Archive for ‘Focus on IRS and Treasury’

EO Tax Journal 2019-18

Paul Streckfus, January 28, 2019 at 4:57 am


Views of Former IRS Commissioner John Koskinen (Part 1)

What follows is Part 1 of an edited transcript of a December 17 Interview of former IRS Commissioner John Koskinen.

Background Note: John Koskinen was the 48th Commissioner of the Internal Revenue Service from December 2013 to November 2017. He is a graduate of Duke University and Yale Law School. His career has included stints as Non-Executive Chairman of Freddie Mac from September 2008 to February 2012, and President of the U.S. Soccer Foundation from 2004 to 2008. Before then, he was Deputy Mayor and City Administrator of the District of Columbia, Deputy Director for Management of the Office of Management and Budget, Chairman of the President’s Council on Y2K, and CEO of the Palmieri Company.

Streckfus: Usually I begin an interview by asking how someone got interested in their work, but in your case, it might take the rest of the day.

Koskinen: I have a checkered employment career that led to being IRS Commissioner. It was my second failed retirement, as everybody knows.

Recalling the IRS Brouhaha

Streckfus: I am going to start by asking you if you remember where you were on May 10, 2013.

Koskinen: I was in Washington. I’ve lived here for almost 50 years now and I remember reading the story in the Washington Post about the management issues at the IRS and I had two thoughts. One is that, as you read the article and a couple of subsequent articles, it was clear that management failures had happened and two, at some point in that period of time it was announced that the Acting Commissioner had been removed and there were major changes going on.

I thought, well, that’s not a good situation because I knew a number of people in the White House from my days in the Clinton Administration. It didn’t totally surprise me when, within a relatively short time, certainly a couple of weeks, I got a call from Presidential Personnel saying, “Hey, how would you like to be considered to be the IRS Commissioner?” I often get asked, “Well, how long did it take to really resolve that?” And I say, “About 15 seconds.”

As you know, I spent my full career, 21 years in the private sector and 25 in the public sector, primarily dealing with organizations under stress. I kid Senator Hatch, whom I got to know when I was the Year 2000 Coordinator for the country, that he made a speech on the Senate floor in May 2013 saying what the Administration ought to do is get somebody out of the private sector who knows how to manage and bring him in. I kidded him it was all his fault that I got fingered to be the IRS Commissioner.

But it really only took 15 seconds because, one, I love challenges, and two, having been in the executive branch, having been the Deputy Director for Management at OMB and the Year 2000 Coordinator, I well understood the importance of the IRS to not only the functioning of the government but to the country. IRS processes, as you know, 150 million individual tax returns a year so, for a lot of people, the only interface they have with the federal government is when they pay their taxes and, if they have a question about those taxes, it’s important for that interface to work well.

Streckfus: As you began at the IRS, what was your sense as to how things had been handled in regard to the alleged scandal? When Lois Lerner made her apology statement on May 10, 2013, at a meeting of the EO Committee of the ABA’s Tax Section, I was sitting in the first row. I immediately knew that something was up because she appeared to be reading from her notes in response to what we later learned to be a planted question. We found out later that Acting Commissioner Steve Miller and she had put a statement together to hopefully head off an imminent TIGTA report critical of the IRS’s handling of exemption applications. In the subsequent uproar Steve was fired by President Obama and Lois was relieved of her duties as EO Division Director. What was your sense of how that situation was handled by the Administration at that point in time?

Koskinen: Well, I understood that there was a problem. At that time I knew only what I was reading in the newspapers but my understanding was they knew the Inspector General report was coming out and it was going to be unfavorable, so there’s a natural inclination to try to get ahead of the story. The problem is that the process often is as important as the substance and having planted the question, it looked a little more defensive than it had to be.

