The Intimidation Game (10 page)

We know that one person in particular took notice: an ambitious partisan by the name of Lois Lerner.

Lerner shocked Washington with her May 2013 admission that her agency had harassed Americans. The shocking thing was that anyone was shocked.

Lerner to this day won't cooperate with any real investigation; the nation has been denied the opportunity to hear her story. But e-mail is a wondrous thing. Between her records and the recollections of her colleagues, we have a vivid portrait of the former head of the IRS's Exempt Organizations unit. She was a brassy, self-assured bureaucrat with Democratic leanings and a near-messianic belief in the need for more speech regulations. And she had a long history.

Before landing at the IRS, Lerner spent twenty years at the FEC, rising to become its acting general counsel. Never in all that time did she hide her views that money was a problem in politics and needed more restrictions. She was seen even then as a highly biased FEC enforcer—one who harassed conservative groups that wanted more freedoms in politics.

While head of FEC enforcement, Lerner played a role in the 1990s in going after former Mississippi governor Haley Barbour over a nonprofit group he established called the National Policy Forum, which had been accused of taking illegal foreign contributions. (The Justice Department would later find no evidence of a crime.) She was part of an effort to take down a dozen Republican state party chairmen and the Republican National Committee, over accusations that they had broken finance laws during George H. W. Bush's 1988 presidential bid. That case stayed open for seven years. She'd most famously help wage a small war against the Christian Coalition, in one of the largest enforcement actions in FEC history. The coalition was accused (with no proof) of illegally coordinating its advocacy with Republican candidates. Mark Hemingway of the
Weekly Standard
documented that the harassment cost the conservative group “hundreds of thousands of dollars, and countless hours of lost work.” James Bopp (of later
Citizens United
fame) handled that case, and he revealed in testimony that the FEC team deposed 48 different people, conducted 81 depositions, put in 127 separate document requests, and sent the group 32 different interrogatories containing hundreds upon hundreds of questions. The agency demanded donor lists, and even inquired into whether people in the group were “praying” for each other. Each of the coalition's 49 affiliates got document demands; it would ultimately hand over 100,000 pages of information.

So Lerner had a lot of practice in harassment even before she geared up at the IRS. Her e-mails show that she was at home in Democratic politics, with biases against conservatives. There's a 2004 e-mail with a former colleague in which she's hopeful she'll be able to get together to “celebrate” a John Kerry presidential victory. In 2012, a friend would muse to her about the “scary” Romney/Ryan ticket and ask how a “creep like Romney” was ever elected in Massachusetts. She'd later that year decline an invitation to a party to celebrate Obama's expected victory, noting that she was nonetheless keeping her “fingers crossed. And, I did vote!” When told that Democrats had kept control of the Senate in 2012, she responded, “WooHoo! [I]t was important to keep the Senate. If it had switched, it would be the same as a Rep president.”

Her husband, Michael Miles, comes off as a passionate liberal who egged his wife on. On election day in 2012, he told his wife that he hadn't been able to find the “socialist-labor candidates on the ballot, so I wrote them in.” Three days after the 2012 election, he complained to her about the losers, “Well, you should hear the whacko wing of the GOP. The US is through; too many foreigners sucking the teat; time to hunker down, buy ammo and food, and prepare for the end. The right wing radio shows are scary to listen to.” Lerner replied, “Great. Maybe we are through if there are that many assholes.” Conservatives, she explained, were “crazy” and worse than “alien terrorists.” In March 2014, a friend wrote to complain about Texas Republicans. Lerner responded, “Look my view is that Lincoln was our worst president not our best. He should'[v]e let the south go. We really do seem to have 2 totally different mindsets.” Around the height of Congress's probe into her actions, she'd write to a friend that Republican congressional investigators were “evil and dishonest” and interested only in “hate-mongering.”

