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IRS puts two managers on leave for accepting free gifts, violating ethics rules

The Internal Revenue Service, fighting political scandal and accusations of lavish spending, said Wednesday that it placed two managers on administrative leave for accepting free food and other gifts in violation of government ethics rules.

Top IRS officials were notified of the misconduct three months ago by the Treasury Department inspector general, whose office discovered the gifts during an audit of a conference in Southern California in 2010, government sources said. But it was not until Tuesday night that Acting Commissioner Danny Werfel was made aware of the case.

Werfel said in a statement that he has begun the process of firing the managers, who allegedly held an after-hours party in their private hotel suites during the three-day conference. It was not immediately clear who gave the managers the food.

“There was clearly inappropriate behavior involved in this situation, and immediate action is needed,” Werfel said. He is scheduled to testify at a House hearing Thursday about the discipline and conference spending at the beleaguered tax-collection agency, which flew 2,600 managers in the small-business and self-employed division to Anaheim, Calif., for a training event that cost $4.1 million.

“The agency stands ready to confront any problems that occur, hold accountable anyone who acted inappropriately and permanently fix these problems so that such missteps do not occur again,” Werfel said.

One of the managers put on paid administrative leave is Fred Schindler, a lawyer who serves as director of implementation oversight for the 2010 health-care reform law for the IRS, congressional sources said. The other is Donald Toda, a California-based manager in the small-business and self-employed division.

Toda’s home phone in Torrance appeared to be disconnected. Schindler did not return a call to his Maryland home seeking comment.

The food cost $1,162, according to the congressional sources.

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.

Inspector General J. Russell George revealed in an audit this week that the IRS paid top dollar for hotel rooms, tens of thousands of dollars for gifts for managers in attendance and $135,000 for outside event planners to book hotel rooms and speakers, one of whom cost taxpayers $27,500 — plus $2,000 for a first-class plane ticket.

Conference spending by the IRS and other government agencies has decreased sharply since then, but the audit drew new scrutiny to an agency already under fire for its targeting of conservative groups applying for tax-exempt status. The extra scrutiny prompted a criminal investigation and forced out the agency’s then-acting commissioner. Another official was pushed to retire early, and a third was placed on administrative leave.

Werfel, appointed by President Obama three weeks ago to clean house at the IRS, has pledged to thoroughly review the agency’s operations.

Some Republicans who have been particularly critical of the agency’s targeting of conservative groups said they supported Werfel’s early moves as acting commissioner.

“He’s promised us to be forthright and free-flowing with information,” said Rep. Charles W. Boustany Jr. (La.), a senior member of the House Ways and Means Committee.

Juliet Eilperin, Ed O’Keefe and Alice Crites contributed to this report.

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

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