[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
PROTECTING SMALL BUSINESSES FROM
IRS ABUSE (PART II)
=======================================================================
HEARING
before the
SUBCOMMITTEE ON OVERSIGHT
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
MAY 25, 2016
__________
Serial No. 114-OS12
__________
Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
KEVIN BRADY, Texas, Chairman
SAM JOHNSON, Texas SANDER M. LEVIN, Michigan,
DEVIN NUNES, California CHARLES B. RANGEL, New York
PATRICK J. TIBERI, Ohio JIM MCDERMOTT, Washington
DAVID G. REICHERT, Washington JOHN LEWIS, Georgia
CHARLES W. BOUSTANY, JR., Louisiana RICHARD E. NEAL, Massachusetts
PETER J. ROSKAM, Illinois XAVIER BECERRA, California
TOM PRICE, Georgia LLOYD DOGGETT, Texas
VERN BUCHANAN, Florida MIKE THOMPSON, California
ADRIAN SMITH, Nebraska JOHN B. LARSON, Connecticut
LYNN JENKINS, Kansas EARL BLUMENAUER, Oregon
ERIK PAULSEN, Minnesota RON KIND, Wisconsin
KENNY MARCHANT, Texas BILL PASCRELL, JR., New Jersey
DIANE BLACK, Tennessee JOSEPH CROWLEY, New York
TOM REED, New York DANNY DAVIS, Illinois
TODD YOUNG, Indiana LINDA SANCHEZ, California
MIKE KELLY, Pennsylvania
JIM RENACCI, Ohio
PAT MEEHAN, Pennsylvania
KRISTI NOEM, South Dakota
GEORGE HOLDING, North Carolina
JASON SMITH, Missouri
ROBERT J. DOLD, Illinois
TOM RICE, South Carolina
David Stewart, Staff Director
Nick Gwyn, Minority Chief of Staff
SUBCOMMITTEE ON OVERSIGHT
Peter J. Roskam, Illinois, Chairman
PAT MEEHAN, Pennsylvania JOHN LEWIS, Georgia
GEORGE HOLDING, North Carolina JOSEPH CROWLEY, New York
JASON SMITH, Missouri CHARLES B. RANGEL, New York
TOM REED, New York DANNY DAVIS, Illinois
TOM RICE, South Carolina
KENNY MARCHANT, Texas
C O N T E N T S
__________
Page
Advisory of May 25, 2016 announcing the hearing.................. 2
WITNESSES
Panel One
Robert Johnson, Institute for Justice............................ 28
Randy Sowers, South Mountain Creamery............................ 18
Calvin Taylor, Taylor Farms...................................... 9
Panel Two
Kenneth Blanco, Deputy Assistant Attorney General, Criminal
Division, U.S. Department of Justice........................... 85
John Koskinen, Commissioner, Internal Revenue Service............ 76
Richard Weber, Chief, IRS Criminal Investigation................. 80
SUBMISSIONS FOR THE RECORD
Cognitive Care Alliance, statement............................... 161
Institute for Justice, letter of February 16, 2016............... 164
Enclosure: Subcommittee on Oversight, letter................. 167
Enclosure: Sowers Petition................................... 170
Table of Contents........................................ 171
Introduction............................................. 172
Statement of Facts....................................... 174
Argument................................................. 180
Conclusion............................................... 195
Exhibit A: Memorandum for Special Agents in Charge,
Criminal Investigation................................. 198
Exhibit B: U.S. Department of Justice, Policy Directive
15-3................................................... 201
Exhibit C: Record of Hearing, Protecting Small Business
from IRS Abuse......................................... 206
Exhibit D: Declaration of Randy Sowers................... 322
Exhibit E: Declaration of Karen Sowers................... 329
Exhibit F: Declaration of David L. Watt, Esq............. 333
Exhibit G: Affidavit in Support of Application for
Seizure Warrant........................................ 337
Exhibit H: Subpoena to Testify Before a Grand Jury....... 344
Exhibit I: article by Van Smith.......................... 346
Exhibit J: Verified Complaint for Forfeiture............. 350
Exhibit K: email about Settlement Agreement.............. 363
Exhibit L: U.S. Department of Justice letter............. 367
Exhibit M: Motion for Final Order of Forfeiture.......... 371
Exhibit N: Final Order of Forfeiture..................... 375
Institute for Justice, letter of March 11, 2016.................. 378
Enclosure: letter from Richard Weber......................... 380
QUESTIONS FOR THE RECORD
The Honorable Peter Roskam....................................... 153
PROTECTING SMALL BUSINESSES FROM IRS ABUSE (PART II)
----------
WEDNESDAY, MAY 25, 2016
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Oversight,
Washington, DC.
