information concerning the “Fast and Furious” scandal, Congress issued a subpoena, held him in contempt, then filed a civil lawsuit, which, as of March, is in mediation; most recently, the DOJ has filed motions to dismiss the case entirely.

Chairmen of both the House Ways and Means Committee and the Senate Finance Committee have authority under the tax code to investigate the IRS issues. Under federal law, the Ways and Means Republicans in the House must keep their investigation secret from Finance Republicans in the Senate just like the Senate Finance Democrats must not share protected information with Ways and Means Democrats. That means that not only is there a self-imposed limit to what Congress can do, there is the added dimension of partisanship: both Sen. Max Baucus, D-Mont., and Rep. Dave Camp, R-Mich., are forced to keep Sen. Orrin G. Hatch, R-Utah, in the dark.

If partisanship were not an issue, Congress should have established a committee that under 6103(f)(3) could be empowered with virtually unlimited investigative authority. But that hasn’t happened. Additionally, Congress always has the ability to appoint its own special counsel to investigate the IRS, as well as hire an outside counsel to advise it in its investigations. That hasn’t happened either.

Congress, in 1999, took away DOJ’s power to demand the D.C. Circuit appoint an independent counsel with prosecutorial power equal to the attorney general when high-ranking officials in the federal government engaged in criminal wrongdoing. However, the attorney general (or acting attorney general, in cases in which the attorney general is recused) is still authorized to appoint a special counsel when a criminal investigation of a person or matter is warranted so long as two conditions are met: an investigation or prosecution by a U.S. Attorney’s Office or litigating division of the DOJ would present a conflict of interest, and the public interest requires appointment of counsel independent from the DOJ. We therefore can infer that Holder’s decision to not appoint a special counsel, and instead ask the FBI to investigate the IRS, suggests that Holder believes no “conflict of interest” exists and it’s not in “the public interest” to have any outside scrutiny of the IRS.

Having exhausted the legislative and executive branch options, only the courts are left. Rule 53 of the Federal Rules of Civil Procedure would allow the federal courts, especially those hearing any of the current challenges to the IRS by tea party groups, to appoint what is called a “special master” to perform investigative and enforcement duties consented to by the parties in the dispute. This also includes authority to conduct an evidentiary hearing and exercise the appointing court’s power to compel, take and record evidence. With a gridlocked Congress and a White House pleading ignorance, the judiciary may be the only government institution capable of providing the thorough and accurate government accountability the American people deserve.

Dan Epstein is the executive director for Cause of Action.

In November 2009, the BIA placed Hanna on detail in Washington, DC, while the Office of the Assistant Secretary for Indian Affairs (AS-IA) reviewed her alleged ethical violations.  Hanna remained on detail for more than 500 days longer than allowed by agency rules.  However, no action was ultimately taken by the AS-IA, so the DOI OIG initiated an investigation in August 2011 after receiving information that BIA officials failed to act on the complaints against Hanna.

During the AS-IA’s formal review of the complaints against Hanna, investigators interviewed BIA employees who were “physically shaking” because they were so afraid Hanna might retaliate against them.  As the AS-IA discovered, Hanna had previously installed 40 “extra” security cameras with live feeds she used to monitor employees in her regional office, and the initial AS-IA report confirmed that Hanna engaged in retaliation and harassment of employees.  However, this report appears to have been ignored by higher ups at the AS-IA, who dismissed the findings as “minor personnel issues” and just so happen to be friends with Hanna.

Hanna not only fostered a hostile work environment.  The DOI OIG’s report ultimately found that the failure of the BIA and AS-IA to ensure Hanna followed agency spending procedures cost the government nearly $200,000.  After reviewing travel vouchers from Hanna’s detail filed by the AS-IA (to whom she had been assigned even though it was the AS-IA investigating her), investigators found an almost complete failure to comply with tax laws and agency regulations.  In sum, Hanna was reimbursed over $130,000 in travel costs, as she often traveled between Oklahoma and DC, with her $117-a-night hotel room sitting empty for weeks for at a time.  Perhaps even more outrageous, Hanna decided she required an agency-provided SUV for the over-two-year detail in DC “because of the snow,” as she later explained to investigators.

