The Intimidation Game (11 page)

She got nowhere. Hull told Hofacre that all letters she wrote to a group requesting information must be sent to him first, so that he could review and edit them. She was similarly told to send to Washington every response letter from any group. In all her years at the IRS, Hofacre had never had her daily work reviewed by Washington Technical. She'd also had broad discretion to recommend the outcome of applications. But now she was blocked from making those decisions.

At first, Hull got back to her quickly. But as the months went on, the feedback tapered off. She'd bitterly complain that she had been “micromanaged to death, and it was just really frustrating.” Hull later testified that he couldn't provide any guidance to Cincinnati “until I knew which way the service was going.” And the service—meaning Lerner and other higher-ups—wasn't saying.

What they were doing was absorbing the thundering daily drumbeat of liberal and media criticism about the IRS and (c)(4) groups in politics. Obama and his surrogates delivered regular broadsides about “shady” conservative groups. Congressional Democrats were still hot in the middle of their DISCLOSE Act fight, flooding the airwaves with diatribes about “anonymous” donors and “dark money.” Arms of the Democratic Party, with assists from independent liberal organizations, filed direct complaints with the IRS about their conservative (c)(4) counterparts. And every senior leader of the IRS was fully aware of the debate and pressure and the political stakes.

In early August, a member of the IRS media team zapped an e-mail straight up the agency chain, clear to the top. The recipients included Lerner; her boss, Sarah Hall Ingram (the commissioner of the Tax Exempt and Government Entities Division); Ingram's boss, Deputy Commissioner Steven Miller; and the chief of staff to IRS commissioner Doug Shulman. The subject was an upcoming
Washington Post
article about—as the reporter put it—the need for “IRS regulations covering campaign/election related activity for section 501c4…in light of [
Citizens United
].” She explained that the premise of the story was that the IRS was underequipped to “regulat[e] money in politics.”

A few weeks later, Lerner sent an SOS to Ingram, noting that the Democratic Congressional Campaign Committee had lodged a complaint with the agency about Obama's favorite bogeyman—Americans for Prosperity. “We won't be able to stay out of this—we need a plan!” explained Lerner. A few weeks later she announced that she did have a plan, to do a “c4 project,” though she warned that “we need to be cautious so it isn't a per se political project.”

In September, Lerner launched herself in the public debate, agreeing to an interview for a front-page story by the
New York Times
that the IRS knew would be focused on the “large upswing in the money donated to 501(c)(4)s [and] that the IRS has too few resources to monitor and deal with compliance and enforcement issues in this area.” Ingram sent an e-mail the day the story appeared, praising it and the agency's media team, and noting that the “‘secret donor' theme will continue—see Obama salvo and today's Diane Reehm [
sic
].” Diane Rehm, a liberal radio host, had that day aired an interview with Representative Chris Van Hollen, who was again banging on about the problems of
Citizens United
.

An adviser to Ingram, Joseph Urban, also kept the leadership team straight on congressional Democrats' wishes. A September alert let everyone know about the Democratic Congressional Campaign Committee complaint about Americans for Prosperity. In October he passed around a press release from Illinois senator Dick Durbin demanding that the agency take aim at the conservative organization American Crossroads. Every senior IRS official later admitted to Congress that they were well aware of the raging (c)(4) debate. As were senior Treasury officials, who circulated e-mails at the time in which they worried to each other about “aggressive c4s” that can act with “impunity,” all fueled by “anonymous donors.” All this was happening as Hull's and Hofacre's cases sat in limbo.

No one in America has ever bought the fiction that the IRS is a politically immune agency. Most might nonetheless be surprised to hear that it isn't even an “independent” agency, as the press likes to suggest. It is officially a bureau of the Treasury Department, which reports directly to the president. That bureau is tasked by law with carrying out “the responsibilities of the secretary of the Treasury” to enforce the tax code. The government itself doesn't list it as an independent agency, and the law allows the president to remove IRS commissioners “at will”—something he can't do at truly independent agencies like the Federal Reserve Board. Even the chief of the Federal Maritime Commission has more political insulation than the IRS head.