There was clearly an issue that had been kicking around for going on almost two years. If at some point earlier in the process, certainly at the start of the IG review, the IRS had said, “you know, we have this challenge and this problem, We don’t know what to do with all these applications from organizations of all kinds that look like they’re politically active but want to be tax exempt. Nobody’s been turned down, but it’s taking too long, but we’re going to get this resolved. We apologize for the delay.” If that was said, if that had happened, I wouldn’t have been the IRS Commissioner.

I understand that when working on a problem like that, you’re trying to get it resolved, you’re hoping you can get it resolved. When you know bad news is going to come out, the tendency is to try to say, okay, how do I get ahead of it? It may not have been the most artful way to get ahead of it, but you could understand their desire.

Streckfus: I think Steve Miller has admitted that it was not one of his better management decisions.

Koskinen: Having spent a lot of time with large organizations as well, as you got more into the details, it was fairly clear that what had happened was a management failure. Nobody should have to wait two years for an answer to any question at the IRS so you can understand the challenge. You have the Tea Party organizations formed in 2010 in response to the Affordable Care Act, which they were concerned about as more government intrusion, and then Citizens United comes out saying corporations are individuals and so suddenly you get people saying, hey, now we can actually put together advocacy groups.

Suddenly, the IRS has these exemption applications coming in with names that look like they are going to be political groups, not social welfare groups. The first mistake, as everybody has conceded, was to only go by their names. You need to find out more about them than just their names.

Part of the problem is that, in a lot of organizations, bad news often doesn’t travel fast, it doesn’t travel at all. People tend to feel they should be able to resolve the issue and so it gets stuck in the middle. When Commissioner Doug Shulman testified that he didn’t know anything about this, I thought, one, that’s true and, two, that’s the problem.

A good example is General Motors and their ignition switch problem. There wasn’t a question that nobody knew about the problem, it was just that nobody at the top knew about the problem and, therefore, the resources of the organization weren’t deployed early enough to solve it.

The same thing with the IRS. The problem started to surface shortly after end of 2011, 2012, and that problem never got surfaced all the way to the top so the agency could have, as a group, said, okay, now we really need to solve this. As I said, if people in 2012 had said, “wow, we’ve got all these things we’re trying to work on and it may take us a little while, we apologize for that,” again, you wouldn’t have had this subsequent problem.

Streckfus: Another thing I’ve noticed over the years is that the IRS folks love to kick the can down the road. They did that when I was there in the seventies and it’s always tempting to ignore a problem for as long as possible. More than one IRS employee has told me the hope was you’d be long gone before the problem could no longer be ignored or it would be in someone else’s area of responsibility.

Koskinen: Right, and on this particular problem you can see the can going back and forth between Washington and Cincinnati.

Streckfus: And with a stop in Chief Counsel for more study.

Koskinen: The ultimate irony, as I look back on my own four fun-filled years is the fact that — and certainly the House Freedom Caucus people and their supporters didn’t want to acknowledge it — you don’t need an approval from the IRS to operate as a social welfare organization. But I apologized early on for the delay, saying nobody should have to wait that long. You do have a right to try to get an answer but the idea that it hamstrung people so they couldn’t operate doesn’t hold true. They could have gone out and engaged in their activities.

Now, the risk, of course, with the fuzzy facts and circumstances test that is applied to determine whether an organization qualifies, is you could be out there supporting these campaigns and advocating for positions and running the risk that the IRS would say, under the all facts and circumstances, this is actually not a social welfare 501(c)(4) organization. This looks like a regular corporation, and therefore all of your contributions are revenues and you owe tax on them. That’s obviously not a good result.

So it’s understandable why people wanted to get IRS clearance but it wasn’t as if they couldn’t have gone off and operated on their own and just filed annual returns. There are some (c)(4)s that do that. In fact, subsequent legislation was passed requiring people who do that to file a notice with the IRS saying, hey, we’re out here.

Another irony is that, when Congress thought it was important to know who is out there operating as a social welfare organization, it recognized they could be out there without bothering to let anyone know by filing the required annual returns. But having said all that, it did seem to me that this was not an excuse for not getting an answer any faster than a couple of years.

