[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
EXAMINING THE SKYROCKETING PROBLEM OF IDENTITY THEFT RELATED TAX FRAUD
AT THE IRS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT OPERATIONS
of the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
AUGUST 2, 2013
__________
Serial No. 113-71
__________
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee MATTHEW A. CARTWRIGHT,
TREY GOWDY, South Carolina Pennsylvania
BLAKE FARENTHOLD, Texas TAMMY DUCKWORTH, Illinois
DOC HASTINGS, Washington ROBIN L. KELLY, Illinois
CYNTHIA M. LUMMIS, Wyoming DANNY K. DAVIS, Illinois
ROB WOODALL, Georgia PETER WELCH, Vermont
THOMAS MASSIE, Kentucky TONY CARDENAS, California
DOUG COLLINS, Georgia STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina MICHELLE LUJAN GRISHAM, New Mexico
KERRY L. BENTIVOLIO, Michigan Vacancy
RON DeSANTIS, Florida
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Stephen Castor, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
Subcommittee on Government Operations
JOHN L. MICA, Florida, Chairman
TIM WALBERG, Michigan GERALD E. CONNOLLY, Virginia
MICHAEL R. TURNER, Ohio Ranking Minority Member
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
THOMAS MASSIE, Kentucky Vacany
MARK MEADOWS, North Carolina
C O N T E N T S
----------
Page
Hearing held on August 2, 2013................................... 1
WITNESSES
The Hon. Daniel Werfel, Acting Commissioner, Internal Revenue
Service
Oral Statement............................................... 6
Written Statement............................................ 9
Ms. Nina E. Olson, National Taxpayer Advocate, Internal Revenue
Service
Oral Statement............................................... 19
Written Statement............................................ 21
Mr. Michael McKenney, Deputy Inspector General for Audit,
Treasury Inspector General for Tax Administration
Oral Statement............................................... 42
Written Statement............................................ 44
Mr. Douglas MacGinnitie, State Revenue Commissioner, Department
of Revenue, State of Georgia
Oral Statement............................................... 61
Written Statement............................................ 64
APPENDIX
Opening Statement by Chairman Mica............................... 98
Opening Statement by Rep. Connolly............................... 100
Letter to the Hon. J. Russell George, Submitted by Mr. Cummings.. 102
Letter to Chairman Issa and Mr. Jordan, Submitted by Mr. Cummings 108
Statement by the President on May 15, 2013, Submitted by Mr. Mica 115
May 3, 2013 e-mail from the Deputy Inspector General for
Investigations, Dept. of Treasury, Submitted by Mr. Mica....... 116
Questions for the Record, Submitted by Mr. Mica, with Responses.. 117
EXAMINING THE SKYROCKETING PROBLEM OF IDENTITY THEFT RELATED TAX FRAUD
AT THE IRS
----------
Friday, August 2, 2013
House of Representatives,
Subcommittee on Government Operations,
Committee on Oversight and Government Reform,
Washington, D.C.
The subcommittee met, pursuant to call, at 9:01 a.m., in
Room 2247, Rayburn House Office Building, Hon. John Mica
[chairman of the subcommittee] presiding.
Present: Representatives Mica, Issa, Meadows, Turner,
Connolly, and Cummings.
Also Present: Representative Jordan.
Staff Present: Ali Ahmad, Communications Advisor; Alexia
Ardolina, Assistant Clerk; Molly Boyl, Senior Counsel and
Parliamentarian; Lawrence J. Brady, Staff Director; David
Brewer, Senior Counsel; Steve Castor, General Counsel; Drew
Colliatie, Professional Staff Member; Adam P. Fromm, Director
of Member Services and Committee Operations; Tyler Grimm,
Senior Professional Staff Member; Frederick Hill, Director of
Communications and Senior Policy Advisor; Justin LoFranco,
Digital Director; Mark D. Marin, Director of Oversight; Tegan
Millspaw, Professional Staff Member; Kristin L. Nelson, Senior
Counsel; Ashok M. Pinto, Chief Counsel, Investigations; Laura
L. Rush, Deputy Chief Clerk; Scott Schmidt, Deputy Director of
Digital Strategy; Sarah Vance, Assistant Clerk; Meghan Berroya,
Minority Counsel; Jaron Bourke, Minority Director of
Administration; Claire Coleman, Minority Counsel; Susanne
Sachsman Grooms, Minority Deputy Staff Director/Chief Counsel;
Jennifer Hoffman, Minority Communications Director; Adam
Koshkin, Minority Research Assistant; Dave Rapallo, Minority
Staff Director; Safiya Simmons, Minority Press Secretary; and
Cecelia Thomas, Minority Counsel.
Mr. Mica. Good morning. I'd like to welcome everyone and
call to order this hearing of the Government Operations
Subcommittee of the Government Oversight and Reform Committee
of the House of Representatives. The subject of today's hearing
is ``Examining the Skyrocketing Problem of Identity Theft
Related to Tax Fraud at the Internal Revenue Service.''
The order of business today will be, we will begin with
opening statements from members, and then we'll hear from our
witnesses. We have four witnesses today, and I'll introduce
them later. And I would remind members it looks like we're
going to have votes commencing about 9:15, which gives us to
about 9:30. So we will again try to get through this and maybe
most of our witnesses. We will then recess and return probably
for questions at that point.
So with that, Chairman Issa and myself, we usually start
these hearings by saying that just generally that we have a
responsibility to investigate problems with our Federal
Government. For lack of a better term, some of those problems,
we call them scandals or wasteful spending or conduct by
Federal agencies or employees.
And this is not an opportunity, say, to pick on IRS, but an
opportunity to follow up actually on this matter. We have had
some four hearings. I was given a list of hearings, and they
date back--I don't know, Mr. Connolly, did you participate in
some of those before?
Mr. Connolly. Yes, sir.
Mr. Mica. So this is not a new scandal or problem, it's
something that we've seen as an issue for some time.
Unfortunately, too, you will hear in just a second, as I cite
some of the issues at hand, it isn't resolved and it hasn't
gotten any better.
Unfortunately, we've heard lately a lot about phony
scandals, and the IRS and some of the things that we've had to
deal with are not phony scandals. Even leaders in the
administration have conceded that in the past, particularly in
regard to some of the targeting by IRS brought to our attention
by the inspector general and other Members of Congress. We
also, as you may recall, just briefly looked at the conferences
in a previous hearing of wasteful spending on IRS conferences.
And I think they were spending about $45 million in 1 year.
After we began some of the revelations with GSA and others, we
discovered in that hearing again wasteful spending that
exceeded what we saw and everyone was appalled at with GSA. And
that review of that matter has resulted in going from $45
million to about $5 million. Considerable saving for the
taxpayers.
And then I think all of us were stunned when we heard about
the--and I don't know of a better term than scandal--with the
IRS improperly awarding contracts to Strong Castle. I'm sure
the members who were here that heard Tammy Duckworth, one of
our war heroes, question the witness who had scammed the system
and also IRS getting a $0.5 billion worth of contract potential
under false pretenses with his veteran's disability.
So again, we have, I think, an important responsibility to
look at these matters. Unfortunately, IRS has had a number of
problems, and this one that we're looking at today continues.
The incidence of identity theft related to tax fraud--now
listen to this--and some of this data is very interesting--it's
grown from 456,000 cases in 2009 to an estimated 1.9 million
cases in 2013. That's a 416 percent increase. The Treasury
Inspector General for Tax Administration estimates that IRS
could issue--in fact, this problem could balloon in the coming
years to $21 billion in fraudulent returns over the next 5
years. Some of the estimates are in 2011 as much as a whopping
$5 billion went out the door being paid in potentially
fraudulent returns.
In fact, this has become such a lucrative business for
criminals that criminals, in fact, are leaving the drug dealing
trade and, we're told, and now getting into applying and also
asking for these fraudulent returns from IRS. So it's being
said that tax fraud is actually taking work away from drug
dealers because it's easier and safer to scam the IRS than it
is to sell drugs.
Sad part about this for the average person, when they do
file these fraudulent return claims, is that it takes more than
a year in most instances to try to get their identity problems
resolved, sometimes to try to get their credit restored, and
very often to actually just get their lives back together. They
are left in limbo, and it doesn't appear that IRS has a means
of actually changing what's going on. They've made some
attempts, but obviously, if you just look at the increases, the
dramatic increases, whatever action IRS appears to be taking is
not working. We've gone, again, from 456,000 to almost 2
million cases. So they've failed to curtail this rip-off of the
public.
In reviewing this matter, I found that some States have
been able to institute some fairly simple matters. And we may
ask about what, again, they are doing that has worked and
hasn't worked. But Georgia has taken some action. Some of the
State revenue departments have taken action--we'll hear more
good about that hopefully--that has successfully stopped people
from illegally accessing taxpayer cash.
The IRS has complained of a lack of resources and said it
will need another $22 million to examine all cases of potential
fraud. I've heard the numbers of 90,000 to 100,000 IRS
employees. Maybe, Mr. Werfel, you can tell me how many you
have. But we do know from our review some 21 units of IRS are
engaged now in tackling this problem. And, again, it's gotten
worse, not better.
So, again, this subcommittee has held four previous
hearings on this subject in the 112th Congress. My colleague,
the ranking member, I think participated in some of those. I
know he is as interested in getting to the bottom of this as I
am and also correcting it, because it is a very serious
situation. So with those opening comments, I'll yield now to
the ranking member, the gentleman from Virginia, Mr. Connolly.
Mr. Connolly. Thank you, Mr. Chairman. And I want to thank
you for holding this hearing. There have been a lot of hearings
about IRS on various and sundry matters, but this is one that
touches almost every taxpayer potentially. And I really want to
thank you for holding this hearing. And as you indicated in the
previous Congress, with former Chairman Platts and Ranking
Member Ed Towns, we had a series of hearings on this subject,
and I attended every one of them.
You know, as you indicated, I think, according to the IRS
Taxpayer Advocate, identity theft jumped 650 percent between
2008 and 2012. And as you indicated, there were almost 1.9
million incidents of identity theft and fraudulent refunds.
Maybe the unintended good news is it's cutting down on drug
dealing, as you indicated. But, you know, this is unbelievably
disruptive to constituents. And if I recall, and Mr. Werfel
will correct my memory if wrong, but at the last hearing this
subcommittee had under Chairman Platts, I think the statistic
was there were only four prosecutions or convictions for this
identity theft. Now, when you have 1.9 million identity thefts
going on, that is an epidemic. And the number of prosecutions
and convictions, not acceptable.
It's profoundly disruptive to our constituents. In my own
district, a gentleman and wife filed their 2010 tax returns
electronically in April of 2011. They fell victim to tax-
related identity thieves. Their tax filing was rejected because
someone else had used their Social Security number and received
a refund before they had filed their legitimate return. My
constituent tried for 2 years to resolve the theft of this tax
refund. He spoke with six different individuals at IRS between
April and August of 2011 and was given six different timelines
for the issue to be resolved, ranging from 6 to 8 weeks to a
year. Further, the IRS provided conflicting information about
forms to fill out, where to send the forms, and whether he
should follow up with the IRS or wait for the IRS to contact
them.
In November of 2011, they received their refund and thought
the issue was resolved. In May of 2012, two of my constituents
tried to refinance their home and were rejected by the mortgage
company because the company was using fraudulent IRS documents.
When my constituent called the IRS, they stated, everything
looks fine here, we can't explain it, and if there's a problem,
we can't really do anything about it.
After many ill-fated pursuits at clearing up the situation,
the gentleman eventually give up in frustration, his problem
left unresolved in refinancing his home. Obviously, that's
unacceptable.
To be fair, the IRS recognizes this fact and is
implementing reforms to enhance its efforts to combat identity
theft by adopting a three-pronged approach. The first prong is
prevention, which means stopping this type of tax fraud from
being successful in the first place. Clearly, given 1.9 million
incidents, much more work needs to be done in this area. We
seem to be losing the battle.
The second prong is providing taxpayer services for those
who have been the victims of identity theft. This is a
significant focus for the IRS, but, again, it appears the
agency is falling short. I can just tell you based on
constituent work in my office, satisfaction is not a prevalent
theme among constituents. For example, an audit by TIGTA
sampled 17 different identity theft cases and found that the
average time it took for those cases to be resolved was 414
days. Unacceptable.
The third prong of IRS's approach is catching and
convicting the criminals who committed these crimes. This is a
critically important step, and one in which we are failing. If
we can step up enforcement, obviously, it deters tax-related
identity theft and protects our constituents. I'm interested,
Mr. Chairman, in learning more about the IRS's efforts on this
three-pronged approach, including examining success stories, as
well as challenges still to be faced.
