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Journalists file $20 million IRS suit

SAN FRANCISCO — The Western Journalism Center, the non-profit parent company of WorldNetDaily.com, yesterday filed a $20 million civil rights lawsuit against officials and former officials of the White House and Internal Revenue Service charging a 1996 audit of the group was politically motivated.

The suit was filed in U.S. District Court in San Francisco, said Joseph Farah, executive director of the center. The public interest legal action group Judicial Watch, headed by Larry Klayman, is representing the journalists, who are based in Northern California.

Farah said he seeks to prove that an IRS audit of the center, begun in 1996 and closed in 1997, was directed or suggested by political operatives in the White House. The audit examined the center’s records for the tax years 1994 and 1995. No violations of the tax code were found, no penalties were assessed and the group’s tax-exempt status as a 501(c)3 educational corporation was extended.

But, Farah claims, the audit left a dark cloud over the organization reducing anticipated revenues from foundations and corporations, drained the center’s financial resources and staff time, forcing cutbacks in staff and the folding of a publication.

Farah said a special legal fund to subsidize the expense of the lawsuit is being established.

The center went public with its claims of government harassment after the first visit by an IRS agent.

“When IRS field agent Thomas Cederquist first visited our accountant in 1996 to announce the audit, he told us that this was a ‘political case’ and the decision about our fate would be made ‘at the national level,'” Farah said. “In America, things like this are not supposed to happen — especially to journalists simply doing their job reporting on corruption in government.”

The IRS will not comment on audit cases, even when they are closed. But another IRS official told Farah the center was singled out because of late tax return filing. Farah and center accountant John Roux say the returns were filed on time.

Farah believes the genesis of the audit came in 1994 when the investigative reporting group began probing alleged corruption and cover-up in the White House. The center gave high-profile support to investigative reporter Christopher Ruddy’s probe of the death of White House Deputy Counsel Vincent Foster. The support included a national
campaign raising questions about the case in full-page newspaper ads in cities across the United States. The first such ad preceded within days the firing of Whitewater Special Counsel Robert Fiske, whose work was a major target of Ruddy’s investigation, and the appointment of Independent Counsel Kenneth Starr.

Within months of the initiation of that newspaper campaign, White House Associate Counsel Jane Sherburne authored a memo, later released to congressional investigators, naming the Western Journalism Center and Ruddy as areas of concern within the administration.

A year later, in 1995, the White House Counsel’s Office, in conjunction with the Democratic National Committee, published and distributed a 331-page report called “The Communication Stream of Conspiracy Commerce,” which claimed the center was at the source of a “media food chain” on the development of administration scandal stories. The American Spectator, another audit target, and the Pittsburgh Tribune-Review, were also listed as primary conduits of stories critical of the White House.

“By early 1996, I began hearing rumors through unofficial sources that the center was being targeted by the IRS,” said Farah. “Interestingly, I always heard these rumors and whispers in Washington, not in California where our organization is based.”

In June of 1996, Cederquist presented the center’s accountant with document requests for the purposes of an audit.

“It was clear from the document requests that the IRS was not really interested in our financial records, our bookkeeping practices or our fund-raising techniques,” said Farah. “What it was interested in was the content of our First Amendment-protected work as journalists. We were asked to explain why we chose to report about White House corruption, why we chose to work with Ruddy and what efforts were made to balance our stories. When my accountant saw the direction of the questions, he asked for an explanation. He was told: ‘Look, this is a political case and the decision is going to be made at the national level.'”

When Farah first broke the story of his experience with the IRS, coupled with research showing a pattern of audits targeting groups and individuals critical of the administration, Congress announced an investigation and IRS Commissioner Margaret Milner Richardson resigned. Since then, however, he says Congress has dropped the ball and the IRS is as unresponsive and unaccountable as ever.

“After our case was closed, we filed a Freedom of Information Act request for the center’s case file,” Farah said. “What we got was a heavily censored, redacted pile of papers, along with an explanation that certain documents were withheld because other government agencies, departments and offices had handled them. In effect, the IRS admitted that our case file had illegally been passed around between government
agencies. I suggest that one of those was the White House. That’s one of the things our suit seeks to prove.”

Cederquist, the original IRS examination agent, Richardson, the former head of the IRS, and Sherburne of the White House counsel’s office, were all named in the lawsuit.