Following the DOI OIG’s referral, the U.S. Attorney’s Office (USAO) for the District of Columbia declined to prosecute this case.  While the USAO might have determined that the evidence did not warrant a criminal prosecution (even though Hanna still owes significant back taxes on her travel reimbursements), it is disturbing that such blatant disregard for agency regulations and federal law has warranted no punishment for Hanna.

To read the full story, see our investigation analysis here.

Investigative analysis of IG report on Jeanette Hanna of BIA

DOI OIG Report on Hanna

Filed 2/06/13:

Appeal 

Exhibit 1

Exhibit 2

Exhibit 3

Filed 2/07/2013

Motion for Expedited Ruling

Support for Expedited Ruling from Peter Prows

Filed 2/11/2013

Order Denying Injunction Pending Appeal (From Judge YVONNE GONZALEZ ROGERS)

Filed 2/12/2013:

Emergency Motion for Injunction Pending Appeal

Declaration of Amber Abbasi in Support of Emergency Motion

Filed 2/20/13:

Opposition to Emergency Motion (Filed by DOJ)

Filed 2/21/13:

Opposition to Amici Motion

Proposed Brief ISO Opp to Amici Motion to Participate

Declaration of Amber D. Abbasi ISO Reply to Emergency Motion

Exhibit 1 to Abbasi Declaration

Exhibit 2 to Abbasi Declaration ISO Reply to Emergency Motion

Exhibit 3 to Abbasi Declaration ISO Emergency Motion

Exhibit 5 to Abbasi Declaration ISO Reply to Emergency Motion

Reply to Emergency Motion for Injunction Pending Appeal

Filed 3/6/13:

Opening Brief and Statutory Addendum

Filed 4/3/13:

Appellee’s Answering Brief (Filed by DOJ)

Filed 4/22/13:

Appellants’ Reply Brief

Sebelius labeled her speech at the Human Rights Campaign Gala as an “official” event, meaning that not only would her travel and time be paid for by the taxpayer, but the time and travel of her aide, AJ Pearlman, would be covered as well.  The Hatch Act is a federal law which, according to OSC, “prohibits federal employees from using their official authority or influence to affect the outcome of an election.”  For instance, the Secretary of Health and Human Services, under the law, cannot campaign for a political candidate using her official title, because this would be an abuse of government authority; nor can she use taxpayer-funded travel or the work hours of taxpayer-funded employees and aides to support a political event, because this would be an abuse of taxpayer funding, furthering a personal and political end.  However, Secretary Sebelius committed each of these violations at the HRC Gala – then attempted to cover it up.

In the first half-hearted attempt to make up for this abuse, Sebelius quickly reclassified the event as “political” instead of “official.”  This retroactive attempt to erase the fact that she used her standing as a Cabinet member to influence two upcoming elections was insufficient, and OSC nevertheless concluded that Sebelius did in fact violate the Hatch Act.

The second part of the abuse was the taxpayer dollars spent on the event, and accordingly, Sebelius had an HHS assistant request that the Democratic National Committee reimburse the government for her own travel.  Even this first attempt was mishandled, however: in January 2013, we filed an FEC complaint explaining that the DNC failed to properly disclose this reimbursement.  In fact, the reimbursement was almost impossible to connect to Sebelius’ Hatch Act violation at all: the DNC sent a check marked only with the word “travel” – preventing accountability in determining whether Sebelius’ violation of the law was truly “repaired” by reimbursement for her travel.

But the missteps didn’t end there.  Cause of Action found, after sending Freedom of Information Act requests to four separate agencies, that the U.S. Treasury was not, in fact, reimbursed.  Cause of Action’s FOIA request to the U.S. Treasury’s Financial Management Service turned up no responsive records – even though our FOIA production from OSC proved that Sebelius was ordered multiple times to reimburse the U.S. Treasury.  In the production we received from our FOIA request to HHS, Cause of Action found the DNC’s check, sent to reimburse HHS, not the Treasury:

While White House press secretary Jay Carney again assured reporters that “the U.S. Treasury has been reimbursed,” this has clearly not been the case.  OSC did, however, recognize that HHS was reimbursed instead of the U.S. Treasury, but failed to take action on it, as showed by Cause of Action’s FOIA production from OSC:

The improper reimbursement raises the question of whether the cost of the trip was truly reimbursed, or whether HHS was simply free to use the funds as it wished.  Because OSC did not insist on the proper execution of its own requests for reimbursement, taxpayers dollars remain, in effect, unrecovered.

