Documents tie Clinton to audit of journalists

A 1996 Internal Revenue Service audit of WorldNetDaily.com's non-profit parent company began with an accusatory letter forwarded to the agency from the Clinton White House, show Treasury Department documents obtained by the Internet newspaper through the Freedom of Information Act.

The Western Journalism Center is one of dozens of tax-exempt organizations targeted for IRS audit after criticizing President Clinton. Joseph Farah, editor of WorldNetDaily.com and founder of the center, first exposed what appeared to be a pattern of political audits three years ago. The revelations were followed quickly by the resignation of IRS Commissioner Margaret Milner Richardson, a close personal friend and political confidante of Bill and Hillary Clinton, and the launching of a congressional probe by Rep. Bill Archer, R-Texas, chairman of the House Ways and Means Committee and co-chairman of the Joint Committee on Taxation.

"Back in 1996 I alleged, based on largely circumstantial evidence, that Clinton was waging a political war on his enemies and employing the IRS as his private army," said Farah. "The documents we now have in our possession, at long last, prove the White House did just that in our case and that his administration has engaged in a massive cover-up of the facts behind this abuse of power."

A heavily redacted 1997 Treasury Department report titled, "Questionable Exempt Organization Examination Activity," was released July 6 to Farah's news organization following three years of FOIA filings and appeals for such information. Contradicting IRS officials and their Justice Department lawyers in two suits pending against the agency by the center and its legal counsel, the Treasury report states unequivocally and repeatedly that the audit began with a letter forwarded from the White House to the IRS.

"The audit originated from a taxpayer who faxed a letter to the White House expressing his concern over a one-page advertisement paid for by WCJ (Western Center for Journalism) that asked for contributions to investigate (White House deputy counsel Vincent) Foster's death," explained the official Treasury Department report. "The fax was forwarded to the EO (Exempt Organizations) National Office and then to the respective Key District Office for appropriate actions."

The taxpayer who wrote the Nov. 9, 1994 letter to Clinton, after spotting the ad in question in the Los Angeles Times, is Paul Venze of Beverly Hills. Venze was unavailable for comment to WorldNetDaily but told Treasury Department investigators the letter to the president was his own idea.

In a report by special investigator Timothy Herlihy and inspector Rod Ammari, Venze is recorded as saying he wondered how the Western Journalism Center "could have been tax exempt because the advertisement seemed politically motivated and mean." The advertisements summarized the key questions and inconsistencies raised through investigative reporting into the Foster case. Foster was found dead in Fort Marcy Park July 20, 1993. Despite the fact that no bullet was found in Foster's body or in the park or surrounding area and that Foster's fingerprints were not found on the gun next to his body, several official government investigations ruled suicide.

Some of the material released among the 59 pages from the Treasury Department is less than enlightening. Several pages are so heavily redacted that they include only three words -- "Western Journalism Center."

For three years, the center has been attempting to obtain its own case file from the IRS without success. FOIA requests have been denied. The Treasury Department report may shed some light on the reasons for stonewalling. High-level IRS officials took a special interest in the center's case after receiving the letters from the White House.

In a section titled, "Case Origination," the report explains that senior auditor Ed Gorman visited the Exempt Organization Technical Branch II Office of the IRS and obtained documents in "a pink envelope" relating to the source of the case examination. The documents included a memo dated Feb. 28, 1995, from the director of the exempt organizations division to the district director in Los Angeles. The memo explained that the fax from Venze to the president was being forwarded "for your information and any action that you deem appropriate." The memo advises, according to the Treasury report, that the advertisement in question might not be in full compliance with IRS regulations and that the organization may not have filed tax returns. (The center was not required to file a return until May of that year.) Included with those advisories and the Venze letter was the cover sheet showing that it was addressed to President Clinton and received by the White House Congressional Affairs Unit Legislative Affairs Division.

While the Treasury Department report concludes there is "no indication as to how the taxpayer's fax and letter was routed from the White House to the IRS," Farah believes that statement is disingenuous and "a last-ditch, ever-changing cover story typical of this administration."

"That letter was forwarded just the way it was to convey a message to officials and underlings at the IRS," he said. "The message was the White House has a special interest in this case. See what you can do to help him out. You don't have to be a genius to figure that out."

From Los Angeles, the case file subsequently found its way into the hands of agent Thomas Cederquist in Sacramento, who first raised suspicions about the fairness of the center's audit when, according to the sworn testimony of the center's accountant, John Roux, he announced during their first meeting, "Look, this is a political case and the decision is going to be made at the national level." At every stage of the process, the case file included the fax letter to President Clinton, along with the stamped cover page showing that the letter had been received and passed on by the White House.