Streckfus: I agree with you. I think part of the problem was the way the IRS was organized. I always thought the reorganization in 1999 was a mistake that caused, at least in the EO area, a great deal of confusion and turnover and that’s why we got new leadership. Steve Miller left Counsel to be EO Division Director and then kept getting promoted. Lois Lerner came over from the FEC to be in charge of EO Rulings & Agreements and then took over as EO Division Director when Steve got promoted to TEGE Commissioner. They both ended up in positions where they probably weren’t prepared for the challenges.

Generally, I was a supporter of President Obama but I do have serious misgivings with how he handled the blow back after Lois made her apology statement. I was on the PBS NewsHour that evening when he made his statement that he was relieving Steve. I thought he overreacted because dismissing Steve and then having the onus on Lois seemed to me to just set up a situation for the Republicans to bash away while the Democrats retreated. Did you have any particular perspective as to how that situation could have maybe been better handled or do you think it was handled properly?

Koskinen: For someone in charge, whether it’s a city or a state or at the federal level, when you’re in the public domain, if there’s a problem, the first question people ask is, well, who is going to get fired? As you know, I was the Deputy Mayor/City Administrator and ran the city of Washington for three years. When I first started, I had known Tony Williams from when he was CFO at Agriculture and I was the Deputy Director for Management at OMB. Tony is a very bright guy who did a great job for eight years as Mayor of Washington but his initial instinct on things, because he had never run a city, was that if there’s a problem, we should fire someone.

My response to him was: “You know, if every time there’s a mistake, we fire somebody, that feels pretty good but, after a while, it will be hard to find people who want to take those jobs.” The District already had a reputation as being a good place to end your career, not forward it.”

In an otherwise favorable article, the only complaint the Washington Post had when I left after three interesting years was I had not fired enough people. Remember, while I was with the city, we had 9/11, we had the snipers, we had anthrax. I was afraid people were going to say there’s a black cloud over this guy and stay away.

My sense was that the President’s immediate response to clean house came without his really knowing how did all this happen? That didn’t work very well for the IRS. Then later, as you know, the President went the other way and on a TV program said there’s not a scintilla of evidence of political involvement, which, while it turned out to be correct, made my life a little difficult because several investigations were still continuing. I had to go to scheduled hearings where I was cross examined about the President’s comment, which, with the ongoing investigations, was seen by the Republicans like a rush to judgment.

Streckfus: Shortly after the President’s initial action Attorney General Eric Holder said they were considering an indictment against Lois Lerner. That probably drove her to take the Fifth, which I assume on advice of her private attorneys. Unfortunately, when you do that people assume you must be guilty of something.

Looking back, do you see that as being mishandled by the Obama Administration? I felt the Administration and the IRS threw her under the bus at that point and so she had to rely on her private attorneys who, I assume, were saying you must take the Fifth.

Koskinen: Again, hindsight is always terrific for making a judgment. For people now it’s easy to forget that, from that time in May, 2013, through the end of the year when the new commissioner showed up, the IRS was under tremendous pressure. The House Freedom Caucus and the conservatives had a heyday because you could get on television every day by claiming that this was all directed politically by the Obama Administration, the President or the Justice Department. Their message was that somebody was telling the IRS to stop these organizations so they can’t be effective in the 2012 election. Again, what that ignored was, if the organizations wanted to be active in the 2012 election, they could have just gone out and done it.

You have to understand that that pressure on Lois and her attorneys was such that they figured this is a bunch of people out for blood. A big problem for anybody being interviewed by the FBI and testifying under oath – as we’ve seen now with the Mueller investigation – is, if you don’t testify exactly correctly, say you make a mistake from your memory, you risk getting charged with making a false statement, even if not directly related to the original issue being investigated. It’s hard for me to fault how Lois’ attorneys were advising her.

Remember, I’m the guy they tried to impeach so these people were perfectly capable of harassing her and trying to find a misstatement in anything she said. The Fifth Amendment is there for everybody’s protection. But for the average person on the street, when you take the Fifth, it sounds like, well, you must be hiding something. Why don’t you testify?