The subcommittee met, pursuant to call, at 9:40 a.m., in
Room B-318, Rayburn House Office Building, the Honorable Peter
Roskam [chairman of the subcommittee] presiding.
[The advisory announcing the hearing follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman ROSKAM. The subcommittee hearing will come to
order.
Welcome to the Ways and Means Oversight Subcommittee
hearing on protecting small businesses from IRS abuse. This is
version 2.0.
There is a line in ``Les Mis,'' one of the adaptations of
Victor Hugo's novel, where Inspector Javert, the guy that
everybody hates, he says this: ``Right or wrong, the law is the
law and it must be obeyed.'' Yet, the author comes up with a
better approach, and he says: ``Actually, the highest law is
conscience.''
I agree that the law must be obeyed. But in a just
government, and in a government that has a department named the
Department of Justice, and a government of limited resources,
we know that Federal agents and prosecutors must choose which
violations to pursue, and when that decision is made they must
examine the situation closely to decide if there has been a
violation at all.
This is our subcommittee's second hearing this Congress on
the IRS' use of its civil asset forfeiture authorities, and
during our hearing last year, we heard testimony about how the
IRS has used a law that is meant to catch drug runners and
terrorists, and instead they have used it to punish farmers and
small-business owners.
And the law I am talking about prohibits people from
structuring their financial transactions to keep them below
$10,000 to avoid reporting requirements. Sometimes it may look
like someone is structuring their bank deposits to avoid the
reporting requirement, but as we heard from a Georgia store
owner last year, Andrew Clyde, some businesses have insurance
policies that only protect cash on hand up to $10,000. So every
time he got close to $10,000, he would deposit his money.
Because the IRS thought that looked suspicious, they seized
his entire bank account, $900,000. They didn't investigate
whether Mr. Clyde was trying to avoid the reporting requirement
before they took the savings. And after they seized the money,
he explained the insurance policy to them and the IRS didn't
give the money back. And when Mr. Clyde took the matter to
court, the government lawyer from the Department of Justice
said that if he wouldn't settle and give $50,000, the
government lawyer would try to prosecute him on criminal
charges.
That is unethical, that is wrong, and it has happened in
more than one case, lest we think that this is an aberration.
In other cases, we have seen sworn testimony that a bank
teller asked a customer to keep deposits under $10,000 to avoid
additional paperwork for the bank. You can imagine this. This
is not speculative. You can just imagine a bank teller saying:
``Hey, it is a big hassle if you bring in $10,000. Why don't
you bring in less money?'' And in that instance, the customer
didn't know that it was illegal, or just thought that they were
helping out the bank teller.
Other people didn't want to be reported, they didn't want
to be reported to the IRS--by the way, who does--and they
didn't know it is illegal to avoid those reports.
The IRS knew that seizing money from farmers and store
owners who appeared to be structuring their transactions wasn't
right unless they were doing it to come up to cover up other
crimes. And that is why the IRS announced a new policy in
October of 2014 that it wouldn't seize money unless it was
derived from an illegal source. Great news. Good policy change.
It is a better policy than what the IRS was doing before, and
we were pleased to hear about the acknowledged need to do
better.
Now, a year and a half later, we want to know how things
are going under that policy. And indeed, a new policy doesn't
right all the wrongs. Those people whose assets were seized
under the old policy were not treated fairly. Several of them
have sent petitions to the IRS and the Department of Justice
asking for justice and asking for their money back, the money
that the IRS has acknowledged they shouldn't have taken in the
first place. The IRS granted one of those petitions and gave
$154,000 back. From all accounts, the IRS did this because it
was the right thing to do.
However, the Department of Justice has not provided any
relief, either financially or procedurally, to those who have
petitioned for return of their funds. Let's remember what we
are talking about. It is not the government's money. It is, by
everybody's acknowledgment, the money that belongs to these
taxpayers. The petitioners deserve a fair, transparent review
process and an answer.