I would also like to be hear more about how customer
service is being improved to prevent the bureaucratic nightmare
that constituents, as well as millions of other Americans face
every year. This year, as with every year, taxpayers face a
number of issues and obstacles as they try to file their
returns. I look forward to working with the IRS to implement
corrective actions that will strengthen taxpayer assistance and
issues during what can be a very difficult time for many
citizens. I hope today we have a productive discussion about
how we're going to achieve this goal in light of this massive
problem.
Thank you, Mr. Chairman.
Mr. Mica. Thank the gentleman.
Mr. Mica. Yield to the vice chairman, Mr. Meadows,
gentleman from North Carolina.
Mr. Meadows. Thank you, Mr. Chairman. And thank you for
calling this hearing.
Thank each one you for being here as we look forward to
your testimony and we deal with this.
You know, over the course of this year it cannot be denied
that the IRS has been plagued with a wide range of scandals.
And while many of these issues have been highlighted, an
ongoing problem, which seems to have flown under the radar,
continues to exist here at the IRS, is this issue of tax fraud
and identity theft and how it relates.
And I didn't realize how big the problem was until I talked
to a few stakeholders. And as I started talking to them and as
they started identifying the issue, I was dumbfounded by the
amount of tax fraud that exists and really the potential for it
to even be exacerbated with the new subsidy that we've got
coming in with ACA and the Obamacare. If you have got a subsidy
issue, and we're looking at really self-identifying who
qualifies, it even presents a greater challenge. You know,
identity theft, tax fraud has increased exponentially over the
past 5 years to the tune of 650 percent. And when we start to
look at that, TIGTA, who will testify here today, estimates
that there could be as much as $21 billion--that's billion with
a ``B''--in fraudulent tax returns over the next 5 years if the
problem is not addressed. And they say that that estimate is
conservative.
As I talked yesterday to a stakeholder, he shared a couple
of different stories, without sharing the details, of just
massive tax returns that comes in and taking advantage of the
tax system that we have, and yet thousands of returns filed on
the same day with, truly, with Social Security numbers that are
legitimate and then we see this, but that is one area. And
we're having to police that in the private sector. So we need
to really look at a solution where the IRS steps up and
identifies this, corrects the problem, or we'll be sitting here
12 months from now with an even bigger problem that is greater
than $21 billion.
So I thank each of you for being here. I thank the chairman
for calling this important hearing. And I am looking forward to
your testimony.
Mr. Mica. Any other members have opening statements?
Mr. Cummings?
Mr. Cummings. I'll be very brief because I know we're going
to have votes in a minute. I just want to make sure that we are
aiming towards the problem. You know, we've had motion,
commotion, emotion, and no results. And the problem just gets
worse.
And so I'm looking forward to the testimony. But I'm also
looking forward to solutions. You know, arguing here and
arguing there and not helping taxpayers avoid being victims and
not addressing the issue of those who will take advantage of a
system that may have some holes in it, and those who spend day
in and day out trying to figure out how to maneuver to extract
something that don't belong to them, those are the issues that
we have to address. If we can send a man to the moon, we ought
to be able to resolve these issues.
And with that, Mr. Chairman, I yield back.
Mr. Mica. Thank the gentleman.
Mr. Mica. Mr. Jordan.
Mr. Jordan. I'm fine, thank you, sir.
Mr. Mica. Okay. Then we have time to probably get one or
two of our witnesses in. Let me introduce them. Again, we have
the Honorable Daniel Werfel, Acting Commissioner of the IRS. We
have Ms. Nina Olson, the National Taxpayer Advocate at the
Taxpayer Advocate Service. Mr. Michael McKenney is the Acting
Deputy Inspector General for Audit at the Treasury Inspector
General for Tax Administration. And Mr. Douglas MacGinnitie is
the State Revenue Commissioner of Georgia.
And we welcome all of you.
As is customary, we swear in our witnesses. So if you'll
stand, raise your right hand.
Do you solemnly swear or affirm that the testimony you're
about to present to this committee and subcommittee of Congress
is the whole truth and nothing but the truth?
The witnesses all answered in the affirmative. We'll let
the record reflect that.
Yes?
Mr. Connolly. I'm sorry, Mr. Chairman. Could I just
inquire, is it the intention of the chair to hear Mr. Werfel
first and then break for the----
Mr. Mica. I think we could do that. We can fit him in
nicely. We still have 11 minutes, so we could give him at least
6.
Mr. Connolly. And I'm informed we have nine votes, Mr.
Chairman.
Mr. Mica. And so we will recess for the appropriate time
and break and then come back, and we will hear the rest of the
witnesses.
And also members will have 7 days to submit opening
statements or extraneous material for the record. Without
objection, so ordered.
Mr. Mica. Welcome back, Mr. Werfel. I asked you earlier how
much longer you'd be there. Till your successor, I guess, was
just named today. But thank you for coming. And you are
recognized. And again welcome.
STATEMENT OF DANNY WERFEL
Mr. Werfel. Chairman Mica, Ranking Member Connolly, and
members of the subcommittee, thank you for the opportunity to
appear before you today to update you on the actions we are
taking at the IRS to combat refund fraud and help victims of
identity theft.
Refund fraud caused by identity theft is one of the biggest
challenges facing the IRS today, and the harm it inflicts on
innocent taxpayers is a problem that we take very seriously.
The IRS has a comprehensive identity theft strategy focusing on
preventing refund fraud, investigating these crimes, and
assisting taxpayers victimized by identity theft.
The agency's work on identity theft and refund fraud
touches nearly every part of the organization. The IRS expanded
these efforts for the 2013 filing season to better protect
taxpayers and help victims. More than 3,000 IRS employees are
currently working on identity theft, more than double the
number at the start of the previous filing season.
Our ability to detect fraud and stop false returns before
issuing a refund continues to grow. We have expanded the number
and quality of our identity theft screening filters and already
this year we have suspended or rejected more than 4.6 million
suspicious returns, which approaches the total of 5 million for
all of 2012.
Our criminal investigations have increased as well. We have
opened roughly 1,100 identity theft investigations so far in
fiscal year 2013, which is already more than all of 2012.
We are also improving our efforts to assist taxpayers who
are victims of identity theft. Last year, we made a number of
programming and procedural enhancements that enable us to move
faster to identify accounts with a high potential for identity
theft. Cases generated as a result are reassigned for review
more quickly than in the past. So far this year we have closed
more than 565,000 cases. That is more than three times the
number of identity theft cases resolved at the same time last
year.
Other procedural enhancements are helping us reduce delays
in releasing funds to a legitimate filer in cases where
duplicate returns are filed. As a result, taxpayers who became
victims this fiscal year are receiving their refunds and having
their problems resolved in less than 120 days, far more quickly
than in previous years. While this is an improvement, we are
continuing to find ways to shorten this time and to ease the
burden on these victims.
But barriers to further progress on identity theft do
exist. One is the sheer volume and complexity of these crimes.
Another is the need to further upgrade our technology in order
to implement improvements, such as more sophisticated filters
and better taxpayer authentication procedures.
Yet another barrier to further progress is our difficult
budget environment. The work we are already doing on refund
fraud and identity theft involves a difficult balance of
resources and staffing at a time when our budget has been
reduced by $1 billion since fiscal year 2010. This includes a
reduction of $618 million this year alone as a result of
sequestration. The IRS has responded to these budget reductions
by becoming more efficient and cost conscious. One result of
our efforts to reduce costs is that full-time staffing at the
IRS has declined by more than 8 percent since fiscal year 2010,
or about 8,000 positions.
Against this backdrop, our need for additional resources to
fight refund fraud caused by identity theft has forced very
critical performance tradeoffs. The progress that the IRS has
made against identity theft would not have been possible
without directing resources away from other enforcement
activities and our service programs. The administration's
fiscal year 2014 budget request provides for an increase in
funding that will let us continue to make progress against
identity theft are also allowing us to continue our enforcement
activities and maintain reasonable levels of customer service.
Conversely, without this additional funding, we would face
difficult choices. And the situation would become even more
serious if we were to incur additional budget cuts. We would no
longer be able to sustain our current level of effort on
identity theft without significantly weakening other programs.
Chairman Mica, Ranking Member Connolly, members of the
subcommittee, this concludes my statement. I'd be happy to take
your questions.
[Prepared statement of Mr. Werfel follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Mica. What we're going to do, since we have 5 minutes
before the vote, is we will recess at this time and then there
will be at least 45 minutes of voting. We have nine votes. That
brings us up to at least 10:15. So I would expect everyone to
be back here by then and we will start immediately I hope 10
minutes after the beginning of the last vote on the floor for
members' purposes. So with that, the subcommittee stands in
recess.
[Recess.]
Mr. Mica. I'd like to call the Subcommittee on Government
Operations back to order after our recess.
The subcommittee has heard from IRS Acting Commissioner
Daniel Werfel as our first witnesses. We have three remaining
witnesses. We will go ahead and begin their testimony. And
again welcome to our panel this morning Ms. Nina Olson. And she
is the National Taxpayer Advocate at the National Taxpayer
Advocate Service.
So welcome, and you are recognized.
STATEMENT OF NINA E. OLSON
Ms. Olson. Thank you, Chairman Mica, and thank you for
inviting me to testify today about tax-related identity theft.
Since 2004, I have identified this issue as one of taxpayers'
most serious problems in nearly every annual report I have
submitted to Congress, and I have testified at numerous
hearings on this subject, including seven since the start of
2012.
To its credit, the IRS has recognized identity theft as a
major challenge and has devoted significant resources to
addressing it. However, while the IRS has improved its ability
to detect fraudulent returns, our analysis indicates that it
has not made comparable strides in providing assistance to
identity theft victims.
In my testimony and my reports to Congress, I have
described the devastating impact of tax-related identity theft
on its victims. Yet despite some recent improvements to cycle
time, it often takes 6 months to a year or longer before the
IRS fully resolves identity theft cases and issues refunds to
the legitimate taxpayers. Thus victim assistance overall
continues to be inadequate.
Let me offer three ways of looking at victim assistance.
First, my organization, the Taxpayer Advocate Service, or TAS,
assists taxpayers whose cases have not been handled properly
through normal IRS channels or who are experiencing financial
hardships. In fiscal year 2011, we received 34,000 cases, by
far the largest number of cases on any single issue and 11
percent of our inventory. By fiscal year 2012, we received
55,000 identity theft cases, which constituted 25 percent of
our inventory. For the first 9 months of fiscal year 2013, our
identity theft cases are 32 percent higher than last year,
suggesting our case receipts in that issue may exceed 70,000
this year.
TAS' case inventory is a pretty good barometer of IRS
problems, so these increases suggest that at least in some
respects victim assistance may actually be getting worse.
Second, the IRS processes for identifying and stopping
returns filed by identity thieves ensnare some legitimate
returns. For example, during this filing season, more than
150,000 returns filed by legitimate taxpayers were flagged and
deemed unpostable. This means they aren't processed and refunds
aren't issued until someone in the IRS looks at them and acts
upon them.
Some returns were stopped because the original identity
protection personal identification number, or IP PIN, was not
entered on the return. The IP PIN is the number the IRS gives
taxpayers when it determines they are victims so their returns
can go through without stopping. When a taxpayer loses his IP
PIN, the IRS will issue a replacement IP PIN, but
confoundingly, the IRS also automatically stops all returns
with these replacement IP PINs; that is, it deems them
unpostable.
Of the over 100,000 returns that were stopped because they
did not have an IP PIN, more than 90 percent of those, over
93,000, were submitted by legitimate taxpayers, yet they had to
wait an average of 6 additional weeks for the IRS to process
their returns, and some are still waiting. In fact, as of
yesterday, there are over 21,000 of these returns over 61 days
old on average waiting to be processed.
Third, while I am pleased that one IRS unit has reduced its
processing time this year, that function's processing time is
only part of the lifecycle of many identity theft cases. In my
written statement, I describe the progress of a hypothetical
case that is representative of many of TAS cases in that it
requires the sequential involvement of multiple IRS units.
Similarly, in 2012, TIGTA analyzed the files of 17 identity
theft victims and found that the IRS had opened 58 cases to
resolve the accounts of those victims, an average of nearly
three and a half cases per victim. That aligns with what we
have observed and explains why I regularly hear from
practitioners and taxpayers that identity theft cases often
take a year or longer to resolve.
Lastly, I note that the IRS now has more than 3,000
employees working identity theft cases, more than double the
number from the previous year. Given the IRS' broad
responsibilities and shrinking resources, that level of
staffing is not sustainable. To make and sustain progress in
addressing identity theft, the IRS must improve its core
processes.
