Since Prohibition, one of the government's most visible law enforcement arms has been the Internal Revenue Service. Al Capone, too clever to leave a trail for ordinary cops, finally was nabbed on tax-evasion charges. So have been thousands of drug-traffickers -- and political figures as well.
Today, however, that once-tough "T-man" image has been shattered, and the IRS itself is being accused of virtually obstructing the efforts of the FBI and other federal agencies to move against organized crime, narcotics dealers and political corruption cases.
The ex-IRS agent who led the investigations of former vice president Spiro Agnew and former Maryland governor Marvin Mandel told Congress last month those indictments couldn't be secured today because of new IRS restrictions on cooperation with other federal law enforcement agencies.
The deputy chief of the Justice Department's criminal division complains his agency's investigators and prosecutors are running into months-long delays and refusals of cooperation by IRS that are seriously impeding enforcement efforts against organized crime and narcotics figures.
The IRS itself concedes it has cut by two-thirds the number of special agents assigned to cases involving gangland operations, drug traffickers and political corruption. The General Accounting Office asserts that the IRS has no credible strategy for dealing with organized crime.
This greening of the once-tough IRS image stems from two major developments.
First, a 1974 cloak-and-dagger scandal involving IRS actions in an offshore tax-haven scheme created an initial public backlash that sent the agency's hierarchy scurrying -- some say excessively -- to clean up its act. Strike force operations were dismantled. Nontax cases were cut back.
Second, Watergate disclosures about former President Nixon's misuse of the IRS to harass persons on his "enemies" list led to new congressional action that sharply restricted the IRS' ability to disclose its information to other agencies. Agents who flout these laws can be sent to prison.
The combination of these changes has had a chilling effect on the agency's general law-enforcement operations that has embittered many old-line IRS special agents and frustrated their counterparts at the Justice Department and federal Drug Enforcement Administration.
Some samples from actual -- and often ludicrous -- case histories.
Item Federal agents in New York, unable to nail down enough hard evidence on Harlem narcotics trafficker Nicky Barnes, routinely asked for a copy of his tax returns. But the IRS delayed action on the request for months, forcing prosecutors to go to trial without the information.
Finally, after it was almost too late to make much difference, the IRS let prosecutors in on what revenue agents had known for months: that Barnes had reported openly on his Form 1040 some $250,000 in income from narcotics operations. (Barnes ultimately was sent to prison.)
Item: IRS agents, raiding a suspect's trash can as part of an investigation on a tax-evasion case recently, found hard evidence that the man was involved in a major narcotics ring. The lode was a prosecutor's dream-find: itemized records, hotel bills -- even the formula for the drugs.
But the agents, following the new nondisclosure rules, kept their find secret from the Drug Enforcement Administration, which was conducting its own investigation. When DEA agents finally got wind of the IRS discovery, they couldn't glean enough details from the IRS to win a court order for the documents.
Item: An alert federal drug-enforcement investigator, spotting some potential tax-evasion cases during a probe of a narcotics gang recently, cooperatively passed the list of suspects on to an IRS agent, thinking he had a carbon back in his files.
When he returned, the investigator realized he had given away his only copy -- and called the IRS agent to have him read back the names. The agent refused. The IRS rationale: The list now was "tax information" -- which the agency is not permitted to disclose.
At least some of the IRS seeming recalcitrance is traceable directly to a series of provisions in the 1976 Tax Reform Act. Designed to protect taxpayers' privacy -- and prevent further Nixon-style abuses of IRS powers -- the law severely restricts the sharing of tax-return information with any government agency.
Under the new code, the IRS no longer simply can pass on information about taxpayers to other federal agencies, or even tell other department it is investigating a case. An agency that wants access to IRS files must get a court order and show the judge in advance how the evidence will help its case.
Moreover, for the first time, the law provides stiff criminal penalties for individual IRS agents or officials who even inadvertently overstep these restrictions. Any agent judged to have violated the new law can receive up to $5,000 in fines and five years in prison.
But critics of the IRS say the agency's hierarchy has gone far beyond the bounds of the new statute in interpreting the new restrictions, and consciously has taken the IRS out of the general law enforcement business.
Over the past 5 1/2 years for example, the agency has slashed by two-thirds the staff hours its criminal investigators spend on narcotics-related cases. And IRS agents report severe new restrictions from above on the use of surveilliance operations, informants -- and even automobiles -- for nontax cases.
As in most such disputes, the issues aren't quite as black and white as they might seem. This one, for example, involves more than merely the 1976 statute or the aggressiveness of the IRS hierarchy. There also are fundamental questions involving taxpayer privacy and the agency's basic role.
For one thing, there's fairly solid evidence that the IRS and other key government agencies had abused taxpayer privacy, not only during the Nixon years but in earlier periods as well. Taxpayers' returns were shunted freely between IRS and other federal agencies.
Former IRS commissioner Donald C. Alexander, who took the first steps to tighten up the operations, says restrictions then were so lax that the IRS ran virtually "a lending library" of private tax data. Governors sometimes were shown tax records of their opponents.
For another, a good many tax authorities argue the IRS should be limited to being solely a tax-collection agency, and should not get into general law-enforcement operations except when records are subpoenaed under court order.
The price may be a high one, Alexander says, but "it's definitely worth it" in terms of the broader question of guaranteeing taxpayers privacy against unauthorized prying. Alexander asserts that the IRS should "not be the running dog for some other agency."
Still, other law enforcement officials argue that tax records often are the only way they have to obtain the hard evidence needed to convict mobsters, drug traffickers and corrupt politicians, who frequently are too well insulated to be caught by conventional detective work. The "paper trail" still works best.
Indeed the IRS itself concedes the Al Capone sort of case has substantial value psychologically in maintaining a tough image for the IRS -- and thereby encouraging more voluntary compliance with the tax laws. The IRS, which in reality has limited sources, depends heavily on this voluntary compliance.
Meanwhile, IRS commissioner Jerome Kurtz -- who declined to discuss the situation in an interview -- is sitting quietly on the situation in hopes that the IRS can quiet the storm before Congress takes a hand in changing the current regulations on its own.
The Senate Permanent Investigation Committee, headed by Sen. Sam Nunn (D-Ga.), held a series of hearings on the question last month, and Nunn is preparing legislation that would seek to alter the 1976 law. The two congressional tax-writing committees have not taken up the issue yet.