Lerner's e-mails also reveal that she held a self-righteous view on finance laws. She spent a career trying to shut down free speech. And since Republicans were generally opposed to that concept, they were in her eyes a threat. The inestimable George Will after the scandal broke would report on how Lerner had in 1996, from her perch at the FEC, told one Republican candidate, “Promise me you will never run for office again, and we'll drop this case [against you].” Lerner's e-mails all begin from the premise that the nation needs more finance laws and express great excitement over the possibility of Supreme Court restrictions or a new DISCLOSE Act, or tougher rules. She was tight with the senior leadership of pro–campaign finance groups. She railed against the
Citizens United
decision, telling a friend it was “by far the worst thing that has ever happened to this country.” She continued, “We are witnessing the end of ‘America.'…Religion has usually tempered the selfishness of capitalism, but the rabid, hellfire piece of religion has hijacked the game and in the end, we will all lose out. [I]t's all tied together—money can buy the Congress and the Presidency, so in turn, money packs [the Supreme Court]. And the court usually backs the money—the ‘old boys' still win.” Such was the view of the woman charged with “fairly” enforcing tax exemption laws.

And she didn't lack confidence. Lerner had little time for other people's views, above or below her. She rarely took issues up the chain of command. And she treated those below her with contempt. Colleagues noted that she liked to “scream” and “yell”; one explained that she wasn't “ideal” to talk to Congress because she was “unpredictable” and “emotional.” Cindy Thomas, the manager of the Cincinnati Determinations unit, explained to Congress, “I don't think that she valued what employees were doing…she didn't really listen to what others had to say. She would cut you off and didn't allow people to express what was going on.…[I]t was like it didn't matter if other people had questions, so to speak.”

When Thomas got the order to send along that Tea Party application to Washington, she didn't worry about it. It was, after all, just another application.

To this day, Democrats perpetuate the myth that the IRS targeting was partly a result of the agency's becoming overwhelmed by a flood of (c)(4) applications. It's a laughable argument. Cincinnati is and has been an assembly line for tax-exempt processing for years. It's what it does. In 2012 alone, the height of the Tea Party scandal, the IRS approved fifty-two thousand nonprofits. Yet somehow we are to believe that the agency was flummoxed by three hundred Tea Party applications.

Cincinnati is able to process applications like the wind because, as Mitchell likes to repeat, its initial job is mostly to make sure the paperwork is in order. In about 35 percent of cases, the screener immediately recommends approval. In another 50 percent, the screener refers the application to one of Cincinnati's revenue agents to resolve a minor technical issue. About 13 percent of cases contain bigger concerns, and also get sent to an agent, though even these are usually solved in-house. All told, Cincinnati resolves 85 percent of applications all on its own, and quickly.

In very rare circumstances, the outpost will send a troublesome application to Washington, which headquarters the Exempt Organizations unit and includes a “Technical” office that brims with exempt-law specialists. Applications that land at the big house usually have some glaring problem—a question over whether someone might be profiting off the venture; a group that seems clearly to be operating outside exempt guidelines. They don't get sent for “media interest”—or at least they shouldn't.

Still, it didn't matter why Washington wanted the case; what mattered is that it did. Bureaucracies like to please, and when Cincy got the news that the Washington big boys approved of its Tea Party case, it went to further work. John Shafer, who ran the screening unit, immediately told his group to identify similar applications. By mid-March, Thomas was able to report that Cincy had at least ten more “tea party cases,” and asked if Paz, who ran Washington's Technical unit, wanted those too. Paz sent out the order to send Washington “a few more” and to “hold the rest” until headquarters had figured out the situation. Cincinnati sent along a charitable (501(c)(3)) application filed by Arizona's Prescott Tea Party, and a social-welfare (501(c)(4)) application from the Albuquerque Tea Party.

Shafer clearly read “hold the rest” as an order to begin identifying any application that might count as Tea Party–like. He tasked a screener with coming up with a process, and that screener took to the Internet to investigate the Tea Party movement. He went back to Shafer, alarmed: “I said, ‘John, there's hundreds of these things, maybe thousands.'” The screener ended up compiling a list of code words: “Tea Party,” “Patriots,” and “9/12” (a reference to the day after the September 11 attacks, when, as movement founder Glenn Beck described it, “we were united as Americans”). Other screeners came up with additional criteria, and the group was soon segregating out any applications that dealt with “government spending, government debt and taxes,” or that contained statements that were critical of how Obama was running the country. By early April, Cincinnati had its first Tea Party targeting list—all at the request of Washington.