In my written statement, I make six recommendations. The
most important is to reorganize victim assistance so that a
centralized unit controls all identity theft cases and each
case is assigned to an employee who manages the case from start
to finish and serves as a single point of contact for the
taxpayer. The IRS may say that this approach will itself
require more resources. But as the head of an organization that
operates in exactly that manner, I believe that it is more
efficient to assign each case to an employee than to require a
taxpayer to navigate multiple functions, working cases with
significant rework and time lags occurring along the way.
I thank the subcommittee for its continued interest in this
matter.
Mr. Mica. Thank you for your testimony.
[Prepared statement of Ms. Olson follows:]
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Mr. Mica. Our next witness is Michael McKenney, and he is
the Acting Deputy Inspector General for Audit at the Treasury
Inspector General for Tax Administration.
Welcome, Mr. McKenney, and you are recognized.
STATEMENT OF MICHAEL E. MCKENNEY
Mr. McKenney. Chairman Mica, Ranking Member Connolly, and
members of the subcommittee, thank you for the invitation to
testify on the important subject of identity theft and its
impact on taxpayers and tax administration. The Treasury
Inspector General for Tax Administration, or TIGTA, has
provided extensive coverage of tax fraud-related identity theft
by conducting both audits and investigations. My comments today
will focus on the results of our prior audit work and two
audits that are ongoing.
The IRS has made identity theft a priority and has made
some progress over the past year. However, significant
improvements are still needed. As of June 30th of this year,
the IRS reported that during the 2013 filing season it stopped
the issuance of $4.2 billion in potentially fraudulent tax
refunds associated with 860,000 tax returns that involve
identity theft. For the 2013 filing season, the IRS increased
the number of identity theft filters to 80 from the 11 it used
in 2012. This enabled the IRS to identify almost twice as many
identity theft tax returns as the prior year.
In our follow-up audit report that will be issued next
month, we determined that for tax year 2011 returns, which are
filed in 2012, there were approximately 1.1 million undetected
tax returns with characteristics of identity theft. The
associated fraudulent tax refunds totaled approximately $3.6
billion, which is a 30 percent decrease from the $5.2 billion
of undetected fraud we found for tax year 2010.
Even with its expanded filters, it will remain a challenge
for the IRS to detect these fraudulent returns unless it has
access to third-party income and withholding information before
the tax returns are processed. In this regard, the IRS is
currently working with three States to determine how partial-
year information may be used to identify fraudulent tax returns
before the refund is paid.
Another challenging aspect to this problem is the use of
direct deposit for the fraudulent tax refunds. Most of the tax
year 2011 returns we identified with indicators of identity
theft involved the use of direct deposit to obtain tax refunds.
These totaled approximately $3.5 billion. In some cases, many
fraudulent refunds are deposited to the same bank account. For
example, one such bank account received 446 direct deposits,
totaling over $591,000.
TIGTA recommended that the limited limit the number of tax
refunds sent to the same direct deposit account. We also
recommended that the IRS work with Federal agencies and banking
institutions to ensure tax refunds are deposited only to an
account in the taxpayer's name.
The IRS developed new filters for the 2013 filing season
which are designed to identify and stop tax returns with
similar direct deposit characteristics. As of May 30th of this
year, the IRS indicated that it had identified over 154,000
such tax returns and prevented approximately $470 million in
tax refunds with the use of these filters. In addition, as of
the end of June, over 18,200 refunds were returned from
financial institutions, totaling more than $60 million.
The IRS still faces challenges in providing assistance to
identity theft victims. In a current audit which reviewed cases
worked in 2012, we found taxpayers have continued to face
lengthy delays in the resolution of their identity theft cases.
In addition, tax accounts were not always correctly resolved,
which resulted in delayed or incorrect refunds.
One practice that is designed to protect taxpayers from
being victimized again the following year is the issuance of
identity protection personal identification numbers. The IRS
issued almost three times as many of these numbers to taxpayers
in 2013 as it did in 2012.
The IRS is continuing to take actions this year to improve
its ability to expedite assistance to victims and prevent
fraud. We will continue our work in this area to evaluate the
IRS' progress. Chairman Mica, Ranking Member Connolly, and
members of the subcommittee, thank you for the opportunity to
share my views.
Mr. Mica. Thank you for your testimony.
[Prepared statement of Mr. McKenney follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Mica. And we'll turn to our last witness in this panel,
Mr. Douglas MacGinnitie. And he is the State Revenue
Commissioner at the Georgia State Department of Revenue.
Welcome, and you are recognized.
STATEMENT OF DOUGLAS MACGINNITIE
Mr. MacGinnitie. Thank you, Mr. Chairman, Ranking Member
Connolly, and members of the subcommittee. I am the
Commissioner of the Georgia Department of Revenue. And I'd like
to thank you all for having me here today.
First, I think it's always helpful to start a little bit
with the big picture. Georgia is the ninth-largest State in the
Union. We have approximately 9.8 million residents. And in
2012, we had about 5 million taxpayers; 4.25 million
individuals and about 750,000 companies.
In Georgia, the Department of Revenue collects about $20
billion in taxes each year, which is about 98, 99 percent of
all State revenue. So we're the tax collector in the State. And
the vast majority of our revenue is individual income tax and
sales tax, which comprise about 85 percent of all State
revenue.
Last year we processed 4.25 million individual returns. And
of those, just about 3 million were refund requests, totaling
about $2 billion. So like all taxing authorities, we're just a
big data processor, right? We bring in $20 billion a year, but
then we have to keep and manage all that information related to
the $20 billion.
Turning to the fraud issue, several years ago, long before
my time at the Department, folks at the Department started to
recognize that there was a problem with fraud and started
trying to fight it. In 2005 a group was formed within the
agency called the Office of Special Investigations--it always
has to sound official and catchy--to fight the fraud. We
started out by putting some pretty simple rules in place, I
gather much like the IRS in their filters, to process those
returns. So, as an example, if too many refunds were going to
the same bank account or the same address, we would start
flagging those returns. There might be a good reason that that
many were going to one address or one bank account, but there
might not be, and we wanted to take a closer look.
Well, as we evolved and as the criminals evolved, we began
to realize that the vast majority of the fraud involved
identity theft. Some of the fraud was the actual taxpayer
making fraudulent claims on their own tax return, but more
often someone was using a legitimate taxpayer's information in
filing a fraudulent came in their name.
We also realized that our ability to look at a return and
tell that the filer was not who they said they were was very
limited. Just looking at a return doesn't really tell you much.
And our ability to access all sorts of third-party data was and
to a great extent still is very limited. Taxing authorities
don't have all that information most of the time.
And personal experience showed it could happen to anybody.
In 2011, after I had started my job, my wife's identity was
stolen. So when my wife and I filed our joint return, it was
kicked out. Someone had already used her name and Social
Security number and filed a return. And if that's not the
definition of irony, I don't know what is. But we had to
process paperwork both at the IRS and the State level. So I
understand this both from an administrative perspective, but
also as a semi-victim.
All that said, our rules-based approach made a difference.
Last year, in 2012, for the 2011 tax year, our program stopped
114,000 refunds, totaling about $75 million. But as I noted, we
still knew we had a significant hole around identity theft. And
in 2011, we were approached by a company call LexisNexis to
help fight that ID theft. I remember clearly the meeting with
LexisNexis, thinking not only do they understand what the
problem is, but also I think they have a program that might fix
it. Often we're called on by consultants who want to sell us
something. They can help us identify the problem, which we all
can see, but much less clear how they're going to fix it.
So in 2012, we started this program, and it works as
follows. After all of our systems are done checking a return,
we think it's okay, we will send that refund request to
LexisNexis with some very limited information. LexisNexis will
scrub it through their databases. And based on the filters that
we've set up along with them, if it seems suspicious, it'll be
flagged. If a return is flagged, an email and a letter is send
to the taxpayer asking them to go to a Web site and answer a
few simple questions that only the taxpayer should know, much
like if you've ever had your credit card stolen, same kind of
system. If they can answer those questions online, the refund
gets put back in the queue and out it goes; nobody has to touch
it. If they can't answer it or they refuse to try to answer the
questions, we hold that refund in abeyance and eventually we
reverse it out and treat it as if it was a fraudulent refund.
In putting together the program, we attempted to balance
the various goals of processing refunds as quickly as possible,
protecting the State's money, i.e., taxpayer money, and
protecting taxpayer identities. We've run the program now for
two seasons, and in the first year there was definitely a
learning curve, but this year it went pretty smoothly.
From our perspective and from taxpayers' perspectives, the
results have even excellent. It's added about 1 to 5 days to
the processing of a refund, and in 2012 it stopped over 44,000
refunds, totaling over $23 million. It cost the State about
$2.6 million. So from a business perspective, the program is a
no-brainer. We spent $2.5 million, $2.6 million, and we stopped
$23 million in fraudulent refunds.
At the same time, the agency avoided all sorts of costs
associated with having to help taxpayers deal with the mess
when somebody's filed a fraudulent refund, much like my wife
and I went through.
So one final thought for you all. Our experience is that
the tax fraud is a growing and serious problem. Last year, our
two programs combined stopped 160,000 fraudulent returns,
totaling $99 million, just shy of $100 million dollars. And if
you do the math, that means approximately 4 percent of all
returns that were filed with us and over 5 percent of the
refund claims were fraudulent. I'll let you do the
extrapolation from that, but it doesn't take long to get to
some pretty big numbers when you look at other States and
obviously at the Federal level.
So thanks for the opportunity to be here. I'm happy to
answer any questions that you all might have.
Mr. Mica. We thank you for your testimony.
[Prepared statement of Mr. MacGinnitie follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Mica. And each of your witnesses. And we'll turn
immediately to some questions here.
Again, I'm conducting the first hearing on this. I heard
one of our witnesses said she had been involved in seven. And I
think this subcommittee has done four of those. The problem is,
though, with the rip-off and refunds that are fraudulent, it's
spun totally out of control. I mean, we had 456,000 cases in
2009, we heard up in 2011 we were at 1.1 million; 2013, the
estimates today are 1.9 million. And some steps have been put
into place, but obviously we don't have a handle on this.
Did you testify, Mr. McKenney, that one account received
446 refunds.
Mr. McKenney. That's accurate. Yes.
Mr. Mica. I mean, that's astounding that something wouldn't
trigger. I just renewed my American Express, and they had a
series of questions. And then also I found any type of
financial activity out of the ordinary is immediately
triggered, I get a call from their security folks.
Mr. Werfel, can't we put in place some protections? And you
heard recommendations or some ideas from Georgia. Where are we?
Mr. Werfel. Yes, we can, and we should. And with respect to
the situation where money goes to the same bank account, we
have now effective in filing season 2013 implemented a filter
in our system to catch it.
Mr. Mica. So the 446 would be triggered in the multiple----
Mr. Werfel. Yes. Now it would be triggered. This is part of
our evolving learning process. As we learn and understand the
schemes, we make adjustments. For us, the goal is to get ahead
of them so we can figure out where the schemes are going before
they emerge. And that's part of our challenge at the IRS.
Mr. Mica. Well, we've heard the nightmare that was
described--actually, the ranking member gave his constituent
experiences and being jerked around by, I think you said, a
half a dozen different folks. One of the recommendations from
victims assistance was a central unit, I guess. We have 21
units or have had, and I think you'd probably have to have some
enforcement or investigations units. But, Mr. Werfel, what
about some one stop for the taxpayer who is caught in this
horrible situation.
Mr. Werfel. I think that's a very important thing. We're
evolving in that direction. We have what's called the Identity
Protection Specialization Unit that essentially helps us
coordinate when you have multiple parts of the IRS involved in
a single identity theft case to make sure there's coordination.
But as Ms. Olson points out in her testimony, the Taxpayer
Advocate has specific recommendations about how we can enhance
that centralization role and make it even more one stop.
And for us, my commitment is to evaluate Ms. Olson's
recommendation. It's a question of making sure, can we do that
evolution effectively and serve the victim? And can we also do
it within our resource constraints. So there's a combination of
things.
But I think the bottom line is we're very concerned about
the impact this is having on victims. Obviously, the impact
it's having on the deficit in Treasury is significant. But the
impact it's having on victims is significant, and we're
committed to figuring out what we can do to help.
Mr. Mica. Well, Mr. Werfel, you've heard of Willie Sutton,
haven't you? The famous bank robber.
Mr. Werfel. Yes.
Mr. Mica. Well, Mr. Connolly, now, I thought you had some
great testimony there. What was the number you said were
prosecuted?
Mr. Connolly. I----
Mr. Mica. I have to question this witness.
