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New Documents Show IRS, DOJ Collusion on Potential Prosecution of Tax Exempt Groups

New Documents Show IRS, DOJ Collusion on Potential Prosecution of Tax Exempt Groups

Judicial Watch announced a major find recently in its independent investigation of the Obama IRS scandal, in which the IRS improperly targeted conservative groups for extra scrutiny when applying for tax-exempt status.

Perhaps more than any other government official, former Internal Revenue (IRS) Director of Exempt Organizations Lois Lerner has become the defiant face of this scandal. From the time of her stonewalling appearance before the House Oversight and Government Reform Committee in May 2013, when she repeatedly took the Fifth Amendment, to her repeat performance last month, Lerner has served notice on the members of Congress – and the American people – that what the IRS did under her direction is effectively none of their business.

Judicial Watch obtained a new batch of internal IRS documents revealing that Lerner directly communicated with the Department of Justice (DOJ) about whether it was possible to criminally prosecute certain tax-exempt entities.

The documents were dragged out of the Obama administration thanks to our October 2013 Freedom of Information Act (FOIA) lawsuit against the IRS, after the agency refused to respond to four FOIA requests dating back to May 2013.

The newly obtained IRS documents contain a revealing email exchange between Lerner and Nikole C. Flax, then-Chief of Staff, to then-Acting IRS Commissioner Steven T. Miller, discussing plans to work with the DOJ to prosecute nonprofit groups that “lied” (Lerner’s quotation marks) about political activities. The tell-tale exchange includes the following:

I got a call today from Richard Pilger Director Elections Crimes Branch at DOJ … He wanted to know who at IRS the DOJ folk s [sic] could talk to about Sen. Whitehouse idea at the hearing that DOJ could piece together false statement cases about applicants who “lied” on their 1024s -saying they weren’t planning on doing political activity, and then turning around and making large visible political expenditures. DOJ is feeling like it needs to respond, but want to talk to the right folks at IRS to see whether there are impediments from our side and what, if any damage this might do to IRS programs.

I told him that sounded like we might need several folks from IRS…

I think we should do it – also need to include CI [Criminal Investigation Division], which we can help coordinate. Also, we need to reach out to FEC. Does it make sense to consider including them in this or keep it separate?

Lerner then “handed off” scheduling the issue to Senior Technical Adviser, Attorney Nancy Marks, who was then supposed to set up the meeting with the DOJ. Lerner also decided that it would be DOJ’s decision as to whether her old co-conspirators from the Federal Election Commission would attend.

By way of background, Democratic Rhode Island Senator Sheldon Whitehouse had held a hearing on April 9, during which, in questioning the witnesses from DOJ and IRS, Whitehouse asked why they have not prosecuted 501(c)(4) groups that have seemingly made false statements about their political activities. In a March 27, 2013, email to top IRS staff, Lerner made it clear that the impetus for the hearing was to go after political groups:

As I mentioned yesterday — there are several groups of folks from the FEC world that are pushing tax fraud prosecution for c4s who report they are not conducting political activity when they are (or these folks think they are). One is my ex-boss Larry Noble (former General Counsel at the FEC), who is now president of Americans for Campaign Reform. This is their latest push to shut these down. One IRS prosecution would make an impact and they wouldn’t feel so comfortable doing the stuff.

So, don’t be fooled about how this is being articulated – it is ALL about 501(c)(4) orgs and political activity. [Emphasis added]

But in an email sent a few minutes earlier, Lerner was forced to acknowledge prosecutions would evidently be at odds with the law:

Whether there was a false statement or fraud regarding an [sic] description of an alleged political expenditure that doesn’t say vote for or vote against is not realistic under current law. Everyone is looking for a magic bullet or scapegoat — there isn’t one. The law in this area is just hard.

The emails show that the day before Lerner broke the news of the IRS scandal, blaming it on “low-level” employees out in the hinterlands, she herself was talking to a top Obama Justice Department official about whether the DOJ could prosecute the very same organizations that the IRS had already improperly targeted. That means the IRS emails show Eric Holder’s Department of Justice is now implicated and conflicted in the IRS scandal – which helps explain why we had to sue in federal court to get these documents.