Plenty of presidents have co-opted the IRS for partisan aims, but Obama took this to new heights, tasking the agency with enforcing big parts of his partisan agenda, such as his health care law. That's one reason why his first-term IRS commissioner, Doug Shulman, made so many visits to the White House in the first three years of the Obama administration. E-mails show an IRS top brass that increasingly worked as an arm of the administration, collaborating with congressional Democrats and the White House to thwart Republicans—on health care, and the contraception mandate, and sequestration.

This co-optation is an important part of the targeting scandal. An IRS that views itself as a neutral enforcer of tax law would have blocked out the (c)(4) noise. An IRS that viewed itself as an extension of the Obama team would have felt compelled to do something. As Cindy Thomas would later say about Lerner, when asked what she thought motivated the Exempt Organizations head, “I believe that she cares about power and that it's important to her maybe to be more involved with what's going on politically.” Thomas noted that Washington had started complaining that Cincinnati was not as “politically sensitive as they would like us to be.”

Back in Cincy, Elizabeth Hofacre became so disgusted by the micromanagement and Washington's refusal to deal with the Tea Party cases on the merits that in July she requested a transfer. She got it in October. Her replacement, Ron Bell, inherited her lockdown, and was told to simply wait for “guidance” from D.C. As the days ticked down to the 2010 election, Cindy Thomas grew alarmed. In late October, she sent a blunt e-mail to Paz, who was now back from maternity leave: “I have a concern with the approach being used to develop the tea party cases we have here in Cincinnati.…Personally, I don't know why [Carter Hull] needs to look at each and every additional information letter.” Her office, she wrote, was now sitting on at least forty-five applications. She wanted to schedule time to “come up with a process so we can get these moving.” Washington kept promising it would send instructions; instead, it kept pushing off the timeline.

Lerner wasn't processing applications, but that doesn't mean she wasn't busy. In September, yet another federal agency noticed Obama's anger with conservative operations. Jack Smith, the head of the Justice Department's Public Integrity Unit, read the
New York Times
article that Lerner had assisted with and tipped off his bosses: “Check out [the
Times
article] regarding misuse of non-profits for indirectly funding campaigns. This seems egregious to me—could we ever charge a [conspiracy] to violate laws of the USA for misuse of such non profits to get around existing campaign finance laws + limits? I know 501s are legal but if they are knowingly using them beyond what they are allowed to use them for (and we could prove that factually)? IRS Commissioner sarah ingram oversees these groups.…[M]aybe we should try to set up a meeting this week.”

Smith's idea was breathtaking. He was proposing that the most powerful law enforcement agency in the land begin prosecuting and jailing average Americans for exercising free speech in opposition to Obama. Yet he got the green light. Smith directed the head of his Election Crimes Branch, Richard Pilger, to meet with Lerner about being “more vigilant to the opportunities from more crime” from (c)(4)s.

Lerner knew Pilger from her days at the FEC, and happily arranged to meet him in early October. A memo summarizing the meeting showed that all the participants had taken to using President Obama's favorite rhetoric about groups “posing” as nonprofits. The participants proposed a “three-way partnership” between the DOJ, the FEC, and the IRS. Lerner in the meantime also arranged for the IRS to transmit 1.1 million pages of nonprofit tax-return data to the FBI, so that G-men could start trolling through the database for potential crimes. This was a few days before the 2010 elections. The database contained confidential taxpayer information that is protected by federal law and that Justice should never have possessed.

The election came and went. The end of the year came and went. Lerner's underlings increasingly started badgering her for answers, and in February 2011 she finally fully engaged in the stalled application process. In an e-mail to Michael Seto, who in January had replaced Paz as the head of Washington's Technical unit, she declared, “Tea Party Matter, very dangerous.” She fretted that the cases could be a vehicle for nonprofits to go back to the Supreme Court and demand even more freedoms. Hull had early in 2011 made his recommendations for how the two test cases should be handled, but Lerner dismissed those findings and instead directed that the two groups be subject to an unprecedented multilayer review. They would first get a vetting by one of her own senior advisers, Judith Kindell, and then go through the wringer at the IRS chief counsel's office. She finished, “Cincy should probably NOT have these cases.” Paz, who was still involved in the discussion, reassured her that Hull was nitpicking everything, and that nothing would move “out of Cincy” until Washington got through “its process.” Hull would testify later that he'd never in his fifty years seen anything like this approach.