Mr. Connolly. I believe, Mr. Chairman, that at the last
hearing we had, I want to say, because I asked, I want to say
there were four convictions.
Mr. Mica. Four convictions. We're lucky that Willie Sutton
isn't around today, because you could scam the IRS and get away
with it. Can you tell us where we are on prosecution?
Mr. Werfel. Yeah. I don't have the exact number, but I can
tell you that in the area of criminal investigation, just like
in some of the other areas we've described, there is
significant ramp-up in activity. We had 1,100 investigations
under way this year. We have convictions----
Mr. Mica. How many?
Mr. Werfel. I don't know the exact number. I know that many
of them were----
Mr. Mica. Well, again, the ranking member has said it's
just a handful, and that's disgraceful.
Mr. Werfel. I can get you the number. I will say that
some----
Mr. Mica. People are stealing from the taxpayer and they're
getting away with it. When the staff told me that some of the
drug dealers are switching out to scamming and ripping off the
IRS with, again, these illegal payments, that should raise
eyebrows because we're talking about billions.
Mr. Werfel. Yeah. I will get you the number of
prosecutions. We are seeing sentences now at 20-plus years,
which we think is a good deterrent. We're getting positive
feedback.
Okay. I just received a note that we have 785 indictments
on identity fraud.
I just wanted to point out that I was on the phone recently
with the field directors in Tampa Bay and Miami for the IRS, in
terms of our work down there. They feel they've really turned a
corner with local police and local law enforcement, getting
positive feedback from local law enforcement about how the IRS
efforts are stepping up in this area. So we have a lot of work
to do. I think the point is, is that things are trending better
in terms of our activity in this area.
Mr. Mica. Well, finally, can you tell me, again, I've heard
90,000 to 100,000 employees, what's the current number of
employees with IRS?
Mr. Werfel. We have roughly 85,000 full-time employees. And
then when you add in part-time employees, it gets to about
95,000. And that's, by the way, that's an 8 percent reduction
from where we were in 2010.
Mr. Mica. Now, again, but a lot of people who are involved
in this use the cost-effective means. We heard from Georgia,
and a limited number of personnel, a lot of electronic
monitoring that the private industry is doing. And somewhere
we're doing it in a very expensive, ineffective fashion.
Let me yield to Mr. Connolly now.
Mr. Connolly. Mr. Chairman, I see the chairman of the full
committee is here.
Mr. Issa. I'm just----
Mr. Connolly. All right. Because I'd be more than happy to
yield to the chairman.
Mr. Mica. I was going to get to him immediately after you.
Mr. Connolly. Thank you, Mr. Chairman.
Welcome to our panel.
I'm glad to hear, Mr. Werfel, that the number of
investigations, criminal investigations, and the number of
prosecutions has gone up. I do think we need to know the number
of convictions.
Mr. Werfel. Yes.
Mr. Connolly. Because my recollection, honestly, was last
time we met in the last Congress was it was in the single
digits, which was a shocking statistic, given the magnitude of
the problem.
Mr. Werfel. Okay, so we have 301 sentences to date in 2013.
So, again, the numbers are increasing. And I don't know that
that's the right number.
Mr. Connolly. Right.
Mr. Werfel. The trend is improving.
Mr. Connolly. But I think all of us could agree, and this
isn't only the responsibility of IRS, nor do I mean to imply
that, but the idea that there are almost 1.9 million cases of
identity theft, which then involve the kinds of problems Mr.
McGuiness--I mean Mister, I'm sorry----
Mr. MacGinnitie. MacGinnitie.
Mr. Connolly. MacGinnitie. So it's Irish.
Mr. MacGinnitie. A little bit.
Mr. Connolly. All right. And his wife experienced, you
know, 1.9 million, even the convictions of only 300 and
something people is not earth-shattering and not reassuring to
the consumer, to the, you know, the taxpayer.
So are you getting cooperation from U.S. attorney's offices
on this? Are they taking this more seriously?
Mr. Werfel. Yes, as an emerging risk for the IRS and for
the broader tax community and tax system, there's a lot going
on. You know, obviously, technologies are changing, we're
training our employees differently, and we're forging new
partnerships with U.S. attorneys, local law enforcement,
States. All of this is happening, it needs to happen quickly
and effectively, because as the chairman pointed out, this is a
problem, and that you point out, this is a problem that's
growing exponentially.
Mr. Connolly. Right.
Mr. Werfel. And I think what the IRS is doing is showing
that we are moving quickly to deal with this emerging risk, but
it's growing very quickly. And so we need some very
sophisticated solutions here.
Mr. Connolly. Yeah, because here's the message. The
chairman referenced Willie Sutton. If Willie Sutton were in the
game today, he'd probably focus on the IRS rather than a bank,
because the chances of your being caught, tried, and convicted
are minuscule. I mean, if you're looking at probabilities, it's
a good place to go for a penalty-free crime. And that is of
great concern I think to this subcommittee.
And of course one of the things I want to give you, you
mentioned in your testimony, Mr. Werfel, that some of this has
to do with resources. A billion dollars of cuts in the budget
of IRS does circumscribe the IRS' ability to full-throated
respond to this exponential threat.
Mr. Werfel. Yes, there's many examples of that. I mean,
what we are worried about is, as our resources decline, can we
keep up with the level of service that we need to provide to
taxpayers and appropriate enforcement activities. And, you
know, on the positive side, as our resources go down, we become
more efficient. And I can point to a lot of different areas,
and I think the chairman mentioned in our conference spending
we had a significant decline. And right now we're at very low
levels of travel and training and conference spending as part
of our efforts to become more efficient.
But there's only so much efficiencies we can drive before
the budget cuts start to impact our ability to tackle huge
issues like identity theft. And, you know, at the appropriate
setting we can sit down and walk through the President's 2014
budget request and how we plan to deploy resources in a way to
get to at identity theft.
Mr. Connolly. I want to get at two other issues in my
limited time.
Mr. McKenney, you talked about direct deposit. So here's
something presumably to try to make more efficient and more
immediate the tax refund to the taxpayer. But unwittingly it
also makes more efficient and in some ways easier for, you
know, the bad guys to interrupt that flow and redirect it
somewhere else. What can we do about that? And should taxpayers
now insist that they want a check and not have it directly
deposited?
Mr. McKenney. One of the things we recommended that they do
and work with Treasury on is to validate that the account that
they deposit this refund into is an account in the taxpayer's
name. And the IRS has started a pilot in that regard--or
Treasury has--and that's starting to show a benefit. So the
more they can authenticate things before they deposit into an
account, the better off they'll be.
Mr. Connolly. Well, but they do have the option of asking
for it in a check form. Is that correct?
Mr. McKenney. Yes, that's true.
Mr. Connolly. And do we find that the incidence of identity
theft is much higher with direct deposit than it is with, say,
old fashioned----
Mr. McKenney. Yes, most of it's direct deposit now. So it's
so quick for a person to take that and have it put to a prepaid
debit card or whatever they can accomplish there, whatever
they're trying to do much faster.
Mr. Connolly. Mr. Chairman,my time has expired. And I will
withhold my last question until--unless----
Mr. Mica. Thank you. No, that electronic thing doesn't
work, though, because they sent my refund, but my wife got it
and there was nothing I could do about it.
Pleased to welcome and recognize the chair of the full
committee, Mr. Issa.
Mr. Issa. Thank you, Mr. Chairman. I'll talk to Pat about
joint account and the benefits thereof, I guess.
Mr. Werfel, this is an important hearing, and I want you to
continue working on it. Obviously, the IRS is behind, clearly,
behind the thieves. They're getting better at it. I think Mr.
Connolly brought the right point, which is, why rob a bank when
you can rob Medicare, Medicaid, and the IRS. It's so much
easier to rob the Federal Government through fraud and identity
theft, candidly, than it is to walk in with a gun into a bank.
However, I have some frustrations I'm bringing to you
today. As you know, a number of months ago the President made
it clear that the behavior that occurred in an isolated basis
in Cincinnati was unacceptable, and he charged that we'd get to
the bottom of it. Well, we've gotten to the fact that it's not
isolated to Cincinnati, as was said. It's not isolated to
Washington. It goes to your Chief Counsel's office.
And as we go to do our discovery, that's where the rub is.
You promised us full cooperation. And yet the Office of Chief
Counsel apparently has 70 attorneys, they're delivering four
documents a day per attorney to us, and they look like this.
And in minute print it says 6103.
Now, if a lawyer is working on a document, four pages a day
per lawyer, are you going to tell me that this is, in fact,
minimal redaction as required by law?
Mr. Werfel. Well, there's a couple of statements that I'd
like to make if I could.
Mr. Issa. No, I'd just like your answers, please.
Mr. Werfel. The lawyers take very seriously their legal
responsibilities to redact information under the law, to redact
information that is specific to an individual taxpayer. And all
such information, bottom line, Mr. Chairman, is all such
information, whether redacted or unredacted, is delivered to
this Congress. It is delivered----
Mr. Issa. You have delivered less than 1 percent--excuse me
for standing, but I kind of have to get over your stack--you
have delivered less than 1 percent of the documents, actually,
to the Ways and Means Committee. You are not delivering to the
Ways and Means Committee.
Mr. Werfel. I disagree with that conclusion.
Mr. Issa. I'm afraid that's what Chairman Camp put out, and
he put it out in writing.
Mr. Werfel. And I disagree with that conclusion, and if I'm
allowed to explain, I can provide specific facts that would
support my disagreement with that conclusion.
Mr. Issa. Here is my question to you. We produced, I
believe, 63 search terms. You added some search terms. I'm not
disagreeing with your adding progressive and looking for
progressive. That's fine. I want more, not less.
You came up with this, it added up to a total of about 80
search terms, and then unilaterally your people, the Office of
Chief Counsel, reduced that down to a dozen. They are not
searching on the terms we've asked for.
Our request is for all information related to this. When
you eliminate search terms unilaterally, you're obstructing us
by limiting the scope of discovery. Do you understand that, Mr.
Werfel?
Mr. Werfel. I do, but I disagree with the premise of your
question and the facts that you're offering.
Mr. Issa. Did you, in fact, did your people limit the
search terms below the search terms that are delivered actually
in your response letter today if you have looked at it?
Mr. Werfel. We are prioritizing searches in order to get
you more documents more quickly, and that is having an impact.
In fact, this week alone the amount of document production that
we have been able to produce has increased dramatically. That
doesn't mean that we've eliminated search terms permanently. It
means that we're making modifications in order to make sure
that we are zeroing in on----
Mr. Issa. That is not your call, Mr. Werfel.
Now, let's go into a little quick detail. What's
interesting about this page, I understand why you've removed
taxpayer specific. But this is also--this information is being
delivered without headers. If the names were there, I still
wouldn't know what those numbers are. Somebody deliberately
printed out information, or actually created digital, in which
they stripped out the meaningful data so you know actually what
these columns are. Even Mr. Connolly would say this doesn't
look like a spreadsheet he has normally had because
spreadsheets say what's on top of it.
Additionally, we asked you for information. We set the
priority, if you are going to slow roll us, and you are slow
rolling us.
Mr. Werfel. That is not true.
Mr. Issa. Mr. Werfel, you frustrated this committee. You
promised to do things and you're not. The Office of Chief
Counsel, as far as we know, have made the decisions to limit
search terms. Is that correct, or did you?
Mr. Werfel. I'm working together with the Office of Chief
Counsel. We are not limiting the search terms in a permanent
way. We are prioritizing to get the most relevant documents. If
I can make a point--if I can make a point----
Mr. Issa. Please. I'd ask unanimous consent for an
additional 4 minutes to explore this.
Mr. Connolly. Mr. Chairman, I will gladly give that
unanimous consent, provided that the Democratic side of the
aisle be allowed to respond, given the fact that we are now off
topic with respect to this hearing. I respect the wish and the
prerogative of the chairman to use this opportunity to query
Mr. Werfel on a different matter, and I respect that, but I'd
like an equal opportunity to respond.
Mr. Mica. I would grant the full committee chair that time,
and we will grant additional time to the minority.
Mr. Connolly. I thank the chair for his graciousness.
Mr. Issa. Thank you.
Mr. Werfel, let's go through the numbers.
Mr. Werfel. I thought I was about to----
Mr. Issa. No, no, I have only been granted additional time.
Mr. Werfel. Okay.
Mr. Issa. Since the Democrats seem to be carrying your
water, I think I'll just use my----
Mr. Werfel. I think they're just important facts for me to
get out and hopefully I can get them out.
Mr. Issa. Yes, they're important facts to get out and
you're obstructing them. So now----
Mr. Werfel. I am not. That is not true----
Mr. Issa. So now----
Mr. Werfel. --and not supported.