Cederquist and other IRS officials are named in a $10 million lawsuit filed on behalf of the center by Judicial Watch's Larry Klayman. Klayman believes criminal contempt citations may be in order after reviewing the Treasury Department document. Cederquist and his superiors in the Sacramento office of the IRS have consistently denied -- even under oath -- that there were any suggestions from above to investigate the Western Journalism Center. Furthermore, Justice Department lawyers defending the government officials have buried potentially explosive evidence from the case file, says Klayman.

"The Treasury report shows there was a direct chain of events beginning with that fax in the White House -- just as I suspected all along but could never conclusively prove until now," said Farah. "This is why the IRS has steadfastly refused to provide us with our own case file, as it is required to do under the law. Had officials coughed up the file, they would have hanged themselves and provided us with a winning case."

The IRS has recently maintained that there are no more documents associated with the case. Yet the Treasury report discusses many in the actual case file being sought.

"At the time the FOIA report was being prepared, those documents obviously existed," said Farah. "If they do not exist now, it seems appropriate to ask what, precisely, has happened to them?"

Cederquist's early biases against the center are evident in the Treasury report. It was his assessment that "investigative journalism is not educational" and, therefore, not a suitable mission for a 501c(3) corporation. Before ever contacting Farah or any other representative of the center, Cederquist had already formally recommended that the group's tax-exempt status be revoked. Only a review process required Cederquist to continue the investigation. As of February 1997, the Treasury report shows, he was still adamantly holding out for revocation.

He also leveled charges against Farah of using the center for personal gain, though, during the 1994 and 1995 audit years, Farah took no salary from the non-profit. IRS officials spoke openly with Treasury Department investigators about the possibility of auditing Farah's personal taxes in an effort to make the case for inurement. One agent, whose name was redacted from the report, commented on "the nice neighborhood" in which Farah lived while devoting many hours to the charity without compensation.

Cederquist was eventually removed from the case by the IRS, a new agent assigned and the tax-exempt status of the center extended with no penalties. But the audit's toll on the center had been heavy. Faced with rising legal and accounting costs, diverted staff time and falling donations, the center was forced to fold one of its two publications and to lay off key personnel including investigative reporters.

Partly as a result of its experience with the nine-month audit ordeal in 1996, the center's leadership came face to face with the chilling reality that it was nearly silenced officially by a government agency for doing what it perceived to be its First Amendment-protected job. Rather than live under the shadow of facing the IRS again because of a run-in with corrupt officials in this administration or another, the center decided to take its latest project, the highly successful WorldNetDaily.com, from the non-profit realm to the taxpaying sector.

Just last month, the Charitable Trust Division of the California Attorney General's Office issued a ruling permitting the center to spin off the red-hot Internet newspaper into a private, for-profit company, which will be able to begin raising private investment capital later this month to expand WorldNetDaily.com into a full-service, one-stop shopping place for news. WorldNetDaily.com already has a readership significantly greater than that of Salon.com, the unabashedly pro-Clinton Internet magazine that went public in June.

"According to the IRS, WorldNetDaily.com has no First Amendment rights as a non-profit," said Wayne Johnson, a WorldNetDaily.com Inc. board member. "Fine, we'll pay taxes and be 100 times larger. The White House may be able to target one little foundation, or one lone investigative journalist, but it can't shut down the Internet. The bureaucratic state is an anachronism that simply no longer possesses the means to silence its critics, short of unplugging the Internet itself."

Long before the IRS audit of 1996, the White House had taken critical notice of the activities of the center. A White House counsel's memo, written by Jane Sherburne in December 1994, lists the center as a major concern with regard to its coverage of the Foster story. In 1995, the White House counsel's office, in conjunction with the Democratic National Committee, produced and distributed at taxpayer expense a 331-page report called "Communication Stream of Conspiracy Commerce," in which it was alleged that the center was directing a vast, international media plot to discredit President Clinton.

This week, with Klayman's assistance, Farah filed a Privacy Act request for any and all files the White House maintains on him and his organization. To a previous FOIA request for such information, the White House claimed to have no pertinent files and claimed exemption from FOIA rules of disclosure. Currently, Farah's news organization is appealing a Superior Court ruling denying it a public trial on charges the audit was politically motivated.

"This new evidence, clearly suppressed by the administration until after a favorable ruling by a Superior Court judge, provides the smoking gun we were hoping to find in the discovery process," said Klayman. "I am confident this new revelation demonstrating the government systematically concealed the truth will persuade the courts to permit this case to proceed to trial and give us the opportunity to expose and punish these abuses of power."