IRS official says agency used poor judgment in holding lavish conference

Correction: An earlier version of this article incorrectly referred to Jill Mirich as an employee of the Anaheim Hilton. She is room service manager at the Anaheim Marriott. This version has been corrected.

Faris Fink, commissioner of the IRS Small Business and Self-Employed Division, apologized to members of the House Oversight and Government Reform Committee at a hearing Thursday. (The Washington Post)
June 6, 2013

The Internal Revenue Service official who signed off on a $4.1 million California conference featuring parody videos, tax­payer-paid gifts and upgrades to lavish hotel suites apologized Thursday and said the agency used poor judgment.

“In hindsight, many of the expenses that were incurred should have been more closely scrutinized or not have been incurred at all,” Faris Fink, commissioner of the tax-collection agency’s small business and self-employed division, told a congressional committee.

Fink, a top deputy in the department that flew 2,600 managers to Anaheim, Calif., for three days in 2010, described a culture that did not blink at what the Treasury Department’s inspector general called excessive spending. But the 32-year employee — who was promoted the following year — said the IRS is “now in a very different environment.”

“We would not hold this same type of meeting today,” Fink told the House Committee on Oversight and Government Reform.

The committee is investigating $49 million in conference spending by the agency from fiscal 2010 to 2012, with a particular focus on Anaheim. Lawmakers disclosed an e-mail showing that two top managers placed on administrative leave this week took $1,162 in free food from an outside event planner, and took pains to hide the gift.

Rep. Trey Gowdy, R-S.C., told an emotional story at a House committee hearing Thursday, contrasting a 2010 IRS conference with economic hardship in his home state. (The Washington Post)

“It is to be kept confidential,” Jill Mirich, room service manager at the Anaheim Marriott, told her colleagues, referring to an after-hours party the managers held for 18 employees in their private suites.

“The beer and wine will be paid by a credit card given to you at the end of the function by Mr. Donald Toda or Fred Schindler,” Mirich wrote on Aug. 21, 2010. “Do not post to room it can’t be shown as room charge.” The last sentence is underlined for emphasis.

Acting IRS Commissioner Danny Werfel said Schindler, director of implementation oversight for the 2010 health-care reform law for the IRS, and Toda, a California-based manager in the small business and self-employed division, violated government ethics rules by accepting the food and other items. He said he is moving to fire them.

In an audit this week, Inspector General J. Russell George said the IRS paid top dollar for hotel rooms and spent tens of thousands of dollars for gifts and for 15 speakers, one of whom cost taxpayers $27,500 plus $2,500 for a first-class plane ticket. The report brought new scrutiny of an agency under fire for targeting certain conservative groups that were applying for tax-exempt status. A criminal investigation of those actions is underway and three top IRS officials have been fired, forced out or placed on leave.

When asked by committee Chairman Darrell Issa (R-Calif.), “What were you thinking?” when Fink stayed in a luxury suite and starred as Spock in a “slick Star Trek” video about a planet with ineffective auditing practices, Fink called the spoof “an attempt, in a well-intentioned way, to use humor to open the conference.”

“The fact of the matter is that they’re embarrassing. . . . They’re embarrassing, and I regret the fact that they were made,” he said of that video and another featuring IRS managers in a line dance that closed the training event. For helping organize the conference, Fink and five other managers took home a total of $6,000 in bonuses.

Werfel, appointed by President Obama to clean house, told lawmakers that to regain taxpayers’ trust he must show that the IRS is impartial, cuts costs and does not make any personal tax information public.

“Each of these questions is solvable,” Werfel said. “I understand the enormity of the moment.”

Issa said the IRS was “effectively guilty of tax evasion” when it gave managers lodging in presidential suites, free meals and gifts without disclosing the perks as income.

While both parties denounced the spending, Democrats were quick to note that conferences at the IRS and other government agencies have dropped sharply in recent years.

Still, “it shows to me a culture of both arrogance and tin ear as to how might this look . . . on the front page of the morning paper,” said Rep. Gerald E. Connolly (D-Va.).

Rep. Elijah E. Cummings (Md.), the committee’s ranking Democrat, read another e-mail sent by an employee of the Anaheim Marriott to a colleague that showed the IRS could have booked the conference in Florida for $1 million less.

“Orlando and Las Vegas are out!” the e-mail began. “This is fantastic news, as Orlando was $1 million less in travel spend. The funding is there and they have been instructed to move forward [in Anaheim].”

Had the IRS not hired outside event planners to scout hotels, the government would have shaved its costs by at least 10 percent, Werfel said. The event planners were paid a $133,000 commission by the hotels. The more the IRS spent, the more the planners made.

Fink was grilled repeatedly by Republicans to explain how he could have signed off on the conference without objecting to a cost first estimated at $4.3 million.

“Did you believe you were entitled to this?” asked Rep. Jason Chaffetz (R-Utah). Fink replied that the conference itself was not wrong, since up to a third of the managers being trained were new.

Chaffetz began to yell. “You have a public trust, and you’re paid by the American taxpayers to be responsible. And you’re saying it was a pretty good conference?”

Fink gave contradictory accounts of when he became aware of the cost, saying at first that he did not know until after the event, then acknowledging that he signed an invoice authorizing the expenditures on behalf of the two IRS deputy commissioners.

The agency said spending on conferences fell from $37.6 million in the 2010 budget year to $4.9 million in 2012. The IRS said it has imposed strict regulations to prevent expensive conferences in the future, and Werfel has pledged to enforce those rules.

Agency rules allow federal employees to accept items worth $20 or less, as long as the total value of gifts from the same person is not more than $50 in a calendar year, according to the Office of Government Ethics.

Josh Hicks contributed to this report.

Lisa Rein covers the federal workforce and issues that concern the management of government.
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