While the reimbursement for Sebelius’ costs was bungled many times over, Sebelius was not the only federal employee affected by her violation.  In her lengthy process of abdicating responsibility for campaigning on the taxpayer dime, Sebelius effectively threw her own aide under the bus.  AJ Pearlman provided background research in preparation for the HRC Gala where Sebelius promoted Democratic candidates, and attended the event to assist.  As Cause of Action showed in an OSC complaint, when Sebelius scrambled to save her own skin by retroactively reclassifying the event as political instead of official, she made Pearlman’s actions illegal as well.  OSC openly acknowledged that Pearlman’s efforts could not legally be funded by the federal government and ordered Sebelius to reimburse the Pearlman’s travel costs as well, as revealed in a letter from OSC to HHS:

As Cause of Action showed in its January 2013 OSC complaint, if Pearlman’s actions, after Sebelius’s campaigning on government time, could not be funded by taxpayer dollars, then Pearlman too would have committed a Hatch Act violation.  As the OSC wrote to HHS: “the Hatch Act would have prohibited” Pearlman’s work on the HRC event – and so the funding had to be reimbursed.  Cause of Action did its part, but OSC has thus far refused to uphold its own rules (read more about Cause of Action’s letter to Congressman Darrell Issa requesting for investigation into OSC’s failure to execute its duties here).

OSC made clear in the excerpts above that had Sebelius classified the event as political from the beginning, Pearlman’s work would have prohibited by the Hatch Act, but it still chose not to take action against Pearlman. Additionally, the President refused to take any action against Sebelius for her violation, claiming that Sebelius’ meeting with “ethics experts” solved the problem.  The White House won’t hold Sebelius accountable, the U.S. Treasury has not been reimbursed, and OSC’s selective enforcement of the Hatch Act hides Sebelius’s victim: the aide who did as requested.

Sebelius broke federal law but the White House chose not to do its job and ask for her resignation – it seems that its “ethical standards” could use some work.

In responding to requests for information from Senators Lamar Alexander (R-TN), Tom Coburn (R-OK), Susan Collins (R-ME), and Orrin Hatch (R-UT), the GAO reviewed:

[D]ocuments provided by CDC, including the written policy on lobbying that pertained to CPPW award recipients; CPPW award notices, which were the written agreements between the CDC and recipients; documentation generated by CDC staff during the monitoring of CPPW recipients; and CDC site visit reports.

The GAO also interviewed CDC officials regarding the lobbying policy that applied to CPPW award recipients in two hundred eighty CPPW cooperative agreements, all of which were made in fiscal year 2010.

But just over six weeks ago, Cause of Action (CoA) released its own report, “CPPW: Putting Politics to Work,” examining twelve grant recipients based on responses to FOIA requests we sent to the CDC. Of those twelve, eight appeared to use federal funds to illegally lobby for things like tobacco taxes, clean air ordinances, and bans on sugary-sweetened drinks, rather than on sensible preventative health efforts.

CoA’s report also demonstrated that the CDC failed to take comprehensive action in one case of illegal lobbying it actually managed to identify.  While the GAO had access to information on all grant recipients and considered two potential lobbying violations identified by the CDC, CoA continues to await more information from the CDC on the other grant recipients. If we found that eight of the twelve we have been able to investigate up to this point are at risk of violating federal law, how many more instances are out there that the GAO and CDC have failed to uncover?

Unfortunately, the GAO’s report was not a substantive investigation. In fact, the most noteworthy aspect of the GAO report is how sparingly the GAO examined the CDC’s ability to follow-through on its own processes for correcting instances of illegal lobbying by grantees.  Instead, the GAO confirmed that the CDC engaged in no active audit function for the CPPW program, could not independently verify subrecipient expenses, and depended on self-reporting by grantees.