Lerner's review meant another ten months of torturous inaction, in which IRS attorneys strung out the process and Cincinnati continued to sit on hold. Lerner grew more and more enmeshed in the (c)(4) debate, taking actions that all looked aimed at shutting down the Tea Party movement. She and Kindell worked on ways that the agency might plausibly deny the groups both (c)(3) and (c)(4) status. She tightened Washington's control—warning that Cincinnati must not “make a move” without D.C.'s say-so—explaining that “these could blow up like crazy if [Cincy] let[s] one out incorrectly.” She demanded more investigation and details into the test cases. In July, she requested and received a briefing on the status of the Tea Party cache, and was told there were now more than a hundred cases in the Cincy backlog.

At that event, Lerner decided to change the criteria by which screeners identified the cases. Using the term “Tea Party,” she explained, was “pejorative” (read: politically dangerous). She ordered that the new BOLO language become “Organizations involved with political, lobbying, or advocacy for exemption under [(c)(3) and (c)(4) status].” This new, broader language had the perverse effect of sweeping significantly more Tea Party groups under the IRS radar.

She debated subjecting organizations to a new requirement—they would have to agree not to “politically intervene”—so as to “pin them down in the future.” She suggested that IRS employees start looking into whether individual Tea Party groups had registered with the FEC, and if so, to ask more questions. She talked to attorneys about proposals to create new IRS rules to crack down on (c)(4) groups. All of this was unprecedented.

And she became obsessed, along with every other Democrat, with the mack daddy of conservative (c)(4) groups: Crossroads GPS. All the way back in October 2010, one of the leading Senate Democrats, Dick Durbin, had written to Doug Shulman asking for an investigation into the group, which had been cofounded by Bush political guru Karl Rove. Democratic staffers in Congress also reached out to the IRS for information on the group, and at least two outside liberal groups complained about Crossroads to the IRS. Lerner forwarded e-mails to her bosses about the organization, lamenting that Crossroads would be able to take part in the election because of a “glitch in the law” and expressing her desire that Congress pass rules to stop such actions. By June 2011 she was looking into the group personally, having requested Cincinnati's Cindy Thomas to send her the application. She supervised the case after that, and ultimately decided to deny Crossroads its tax-exempt status. In a later e-mail to a subordinate, she made clear that the decision came down to politics. “I don't think your guys get it and the way they look at these cases is going to bite us some day. [Crossroads] is on the top of the list of c4 spenders in the last two elections. It is in the news regularly as an organization that is not really a c4, rather it is only doing political activity—taking in money from large contributors who wish to remain anonymous.…You should know that we are working on a denial of the application, which may solve the problem.” The “problem” was Crossroads' existence. Lerner's campaign to tank Crossroads was in stark contrast to efforts she'd take over the same years to expedite the approval of liberal nonprofit applications, including several done at the request of Democratic senators.

By the summer of 2011, Lerner was under growing pressure from below to do something about the backlog, and so her Technical unit finally decided to perform a “triage” of the now 150 languishing Tea Party applications. It became a new method of delay. Until now, the conservative universe had heard little or nothing from the IRS. The “triage” marked the official start of the harassment. Carter Hull, despite his fifty years of agency service, was inexplicably pulled off the cases. They were reassigned to Hilary Goehausen, an IRS rookie who had only been with the agency a few months. It was a curious appointment. IRS officials later claimed that Hull was going “too slow” on the applications and that the agency wanted to train up Goehausen. Most organizations don't train newbies by tasking them with cases that their boss views as “dangerous.” More likely, Goehausen got the job because she'd prove to be easier about taking orders.