Washington was making its own list. The day after Paz asked for several more applications, a manager in the Washington office sent an e-mail to his D.C.-based “technical” agents. “Be on the lookout for a tea party case. If you have received or do receive a case in the future involving an exemption for an organization having to do with [the] tea party let me know.”

Paz that spring went on maternity leave, and her temporary replacement, Steve Grodnitzky, took up her cudgel. He wanted more information on the two Tea Party cases Washington was now working, and he wanted the issue elevated to senior leadership. He ordered an underling to create a “sensitive case report” on the Tea Party issue, to be included on a list that is every month sent up through the ranks of the IRS to alert top officials to key issues. This sensitive report, sent to Lerner in April 2010, showed the extent to which Washington was already in charge. It informed Lerner that D.C. was working two cases, that Cincy was holding another thirteen, and that Washington was “coordinating” with that outpost to “provide direction as to how to develop those cases based on our development of the ones in D.C.”

So we know that as early as April 28, 2010, Lerner knew about the Tea Party issue. A few weeks later, she asked Grodnitzky on what “basis” the “Tea Party” was asking for 501(c)(3) charitable status. Grodnitzky's reply was dripping with institutional bias: They “are arguing education, but the big issue for us is whether they are engaged in political campaign activity.” The comment reveals how the IRS was already veering off the prescribed rails. Charities, it is true, are barred from endorsing candidates. But they are absolutely free to engage in education, including political education—whether it be the importance of voting, of the Constitution, or of the environment. They can even legally lobby for causes. The Center for American Progress? Defenders of Wildlife? The NAACP? Media Matters for America? Those are all wildly political groups, and all charities. And not a one was ever harassed by the IRS. It's telling that the IRS immediately doubted the conservative claim of education.

In any event, only a small number of Tea Party groups even asked for charitable status. Most were asking for (c)(4) status—as social-welfare organizations—a category that allows entirely for direct political activity.

Lerner would admit this only a few months later in an October 2010 talk at Duke University. That talk later became famous, because in it Lerner acknowledged that the IRS was acutely aware of outside demands for it to act against conservative groups. Talking about the Democratic and media uproar over (c)(4) groups, she said, “So everybody is screaming at us right now, ‘Fix it now before the election. Can't you see how much these people are spending?'” Lerner nonetheless acknowledged that there was no formal way for the IRS to stop the activity, because “(c)(4)s can do straight political activity. They can go out and pay for an ad that says, ‘Vote for Joe Blow.'”

In any event, Grodnitzky assured Lerner that nothing would happen until she gave “clearance.” And it was already becoming clear that nobody intended to approve any Tea Party groups before the 2010 midterms.

Ronald Shoemaker, a senior employee in the D.C. Exempt unit, tasked tax specialist Carter Hull to work the two “test cases,” with the idea that these would guide the IRS on how to handle the rest of the Tea Party stash. Hull was a fifty-year veteran of the federal government and a respected authority on (c)(4) applications. The specialist got busy, and already by mid-April he'd sent letters requesting additional information or clarification to the Prescott and Albuquerque Tea Party groups. A slight delay cropped up when the Prescott group never responded, forcing Washington to go back to Cincy to get a replacement “test” case for Hull to work. Still, Hull's notes show that he had finished his review of the Albuquerque (c)(4) application by July 8. His conclusion: It should receive tax-exempt status. This all transpired over the summer of 2010.

Back in Cincinnati, another veteran of the service, Elizabeth Hofacre, was charged with working through that office's Tea Party backlog, which by April numbered twenty applications. Hofacre created the first version of what would become the infamous Be On the Lookout (BOLO) list, a document designed to help other agents identify “local organizations in the Tea Party movement [that] are applying for exemption.” Hofacre's BOLO spreadsheet continued to be updated and refined over the next three years, ultimately encompassing dozens of terms designed to ensnare hundreds of conservative groups. For now, she zipped the first version to some agents in Cincinnati and in Washington, and set out to work through the queue of stranded Tea Party applications.