Investigating the IRS

Posted: May 05, 2005 12:00 AM

WASHINGTON, D.C. -- A Senate rider inserted in an emergency appropriations bill in the dead of the night, which would close a rare window into political foul play at the Internal Revenue Service, was quietly removed Tuesday in Senate-House negotiations. That offers full disclosure of a major scandal that has been percolating for a decade.

 The rider would have de-funded the investigation begun in 1995 of then-Housing Secretary Henry Cisneros by Independent Counsel David Barrett. The amendment was sponsored by three highly influential Democrats, purportedly to stop leakage of federal money in a run-on program and end persecution of a no-longer-prominent Democratic politician. In fact, Barrett's investigation is the first independent probe, with subpoena power, of the IRS.

 Passage of the amendment probably would have meant Barrett's voluminous report on the Cisneros case never would see the light of day. The document has been inspected by attorneys for prominent Democrats mentioned in it. That inspection was followed by belated efforts from Senate Democratic leaders to terminate Barrett, raising suspicions.

 Democrats and their friends in the news media complain with sudden new urgency that Barrett has squandered $21 million over 10 years on a case in which Cisneros admitted in 1999 to lying to an FBI background investigation about his payments to a former mistress to keep her quiet. He was fined $10,000 and then pardoned by President Bill Clinton in 2001. Cisneros' bigger problem is an allegation of fraud in not paying taxes on funds used for the hush money.

 The report, described as 400 pages long with over 2,000 footnotes, is sealed by court order. So are Barrett's lips. But enough has leaked from sources familiar with its content to suggest political dynamite. Sources indicate an IRS whistle-blower contends the tax fraud investigation was transferred from a regional office to Washington, where the IRS and the Justice Department suffocated it. That raises the question of whether Cisneros, then a rising Democratic star, was improperly protected by Clinton administration officials. Barrett's use of the subpoena, according to sources, has fleshed out the story.

 The investigation has been so protracted because of delaying motions by the Williams & Connolly firm, attorneys for Bill and Hillary Clinton. These lawyers, headed by David Kendall, are described as poring over the sealed Barrett report, according to sources, because clients are named. Coincidentally or not, the case aroused sudden interest within the Senate's Democratic power structure.

 Sen. Byron Dorgan, Senate Democratic Policy Committee chairman, in the middle of a long floor speech on April 5, gave notice he would try to amend the emergency money bill "to shut off the funding" for Barrett.

 Dorgan was the amendment's principal sponsor. Co-sponsors were Sen. Richard Durbin, the minority whip, and Sen. John Kerry, the 2004 nominee for president. In the collegial Senate Appropriations Committee, the amendment was routinely added to the emergency bill to fund hostilities in Iraq. It passed the Senate without debate or comment late in the evening of April 21.

 The first public notice of their plans was an April 22 editorial in The Wall Street Journal that elicited a letter to the newspaper from Dorgan, Durbin and Kerry that was published April 27. It asserted Barrett's "report should be made public, and we hope that it will be," even if the independent counsel is stripped of funds. This marked the first mention by the de-funders about making the report public.

 Maneuvers like this de-funding are best done quietly, but that no longer was possible. On April 27, two freshman Republican senators (Tom Coburn and Jim DeMint) and two more senior colleagues (Jeff Sessions and Jim Inhofe) wrote Appropriations Committee Chairman Thad Cochran. They urged elimination of the de-funding because of "the risk that the final report on this investigation will not be released."

 Although none of the four Republican letter-signers sits on Appropriations, they prevailed. In the Senate-House conference Tuesday, the House objected to the Dorgan amendment, and the Senate receded. The report may soon be public, and people who have read it say the worst suspicions about the IRS will be confirmed.