Streckfus: That’s the problem because I think we now know that Lois wasn’t involved in any criminal acts.

Koskinen: I understand that when she testified under seal in one of the lawsuits, some thought that, had she said in public what she testified to the court, nobody would have been excited. I don’t know what the testimony was but I can assume she laid out just what we talked about, what we could see.

The IRS took a lot of heat for the first six months after her public statement and then, for the next six to twelve months, it was about, why can’t you guys just give us all your data? We ultimately gave them 1,300,000 pages. There’s not a single email from anybody outside the agency saying, hey, let’s get these people. There’s not a single email internally where anybody says, hey, you know, it will be great if we can stop these people from acting, let’s single them out. In fact, the IG ultimately, after two or three more years, issued his follow-up report just before I left, saying, well, they really did target liberal groups as well.

As I said at the time, going into it, clearly they targeted and singled out more conservative sounding groups because there were more of them. The vast majority were people, as I said, driven by the Tea Party movement opposed to the Affordable Care Act and anxious to organize groups to defeat it. If you step back, it looks a lot like a tremendous amount of smoke with no fire underneath it.

The risk is for the people involved, Lois, Steve, and others. It’s a difficult problem to have to explain to the people who say, well, you guys were picking on conservatives. When actually, they may not have been doing their job most effectively but they were not acting with malice aforethought, trying to get people.

Streckfus: Despite the hazards I just feel that Lois and the IRS would have been better off if she hadn’t taken the Fifth, because that allowed her accusers to create their own reality and make her the villain.

Koskinen: If she hadn’t taken the Fifth, if she had just laid out what I talked about, she would have gotten yelled out for not being the world’s greatest manager but it would have been much harder to them to make their accusations of political bias. People would still have asked how come you did that and what went on, and there still would have been hearings, but accusing Lois of destroying emails and targeting conservatives and claiming she was a liberal from the Federal Election Commission would not have been much of a story.

Streckfus: Unfortunately, they were able to find some quotes of hers where she seemed opinionated.

Koskinen: The quotes, as a general matter, indicated that she was a liberal Democrat, but, as I said, if you go through literally hundreds of thousands of emails, there’s nobody saying let’s get these people or let’s slow this down or let’s make sure they can’t do anything. Not a single email.

The IRS Workforce

Streckfus: So you came in as Commissioner and you had to deal with this mess that had been created. What was your impression of the IRS, in particular the EO functions and the individuals who you were dealing with at that point in time?

Koskinen: They had brought new people in. One of my theories of management is if you want to know what’s going on, go talk to the frontline employees. I told people I’d like to visit all the offices and they said, well, there are 500 of them. So I said I’d like to see some of the offices. I started in January [2014]. I was confirmed the 23rd of December so in mid-January I thought the first place to go was Cincinnati and talk to the employees there. I thought it was important for them to know I understood the pressure they were under.

Streckfus: I read they were very bitter because they felt they were being dumped on.

Koskinen: My thought was to let them know I understood their problems and we would be supportive. Just my being there I felt helped. It was fascinating to me. I met with a couple hundred frontline employees. I always did the town halls with frontline employees without their managers and then I’d do a town hall with the managers. I thought that I would hear a lot of people grumbling, complaining, saying woe is me. But it was reassuring, even amazing, that in the hour and a half we spent, mostly going back and forth, I didn’t hear anybody say, gee, I’ve got huge legal expenses or this has been a terrible experience or my neighbors don’t like me anymore.

The focus was basically how do we get the work done with the constrained resources we have, with the limitations we have? I’ve told people it was not what you would have expected if you went there and it was a tribute to the dedication to the mission of the agency of these people who had been criticized for months. The Cincinnati Enquirer was running negative stories about them. In fact, I was told by [IRS Communications Chief] Terry Lemons that he had been advised we should not talk to the Enquirer. Every place I go I do a press conference. So I told Terry, well, they’re going to know I’m here, it’s not going to be a secret, so when they call, I’ll take the call.