Mr. Issa. Mr. Werfel, apparently you were put in by the
administration to run cover until somebody new would come in.
Mr. Werfel. Again, that is not true.
Mr. Issa. It is now my time, and I'm going to explain to
you what this committee has found.
Mr. Werfel, in 2 months, out of 64 million pages, you have
delivered 12,100, and this is over 2,500 of them. They are
completely useless. Your interpretation of 6103 is so broad
that you are delivering no meaningful information.
More importantly, we have prioritized a number of
discovery. Lois Lerner, a woman who did not properly, but did
attempt to take the Fifth before our committee, we have asked
for all correspondence. It has not been forthcoming. We have
asked for correspondence with the White House.
Mr. Werfel, let's understand something. Correspondence with
the White House, by definition, had darn well better not
include 6103, so redaction is not appropriate. We are not
covered by the Privacy Act. Therefore, even if it includes
names of individuals like Sheldon Adelson and how you're going
to target him or something, even if it included that, quite
frankly, it would not be 6103. It would be communications with
the outside.
Additionally, your people have unilaterally chosen to
redact, according to them, private information. Mr. Werfel, you
don't have the right to have private communication on
government time and government equipment. If Lois Lerner or
others had private communications, they are not subject to
6103, because if there's 6103 in there, we expect them to be
immediately referred for criminal prosecution. You can't have
private conversations and release 6103. That, of course, would
be wrong.
So as we go through this discovery and find far excess
redacting, no question at all, slow rolling discovery, limiting
search terms, you may call it prioritizing, but you are not
prioritizing as we need them. It is my expectation that we
should have already received communications to and from the
White House. We should have already received communication
between anyone who was conducting non-6103 business. We should
have already received Lois Lerner's entire packet.
These are not my expectations. These are the American
people's expectations. Your speed of delivery is such that you
will be long gone, the President will be long gone, Lois Lerner
will have retired before we would receive a sufficient amount
of information to be meaningful.
You're leaving me no choice. I've asked you for
information. You're not forthcoming. Your own Chief Counsel's
office appears to be clearly compromised. The lawyers there are
included in this investigation. The communications to and from
those lawyers clearly mean that the Office of Chief Counsel, a
political appointed office, has been compromised. You're
leaving me no choice, I will be preparing and sending a
subpoena for these documents to the Secretary of the Treasury,
who will be remaining on, and our expectation is that the
Treasury Department will take over the delivery of documents in
a timely fashion, use such attorneys as they may see fit that
they believe are not compromised. And I would ask you to
immediately instruct the Chief Counsel that they, the Chief
Counsel's office, may not any longer be part of the decision
making, only attorneys who are not part of our investigation.
And quite frankly, I'm deeply disappointed. It was my
expectation with our past relationship and your past work that
you would come in not just wanting to be a caretaker, but
actually get to the bottom of this. But as Cincinnati turned to
Washington, Washington turned to political appointee offices,
and the President began calling this scandal phony, and
Secretary Lew began calling this scandal phony, what I can't
understand is how you can think the American people would
accept this as phony.
This is a real investigation. We need real discovery. If
these documents need to be redacted, then by definition you
have no reason to deliver them. If you can only deliver me
blank pages, completely blank pages, deliver them to the other
committee.
But I'll tell you one thing, as these pages, which are
almost impossible to figure out where they came from, are gone
through by the Ways and Means Committee, you'd better hope,
you'd better really hope that we don't find something there
that clearly should not have been redacted, which we expect we
will.
Moreover, I'm sad to see you go because I thought you could
do something. I'm sad to have to issue a subpoena because
that's not what I thought we were going to have. We did not
enter this investigation thinking that this was some grand
conspiracy. We entered this thinking this was something
fundamentally wrong. My Democratic friends are convinced that
progressives were targeted, even though your own Inspector
General has said he found no evidence of it, while he did find
evidence of other groups, generally called Tea Party groups,
having been targeted.
We don't want to find only one side. We want to find anyone
that's targeted, and we want to hold people responsible. Today
Lois Lerner is being given full pay and not held accountable.
Our job is to find out everyone that should be held accountable
and make sure the American people can trust this will not
happen again, because I believe if we're thwarted in this
investigation this will become a pattern of behavior, whether
by the chief executive of the United States or simply by
individuals who have power within bureaucracies such as the
IRS, the EPA, OSHA, and the like.
Mr. Chairman, I now owe 6 minutes to the Democratic member,
and I understand. I yield back.
Mr. Mica. Duly noted. And I recognize at this point the
ranking member of the full committee.
Mr. Cummings. I counted 7.
Mr. Mica. Well, I'll make that determination.
Mr. Cummings. I'm just looking at the clock.
Mr. Mica. We started at 4. You weren't here, sir. I will
make the determination.
Mr. Cummings. Thank you for recognizing me, Mr. Chairman.
Mr. Mica. You are recognized for 5 minutes, and then I will
consult with the ranking member to see how we distribute the
balance of the time, I promise. Thank you.
Mr. Cummings. Mr. Werfel, first of all, I want to thank you
for your service. I listened to what just was said to you, and
I again thank you for your service. Earlier this week Chairman
Issa accused you of obstructing the committee's investigation
because you were not producing documents fast enough, in his
opinion. You have produced to Congress tens of thousands of
documents. We have interviewed 18 IRS witnesses. And today is
the third time you have testified personally before our
committee in the last 2 months.
In addition, Mr. Werfel, there's a law, Section 6103 of the
Internal Revenue Code, that prohibits you from revealing
information to our committee that identifies specific taxpayer
information. Is that right?
Mr. Werfel. Yes, that is correct.
Mr. Cummings. And you need to review all the documents you
are producing to our committee to first make sure they comply
with the law. Is that correct?
Mr. Werfel. Yes.
Mr. Cummings. I'm not concerned with your compliance, Mr.
Werfel, because I have seen it. My concern is the actions of
the IG was blocking you from providing information about
progressive groups to this committee.
Mr. Werfel, 2 weeks ago, on July 17th, you testified that
some non-Tea Party groups received treatment similar to Tea
Party applicants and the IRS denied at least one category of
applicants after a 3-year review. Is that right?
Mr. Werfel. That's correct.
Mr. Cummings. In this instance, your career experts
reviewed these documents and told you this information was okay
to share with the committee, that it did not reveal specific
taxpayer information and did not violate Section 6103. But just
as you were about to produce the documents, this information to
the committee and the information to the committee, the IG
personally intervened and claimed that it might reveal specific
taxpayer information. Is that right?
Mr. Werfel. That's correct. The IG reached out to me and
expressed concerns about our pending delivery of the
information.
Mr. Cummings. So you were about to hand us documents, the
same kind of documents Mr. Issa just asked about, but then the
IG says no. Is that right?
Mr. Werfel. The IG raised serious concerns.
Mr. Cummings. When we asked the IG about this, he confirmed
that his effort to block your disclosure to the committee was
unprecedented. We don't hear those complaints coming from over
the other side now. When we pressed him on this, he said he was
still in: ``ongoing discussions'' with the office, and that he
would resolve this issue with you: ``sooner rather than
later.'' The problem is we have not heard a single word from
the IG since then.
Can you give us an update? Has he withdrawn his objection?
Are your discussions still: ``ongoing''?
Mr. Werfel. They are. I have spoken to him recently about
it. He reasserted his concern and indicated that he was still
not convinced that the information was not taxpayer----
Mr. Cummings. The information about the progressive groups?
Mr. Werfel. In this case, yes.
Mr. Cummings. Do your career experts at IRS still believe
it would be appropriate to provide this information to the
committee?
Mr. Werfel. Yes, they do.
Mr. Cummings. I'm deeply disappointed that the IG continues
to block the production of information about progressive groups
to the committee. Representative Connolly and I sent a letter
to the IG yesterday asking him for an explanation.
Mr. Chairman, I ask that our letter be included in the
record.
Mr. Mica. Without objection, so ordered.
Mr. Cummings. As I have said throughout this investigation,
our job is to ensure that all applications for tax-exempt
status are treated fairly, regardless of whether they are
conservative, progressive, or in between. If we do not receive
a satisfactory response from the IG by next week, I would ask
that you go ahead, Mr. Werfel, and produce these documents.
You know, the chairman just said, he just told you, he
wants the documents. So let's get him the documents, even over
the objection of the IG. We will follow up and let you know if
we hear from him, but look forward to hearing from us.
Mr. Werfel. Thank you. And if I can just make a point, you
know, I'm not exactly familiar with the exact procedures of the
committee in the hearing, but I would like an opportunity to
respond to each of Chairman Issa's allegations and questions. A
lot of them warrant corrections of fact and clarification. I
wish he was here for me to respond to him directly, but at some
point during the course of the events today I would appreciate
the opportunity to respond.
Mr. Cummings. May I use the other 5 minutes?
Mr. Mica. If you would like. You have 6 minutes.
Mr. Cummings. Thank you. Thank you, Mr. Chairman.
One of the things that I remind my committee members is
that when people come in here, they come here, these are public
servants, they are giving their best, and their family,
everybody is watching them on C-SPAN, employees, accusations
are made, and they never have an opportunity to respond. And it
really, really bothers me. And so I want you to respond, if you
may. Try to leave me a few more minutes, because I need to ask
you a few more questions. Do the best you can.
Mr. Werfel. First of all, the notion that we're impeding or
obstructing is completely false. In fact, the opposite is true.
We are involved in a thorough, comprehensive effort to fully
cooperate with all the congressional committees that are asking
questions, asking for witnesses, asking for documents, and
there's substantial facts in evidence that demonstrate our full
cooperation.
And keep in mind, I have been in seat for 9 weeks, and this
process is moving forward, and we are getting better and more
effective at producing this discovery on a day-to-day basis. I
have more than 100 employees working on the document request
that Chairman Issa raised a concern about. This includes 70
attorneys working full-time to review documents. We are
producing documents on a weekly rolling basis. This committee,
as of today, will have over 16,000 pages of documents that have
been delivered. But to Congress as a whole, as of today, there
will be 70,000 pages of documents delivered.
Now, what's important about the redaction process here, and
what's very important to make sure that the public and the
American people understand is that all of these documents are
being produced to Congress. We operate within legal constraints
in terms of what we can deliver to who and to when. We have to
protect taxpayer information, and there are rules enacted by
this Congress that require that certain documents can only go
to the tax communities while other documents can come to----
Mr. Cummings. And if you violate 6103 what happens, what's
the penalty?
Mr. Werfel. It's criminal. It's a criminal violation.
Mr. Cummings. Jail time.
Mr. Werfel. Exactly.
Mr. Cummings. All right. Go ahead.
Mr. Connolly. Would the gentleman yield?
Mr. Cummings. Of course.
Mr. Connolly. Mr. Cummings, the very same chairman who just
railed against Mr. Werfel in his 9-weeks tenure, did he not say
on June 18th in defense of the Inspector General, Mr. George,
that in erring on the side of caution, that was the right
policy----
Mr. Cummings. He certainly did.
Mr. Connolly. --as to 6103? And therefore, the withholding
of documents was justified.
Mr. Cummings. That's right.
Mr. Connolly. Is it also true, Mr. Cummings, that the list
of search terms submitted to Mr. Werfel and IRS by the majority
on this committee includes 81 items?
Mr. Cummings. That's right.
Mr. Connolly. And is one of the terms ``audit,'' the word
``audit''?
Mr. Cummings. That's right.
Mr. Connolly. Might that generate, I don't know, a lot of
paper at IRS, Mr. Cummings?
Mr. Cummings. Yes.
Mr. Connolly. Thank you, Mr. Cummings.
Mr. Werfel. And I'm going to get to that point, but let me
quickly go through some of the statistics and facts to make
sure that there is an understanding of the amount of discovery
that's coming across from the IRS to these committees.
Mr. Cummings. And intertwined in that, your testimony
earlier, that you are losing, I think you said, 8,000
employees, 8,000.
Mr. Werfel. Yeah. We take this very seriously, and out of
Chief Counsel's office of 1,600 lawyers, we have 100 lawyers
working on this; 100 people, 70 full-time. I said there was now
70,000 pages of documents as of today, by the end of the day
today, that will be delivered to Congress. These have very
relevant information on them that were specifically requested
by the committee. There was a prioritization. You asked for the
BOLO spreadsheets; we got you them. You asked for the emails
associated with the BOLO spreadsheets; we got you them. You
asked for training materials, emails that were self-selected by
witnesses appearing for interviews. All of those were
delivered.
We've responded to 41 different letters from members of the
committee. Including today's hearing, IRS officials, including
myself, have appeared in 15 hearings since the IG report was
issued. We have made 19 employees available for a total of 29
interviews. Supporting all of this is thousands and thousands
of work hours as we work to be cooperative.
