IRS Official Invokes Fifth; Lawmakers Criticize Treasury IG

Lois Lerner, head of the IRS unit that decides whether to grant tax-exempt status to groups, listens during a hearing on Capitol Hill. Lois Lerner, head of the IRS unit that decides whether to grant tax-exempt status to groups, listens during a hearing on Capitol Hill. J. Scott Applewhite/AP

Sparks continued to fly around the Internal Revenue Service scandal on Wednesday, with a key official invoking her Fifth Amendment rights, a Treasury official stressing the independence of an inspector general, and Republicans expressing skepticism that the no higher-ups in the Obama administration knew agency employees were targeting conservative groups seeking tax-exempt status.

In a dramatic appearance at the House Oversight and Government Reform Committee, Lois Lerner, director of the agency’s exempt organizations division, attempted to invoke her Fifth Amendment right not to testify. But in declining to answer questions, Lerner asserted her innocence, prompting committee chairman Darrell Issa, R-Calif., to suggest she may have given up her right to avert questioning.

Lerner, after citing her 34 years as a lawyer who joined IRS in 2001, said, “I have not done anything wrong. I have not broken any law. I have not violated any IRS regulations. I have not provided false information to this or any other committee. But I have been advised by counsel not to testify or answer questions. “Some will assume I’ve done something wrong. I have not,” she said.

Issa said, “I believe you have not invoked rights but effectively waived rights” and dismissed Lerner and her counsel “subject to recall.” He later said the meeting was not adjourned but in recess, to keep that option open. 

In launching the hearing, Issa admonished Treasury Inspector General for Tax Administration J. Russell George, who conducted the audit detailing IRS mishandling of applications by activist groups, for not informing the committee of his probe back in May 2012. “Despite numerous requests from the committee, the IG failed to do that. That’s existing law, under the Inspector General Act,” Issa said. “Particularly after the General Services Administration scandal, to wait 10 months is perhaps the greatest failure of otherwise exemplary inspector general.”

George replied that he had provided a detailed timeline. “There are established procedures for conducting an audit, and we will not report information until the IRS has had an opportunity to look at facts,” he said. “It is impractical to give you partial information that may not be accurate” or that “may not be retained on Capitol Hill, which would not be fair to the people being investigated.” George offered to work with Issa on clarifying an IG’s responsibilities under the law.

Another official, Deputy Treasury Secretary Neal Wolin, also drew criticism for not sounding an alarm on the use of political terms to sort applications. He testified that “the activities described in the report are absolutely unacceptable and inexcusable,” noting that upon learning of the TIGTA findings, Treasury Secretary Jack Lew accepted the resignation of acting IRS Commissioner Steven T. Miller and asked his proposed successor Danny Werfel to conduct a review on ways to prevent a repeat of the wrongdoing. (Werfel on Wednesday sent his first message to IRS staff, acknowledging “difficult times.”)

But, Wolin said, “there is no indication that Treasury was involved in the improper conduct at the IRS. The TIGTA report did not find any evidence that Treasury or others outside the IRS had any role,” he said. When George informed him “at some point in 2012” that he was auditing IRS review of tax-exempt applications, “he told me only of the fact that he had undertaken such an audit, and he did not provide any findings. In that conversation, I told him that he should follow the facts wherever they lead. I told him that our job is to stay out of the way and let him do his work.”

Treasury’s hands-off approach to TIGTA probes, he said, is “how the process functions. That is how the process should function. And that is how the process functioned here.”

Issa said he was disappointed with Wolin’s answer. “Many people think the IRS is independent agency, but that is not the case,” Issa said. “It is not only part of Treasury,” it can be challenged by Treasury.

Ranking committee member Rep. Elijah Cummings, D-Md., agreed that the failure of Lerner and then-IRS Commissioner Douglas Shulman to inform Congress “is one of their most significant failures, and I do not believe their answers to date have been sufficient.” He said the scandal “goes well beyond the IG report. It’s about gross incompetence, about truth and trust. In some cases, it took three years to resolve [the applications] -- we are better than that.”

But Cummings also called for Congress to update the law and regulations on the political activity on 501(c)(4) organizations, and he led Shulman through a series of questions establishing that he was an appointee of President George W. Bush and that there is “no evidence” that he directed the IRS to harass or delay tea party groups’ applications.

Shulman repeated earlier testimony that he is “comfortable” with his handling of the matter in 2012, given the facts he had at the time. “The briefing was vocal, not detailed, and I was told the practice had stopped,” he said. “I had some of the facts, not all of the facts, no idea of the scope and severity.”

Issa told Shulman, “If you knew or didn’t know you were derelict in your duty, either way, it’s not something you should be proud of.”

Other Republicans questioned Shulman on his alleged 118 visits to the White House, asking whether he discussed the targeting issue there, and asked why, if there had been 42 news stories and letters from 132 members of Congress during the period in question, he hadn’t acted. “The IRs is charged with enforcing Obamacare and is targeting the groups specifically formed because they opposed Obamacare,” Rep. Jim Jordan, R-Ohio, charged. “Are you being square with us?”

Rep. Stephen Lynch, D-Mass., issued a warning: “You misled Congress; you abdicated your responsibility,” he told Shulman. “If you can’t answer the questions, you will leave us no alternative but the appointment of special prosecutor. You are stonewalling. There will be hell to pay.”

Rep. John Mica, R-Fla., said despite all his experience with scandals, he had “never seen a scandal that so shocked the American people. When I went home, everyone asked about it because everyone pays taxes. They want us to get to the bottom of it.” He said the IRS had “closed down and gagged groups for 27 months.” He also asked whether Lerner received or deserved bonuses.

Shulman could not speak to the bonuses but was under the impression that conservative groups targeted by the IRS remained in business. “My best undertanding is that these people were not closed down, they were operating at the time,” he said.

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