IRS chief and Treasury knew about plan to use planted question to unveil scandal

MCCLATCHY WASHINGTON BUREAUMay 21, 2013 

— The secretly planted question and its very public answer that triggered the IRS scandal now gripping the nation’s capital came from the top of the agency, fired Acting Commissioner Steven Miller testified on Tuesday.

Grilled by the Senate Finance Committee, Miller went farther than prior comments when asked whose idea it was to plant a question at an American Bar Association conference about the inappropriate targeting of conservative groups.

“I will take responsibility for that,” Miller said, expanding on last week’s admission that he knew mid-level manager Lois Lerner had answered a question planted by a member of an IRS advisory council. “Now that we had the (inspector general’s) report, we had all the facts … we thought we’d get out an apology.”

The report he referenced was a much-anticipated audit, released last week by the Treasury Department’s Inspector General for Tax Administration J. Russell George.

“Obviously the entire thing was an incredibly bad idea,” Miller said of the planted question. “I think what we tried to do is get the apology out and start the story. The report was coming, and we knew that.”

Nearby at a hearing of the Senate Banking Committee, Treasury Secretary Jacob Lew acknowledged Tuesday that there was contact between his agency and the IRS on the planned plant.

“There were some conversations at a staff level between Treasury and IRS. You know, there are -- it is -- was the discretion of the IRS to decide how to manage this matter,” Lew said in answer to questions from Sen. Mike Crapo, R-Idaho.

A Treasury official, demanding anonymity to speak freely, explained that agency officials had learned in April that Lerner might make a speech acknowledging the targeting and “expressed some concern about the idea of a speech, but ultimately deferred to the IRS on that issue. “

The speech never happened, and Treasury learned later that Miller might make an apology in congressional testimony, the official said. Eventually Treasury staff “was made aware that Lerner would be asked a question about the issue at the ABA conference on Friday, May 10. Treasury again deferred to the IRS on their interest in making a public apology,” the Treasury official said.

White House officials were aware of the first two possibilities but not the planted question, the Treasury official said.

In his testimony Friday, Miller told Sen. John Thune, R-SD, he did not have any discussions with the White House and did not know of anyone who did.

The Treasury Department did not immediately say who in the agency discussed the damage-control plans with IRS officials or the White House.

In testimony last week before the House Ways and Means Committee, Miller understated his involvement when asked about the plant. Treasury and White House officials did not reveal this information last week when asked directly by McClatchy and other news organizations who in the Obama administration knew in advance about the explosive audit findings.

Senators on Tuesday were incredulous that the IRS sought to get out in front of a negative story without notifying lawmakers who had been inquiring about alleged IRS harassment for nearly two years. These lawmakers were told repeatedly by Miller and other top IRS officials that there was no targeting.

Sen. Orrin Hatch, R-Utah, called Miller a liar.

“You didn’t mention any of this in your response to me, the Senate or any other congressional body … that’s a lie by omission,” Hatch said. “There’s no question about that in my mind.”

Miller denied lying to Congress, saying he still doesn’t think there was politically motivated targeting of conservative groups.

Inspector General J. Russell George on Tuesday stepped into the limelight when Miller and his predecessor, Bush administration appointee Doug Shulman, refused to say how they were unaware of a matter so serious. The targeting of groups happened in a Cincinnati–based division in charge of approving applications from organizations seeking tax-exempt status.

“Was there no ongoing oversight of the employees in Cincinnati, and what they were doing? Why didn’t you know?” Sen. Debbie Stabenow, D-Mich., asked of Miller and Shulman.

When Miller and Shulman revealed no new details, George stepped in.

“The bottom line is it was just a breakdown of communications and mismanagement by the Internal Revenue Service,” George said, noting it took senior officials in Washington almost a year to answer initial requests for clarification from employees in Cincinnati. Once a clarification came, employees went back to the inappropriate criteria.

Under questioning from Crapo, George acknowledged that while he found no evidence of political motivation, he did not rule that out. He said IRS employees did not talk to him under oath.

Miller on Tuesday again refused to name lower level officials involved in the targeting of conservative groups or those who sent inappropriate letters asking for inappropriate information from applicants.

“We transferred and reassigned an individual who had been involved in the letters,” Miller repeated, noting another employee was given verbal counseling.

Miller again maintained that words and names such as tea party and patriot were used as short cuts, not targeting, to flag applications for special scrutiny. Groups subjected to closer scrutiny came from both sides of the political divide but were predominantly tea party organizations. The IRS was trying to determine if these applicants were social welfare organizations seeking tax exempt status to advocate for issues, versus fig leaves for political parties.

But the letters sent by the IRS to conservative groups suggest otherwise. Sen. Charles Grassley, R-Iowa, cited a woman in his district, Susan Martinek, who sought tax-exempt status for the Coalition for Life of Iowa.

Grassley said that Martinek was told her application was ready for approval but first required a letter signed by her board members that the pro-life group wouldn’t picket in front of Planned Parenthood offices.

“That’s outrageous,” Grassley said, suggesting groups were asked to forgo their First Amendment rights in order to get tax-exempt status for their organization.

Many Democratic senators complained that neither Miller nor Shulman enforced the law regarding who gets tax-exempt status. The statute says groups seeking that designation must have a primarily social-welfare mission, but instead many have become conduits for funneling money anonymously into political campaigns.

The group Citizens for Responsibility and Ethics in Washington filed a lawsuit against the IRS on Tuesday to compel the agency to initiate a rulemaking procedure to address serious conflicts in the IRS regulations. CREW argues that tax law requires that the tax-exempt status can only go to groups operated exclusively for social welfare purposes.

A day earlier, California-based NorCal Tea Party Patriots brought a federal suit in Cincinnati against the IRS alleging the agency, in targeting it, violated its constitutional rights to free speech. The suit seeks unspecified damages.

Email: khall@mcclatchydc.com; Twitter: @KevinGHall; Email: dlightman@mcclatchydc.com; Twitter:@Lightmandavid

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