And I think the trend here, which is important, is that the
document production in particular, because that's of concern,
is increasing. In fact in this week alone we are having
increases, and the reason is, is because over the last few
weeks we have made important changes to that process. I have
added more people. We're making technology enhancements.
But perhaps most important, to get to one of Chairman
Issa's most critical concerns, which I think really warrants
clarification, what happens is when we get 82 search terms it
produces a large amount of documents, a majority of which are
nonresponsive. And what happens is you have to look through
every document. We have a responsibility to look at every page.
And if you produce an enormous amount of documents to look
through, it takes longer and longer to find those responsive
documents and give them to you. Roughly 75 percent of all the
documents that were being pulled based on the 80-plus search
terms were nonresponsive, yet staff time was being eaten up
going through each document.
So what we did is we tried to help the process along, not
by permanently saying we're not going to search these search
terms, but by saying, if we can take the search terms and
ensure that we have a higher response rate in some of this
information, then we're going to get the information that this
committee and other committees want quicker.
So no unilateral decision has been made to alter the search
terms in perpetuity, not at all. That's not true. What has
happened is we have made an adjustment to the search term in
order to increase the number of documents you get sooner rather
than later. The fact that I'm able to deliver thousands of
pages of documents today is because we have made these
improvements. It doesn't mean that we're not fully committed to
getting all these documents.
Mr. Cummings. Before my time runs out, you're trying to
obey the law, is that what you are telling us?
Mr. Werfel. I'm trying to obey the law.
Mr. Cummings. That we made, that this Congress made.
Mr. Werfel. Yes.
Mr. Cummings. And finally, I want to just enter in the
record the letter of August 2nd, 2013, to Chairman Issa, Mr.
Chairman, from Mr. Werfel. I would like to have that entered
into the record.
Mr. Mica. Without objection, so ordered.
Mr. Mica. That concludes the time of the gentleman. And I
will recognize then Mr. Jordan.
And Mr. Jordan, you have 25 seconds in addition to the 5
minutes.
Mr. Jordan. That's fine. Thank you, Mr. Chairman.
Mr. Werfel, you know, 81 search terms, 12 search terms,
2,500 pages of redacted, you know, blank page, whatever. And
you have got reasons and you gave your explanation, that's
fine. But it's been almost 3 months since Lois Lerner had a
planted question asked where she told the world that this was
going on. And we have been asking ever since that happened for
Lois Lerner's emails, and you guys won't give them to us. Now,
that's not redacted. That's not 61. We just want the
correspondence from the person at the center of the storm and
you guys don't give it to us. It seems to me that's a couple
hours. You got 1,600 lawyers. Why can't you give us her emails.
Mr. Werfel. I don't know that that's the case. In fact----
Mr. Jordan. Our staff told me we have not----
Mr. Werfel. --we've provided all of the emails.
Mr. Jordan. Our staff told me we have not gotten emails
from Lois Lerner.
Mr. Werfel. We should clarify that. In fact, I received a
letter recently which attached an email from Lois Lerner that
we produced. I mean, so we are producing these emails. In fact,
when you make a specific request to us----
Mr. Jordan. We want the emails from anyone at the IRS
correspondence with the White House. Why can't we get that?
Mr. Werfel. We've looked at those, too, and we've searched,
and in some ways, in some searches, we came up with zero. There
were no emails between that individual and the White House. But
this is the point I'm trying to make. If you have a particular
request, give it to us. We will move it higher in the priority
list and we'll get you the documents.
Mr. Jordan. Well, then why are we not getting this?
Mr. Werfel. I don't know.
Mr. Jordan. William Wilkins, we're not getting his emails.
Mr. Werfel. That's also not true. Two things about William
Wilkins, if I could. One, I think today or this week we are
producing, because you made a specific request, and as part of
our cooperation, if you want to put something in the front of
the line, please, put something in the front of the line
because that is going to help us. It's about prioritization.
The other thing about Bill Wilkins is we've offered Bill
Wilkins to be interviewed by this committee. Last week we made
that offer. It's a standing offer. At this time, your staff has
not taken us up on this offer.
Mr. Jordan. Oh, we will at some point. Trust me.
Mr. Werfel. I hope do you, because this is not about
obstruction. This is about offering as much information as we
can. And the fact is, is that I know you have a lot of
questions about Bill Wilkins, we want to get you those answers.
We have offered him to be interviewed by your staff. You
haven't taken us up on that.
Mr. Jordan. So I just a want to be clear then. Every single
email of Lois Lerner's that we have asked for, you have sent to
us?
Mr. Werfel. No. But we've provided hundreds of her emails.
But, again, this is a process.
Mr. Jordan. No, no, no, no, no, no. It's pretty simple. You
go to her computer and you get her emails.
Mr. Werfel. It's not that simple.
Mr. Jordan. Well, it shouldn't take 3 months.
Mr. Werfel. Well, the challenge that we have----
Mr. Jordan. Well, here is the point. Just a little bit ago
you said you did send us all the information. And then I asked
you the question, did you send us every single email from Lois
Lerner, and you said no. So which is it? Did you send them all
or did you not send them all?
Mr. Werfel. We sent many Lois Lerner, but not all of them.
Mr. Jordan. So that's different than you first told me. You
got to be square with us.
Mr. Werfel. I'm being square with you.
Mr. Jordan. We want every single email from Lois Lerner. We
want every single correspondence from Bill Wilkins. And we
would like any correspondence between the IRS and the White
House. And you haven't given it all to us.
Mr. Werfel. And here's my answer if I could, which is----
Mr. Jordan. I'm giving you plenty of time to answer.
Mr. Werfel. This is a process, and we are providing
information on a rolling basis. We are getting it as quickly as
we can to you. If you have a specific request, we will do our
best to put that at the top of the priority ladder and get you
that.
Mr. Jordan. We have a specific request. We want every bit
of correspondence from Lois Lerner and you won't give it to us.
Here is the lady who broke the story with the planted question.
Here is the lady who took the Fifth. Here is the lady who is at
the center of this storm. And we want every bit of email from
her, and you won't give it to us.
Mr. Werfel. I will tell you I'm committed to.
Mr. Jordan. And you have had 3 months to do it.
Mr. Werfel. I will tell you what we're committed to. We're
committed to reviewing every one of Lois Lerner's emails, and
providing the response. Some of it has to be redacted for 6103.
Some of it be reviewed for relevance and----
Mr. Jordan. Why would Lois Lerner have 6103 information in
her emails? She is the policy person. So she's got specific
taxpayer information that she's sending all over the place?
Mr. Werfel. It might be very normal for Lois Lerner to
email someone inside the IRS who is authorized to have taxpayer
information.
Mr. Jordan. Well, let me ask you to do this for us.
Mr. Werfel. A lot of her emails----
Mr. Jordan. When you go back to the office today----
Mr. Werfel. Yes.
Mr. Jordan. --can you tell those 70 lawyers, amongst the
1,600 you have at the IRS, can you tell them to focus on one
thing: Every single bit of correspondence Lois Lerner has sent
to anyone on the planet, we want that information given to this
committee so we can get to the bottom of the story. Can you do
that?
Mr. Werfel. I will go back and I will ask the team to
prioritize that over other document requests that we've
received, because you've asked, and that's part of the
partnership.
Mr. Jordan. If the President wants to work hand in hand
with Congress and you guys want to get to the bottom of this
story, why wasn't that done back in May when this story broke?
Here is the lady who has taken the Fifth, who broke the story
with the planted question, who tried to blame it on two rogue
agents, which you know isn't true. Here is the lady at the
center of this storm. Why wasn't that done the very first day
you came on the job where you said, you know what, here is the
lady at the center of this whole thing, let's get every bit of
correspondence and let's get that to the committee.
If the President really wants to work hand in hand with
Congress to get to the truth, I would have expected that would
be the very first action you would take, Mr. Werfel, and here
we are 3 months later and you are telling us in this committee,
we have only sent you some of Lois Lerner's emails. Why wasn't
that done day one?
Mr. Werfel. I think the process----
Mr. Jordan. Don't you think the American people would have
liked to have that information from day one?
Mr. Werfel. Yeah, I know. A couple of other responses.
First, Lois Lerner's emails are on the top of our list and we
are working through it. But we're also producing----
Mr. Jordan. That's not good enough. That's not. We want
them and we wanted them in May and you still haven't got them
to us. Here it's August.
Mr. Werfel. And as I've demonstrated, we've produced a lot
of information to you that's highly relevant to your
investigation.
Mr. Cummings. Mr. Chairman? Mr. Chairman?
Mr. Mica. Okay, wait a second. Okay. So we got 10 seconds.
Go ahead.
Mr. Cummings. Mr. Chairman, may I have 10 seconds just to--
--
Mr. Mica. The gentleman is recognized.
Mr. Cummings. The gentleman just said that we hadn't
received documents with regard to William Wilkins. We have
received, I know we haven't received all of them, but I have
got them right here. If the gentleman would like to have them,
I will give them to him.
Mr. Mica. The gentleman yields back.
Okay, I think we've got even time now. And I think Mr.
Turner, the gentleman from Ohio, is to be recognized.
Mr. Turner. First off, let me join my colleagues, Mr.
Jordan, of course the chairman, being outraged to the fact that
the IRS in the beginning didn't tell the truth on this. We're
not dealing with the IRS coming forward and saying this is what
has happened, either to the American public or to this
committee. The IRS came forward first with a fiction that this
was something that was done by rogue agents down in IRS in
Cincinnati. Now we are learning, of course, that it's not. Now
they are not being forthcoming with information. And it's just
astounding to have both members of this investigative
responsibilities of this committee and certainly yourself, Mr.
Werfel, defend not giving us, the American public, information.
But the chairman has said, luckily, you know, we're not
dependent upon your good graces to get this information. The
chairman is issuing subpoenas. And we certainly have the full
ability to use the Federal Government's authorities to compel
your answers since you have not chosen to. And I look forward
to the fact that that is coming. I think it is hysterical that
you keep saying we are doing this on a rolling basis because
the only thing that's rolling is that you're rolling the
American people and you're rolling this committee and it is
going to stop.
Now, getting us back on topic. The issue of identity theft
is certainly a very important one, and it's one that of course
the IRS and its processes can have an effect upon where people
have vulnerabilities. Commissioner MacGinnitie--did I pronounce
that correctly--I appreciate your testimony. You mentioned
LexisNexis. They're actually in my community, and I appreciate
you working directly with them. I think it's important for us
to look to industry and the ways in which some of the data
processing, data mining efforts can be used to be able to
detect issues of identity theft.
Now, Mr. Werfel, the financial industry and commercial tax
software manufacturers have made recommendations to the IRS to
improve its detection and prevention of identity theft.
Additionally, the IRS has started two task forces to address
fraud in tax preparation and bank settlement products. One
positive step is the IRS' issuance of guidance that allows tax
preparers to run algorithms that identify fraudulent returns
and report that fraud to the IRS. The American Coalition for
Taxpayer Rights has also worked with the IRS to ensure members
of ACTR can send real-time reports of fraud to the IRS.
Mr. Werfel, the financial industry has important expertise
and has taken steps to combat identity theft. How is the IRS
working with the tax software companies on the issues of this
problem? Also, we are aware that the State of Georgia has
utilized the private sector to help identify potential fraud
through third-party information. We understand the IRS has a
program to receive information from industry. Could you
describe this? And how have you worked with companies to help
them identify consumer fraud and identity theft?
Mr. Werfel. Well, we have a very critical partnership with
private industry. They often are developing and are at the
cutting edge of sophisticated solutions to deal with fraud or
error. There are companies that we have working at the IRS
right now that help inform on our filters, help inform on
trends and schemes that we can help capture, help us, provide
us information. We also benchmark and see what other companies
are doing that can face similar challenges, whether it's a
credit card company or other types of entities in the financial
services industry.
So I think that we have a robust partnership with private
companies and experts, and I think if we're going to tackle
this issue effectively we're going to have to stay very close
with our corporate partners because they are very----
Mr. Turner. Mr. Werfel, one thing I'm interested in
specifically is the interface between the private sector and
the IRS. And obviously, there's a huge amount of communication
that's going back and forth that includes opportunities for
discovery of identity theft. Not just looking to how industry
can be applied to your internal bureaucratic operations, but
how also, through that collaboration, identity theft might be
more easily identified.
Mr. Werfel. Yeah, I completely agree. There is a lot of
dimensions to this problem, and very often technology is going
to be a solution that helps us stay ahead of it. I mean, what
we have been describing in this hearing is a problem that's
emerging quicker than the solutions are to tackle it.