These findings are particularly troubling because, as the GAO fails to mention in its report, by 2015 the Department of Health and Human Services will be able to spend $2 billion per year in perpetuity on similar programs through the Affordable Care Act’s Prevention and Public Health Fund.

The CFTC’s watchdog said Gensler was intimately involved with the events leading up to the collapse, but only decided to recuse himself from the case after the official bankruptcy. His recusal was “unnecessary and wasn’t required by ethics rules” according to CTFC’s Inspect General.

Gensler also used his personal email to communicate with staff, which raises questions about the ability to obtain the email records via a Freedom of Information Act Request. Gensler claimed he used personal email because “he did not know how to access his work e-mail from home.” The House Oversight Committee has requested access to his emails from his personal account.

How Jon Corzine went from this

Via Fox Business

To this

Via DailyBail

But still hasn’t been held accountable

The MF Global rogue trader that lost $141 million in an overnight trade in 2008 was sentenced to five years in prison and ordered to pay $141 million in restitution. Ex-CEO of MF Global Jon Corzine put a $6 billion bet on European debt, failed to implement adequate controls despite multiple warnings, and illegally used $1.6 billion in  customer funds (Report and lawsuit). His punishment? He might have to start a hedge fund.

Joe Biden called Corzine “the smartest guy I know in terms of the economy and on finance,”  but Corzine insists his stewardship of MF Global was like this:

Via Imgur

Instead of this:

Via Biosocket

Friends in the right places

Corzine served as CEO of Goldman Sachs for 5 years before heavily financing his campaigns for Senate and Governor of New Jersey. Corzine was a top bundler for President Obama’s reelection campaign and is credited with raising $500,000 or more. Gary Gensler, head of the Commodities Futures Trading Commission (a financial regulator with oversight of MF Global), was a Goldman Sachs alum with Corzine and others in executive positions at MF Global. CFTC’s Director of Public Affairs is a former Corzine aide from his time in the U.S. Senate.

MF Global representatives met with CFTC officials 10 times during 2010 and 2011 and MF Global paid firms a total of $130,000 to lobby the CFTC for favorable regulations in 2010 and 2011.

More than two and a half years after the collapse of MF Global, the CFTC has not issued any enforcement actions and the investigation is still ongoing.

The National Futures Association could not even vote to ban Corzine from trading with other people’s money.

A perfect storm of special treatment

The New York Fed fast tracked MF Global’s primary dealer application shortly after Corzine was announced as CEO. Despite 3 straight years of losses, weak internal controls, and a risky new business strategy, MF Global was designated a primary dealer. It announced a $4.7 million loss for the quarter the following day.

The Financial Industry Regulatory Authority (FINRA) granted a waiver for two required licensing exams which it gives mainly to those returning from public service or to management professionals. Unlike other CEOs, Corzine directly traded with company money and even had his trades separated in documents with his initials: JSC.

If you had blown up a company and illegally used $1.6 billion in customer funds:

Via Times Union

Meanwhile, Corzine is living it up because his political connections leave him unaccountable:

HARDI Responds to Motion Opposing Its Standing in Court

Columbus, Ohio – Heating, Air-conditioning & Refrigeration Distributors International (HARDI) submitted a court filing Tuesday, May 28, 2013, in the Regional Efficiency Standards lawsuit in the U.S. Court of Appeals. This filing is in response to a motion by the American Public Gas Association (APGA) which seeks to deny HARDI an opportunity to present compelling information before the court.

On May 1, 2013, when the court accepted a stay from the furnace standard, it asked all parties involved to schedule additional briefings with the court. HARDI has sought to comply with the court’s wishes to schedule briefings, but filings by other parties have complicated and delayed the process.

HARDI believes the court should deny APGA’s motion and recognize that HARDI has standing to challenge the Direct Final Rule in its entirety.

Jon Melchi, HARDI director of government affairs, said, “HARDI continues to believe the facts of this case are on its side and will take every opportunity possible to communicate those facts. HARDI, with the support of the membership, will continue to fight this case of government overreach which we believe harms the HVAC industry.”

