Friday, May 17, 2013



The Internal Revenue Service's watchdog told top Treasury officials
around June 2012 he was investigating allegations the tax agency had
targeted conservative groups, for the first time indicating that Obama
administration officials were aware of the explosive matter in the
midst of the president's re-election campaign.

The disclosure to the Treasury general counsel and the deputy
secretary was a cursory one, according to J. Russell George, the
Treasury inspector general for tax administration. He said he didn't
reveal conclusions of the probe, which was in its early stages, and
his disclosure came as part of a routine update to Treasury leaders.
At the time, Republican lawmakers were complaining publicly about
alleged IRS targeting of tea-party groups.

The revelation nonetheless raised a fresh set of questions about who
was aware of the problem within the Obama administration. It was one
of several new details that emerged during a contentious four-hour
House committee hearing Friday, held one week after an IRS official
revealed at a legal conference that the agency had taken "absolutely
inappropriate" actions in targeting conservative groups seeking
tax-exempt status for often heavy-handed scrutiny.

Among other disclosures: The conference revelation was itself
stage-managed. Ousted IRS acting Commissioner Steven Miller testified
he planned it with the director of the division in question.
Republican lawmakers expressed amazement that IRS officials didn't
tell them first.

The hearing left numerous other fundamental questions unanswered,
however, including who ordered the targeting and why it continued so
long, pointing to a protracted investigation ahead. Mr. Miller
conceded the agency likely disciplined the wrong employee in one
effort to address the problem. Another was reassigned in the agency's
Cincinnati office, but he couldn't provide the employee's name.

Following the hearing, House Ways and Means Committee Chairman Dave
Camp (R., Mich.), who led the proceedings, expressed frustration and
left open the possibility of issuing subpoenas to the IRS. "I think
the most interesting revelation was the overall arrogance of the IRS
and the lack of information from somebody who was in charge," Mr. Camp

The Treasury Department, in a statement, confirmed officials were
notified in June 2012 that an audit had begun. It added an underlined
sentence, "Treasury strongly supports the independent oversight of its
three Inspectors General, and it does not interfere in ongoing IG

Treasury also said Neal Wolin, the deputy secretary, didn't notify
anyone outside of Treasury that the audit was under way and that Mr.
Wolin and Treasury Secretary Jacob Lew "learned about [the inspector
general's] findings when they were reported publicly last week." A
White House aide said Friday that Treasury officials didn't share the
information with White House officials.

White House officials say they learned about the targeting of
conservative groups from the report, and not before. President Barack
Obama on Thursday said, "I can assure you that I certainly did not
know anything about the IG report before the IG report had been leaked
through the press."

At the hearing, lawmakers of both parties expressed anger that IRS
officials didn't reveal the problems to them in 2012. GOP lawmakers,
after receiving complaints from tea-party groups about IRS scrutiny,
asked then-commissioner Douglas Shulman about that in March 2012. He
testified before the Ways and Means committee then that there was
"absolutely no targeting," but he didn't correct his testimony after
learning of the problems in May, according to congressional
investigators. Mr. Shulman couldn't be reached for comment.

Several other IRS officials, including Mr. Miller, didn't disclose the
problems to lawmakers in letters and testimony. Mr. Miller Friday
cited the continuing inspector-general investigation, even though he
obtained an internal IRS investigation in May 2012 that came to some
of the same conclusions as the inspector general report.

"I was not going to go there because I did not have full possession of
the facts, sir," Mr. Miller said at one point.

In sometimes combative testimony, Mr. Miller also took exception to
the idea that the IRS had engaged in targeting conservative groups,
pointing out that groups representing other ideologies also were
caught up in the extra review.

The inspector general's report said that based on a statistical
sample, "all cases with Tea Party, Patriots or 9/12 in their names
were forwarded" for extra scrutiny. Many of the cases were delayed for

Lawmakers of both parties questioned his response.

"Throughout this time, the IRS leadership has demonstrated a total
disregard for the oversight role of the Congress and this committee,"
said Rep. Sander Levin (D., Mich.), the committee's top Democrat. Mr.
Shulman "had an obligation to return to this committee and set this
record straight. So did Mr. Miller."

"How was that not misleading this committee?" said Rep. Paul Ryan (R.,
Wis.) to Mr. Miller. "How can we not conclude that you misled this

"I did not mislead the committee," Mr. Miller responded, adding later,
"I answered the question truthfully."

Messrs. Miller and George, the inspector general, said so far they had
discovered no evidence that the targeting was politically motivated,
and Mr. Miller described it as a bungled way to try and screen

Later Friday, the woman who posed the question at a conference to IRS
official Lois Lerner—the moment last week that first revealed the
problems at the IRS—said Ms. Lerner planted the query. Washington
lawyer Celia Roady said in a statement that Ms. Lerner provided her
the question to ask. She added that Ms. Lerner "did not tell me, and I
did not know, how she would answer the question."

The IRS didn't respond to requests for comment from Ms. Lerner, who
runs the exempt-organizations unit at the agency.

Mr. Miller said the IRS, meanwhile, had "called to get on the
calendar" to also brief the Ways and Means committee—a statement
Republicans met with barely disguised disbelief.

Mr. Camp and other GOP lawmakers suggested a pattern of efforts to use
the IRS to attack conservatives. Those include a White House
official's discussion in mid-2010, during a briefing with reporters,
of the purported tax-filing status of Koch Industries. Its owners are
big donors to conservative causes. The tax-filing status of businesses
is often confidential. The White House said in 2010 that the
official's statement "was not based on any review of tax filings." It
promised not to use the example in the future.

In an interview, Mr. Levin said the IG's report to Treasury officials
constituted only "a brief reference," that he doubted was communicated
up the chain.

—Peter Nicholas contributed to this article.