I grew up in Ashland, Kentucky, about 120 miles up the Ohio River near West Virginia. I did an interview with the reporter at the Enquirer who had been writing all these stories and, as often happens, his story after our interview was, local boy makes good, a guy from Ashland is now the IRS Commissioner. He then gave a positive view of the IRS and wrote what I said I thought we needed to do. It was an example of why I’ve always said, if you don’t talk to reporters, you should not be surprised when your side of the story doesn’t show up.

When I arrived at the IRS Ken Corbin was acting EO Director and then moved over to Wage and Investment. Then Sunita Lough came in to lead EO. As I’ve said many times and I really do mean it, having spent 45 years all over the place, this was as good a workforce as I’ve ever worked with. I’ve always said when an organization has major problems and I’ve taken over a lot of bankrupt, troubled organizations, the people are never the problem. It’s a question of leadership, of structure, of resources, of training. Certainly for the IRS, not only is the workforce terrific but the leadership training program is really phenomenal. I never had a problem with getting responses from the management and the employees, too.

The Buck Stops Where?

Streckfus: One of my continuing concerns with the EO functions is there’s not one person at the IRS who is really responsible for keeping the trains running on time. Obviously the Commissioner is ultimately responsible but you have people in the TEGE Commissioner’s office, in the EO Division, in Counsel, in Appeals, even in Income Tax and Disclosure for some EO matters, so it’s easy to say it isn’t my responsibility when something goes wrong. When I read about what went on with the Tea Party cases it was obvious to me that no one was really in charge and able to say, we’ve got to get this fixed now.

Koskinen: It’s a good point. It applies in some ways to all of the silos, as I call them, at the IRS. So that siloization of the agency as part of the restructuring raises interesting issues. Part of what happens with EO at the top of the IRS is you don’t pay attention to it because there are so many demands on your time coming from Wage and Investment, SBSE, and LB&I. They all involve tax administration and collection, so it’s easy for EO to be off on the side since they’re not collecting a lot of money. But as somebody said, you get more interesting challenges there than you get elsewhere.

Back to your point on who’s responsible. The question is how do you get those issues to the top when they come up and get stuck? We created an enterprise risk management process. At all my town halls I’d say enterprise risk management only works if every employee — frontline workers, mid-level managers, senior managers — feels that it’s not only possible but it’s their responsibility to raise their hand if there’s a problem.

At my confirmation hearing, I said if there’s a problem, it’s my problem and we’ll fix it. If somebody makes a mistake, it’s my mistake and we need to fix it. My mantra for everybody, one of several, was the only problem you can’t solve is one you don’t know about. Also, we don’t shoot messengers, we thank them. I told managers for that to work employees have to believe it’s true.

Streckfus: A lot of managers want their employees to follow the chain of command. They don’t want somebody going to the top with a problem.

Koskinen: I told managers that your employees who work directly for you have to be comfortable coming to you. In addition, we had a mailbox, one for the Commissioner, which almost never got used, for reporting problems. Risk management had a mailbox that they set up. But you’re right, the risk, so to speak, is that, after employees raise their hand, the manager will feel either I don’t want anybody to know about the problem or I should fix this myself, it’s my responsibility, that’s what I get paid the big bucks for.

One of the things I did was I met every month with the IRS leadership, not just the Division Commissioners. The Commissioners could bring anybody they wanted. Of course a lot of people thought, hey, you get to meet with the Commissioner. So I’d have the top six or eight executives out of each division come in once a month and talk about whatever they wanted. They would also send materials in. The rule of the game was they had to assume I had read the materials so we just had a discussion for an hour and a half about what was going on in their divisions.

