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New report: IRS deliberately broke rules

Posted By Bob Unruh On 06/25/2013 @ 1:22 pm In Front Page,Money,Politics,U.S. | No Comments

Just as the Internal Revenue Service, probably the most-feared federal agency in the United States, is trying to recover from the scandal over its documented targeting of conservative organizations, a new congressional report accuses the federal agency not only of misbehaving again but of deliberately breaking the rules.

The IRS defense of its strategy to target conservatives now includes claims by the agency’s new chief, Danny Werfel, that agents also used “Israel,” “progressive” and “occupy” to identify groups for closer examination.

The claim reported by the Associated Press comes in the wake of weeks of documentation that the IRS deliberately targeted organizations with “tea party” or “patriot” in their names with what probably were illegal questions about the content of their prayers, the relatives of their officers and what statements they planned to make in the future.

One conservative group said the IRS demanded that it promise not to protest at an abortion business.

An IRS document given to the AP now argues that agents used additional search terms to identify different groups. But the AP said the IRS didn’t say how many progressive groups received close scrutiny or how the agency treated their requests.

Dozens of conservative groups, along with intrusive questions, were hit with lengthy delays, AP noted.

Now comes a new report from House Oversight and Government Reform Committee Chairman Rep. Darrell Issa, R-Calif., that details an abusive contracting practice at the IRS.

Worse, it appears to be deliberate.

“The IRS’s cavalier attitude towards the impartiality that the acquisition process requires, the lack of proper training for IRS acquisition officials, and a reluctance to admit a problem and face it head-on resulted in awards – over just a six month period – with a potential value of over $500 million to a company with no track record and whose average annual revenues were $250,000,” the report said.

“In fact, since this committee’s investigation began in February 2013, the IRS has issued 18 awards to Strong Castle, totaling nearly $4 million,” the report continued.

“Even though the committee’s investigation has unveiled serious wrongdoing with IRS procurement practices, the IRS has chosen to ignore these findings and continue to award contracts that have an appearance of impropriety. This comes despite the pledge of the director of IT procurement, who testified that if Strong Castle ‘misrepresented some facts … [he] would immediately cancel the award, and then [he] would go out and re-solicit for those requirements.’”

The report focused on the unhealthy relationship between an individual at the IRS and the contractor Strong Castle.

The report uncovered a strong personal relationship between IRS Deputy Director for IT Acquisition Greg Roseman and Strong Castle President Braulio Castillo.

According to a report from Issa’s office, the company’s annual revenue was only $250,000 but surged with more than $500 million in government contracts over a period of six months.

The company gained the contracts through its designation as a HUBzone business, the report said, by setting up an office in Washington and hiring college kids to staff it, even though the real operational center was in a wealthy suburb.

The report concludes the company gained the designation by “making false representations to the Small Business Administration.”

“Despite knowing about these concerning issues with Strong Castle/Signet Computers, the IRS has failed to revoke tainted large contract awards or take disciplinary action against IRS employees who acted inappropriately. Throughout the report, numerous examples from texts, emails, and witness testimony show that the IRS contracting officer played an often hands-on role in tilting the table in Strong Castle’s favor in numerous contract competitions,” Issa’s report said.

“Today, the IRS cannot look taxpayers in the eye and truthfully say they are protecting their contributions to government,” said Issa. “By inappropriately using a personal relationship and abusing a provision designed to help disadvantaged businesses, the IRS and Strong Castle have made a mockery of fair and open competition for government contracts. Taxpayers deserve accountability and the committee is troubled by this unacceptable behavior.”

The committee plans a hearing tomorrow on the newest chapter in the IRS scandal.

Among the topics investigated will include the special business designation Castle obtained. The panel also will investigate how the company owner was able to be designated a Service-Disabled Veteran-Owned Small Business because of a foot injury he sustained at a military prep school.

“He was able to get this designation despite the fact that he never actively served as a member of the armed services, he played college football after the injury, and 27 years went by before he sought the designation as a disabled veteran. Castillo sought the disabled veteran designation only months before he purchased the company and was so focused on its ability to help secure contracts that he didn’t even know it would entitle him a $450 monthly payment,” Issa’s office explained.

Regarding the HUBzone designation, Issa’s office said: “Strong Castle gained a competitive edge by winning a designation from the Small Business Administration as a HUBzone contractor. Strong Castle did this by (1) hiring full time college students from Catholic University to fulfill the 35 percent requirement; (2) falsely dubbing more senior employees who lived in other areas as ‘consultants’ so that they would not harm the 35 percent employee threshold minimum; and (3) although the company opened a new ‘headquarters’ office in Leesburg, Virginia, it also opened a small office in Chinatown that it said was its ‘principal office.’ One student employee was fired after Strong Castle discovered she did not live in the HUBzone area. Another student supposedly worked 9 hours at the office the same day he had 4 ½ hours of final exams. Strong Castle said this was simply a discrepancy in its records.

“The committee reviewed over 350 text messages between Roseman and Castillo,” Issa’s office said. “The messages show a relationship far closer than an arms-length relationship between a contractor and government contracting customer. Text messages include grossly inappropriate homophobic slurs that underscore a problematically close relationship.

“The IRS is not blameless in this matter,” the report found. “The IRS single-handedly helped Strong Castle grow from a business with $250,000 in annual revenue to one that won over $500 million of potential awards in just six months.”

It continued: “Perhaps most alarming of all is the fact that IRS officials – including Deputy Commissioner Beth Tucker – repeatedly denied a problem existed and failed to take action when Chairman Issa first raised these concerns in a February 2013 letter. Even after the IRS acknowledged a severe problem existed, the IRS has still failed to take substantive action. Despite a promise to the committee by the director of IT procurement that he would ‘immediately cancel the award,’ the IRS remains defiant in allowing a $266 million contract with this questionable vendor to stand.”

“Braulio Castillo and Greg Roseman have been friends since 2003. The two are close friends. Castillo and Roseman talk frequently and exchange hundreds of text messages and phone calls. Many of Roseman’s texts include homophobic slurs and other explicit language,” the congressional committee found.

The documentation Castillo supplied also was questioned. The report said his request for disability was based on a foot injury in a prep school football practice.

“My family and I have made considerable sacrifices for our country. My service connected disability status should serve as a testimony to that end. I can’t play with my kids because I can’t walk without pain. I take twice daily pain medication so I can work a normal day’s worth. These are crosses that I bear due to my service to our great country. I would do it again to protect this great country,” he stated.

“This investigation demonstrates the need for better fraud controls in the socioeconomic programs as well as the need for better training and acquisition officials at the IRS and other agencies,” the congressional report said. “If agencies cannot – or will not – take decisive action when a problem arises, waste, fraud, abuse, and mismanagement will persist. When this occurs, it is the taxpayers who suffer.

“In order to restore the trust of the American people, the IRS must take concrete steps to prove that it is capable of being a responsible steward of the money it collects.”


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