Technology is the key.
Mr. Turner. Mr. Werfel, now turning back to the IRS
scandal, I want to say this. You know, when you first came on
and sat in front of these committees and gave everybody and the
American public your statement that you were going to get to
the bottom of this, you don't get to just decide that. You have
to actually prove it. And the fact that you're not standing in
front of the committees and readily disclosing the information
that would establish both what happened, that you're stopping
it and correcting it, is a tremendous amount of arrogance. And
I certainly hope that you will become forthcoming.
Mr. Werfel. It's not true. It's just simply not true. We
are providing the information. We are doing it----
Mr. Turner. I yield back.
Mr. Werfel. We are doing it in a robust and legally
appropriate way. But any indication that we are standing in the
way of discovery is just not true.
Mr. Mica. Thank the gentleman.
Recognize now the gentleman from North Carolina, Mr.
Meadows.
Mr. Meadows. Thank you, Mr. Chairman.
Thank you, each one of you, for being here.
Mr. Werfel, and Mr. McKenney, if I could direct your
attention. As we look at tax preparation and the industry and
addressing this issue of tax fraud, you know, what are the
recommendations that have been made that have not been
addressed or that we're failing to address with regards to the
IG, with areas--because we're seeing that it's growing.
According to Mr. Werfel's testimony, it says that it's growing.
So what have we not addressed?
Mr. McKenney. At least from our perspective, the main
concerns the IRS needs to be in a position to be able to do is
authenticate kind of in three areas. One, as the tax return
comes in the door, make sure they authenticate that it's from
the right taxpayer. When they validate the income and
withholding, they need to run that against income and
withholding to verify that. And then on the end of where they
deposit into a bank account, that also needs to be
authenticated so that they deposit to a bank account that's in
the name of the taxpayer. So those are the three areas where we
believe it needs improvement.
Mr. Meadows. So, Mr. Werfel, why do you think we have not
been more successful in addressing that? Is this a lack of
working with the tax preparers?
Mr. Werfel. I think, you know, we want to achieve more than
we can given time and resources. The schemes emerge, the
identity theft problem grows quicker than we want.
I'll give you an example. You know, one of the things that
the IG has pointed out is that we can do more to use the
standard authentication procedures that are using credit cards.
Like if you are authenticating yourself, they might ask for
your mother's maiden name or something that potentially the
identity thief might not know about you. They might, but they
might not. It improves the chance. So we've developed this
program we call our out-of-wallet program, where we are
implementing those very types of procedures, but we are finding
that it takes resources. The more people----
Mr. Meadows. So this all gets down to money, is that what
you're----
Mr. Werfel. No, no, I'm just giving you an example.
Mr. Meadows. Okay.
Mr. Werfel. It's a combination of knowing about the
solution and having the resources to effectively implement it
and make sure that it is going to have the most positive return
on investment. So there's a lot of factors at play.
Mr. Meadows. All right. So let me go with this, because
we've got an issue. You've said that this is increasing, this
problem is increasing, and yet what we have is we have--and
I've talked to some of the groups that are actually working to
try to solve this in the private sector. And so if it's
increasing, and they are making recommendations on how to fix
it, the private groups that you work with, where is the
problem? Is it that they are making ineffective recommendations
or we're just not implementing it at the IRS? Who's at fault?
Mr. Werfel. I don't know if I want to say it's a fault.
It's an inherent reality that the problem grows quicker than
our solutions can track it.
Mr. Meadows. So if it's growing bigger, and they're
identifying, because I've talked to some of the stakeholders,
and they have a lot of recommendations, and they would indicate
that you all are not acting on a lot of their recommendations.
Would you agree with that? Or are they just not telling me the
truth.
Mr. Werfel. I'd want to take some time before I would
concur with that. I mean, I think we are looking at----
Mr. Meadows. Are you aware of any times where they've made
good recommendations that you have not implemented at the IRS?
In preparation for this hearing, did you see, my gosh, we
should have done that?
Mr. Werfel. I didn't see any, so let me go back and talk to
the team about whether there are any such situations, and I can
make you aware of them.
Mr. Meadows. Okay. Let me go on a little bit further. In
recent years, we have seen and you talked about instances of
hundreds of direct deposits going to banks----
Mr. Werfel. Yes.
Mr. Meadows. --and going to the same bank account. What
steps are we taking? I mean, that seems like that would be a
very easy programming issue to deal with in working with
financial institutions, and yet I have heard of one that had
400. I have heard of another that had 1,000 going to the same
bank account, you know.
Mr. Werfel. Yeah.
Mr. Meadows. How can you not address this?
Mr. Werfel. We are absolutely addressing it. And as I
mentioned earlier----
Mr. Meadows. You mean you are going to be addressing it?
Mr. Werfel. No, we are, effective with filing season 2013,
we have put in place new filters to help us identify redundant
bank accounts. And as Mr. McKenney testified earlier, he gave
some of the facts of what an impact that's having. So I would
have liked to have caught that before. This is one of those
things where a scheme emerges, and we can hit it as soon as it
emerges, or we can be out in front and----
Mr. Meadows. I would encourage you to work closer with
those stakeholders to do this. I have a few other questions
here, but I'm running out of time, so let me finish with this
one. Do you not see a problem with Obamacare coming in and with
the subsidies that are about to be asked for under just, you
know, in terms of just saying, well, I qualify, do you not see
schemes that could come out of that that would make this pale
in comparison?
Mr. Werfel. We're certainly focusing on potential risk of
fraud in the----
Mr. Meadows. Yes or no? Do you see the potential for great
schemes?
Mr. Werfel. I see it. But there is one point I want to make
about the Affordable Care Act which is important, is when
people get tax credits under the Affordable Care Act to help
subsidize their premiums, they don't get the money. The money
goes to the insurance company. So if I'm an identity thief or
someone who is looking to defraud the government, I'm going to
prioritize a place where I'm actually going to get cash----
Mr. Meadows. So what you're saying is we should just get
rid of where we pay people when they haven't paid any taxes,
that would get rid of all of this, all the tax credits that we
give to people when they haven't paid taxes?
Mr. Werfel. No, what I'm suggesting is, is that because the
Affordable Care Act is structured such as if you get the
economic benefit, you don't get the money, it goes directly to
the insurance company, that that is a disincentive for identity
thieves and other fraudsters to come in and try to defraud that
program, because there is never a point in the process where
they are going to get cash in hand when they're doing that type
of premium tax credit application.
That doesn't mean that in the entire lifecycle of the
Affordable Care Act we aren't concerned about certain
vulnerabilities that we're working on. I'm just suggesting that
that's a critical part of IRS' role, and there you have
something in place that's going to disincentivize tax frauds
from leveraging.
Mr. Meadows. Well, I thank the chairman for his indulgence.
Mr. Mica. Well, they haven't called a vote yet. They are
going to call a couple of vote in a few minutes. So I guess
with agreement with the ranking member, we'll just divide
remaining time, 6 minutes a side.
And, Mr. Connolly, you can divide your 6 minutes. I'll
recognize you at this time.
Mr. Connolly. I thank you, Mr. Chairman, and I thank you
for being fair in allocating time.
Let me just say, speaking for myself, Mr. Werfel, I
apologize for the treatment you have gotten here today. One can
stand up on a pile of paper, and that act could be construed,
I'm sure it was not intended, to be an intimidating act. One
can use those histrionics to hide the fact that, in fact, if
anybody has blocked the issuance of documents that counter a
narrative, it's the Inspector General, Mr. George, who is not
here today.
Mr. George testified under oath in response to questioning
to me that the 202 unidentified entities he was looking at, he
could not--there was no way of ascertaining whether progressive
groups could be included in their number. And yet,
subsequently, I believe on the 18th, under oath again, in
response to questioning from Mr. Cartwright of this committee,
he said he had indeed been apprised that there were BOLOs for
progressive titles as well before the 22nd hearing. And in my
view, that is at best, most charitably, an elusive answer under
oath.
We now have the Inspector General blocking documents being
made available to this committee in an abundance of caution
with respect to 6103, according to your own testimony. And it's
been described as an unprecedented intervention by an IG on the
eve of producing documents. I don't hear any outrage about
that. That's just perfectly fine. It's the General Counsel
who's the problem.
I say it's the Inspector General who's the problem. I say
the Inspector General has not provided objective and
independent analysis before this committee. I say he has
compromised his integrity and his credibility as a witness in
this trumped-up so-called scandal.
The fact of the matter is, based on everything we know, the
IRS messed up in Cincinnati. They created so-called Be On the
Look Out, BOLO's, to try to screen an avalanche of tax-
exemptions applications, some of which were clearly triggered
by the Citizens United decision by the Supreme Court. And
overwhelmed, they tried to create a filter. They did it badly.
They were cautioned not to do it and they persisted. Wrong. And
my colleagues on the other side of the aisle are right, as are
we on our side, to criticize the IRS.
You came in, in the midst of that, to help try to clean up
that and get to the bottom of it, and I congratulate you in
trying to do so. And I have no evidence in front of me that you
have done anything to obstruct or block. And I will say it is
unfortunate that we could not go forward on this committee on a
bipartisan basis and understand that both progressive and
conservative groups apparently were targeted, and that's wrong.
It's wrong if it's conservative. It's wrong if it's
progressive. It's wrong if it's both.
But the idea that there is some underlying scandal here
that is political and goes all the way to the top was indeed
the narrative before any facts were even known. And it was
wrong.
So I'm not surprised at the drive-by shooting nature of
some of what's taken place here. And I regret it, because I do
not think it's worthy of this committee. I think we could have
and should have had a bipartisan analysis of what went wrong.
But that narrative just won't plow.
And, Mr. Cummings, I'd be glad to yield to you the balance
of my time.
Mr. Cummings. Thank you very much. Thank the gentleman for
yielding.
Going back to the letter of August 2nd, 2013, Mr. Werfel,
that I introduced a few minutes ago, and it states--because I
need to this be--I need the folks to hear this--and it states
that as of today you have provided more than 16,000 pages of
documents to the committee and more than 70,000 pages of
documents to those committees that are authorized to receive
taxpayer-specific information. Is that correct?
Mr. Werfel. Yes.
Mr. Cummings. Given the importance of protecting the
confidentiality of taxpayer information, can you explain what
additional steps are required before the IRS can produce
responsive documents to our committee and what you have done to
assure this process is expedited?
Mr. Werfel. Yeah. So under the law we are required to make
sure that no information that's specific to a taxpayer can be
disclosed to anyone that's not authorized to receive it. And
under the law, the tax committees, in particular Chairman Camp,
Chairman Baucus, and their designees, under the law are the
only entities that can receive that type of information in
Congress.
And if I could offer an example----
Mr. Cummings. Quickly, because I want to address something
Mr. Jordan said. Go ahead.
Mr. Werfel. Just the one example I want to give, it's easy
to pick up a document with a bunch of black on it and say
you've redacted everything, this is unacceptable. But the
reality is, some of the documents requested by the committees
are taxpayer case files. They say, I'm going to pick taxpayer
X. I want their file. I want their application for tax-exempt
status. I want everything associated with it. So we grab a file
and give it to them and it might be a bunch of pages, but
because it's a taxpayer file, the entire file is protected
under 6103 and it would be a crime for us to disclose that to
any unauthorized sources.
So we can have someone, you know, kind of indicating, look
at all these pages that are completely blacked out. But what I
want to make sure is we get the facts out. The facts are, those
documents are coming to the Congress. We are working furiously
to get them up here. But just the fact that they're blacked out
is not in any way an obstruction. It's a legal responsibility
that we have. And if there are concerns about the way in which
we are redacting, I've said it before, we should talk to
Chairman Camp, we should talk to Chairman Baucus. They have
authorities to provide that information as well to other
Members of Congress.
There's a checks and balances program here in place to make
sure that the right discovery receives to the right hands. And
I just want to make sure that we are leveraging those checks
and balances and understanding the facts.
Mr. Cummings. Again, thank you for your service. I see my
time has run out.
Mr. Mica. Thank the gentleman.
Let's see, we have 6-1/2 minutes left now. I'll yield 4
minutes to Mr. Meadows, and I think he is going to yield some
of that time to Mr. Jordan.
Mr. Meadows. For each one of you that have come here today,
I thank you. We have a number of questions that we will give to
you. We ask that you respond in terms of for those particular
information.
Mr. Meadows. Mr. Werfel, I want to give you a chance to
change what you just responded to with Ranking Member Cummings.
You said that we have 16,000 documents at this particular time
in Oversight, and that's----
Mr. Werfel. Let me clarify that.
Mr. Meadows. Because we have 12,000.
