IRS redacts audit case file

By WND Staff

SACRAMENTO – The Internal Revenue Service has formally responded to a Freedom of Information Act request for the case file in the audit of the Western Journalism Center with a redacted, incomplete report citing “governmental privilege,” according to Joseph Farah, executive director of the center and editor of WorldNetDaily.

The center was audited for the tax years 1994 and 1995 after it became involved in high-profile investigative reporting into Clinton administration scandals, including support for journalist Christopher Ruddy’s probe into the death of White House Deputy Counsel Vincent W. Foster Jr.

Farah claims the audit was politically motivated and believes it was directed by the White House counsel’s office, which, according to memos released by congressional investigators, targeted the center for action as early as December 1994. Subsequently, the counsel’s office assisted in the preparation of a 331-page report called “The Communication Stream of Conspiracy Commerce,” in which it alleged the center was at the source of a dark and mysterious “media food chain,” which initiated administration scandal stories and “fed” them to larger news organizations such as the Wall Street Journal, The New York Times and the Washington Post.

“When the IRS field agent first approached us, he demanded all kinds of documents that had nothing to do with our finances or bookkeeping,” Farah said. “They focused almost entirely on the content of our work. When our accountant questioned the propriety of the requests, he was told, ‘Look, this is a political case and the decision is going to be made at the national level.’ Similar statements were repeated subsequently.”

While the IRS released 114 pages of material to the center, most of that material consists of the non-profit corporation’s own tax returns and support material. In addition, on the limited number of pages of actual IRS reports, some words and phrases are redacted, or crossed out, rendering them unreadable.

“Certain information has been deleted from some of the pages provided,” explains Susan J. Hernandez, Los Angeles district disclosure officer, in a letter dated Oct. 20. “The withheld information to which we are denying access is exempt from disclosure pursuant to exemption (b) (5) of 5 U.S.C. 552. Enclosed is a Notice 393 which explains the exemptions and provides appeal rights.”

That exemption from Freedom of Information Act disclosure is for “inter-agency or intra-agency memorandums (sic) or letters which would not be available by law to a party other than an agency in litigation with the agency.”

“Here the IRS appears to be admitting that there is a paper trail of memos concerning our case,” said Farah. “This is precisely what I expected and the very reason for our FOIA case. I believe that paper trail leads right to White House.”

Hernandez’s letter further explains that the exemption “protects intragovernmental documents reflecting advisory opinions, recommendations, anylysis (sic), and deliberations that are part of the government decisions-making process. Portions of certain documents withheld fall within the governmental privilege category and are therefore exempt from disclosure.”

However, other opinions and recommendations of that kind were included among the released documents.

“What’s amazing to me about this response is the fact that the IRS has withheld even papers it previously had submitted to the center – such as document requests,” said Farah. “I believe the agency’s cautious and conservative response is further indication that officials know they have violated the law and are vulnerable to legal action.”

The IRS closed the audit in May of this year, with no penalties and a continuation of the center’s 501(c)3 tax-exempt status. However, Farah claims the nine-month-long audit had devastating financial consequences for the center, prompting the folding of one publication and the layoff of key employees.

“The hard costs of the audit – legal, accounting, etc. – were in the tens of thousands of dollars,” explains Farah. “But the real fallout was a loss of anticipated revenue – contributions from foundations, corporations and individuals that were scared off because we were under scrutiny.”

In addition, Farah charges other high government officials directly intervened with his donor base to discourage future contributions.

“The classic example is when then-Energy Secretary Hazel O’Leary called one of our supporters and warned him that he was jeopardizing federal contracts by contributing to the center,” said Farah. “The pressure doesn’t get much more blatant than that.”

Farah said he is consulting with his legal counsel, William Lehrfeld, on the center’s options. But an appeal, he said, is a certainty.