Dan Epstein, executive director of Cause of Action, who is representing HARDI in this lawsuit, said, “We hope the court honors the merits that HARDI brings to this case so that they can continue to fight against the abuse of discretion by the Department of Energy that is affecting thousands of Americans.”

For more information about HARDI’s case against the Department of Energy click here.

Last Thursday, Dan Epstein, Cause of Action’s executive director appeared on WDEL’s The Rick Jensen Show to talk about the scandal surrounding  the IRS’s exempt organizations unit and recent discoveries it specifically targeted conservative organizations when applying for the tax-exempt 501(c)(4) status. Rick asked the questions and Dan dished out the answers. Here are some of the highlights:

Rick: There are so many people that don’t believe that using the IRS as a weapon is illegal and is a big scandal.  So what? Lots of presidents have done this. It’s not a scandal. Why should we care?

Dan: Actually, not a lot of presidents have done this; in fact the Internal revenue code—the whole reason why we were able to get transparency on what Nixon was doing and allegedly Johnson and Kennedy was because there’s a specific provision of the tax code that specifically authorizes the President to get tax information and he has to report that back to Congress. Cause of Action investigated this…we found that in fact even though the President had appeared to have gotten private information of certain entities he did not use the statutory mean s to do that.

So why should we care? We should care because:

1)       We want a President, an Administration that follows the law.

2)       It’s not just the issue of political corruption or political targeting; it’s the silencing of free expression.  When you’re a non-profit and an organization that wants to get a tax-exempt status and you apply to the IRS, part of what that IRS application and certification does… it’s the government approving you to engage in certain protected expression.  When you don’t’ approve them and when you actually are engaged in selective politicization in terms of whom you approve, you’re violating the most important  amendment in the United States Constitution, that’s the First Amendment, that’s the freedom of speech, the freedom of expression, the freedom of no government-established religion.  And when you infringe on that, you’re fundamentally infringing on something has been most key to the expression of our basic rights.

Rick: The Tea Party…they don’t want to pay taxes.  They should be investigated. The IRS investigating Tea Party is the right thing… the IRS is doing the right thing, right?

Dan: It’s actually quite ironic because the Inspector General’s report from the IRS—TIGTA actually showed that in fact if the IRS was really just concerned about groups that are doing political activity then the IRS actually was in fact under-inclusive.  In fact, most of the Tea Party groups that the IRS investigated were actually not doing any political activity and were educational or social in community-outreach organizations.  Yet in fact, there were left-of-center groups that applied for tax-exempt status that were granted it and yet clearly—according to the Inspector General—were engaging in political activity.

So if anyone needs to be audited, if anyone need s be investigated, it’s not the majority of the Tea Party groups, it’s the left-of-center groups. And in fact the person is incorrect because the Inspector General, the government official who investigated this stated that as a matter of fact most of these Tea Party groups were not interested in engaging in policy.

Rick: Asking some group to answer a few questions is not intimidating. These Tea-Party people they’re just whining and trying to make something out of nothing.  Big deal- you have to answer a few questions. How the heck can that be intimidating or harassment?

Dan: There are a number of issues there. It’s not just as if they’re asking a few questions.

1)      They’re asking for in many cases, disclosure of donors, disclosure of contributors, and in other cases they’re asking specific questions that relate to how you would answer certain political questions.  So the IRS has no authority to do those types of things. The IRS does not actually have the authority to respectively use the examinations process as an audit process.

2)       It merely wasn’t just a few questions, because in other instances, the IRS actually conducted audits which are a costly enterprise- you have to hire lawyers.  Most organizations have to hire lawyers anyways to apply for an exempt status… it’s not just a question of having to deal with questions, its having to deal with questions that very much take the posture  of an investigation, or as we now know, were actual audits.

Rick:  Regarding the disclosure of donors and contributors to these groups we (the public) want to know who’s funding these groups and who’s behind them and behind this. [Shouldn’t the IRS be investigating this?]

Dan: When you’re applying for exempt-status as a  501(c)(4) which is basically a social-welfare organization, what the IRS is trying to determine is in fact,  should you be a 501(c)4 or should you be a section 524 – a Political Action Committee (PAC)?  That’s really what the examination process is geared towards.  It has nothing to do with donors.  It has everything to do with what is the evidence that you’re going to be engaging in social welfare activities verses pure politics.

