How Clinton targeted me for audit

On Oct. 22, 1996, I alleged in the pages of the Wall Street Journal
that my non-profit news organization, the Western Journalism Center, the
parent company of WorldNetDaily.com, had been targeted for an Internal
Revenue Service audit because of our investigative reporting into
Clinton administration scandal and cover-up.

Back then, and for nearly three years subsequent, those allegations
were supported largely by a powerful body of circumstantial evidence.
Today, thanks to documents obtained through the Freedom of Information
Act, we have in our possession official Treasury Department documents
that confirm my explosive accusation — an offense that rivals any abuse
of the Watergate era.

A heavily redacted 1997 Treasury Department report titled,
“Questionable Exempt Organization Examination Activity,” shows the IRS
audit began with an accusatory letter forwarded to the agency from the
Clinton White House.

“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,”
explains 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. In a section of the Treasury report titled, “Case
Origination,” it cites a memo dated Feb. 28, 1995, from the IRS’
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 ad 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.

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.” Nevertheless, it represents a smoking gun linking the Clinton
White House with political abuse of the IRS.

For three years, I have been trying to obtain my organization’s own
case file from the IRS without success. FOIA requests have been denied.
Two lawsuits — including one for $10 million — have been filed by
Larry Klayman’s Judicial Watch on behalf of the center. With the release
of this Treasury Department report, the reason for the IRS and Justice
Department stonewalling becomes clear. High-level IRS officials took a
special interest in the center’s case after receiving the letter from
the White House.

While the central point of the report — that the audit initiated
with a White House communication remains unequivocal throughout — there
is an attempt to cover for the White House. It concludes, for instance,
that there is “no indication as to how the taxpayer’s fax and letter was
routed from the White House to the IRS.” In other words, there were no
“fingerprints.” No signatures. No actual White House employees
identified as responsible for passing on the memo. How convenient.

From the Los Angeles IRS office, 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 my 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 the letter had been
received and passed on by the White House.

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. 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 cover-up continues even today. The IRS still maintains there are
no more documents associated with the case — even though the Treasury
report discusses many in the file never produced for the center. At the
time the FOIA report was being prepared, those documents obviously
existed. If they do not exist now, it seems appropriate to ask, What,
precisely, has happened to them?

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 was 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.

But, in the long run, the administration may have done us a favor.
Partly as a result of my nine-month audit ordeal in 1996, I came face to
face with the chilling reality that my news organization was nearly
silenced officially by a government agency for doing its First
Amendment-protected job. Rather than live under the shadow of facing the
IRS again because of some future run-in with corrupt officials in this
administration or another, the center decided to take its latest
project, the highly successful Internet newspaper 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 news service 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.

If we have no First Amendment rights as a non-profit, we’ll take our
chances in the for-profit realm.