Over time, people would tell me we’re having this problem or we’re slow here or something else is going on. When I started we were implementing the Affordable Care Act. Then implementing the Foreign Account Tax Compliance Act (FATCA) became a major challenge while it turned out the Affordable Care Act was chugging along dealing with its challenges. For FATCA it became clear that IT and LB&I were ships passing in the dark in terms of nobody was coordinating solutions for, how do we get this done? Only the Commissioner can do that, but if nobody asks the Commissioner, if nobody tells the Commissioner there’s a problem, then the Commissioner isn’t able to  make decisions.

Streckfus: And of course, you have responsibility for 80,000 employees and you could have ten new critical issues on your desk each morning and where do you start? As I believe Obama once said, what scared him about having thousands of federal employees was that each day at least one of them was screwing something up that he would be held responsible for.

Koskinen: People used to say to me about tax administration, how complicated can that be? People file returns, you look at them, you give refunds. I said, sit in my office any day and just watch the issues as they come through.

But back to where we were. I think the problem for EO administration was less that there wasn’t anybody responsible but much more that there wasn’t a way for issues that were stuck to get surfaced. For problems to sit around for two years is wrong.

Streckfus: And even more in some of those cases.

Koskinen: Let me say again, nobody got denied, they just got delayed, and the delay itself was, in many ways, a denial.

Streckfus: I think a lot of EO tax practitioners understood that but the scandal scenario was just too juicy for many who already disliked the government. Never let the facts stand in the way of a good story.

More on the IRS Brouhaha

Koskinen: The Senate, at least while I was there, never held a hearing on the delays in processing exemption applications. I must have gone to twenty House hearings. If you’ve been in Washington a while, you know, if you’re a Senator, you’re one of 100. You can say it’s a nice day outside and people will be interested. But if you’re a Member of Congress and one of 435, you’re mostly anonymous, so your goal in life is to get an issue that gives you visibility. Then once you find the issue, the last thing in the world you want is for the issue to go away.

That’s why we had three or four years of Benghazi. Then you had four years of Lois and the IRS because, as a Member of Congress, you can raise money, you can be on Fox News every night. If you google Koskinen, what you’ll get is a whole set of Members of Congress on Fox News or YouTube cross-examining me. The Ricketts family, who own the Chicago Cubs, offered a million dollars to support candidates for Congress who would support impeachment of me. I grew up in Cleveland before I moved to Kentucky, so, as luck would have it, in 2016, the Indians, for the first time in a long time, were playing in the World Series against the Cubs. The only directive I ever gave was I told people “nobody roots for the Cubs.”

Streckfus: After you were there, it seemed like crazy things kept happening, like disappearing emails. What was your sense at that point, was it just screwed up communications or inept people?

Koskinen: I refer to this as the gift that kept on giving. At the start you’ve got this claim that political forces are directing the IRS and then everybody complaining that the IRS isn’t producing documents fast enough. When I called [Senate Finance Committee Chairman] Orrin Hatch when I had been nominated just to touch base with him, he said, would you just tell [Acting Commissioner] Danny Werfel to get us the information. I said I will, but obviously they’ve got to be trying hard.

Well, it turned out to search emails, you had to pull the hard drives off computers and then download them, and then you had to put them into a file and you had to search them to make sure you weren’t revealing taxpayer information. The IRS and the various investigators finally had agreed, before I got there, that they would look at 82 to 88 custodians, as they were called, rather than the entire agency because it was going to be hard enough to find all of the emails for the custodians, the people most directly involved in the processing of social welfare applications.

They’re working with that laborious process and the delays in providing documents become the issue and I’m getting yelled at in hearings because we’re not producing documents fast enough. That’s in February or March, 2014, in a hearing. The House Government Reform and Oversight Committee had provided a subpoena in August [2013] to Werfel and the Treasury Department demanding a wide range of documents, some requiring a search of the emails of every employee of the IRS. They reissued the subpoena in February [2014]. One of the issues was they wanted all the communications between anybody in the IRS and anybody in the White House or externally.