Rick: What’s with the IRS sending the names of donors to the media? When you actually send these names illegally to a group like ProPublica they can use the list of these names against them in public.

Dan: What the IRS did in disclosing those lists to ProPublica is illegal. Imagine if the IRS was to take any of our tax returns and just give it to a news organization. That is a violation of law.

Rick: So the question is…. these phony retirements. You’ve got two people who are going to retire anyway, and Obama is saying, “Okay we fixed it, we’re retiring them early.”  So who goes to jail?

Dan:  What we know is that so far, the only things that have happened from the criminal side is that Attorney General Holder has asked the FBI to investigate.  Congress doesn’t have the authority to recommend prosecution.  It looks like the claim is that these were just a few rogue employees.  The likelihood is that the FBI will find no criminal wrongdoing, that’s typically what happens with these types of issues.  It may just be a slap on the wrist.

Rick: Is it a problem that Eric Holder is in essence investigating himself, recusing himself and saying, “I may be a whistleblower myself”?  Should we have a special prosecutor?  Who oversees Holder?

Dan: I think we need to do one of a few things:

1)      Congress either needs to set up a special committee to investigate the IRS –which it can do and empower through emergency legislation— it can either make it an Article 1 Committee, which is legislative or it can make it an executive branch committee and give it prosecutorial power.  Congress has the authority to do that.

2)      What can happen (and this likely not to happen) is that the Attorney General, or if he has a conflict of interest, the Deputy Attorney General could appoint an Independent Counsel or a Special Counsel which would actually have much of the prosecutorial authority as the Attorney General himself.

3)      In any of these legal cases that have now been filed, whether the case in Ohio or the case filed in the U.S. District Court for the District of Columbia – in either of these cases, a judge (based off the necessity of fact gathering) can appoint an Independent Prosecutor and assign an Independent Counsel to prosecute these issues.  A federal judge has the opportunity to recognize the importance of independence here.

For more information on Cause of Action’s investigation into the IRS click here.

Dan Epstein discusses IRS scandal on WDEL 5/23/2013

Executive Director Dan Epstein discusses IRS scandal on KNSI

Executive Director Dan Epstein discusses the IRS scandal on WIBA

“Targeting applicants for tax-exempt status using political labels threatens to undermine the public’s trust in the IRS,” the letter stated.

Read the full letter here: Hatch-Baucus Letter to IRS

CoA requests access to the following records pertaining to the Internal Revenue Service’s (IRS) Exempt Organization (EO) Division for the time period January 1, 2009 to the present:

1.  Copies of any criteria that the IRS Cincinnati Service Center has used to assess applicants for 501(c)( 4) status;
2.  Communications from the Treasury Inspector General for Tax Administration (TIGTA) to the EO Division concerning any audit or investigation conducted of the EO Division;
3. Copies of any Form 990 Schedule B (Schedule of Contributors) released by the IRS to a third party in response to a Freedom of Information Act (FOIA) request, as well as copies of the IRS’s FOIA response letter to that request;
4. All records, including documents and emails, relating or referring to any disclosure of an exempt organization’s Form 990 Schedule B to any employee, contractor or officer of the Executive Office of the President, excluding any such records disclosed pursuant to 26 U.S.C. § 6103(c) or 26 U.S.C. § 6103(g);
5. All records, including documents and emails, referring or relating to any request from the President, Vice President, Cabinet official, employee in the Executive Office of the President, or employee in the Executive Office of the Vice President to any officer or employee of the IRS to conduct an audit or other investigation of any particular taxpayer; and a. If any requests are located in response to this item, then all communications between the IRS and TIGTA concerning those requests.

Click Here for the full request

Related work on the IRS:

FOIA Freak-Out: IRS Wrongly Denies FOIA Request, Comes Unglued Over Media Response

Cause of Action letter to the U.S. Attorney Kerry Harvey requesting an investigation of the IRS and their employees in the IRS Cincinnati Service Center in Kentucky for potential violations of the law concerning conspiracy by singling out organizations based on political views stated in their tax-exempt applications.