The reaction to these new Judicial Watch revelations has been explosive. Congress, which had been supposedly investigating this scandal for years, evidently hadn’t been given this information. Once again, Judicial Watch proved itself better at ferreting out the truth than Congress. But Rep. Darrel Issa (R-CA) and Rep. Jim Jordan (R-OH), who have at least been trying to get at the truth through their leadership roles at the House Oversight and Government Reform Committee, were quick to our react to our disclosures.

“The release of new documents underscores the political nature of IRS Tea Party targeting and the extent to which supposed apolitical officials took direction from elected Democrats,” said House Oversight Chairman Issa. “These e-mails are part of an overwhelming body of evidence that political pressure from prominent Democrats led to the targeting of Americans for their political beliefs.”

“Now I see why the IRS is scared to give up the rest of Lois Lerner’s emails,” said Rep. Jordan. “Not only do these e-mails further prove the coordination among the IRS, the Federal Election Commission (FEC), the Justice Department and committee Democrats to target conservatives, they also show that had our committee not requested the [IRS] Inspector General’s investigation when we did, Eric Holder’s politicized Justice Department would likely have been leveling trumped up criminal charges against Tea Party groups to intimidate them from exercising their Constitutional rights.”

Media coverage was significant and our revelations gained national headlines. It is easy to see why.

Talking about throwing people in jail is a lot easier to understand than talking about an effort to delay approval of an application for exemption under Section 501(c)(4) of the Internal Revenue Code.

I encourage you to look at all the emails, as there’s plenty more than the big headline about jailing Obama’s political opponents. The documents include email exchanges showing that, before Lerner’s May 10, 2013 speech to the American Bar Association blaming “low-level” employees in Cincinnati for targeting tax-exempt organizations, the IRS Exempt Organizations division was desperately scrambling to defuse the emerging targeting scandal:

  • May 1, 2013: After receiving an email from an assistant showing that 501(c)(4) applications had increased from 1591 in 2010 to 3398 in 2012 , Lerner wrote back, “Looks to me like 2010-2012 doubled too. Oh well – thanks.”
  • May 2, 2013: Discussing an upcoming conference call with approximately 100 congressional staffers on May 22, Lerner cautions aides, “Need to be careful not to mention sequester/furlough unless asked although can allude to budget and resources restraints.”
  • May 2, 2013: In response to an email reminding her about the upcoming conference call with congressional staffers, Lerner responded, “Arrgh – I just saw it. Sharon [White] could skate, but Cindy [Thomas] is the person who could answer that stuff. We need to give them some type of language in the event that type of question comes up.” [apparently in reference to earlier email referencing “sensitive issues”].

The new documents also include emails exchanged after Lerner’s May 10 ABA speech – including a scathing email from Cindy Thomas, the former program manager of the Cincinnati office, to Lerner:

  • May 10, 2013: In an email to an aide responding to a request for information from a Washington Post reporter, Lerner admits that she “can’t confirm that there was anyone on the other side of the political spectrum” who had been targeted by the IRS. She then adds that “The one with the names used were only know [sic] because they have been very loud in the press.”
  • May 15, 2013: In an email from an aide to Lerner, the aide specifically mentions “Tea Party Organizations”, the “Tea Party movement,” and “Patriots” as organizations targeted by the IRS.

The Judicial Watch FOIA requests came on the heels of an explosive May 14, 2013, Treasury Inspector General report revealing that the IRS had singled out groups with conservative-sounding terms such as “patriot” and “Tea Party” in their titles when applying for tax-exempt status. The IG probe determined that “Early in Calendar Year 2010, the IRS began using inappropriate criteria to identify organizations applying for tax-exempt status to (e.g., lists of past and future donors).” According to the report, the illegal IRS reviews continued for more than 18 months and “delayed processing of targeted groups’ applications,” preparing for the 2012 presidential election.

Lois Lerner, who headed the IRS division that handles applications for tax-exempt status, retired from the IRS with full benefits on September 23 after an internal investigation found she was guilty of “neglect of duties” and was going to call for her ouster, according to news reports. On April 9, 2014, the Ways and Means Committee referred Lois Lerner to the DOJ for criminal prosecution. On April 10, 2014, the House Oversight Committee voted to hold Lerner in contempt of Congress.

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