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Witnesses Say IRS Agent Tried to Frame Ex-Senator

By Albert B. Crenshaw
Washington Post Staff Writer
Friday, May 1, 1998; Page A01

A rogue Internal Revenue Service agent tried to frame former Senate majority leader Howard H. Baker Jr. (R-Tenn.) on money-laundering and bribery charges in a bizarre attempt by the agent to advance his career, current and former IRS agents told the Senate Finance Committee yesterday.

The witnesses, describing the agency as riven by fear, favoritism and foul-ups, said senior IRS managers in Tennessee then covered up for the rogue agent when the scheme was uncovered by his supervisor and two other IRS workers. Top officials instead placed the complainers under investigation, driving one out of the Tennessee office and two out of the agency.

The phony charges, which were also directed at two other prominent political leaders in Tennessee, were made in 1989, after Baker had left the Senate and completed a stint as President Ronald Reagan's chief of staff. The agent, meanwhile, kept his job despite other complaints of drunkenness and sexual harassment -- losing it only after an arrest on suspicion of cocaine possession several years later.

On the third day of hearings into the IRS, other witnesses also described how agency supervisors often concede multimillion-dollar tax cases to wealthy corporations and individuals, sometimes in hopes of currying favor and perhaps winning a job. Major cases were also closed, witnesses said, in order for managers to improve their rankings on internal agency statistical measures.

The hearings have been designed by Republican leaders for maximum public relations effect, with committee aides whispering earlier in the week that yesterday would prove to be a bombshell. IRS officials, meanwhile, have been repeatedly blindsided by the charges because the committee has dispensed with the usual courtesy of providing names of upcoming witnesses. Yesterday, six IRS agents could be seen in the hearing room, scribbling notes on the proceedings.

IRS Commissioner Charles O. Rossotti called the testimony about the bogus case against Baker "deeply disturbing," and said he has asked the Treasury Department inspector general to investigate. He promised to take "appropriate disciplinary action" in the Baker case.

The phony charges -- also made against then-Rep. James H. Quillen (R-Tenn.) and David Crockett, a state prosecutor -- came to nothing. The FBI and a U.S. attorney's office refused to pursue a case after receiving referrals from the agent.

But when Baker made a dramatic appearance before the committee, he said he found the episode alarming, even if he remains confident he could have defended himself.

"This matter was referred to the Justice Department. . . . There was an FBI file," he said, adding that in his experience, things like this never completely go away.

"I have seen too many raw files to sit here and tell you those charges have been obliterated," he said, adding he was not aware of the incident until he learned of it from the committee. "I have never been so infuriated."

Committee Chairman William V. Roth Jr. (R-Del.) said to Baker: "To me, it's unbelievable. If they would do it to you, what about the typical American citizen who might be targeted?"

The agent, who was never identified, is now deceased, an IRS spokesman said.

In previous hearings this week, the panel heard IRS employees describe how misconduct complaints against superiors are downgraded or shelved and business owners tell of being raided by armed IRS agents on trumped-up or nonexistent charges.

The other witness yesterday also raised serious concerns about the agency. Maureen O'Dwyer, who works in the IRS's Manhattan District office auditing large international corporations, told of one case in which she had concluded that a big company owed $12 million in back taxes and perhaps another $12 million in penalties and interest. The company had agreed in principle, but wanted another two weeks to do a study to support its case for a lesser amount.

The extension was given. But the next day, a local IRS executive deemed the case to be "over-age" and ordered O'Dwyer to close it, giving up any chance to recover the back taxes.

"The Manhattan District was and still is statistics driven," she said. "A manager who has an aging case in his group will not receive an evaluation that will merit him a monetary award or help him" advance his career.

Michael Ayala, an analyst in the Georgia District, said top IRS officials continue using collections and seizures to evaluate workers' performance, despite promises to stop the practice.

Showing a copy of an internal report from this January, Ayala said it has charts and graphs of seizures, levies, summonses, and the like and "clearly evaluates each district as 'improved' when more seizures are made and 'slipped, failed or disappointing' when fewer seizures are made."

Likewise, Ginger Jarvis, who audits large cases in Manhattan, said her "current branch chief maintains monthly statistics of dollar yield per hour per agent" with agents' names attached.

She and others echoed charges of earlier witnesses that agency managers are rarely called to account for their actions, and abuse of subordinates is common.

The workers involved in the Baker case agreed.

Tommy Henderson, the rogue agent's immediate supervisor, said he realized much earlier that the agent had an alcohol problem and was unreliable. He sought to have the agent's gun and credentials taken away, and urged superiors to place the agent in treatment.

"I was told to sit down and shut up," he said.

His position was impossible, he said. "I would be sitting betwixt and between a rogue agent and a management that would not cough up the truth," Henderson said.

Henderson resigned as a group manager in Knoxville and took a lower-ranking job in Florida. Two co-workers testified they were driven from the agency for taking his side in the dispute.

Former Special Agent Patricia J. Gernt was accused of stealing a co-worker's gun -- though it appeared the colleague had simply lost it -- and she was subjected to various forms of harassment at work, she said. She later retired and sued the agency, settling out of court in 1994.

Barbara Latham, a tax-fraud investigative aide in the office, said "the fiasco of the missing gun" lasted three years and consumed nearly $1 million in cash and lost time -- "including $100,000 to hire two private attorneys to defend the supervisor."

When she backed Henderson and Gernt, she was harassed and placed in danger, she said.

"I was even expected to participate in raids alongside heavily armed agents wearing protective vests," said Latham, at the time 60. "The only difference was I was given no vest, no weapon or any other protection." She ended up taking early retirement.

Staff writer Stephen Barr contributed to this report.

© Copyright 1998 The Washington Post Company

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