IRS Is At Risk of Conspiracy

By Dan Epstein   Published May 16, 2013   

In the wake of recent scandal arising from the Internal Revenue Service’s (IRS) targeting of social welfare groups for their political beliefs, little has been said about the fact that the IRS also scrutinized several pro-Israel organizations, including Z Street, an organization that applied for 501(c)(3) status.

According to Politico, Z Street was targeted by the IRS because “applications mentioning Israel were getting special attention.”

Another group was asked by the IRS, “Does your organization support the existence of the land of Israel?  Describe your organization’s religious belief system towards the land of Israel.”

The supposed justification for such questions: “the government shouldn’t bestow a benefit on an individual or organization engaged in illegal activity like terrorism.”

It’s not merely problematic that the IRS’ questions are woefully under-inclusive with regards to preventing the funding of terrorism – indeed they simply equate being in support of Israel (Zionism) as terrorism, which is less a statement about concerns against promoting terrorism than a reflection of patent anti-Semitism.

These questions are also overly inclusive to the degree of violating protected expression, hinting that the IRS sought to discriminate against those groups that held certain religious beliefs – whatever the form.  (If there’s any question as to the anti-Semitism here, simply look at Jeffrey Goldberg’s tweet on a recent Al Jazeera article which equates Zionism with anti-Semitism).

But government myopia has lurked behind state-sanctioned discrimination throughout history.

To illustrate, Jon Waddell, manager of the IRS’s Exempt Organizations Determinations Group stated “Israel is one of many Middle Eastern countries that have a ‘higher risk of terrorism’… A referral… is appropriate whenever an application mentions providing resources to organizations in a country with a higher risk of terrorism.” Higher risk compared to whom? Libya? Afghanistan?

The idea that supporting Israel is equitable to supporting terrorism is not only racist, it’s false.

The State Department has designated only four countries to be “State Sponsors of Terrorism” – Cuba, Iran, Sudan, and Syria — and in its most recent report on Mideast terrorism, Israel was identified by the State Department as “a resolute counterterrorism partner in 2011.”

Far from being a country whose support constitutes a higher risk of terrorism, the State Department holds the opposite: “Israel faced terrorist threats from Hamas, the Popular Resistance Committees, and Palestinian Islamic Jihad (PIJ), particularly from Gaza but also from the West Bank, and from Hizballah in Lebanon.”

No citizens of Israel are listed on the FBI’s terrorism watch list, but the majority of those who are listed share one thing in common: being anti-Israel.

The idea that the IRS’s targeting of American pro-Israel groups had any sound basis in public policy is not only inaccurate, but has never been justified by U.S. policy, and hopefully never will be.

To give a sense of why the IRS’s anti-Semitism is also dangerous as a policy matter, consider those groups and funding schemes that the IRS has failed to scrutinize in the name of public policy.

On May 30, 2010, the Freedom Flotilla, led by the pro-Hamas Free Gaza Movement, incited violence and the death of nine people in an attempt to defy Israeli law.

The flotilla was funded by the Free Gaza Movement,  which is a project that the IRS has allowed to receive tax-deductible contributions through an IRS-approved financial sponsor, the American Educational Trust, a 501(c)(4) based in Washington, D.C. Apparently fundraising for enemies of the United States is not the type of red flag that concerns the IRS.

Indeed, as another example, consider that the International Solidarity Movement, which has ties to Hamas and Islamic Jihad, receives tax-deductible contributions through its financial supporter, the A.J. Muste Memorial Institute, an IRS-designated 501(c)(3) charity.

So we have an IRS that willfully prevents the free exercise of American groups that support a country that has been a “resolute counterterrorism partner” of the United States since its inception and yet an IRS that has supported entities which have funded the pro-terrorism Free Gaza Movement and International Solidarity Movement.

If only this was a regrettable moment of anti-Semitism in the country with the world’s oldest Constitution committed to liberal democracy.  But, sadly, it presents a much deeper problem: an administration that has convinced its agencies that violating freedom in contexts that have no rational relationship to the prevention of terrorism, is, indeed, good policy for America.

Dan Epstein, executive director, Cause of Action, a non-profit, nonpartisan government accountability organization.