Mr. Werfel. Right. Today, as of today, we are scheduled to
produce by the end of the day today, you know, it's on
schedule, I hope--that's my goal, that by the end of the
business day today we have additional pages of documents that
will put you at about 16,500 pages for the total.
Mr. Meadows. Will those be any more meaningful than what we
have already gotten?
Mr. Werfel. They are responsive to the documents that you
have asked for.
Mr. Meadows. Will they be any more meaningful? You're an
educated individual. Will they be any more meaningful?
Mr. Werfel. I don't know how to respond to that because
they're the documents that you requested. We are trying to
provide you responsive documents, so they will be meaningful in
some way if they are responsive. I don't know how----
Mr. Meadows. Well, you're sending a very clear message.
It's just not one, I don't think, that----
Mr. Werfel. I will say, if I can respond, you said any more
meaningful than the documents that we provided. We provided you
BOLO lists. We provided you emails associated with BOLO lists.
We provided you training materials. We furnished for you 19
witnesses that have been interviewed 29 different times by
committees. That's meaningful information. I think it's very
meaningful information. So the notion that we're providing you
information that's not meaningful I don't think is correct, and
I want to clarify the record on that.
Mr. Meadows. Well, I'll yield to the gentleman Mr. Issa.
Mr. Issa. Thank you. I didn't plan on coming back, but I
just want to go through a couple of things.
Mr. Werfel. Please.
Mr. Issa. According to you, nothing on this page is
anything but 100 percent taxpayer-specific information,
taxpayer identity information. Identity.
Mr. Werfel. It may be. And as I was just explaining, I
think you missed it, right before you came in, if I could
explain----
Mr. Issa. No, no, look, I've gone through the 6103 and I'm
going to get to my point very quickly, because Mr. Cummings
made a point, and it's a good one. Except he made a point
trying to disparage a long-serving government servant, the IG.
The IG has been consistent, as far as I can tell, in a
highly, highly limited release under 6103. In other words, the
ranking member is upset because he's not getting progressive
groups that under oath the IG said were not targeted in his
evaluation looking at the information. The amazing thing is,
you didn't defend him, and I'm shocked. I'm shocked that you
would not at least say that the Office of the Inspector
General, which includes key lieutenants, one of whom was the
Democratic deputy staff director here, that they are above
politics, they are above partisanship, that they have a level
of consistency. Instead, you let him imply that he was
basically trying to thwart an investigation on progressives.
Will you----
Mr. Werfel. That was not my intent.
Mr. Issa. Will you make it clear today----
Mr. Werfel. I will.
Mr. Issa. --that as far as you know he has been consistent
in what he has said; that his office, although it includes
people that at certain times worked for Republicans or
Democrats, that it is considered to be nonpartisan, and their
actions to this day, to the best of your knowledge, have been
above question?
Mr. Werfel. I will respond in this way: I have a deep
respect for Russell George and his office. I have had a
longstanding relationship with him and other members of the IG
community. In my short tenure here, there have been moments
along the way where we have disagreed. We have disagreed on the
nature of whether something is 6103 protected. We have
disagreed on the nature of some of the facts and data
associated with the 501(c)(4) backlog, et cetera.
But to your point, I have no basis to challenge his
integrity in any way, shape, or form. I think he is an
individual of great integrity, and I'm glad you asked the
question.
Mr. Issa. Well, then, his integrity was challenged by the
ranking member.
Mr. Cummings. That's not true.
Mr. Issa. Well, I'm afraid----
Mr. Cummings. There you go again.
Mr. Issa. --that the record will speak for itself.
Mr. Chairman, I haven't done my second round. The ranking
member has. Could I have my 5 minutes.
Mr. Mica. Well, okay, we had divided time up. We have 2-1/2
minutes left on our side.
Mr. Issa. If I could have that I will be brief. Thank you.
Mr. Mica. The gentleman is recognized.
Mr. Issa. I'm asking you today as we send a subpoena--I
have signed it now.
Mr. Werfel. Okay.
Mr. Issa. --to Secretary Lew--who, by the way, I'm hoping
he can get above his statements on a phony scandal about this
and realize this scandal is real. Real Americans were really
victims.
Now, those victims, I'd love you to sit down, look at the
law, and make the appropriate decision, which is withholding
details on people who were victimized is not the intent of 6103
and that the clear intent can be recognized. When you hand--oh,
people are smiling and smug behind you. I just wish the camera
could see there. Sort of, oh, well, we're going to get past
that.
The fact is, Chairman Camp is looking at a lot of this
information. Today you've talked about how fast you're
delivering things. All you had to do was hand his people
basically the keys to the search, and they could have looked
online over your shoulder. They have complete right to 6103.
You don't have any redacting capability. They have the right to
everything you see, they can see. And still he's received a
fraction of the documents. You continue to essentially slow
roll. He is getting documents in the order that you choose to
give them, and that's wrong. That's just plain wrong. So we
can----
Mr. Werfel. That's not true.
Mr. Issa. No, no, it's my limited remaining time. I was
with Chairman Camp earlier today. I've looked at his releases.
I'm up to date. He is frustrated and said so in a letter to you
with the speed of the release, with the fact that you don't
have a reason to do anything other than comply and turn over.
The fact is the American people need answers and people who
have been victimized need it. So I'm joining with the ranking
member in one sense, not that you invent out of thin air and
help support this progressives were victimized, when in fact we
have a sworn statement that they weren't, but that you make
available every possible piece under a uniform interpretation
of 6103. And if you want to go to the level that Mr. Cummings
wants on what 6103 is, great. Be consistent, lower it to lowest
level, and more importantly, go back and soul search with that
legion of attorneys and say, how in the world can we keep
victims a secret? And that's what you are doing today. You are
keeping victims a secret standing behind this.
I do not believe that this is minimum redaction under 6103.
I don't think you believe it either. And as you go off into
your private life, I want you to think about the legacy of
whether you helped victims or hindered this investigation.
I thank the chairman and yield back.
Mr. Cummings. Thank you very much, Mr. Chairman.
Mr. Mica. Okay. We could probably get 2 minutes in a side.
Mr. Cummings, 2 minutes.
Mr. Cummings. Let me be very clear. With regard to the IG,
there were things that were left out of his report that he
admitted--that he admitted. There was disagreement, Mr. Werfel,
with regard to documents, 6103, and what came under 6103. And
clearly you had, based on the testimony that we had in the last
hearing, you had career folk whose job it was to determine what
was or was not 6103 to say that these documents could be
released. Is that right?
Mr. Werfel. That's correct.
Mr. Cummings. And there was disagreement. The mere fact
that one disagrees with someone does not mean you question
their integrity. I disagree with my wife a lot, but I love her
to life and I trust her. But what we have said is that we want
the truth, the whole truth, and nothing but the truth, so help
me God. That's what we want. Whether it's progressives, whether
it's liberals, whether it's conservative, anything in between,
we simply want the whole truth.
And so, you know, on the one hand they say in one hearing,
oh, we've got to be real careful with 6103. Then in the next
hearing they said, dammit, we don't like the way you're dealing
with 6103. Give us everything as fast as you can.
Seventy lawyers--70 lawyers--working full-time going
through documents. Let me tell you something. On the one hand,
if you release information about taxpayers they'd be all over
you. I'm just saying, I mean, you're damned if you do and
you're damned if you don't. And I think the best thing to do is
to obey the law, period.
And, Mr. McKenney, you have got recommendations. Mr. Werfel
talked about 8,000 employees, losing 8,000 employees,
sequestration. How does that affect your recommendations, the
loss of employees?
Mr. McKenney. As it relates to identity theft?
Mr. Cummings. Yeah.
Mr. McKenney. Well, obviously, when they have a problem
they have to deal with they have to draw from their existing
employee base, which affects their other operations. That's the
concern, and it would be a concern of ours also.
Mr. Mica. Okay. Let's see, you have 2-1/2 minutes. Mr.
Jordan, you are recognized.
Mr. Jordan. Thank you, Mr. Chairman. I would just say this:
They did release 6103 information, the Inspector General said
so four different times, and one of those cases was referred to
the Justice Department for prosecution, and this Justice
Department won't prosecute. So they did exactly what--I want
all the information. So we have the IRS releasing 6103
information, but they can't give us Lois Lerner's emails. I
don't care, you said 70,000 pieces, you know, you can make it a
million pieces of information, but if you don't give us her
emails, what does it mean?
I want the emails. Here is an example. We got some limited
emails regarding Mr. Wilkins. Here is an email from Janine
Cook, who I think works in the Chief Counsel's office, an email
she sent to Mr. Wilkins. And she says, ``Bill, thought you
might be interested in this''--it deals with the Tax Code,
Citizens United--she says, ``Bill, thought you might be
interested in this in light of your earlier email.'' So we get
that email, but we don't get the earlier email. We want all the
emails.
I mean, this is a great example of, you know, you keep
saying, well, we are sending you some. Mr. Werfel, we want them
all. And let me ask you this: Why have you limited the search?
Why have you limited the search to May 10th, 2013? There are
still all kinds of cases pending. People still haven't got a
resolution to their tax-exempt status. Why are you limited to
that day?
Mr. Werfel. I can answer all those questions. First, let me
just point out that this process moves forward. It's not like
it's over today. There is a cooperation that can exist. And if
you have particular documents that you're not seeing coming
through in the midst of all these tens of thousands of pages,
you bring it to our attention----
Mr. Jordan. You told me earlier, Mr. Werfel, that you have
not sent us all Lois Lerner's emails.
Mr. Werfel. We have not. We're reviewing them. And I can
explain to you the subject of that review. As they're ready
they come over. But they're being reviewed for responsiveness.
Mr. Jordan. All right.
Mr. Werfel. And as an example, we might get an email that
we pull down that's an email exchange between a worker and
their spouse about an upcoming medical appointment that they
might have, or day care arrangements. And we're not going to
send that over, it's nonresponsive. And if we did send that
over, you'd say you're loading these documents with things that
are, you know, not helpful to our review.
So these are just, I think, standard procedures that a
government agency would go through to make sure that we're
giving you----
Mr. Jordan. Well, you can't have it both ways. You can't
brag about 70,000 pieces of information and documents you've
sent over and then say, oh, but we don't want to send you too
much, we want to just--we want to have----
Mr. Werfel. We want to be responsive. That's the key. So if
you have a particular email----
Mr. Jordan. I'll tell you what. I'll tell you what. We'll
take all Lois Lerner's emails, we'll take all Bill Wilkins'
emails, and we'll take all the emails from IRS staff to the
White House. We'll take all those, and we'll be the judge if
you're being--if you're sending us too much information.
Mr. Werfel. I'm going to review them for responsiveness,
because that's a standard procedure that's done. But let me
make one point. You picked up a piece of paper that we've
provided to you, discovery, and you've said, this is
interesting, I have an additional question based on this email.
That's great. Tell us that, and we'll look for the very
document that you're asking for, because this is a cooperative
process.
Mr. Jordan. We will do that.
Mr. Werfel. This is cooperation. This is not impedement,
this is cooperation. And that's my commitment.
Mr. Mica. I thank the gentleman, both the witnesses and
members of the panel for participating today. As we conclude,
just let me say that we started out, of course, on the issue of
identity fraud and the way IRS is dealing with it and the
revelations that the IRS is being used somewhat as a piggy bank
for fraudulent tax returns right now.
As I said when we started, we are trying to look at some of
the problems within IRS, and we've looked at the conference
spending, we've looked at the contracts in another hearing, and
today the fraudulent returns. We'll continue that. We want to
correct the situation. And we do have these scandals to deal
with.
We diverted a bit to the, I guess, the frustration by
members on our side. And when you have, you know, thousands of
pages, you did in fact provide the pages, and then the
President and others orchestrating the phony scandal title to
these investigations.
Just in closing, I'll put in the record the statement of
the President in May when this became public about the scandal.
``I've reviewed the Treasury Department watchdog report. The
misconduct that it uncovered is inexcusable. It's inexcusable.
And Americans are right to be angry about it, and I'm angry
about it and will not tolerate this kind of behavior by any
agency, but especially IRS.'' These are the words of the
President. And then he directed Secretary Lew of Treasury to
follow up with the IG to see who is responsible. We're trying
to find out who's responsible, too, and we'll do that, and
continue to do that.
So I thank you for being with us and participating as
members of the panel. There being no further business before
the Subcommittee on Government Operations, we'll leave the
record open a total of at least 7 days for additional questions
may be submitted to the witnesses.
Mr. Mica. Again, thank you for participating, and this
hearing is adjourned.
[Whereupon, at 12:10 p.m., the subcommittee was adjourned.]
APPENDIX
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Material Submitted for the Hearing Record
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