The subpoena had all sorts of requests, and Mark Meadows, now the head of the House Freedom Caucus, asks me, when should we find you in contempt? And I said, well, whenever you think you can prove it in court. I said we’re providing materials as fast as we can. They were grumbling so I told them, if you want us to review 100,000 employees, it will take years. Is that what you want? Give me your priorities. They said we want all Lois Lerner emails. I said, okay, so we began getting all of her emails.

A few weeks later in April, I’m advised that Lois’ hard drive crashed in 2012. I said, wonderful. There are emails around that crash that show that Lois was working with IT to try to reconstitute her emails because she was worried about losing them. I said what we need to do is figure out how many of her emails we can find in the computers of the custodians. If she sent an email, it should be in the recipient’s computer. If they sent emails to her, they should have what they sent. So we did that. We found 24,000 emails from the crash period. We then in June filed a full report and talked more about the email crash and how we got 24,000 emails, which we were then providing.

The next big issue is why I did not immediately report the crash to them in April. Nobody explained why between April and June — six to eight weeks — it made any difference whether they knew about the crash. But the biggest complaint about me was, “you hid that from us and you didn’t tell us” and I said, “well, I just told you.” They said Lois was obviously destroying evidence. I said no, if you look at the emails, she was trying to get them reconstituted. “Well, you lost all these emails,” they argued. I said, “we found 24,000 for you,” but 24,000 was a number nobody cared about.

I discovered that, if you are a Member of Congress with an agenda, what you do with information that is inconsistent with where you are going is just ignore it. I would provide the data or the response to a question and normally you’d think people would say, well, that’s not right or you looked in the wrong place. But a number of members of Congress determined that the best thing to do when I provided an inconvenient fact or answer was just ignore it and go on to the next question.

There was a hearing in 2016 before the Judiciary Committee. We’re three years later and somebody said, well, what’s the difference between Lois’ hard drive crash and Rosemary Woods? I said we have no idea what was in the 17-18 minutes that Rosemary erased. We have 24,000 emails involving Lois from the time of her hard drive crash, none of which say anything exciting. It was clear these people had never paid attention to the fact that we had provided those 24,000 emails.

Of all the things that went on, I thought it was important to give people a full picture of how Lois handled the hard drive crash. She tried hard to recover her emails. Now here are the emails, nothing significant has been lost. It turned out a reasonable percentage of hard drives crash every day, two to five percent. When we looked again, another five or six of the 88 custodians had had hard drive crashes, which we reported to Congress immediately.

The next day the headline was, “Five More People’s Emails Lost.” Well, for three or four of them, they didn’t lose any emails in the crash. I tried to get people to understand that’s why you don’t give the first piece of information you get without providing the full picture. Otherwise, the quick response is everybody lost emails and people think the place is out of control, when it turned out the number of emails lost was miniscule.

Having said that, the Freedom Caucus members participated in hearings in June saying we don’t believe you. Then, the question was, well, okay, what about back-up tapes and these disaster recovery tapes? Danny had said they usually get recycled every six months. In June of 2013, he said we’re saving them. These then started to pile up all over the place. I said that’s the process for saving them.

We did save them all as they were created. However, they had changed servers sometime in 2011 or 2012 and so they had old servers and old materials in a closet full of junk in New Carrollton. Emails had gone out from Terry Mulholland saying don’t throw anything out. But two guys on the midnight shift in West Virginia get this box labeled junk and got rid of it all, including the handful of old, disaster recovery tapes. Again, you would have thought from the news that this was a conspiracy to destroy evidence. Everyone ignored the fact that the Inspector General, who had found the issue and investigated it, said that this was simply an unintended mistake, not directed by anyone.

All of this ends up being my fault even though I wasn’t there in 2012 or in 2013, which didn’t surprise me because it comes with the territory. It was a way to keep the issue going. By this time, they had given up on it being the fault of the President or the White House or anybody outside of the White House. They had actually given up on there being any incriminating emails and now all they could say was. “oh well, the stuff was destroyed, people were hiding stuff from us. There must have been a smoking gun in there somewhere.” So the hearings were a lot of fun.

Streckfus: I think I listened to probably every one of those hearings. I developed a personal disdain for Jim Jordan, the Republican firebrand from Ohio. I thought he was just outrageous in the way he treated you and other IRS representatives. He did it again last week at a hearing on the Clinton Foundation. I don’t know if you saw the movie Animal House, but Jim Jordan reminds me of the character Doug Neidermeyer, both in looks and demeanor.

Koskinen: I didn’t see the hearing. I just got a note that there had been a last hearing in which EO came up, but I was not mentioned. What did he have to say last week?

Streckfus: He attacked Phil Hackney, a witness for the Democrats, who was an attorney with IRS Office of Chief Counsel during the Tea Party matter and now he is a law school professor and the Republicans were mad at him because he wrote an op-ed for the New York Times blasting the Trump Foundation. Jordan got on him and instead of asking him anything about what was going on at the hearing, he just attacked him, asking him if he were involved in the scandal when he was at the IRS. That’s Jordan’s approach, come on strong and act outraged.

Koskinen: Part of the issue when you hold those hearings is you’ve got one witness and 35 committee members. It’s easy over time to become a bully and to assume that you can just browbeat witnesses. Jordan was forever flashing up pages on a screen nobody could quite read and then arguing about them. I would say, could I see that document? And he’d give it to me and I’d say, well, you know, if you read the next paragraph or the next page, it explains things but it’s not up there. I think what aggravated Jordan more than anything else was he was not used to people saying that’s not right or that’s not true. I think he kept hoping either I’d collapse or yell at him or something. He’s the only guy who shows up at hearings in his shirtsleeves. I never figured out what he was trying to prove.

Streckfus: I think that’s part of his blue-collar act.

Koskinen: His macho image, man of the people.

Streckfus: Former wrestler.

Koskinen: And he was a good wrestler in college. In fact, he was a national champion and became a successful college coach. My favorite Jordan story involves an award I was given. The National Academy of Public Administration every year or two gives an award for outstanding career management achievement as their ultimate honor. In 2016 Bill Ruckelshaus and I were selected for the honor. A nice guy named David Chu was the NAPA Chair of the Awards Committee that reviewed all that. Six to nine months later, Chu is testifying about something relating to GAO and Jordan, out of the blue, says, how could you give an award to Koskinen? What was behind that? Who paid you to do that? I thought, Congressman, let it rest.

Streckfus: We know it’s all part of his act, he loves to showboat, and it probably goes down well in his conservative district. He was even recently being considered by some of his colleagues for House Minority Leader.

Koskinen: Yeah, nobody was going to run. I thought, well, that would be good for the party.

(to be continued tomorrow)
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EO Tax Journal 2019-13

Paul Streckfus, January 18, 2019 at 5:17 am

1 – Editor’s Notebook

2 Update on EO Developments under the Tax Cuts and Jobs Act Continue…

EO Tax Journal 2019-11

Paul Streckfus, January 16, 2019 at 5:54 am

1 – Editor’s Notebook

2 – In the News

3 – EO Council Comments on Notice 2018-67 Continue…

EO Tax Journal 2019-10

Paul Streckfus, January 15, 2019 at 5:20 am

1 - Editor’s Notebook

2 – San Francisco Law Firm Serving Nonprofits Seeks Associate

3 – Executive Summary of ABA Section of Taxation Comments on Opportunity Zones Proposed Regulations

4 – Excerpts from Reply Brief of Freedom Path Continue…

EO Tax Journal 2019-9

Paul Streckfus, January 14, 2019 at 5:11 am

1 Editor’s Notebook

2 – Articles of Interest

A – Private Foundations Can Now Own 100% of Business Enterprise

B – North Carolina’s Nonprofit Property Tax Exemption Conundrum

C Good News / Bad News: The IRS has Released Interim Guidance Regarding the New Excess Compensation Excise Tax Applicable to Tax-Exempt Organizations Continue…