Furthermore, every single member of this subcommittee--
every single member of this subcommittee--has called upon the
Department of Justice to review and the IRS to review all IRS
civil asset forfeiture cases brought solely on the allegations
of structuring. We have sent two letters asking for that
review. I met with Mr. Weber--who we are going to hear from in
the second panel, who is not here to hear, interestingly,
apparently, although they were invited to attend, to hear from
these witnesses, we will hear from Mr. Weber later--and the
Department of Justice's representatives back in February and I
reiterated that request in this room. And while we received
letters in response, we haven't received answers.
And despite our request for a review of those cases brought
under the previous policy and now the corrected policy, it
doesn't appear that any comprehensive review has taken place.
And I hope we get those answers today.
I would like to yield now to my friend and the
distinguished gentleman from Georgia, the ranking member, Mr.
Lewis.
Mr. LEWIS. Good morning. Good morning, Mr. Chairman, and
Members of the Committee. I regret that I was running a little
late, but I am sure Mr. Rangel and Mr. Davis were prepared to
sit in. They know something about sitting down or sitting in
and standing up. Thank you.
Mr. Chairman, I would like to thank you for holding this
hearing. Thank you. I am pleased to have the Commissioner
testifying before us today. I appreciate his hard work on
behalf of the American people. The Commissioner brings truth
and honesty to this key government agency. He is a thoughtful,
hard-working public servant.
I would also like to thank the other witnesses for taking
the time to be here today.
Under the law--under the law--banks are required to report
deposits of more than $10,000. As many of you know, taxpayers
are barred from structuring their deposits of income earned
from legal or illegal sources in a manner that seems to avoid
the reporting requirement. When small businesses appear to
structure their deposits to evade bank reporting laws, the
government can seize their bank accounts.
The press reports on these matters in 2014 brought this
important oversight matter to the subcommittee's attention. In
response, we held a hearing on this topic last February. In
that hearing, we learned how many small businesses were simply
making cash deposits from their daily operations. They were not
engaged in any illegal activity, but were unintentionally
captured by the law.
During the hearing, all subcommittee members agreed that
while allowed under the law, the government should not seize
the bank accounts of taxpayers where the cash being deposited
was not earned from criminal activity.
In October 2014, the Federal Government changed its policy
and agreed that in the future it will only seize assets where
the deposits were earned from illegal sources. Since the
hearing, the subcommittee members have written a number of
letters requesting updates on the policy change. Together, we
asked what can be done for those taxpayers whose assets were
seized before the change.
I understand that the witnesses on the first panel have had
their asset seized before the policy changed and both filed
petitions to have their assets returned. I look forward to
hearing more about their experiences.
Mr. Chairman and members, we must do more to resolve this
issue for small businesses. It is the right thing to do. It is
the just thing to do. I hope that we will be successful in
securing a timely, fair, and bipartisan resolution of this
important matter.
Again, I want to thank all of the witnesses for being here.
And again, Mr. Chairman, I want to thank you for holding
this hearing.
Chairman ROSKAM. Thank you, Mr. Lewis. You have admonished
this committee to do more and we intend to do more. And to help
us do more we are going to hear from our witnesses in the first
panel.
Calvin Taylor and Randy Sowers are both farmers in
Maryland. The IRS seized thousands of dollars from each of them
and they have both petitioned the government to get their money
back. We will also hear from Rob Johnson, an attorney at the
nonprofit law firm the Institute of Justice who has represented
a number of individuals and small businesses whose assets have
been seized.
Gentlemen, the committee has your written remarks, and I
would like to now recognize you each for 5-minutes each.
So, Mr. Taylor, if we could start with you.
STATEMENT OF CALVIN TAYLOR, TAYLOR FARMS
Mr. TAYLOR. Thank you very much. I have here with me my
wife, my lawyer----
Chairman ROSKAM. There is a button that says push down on
the lower part of that mike. There, go.
Mr. TAYLOR. Okay. I don't use these on the farm.
With me today are my wife, my lawyer, Steve Gremminger,
from the Gremminger Law Firm. We operate a diversified family
farm on the Eastern Shore.
In 1984, when my wife was pregnant with our third child, we
decided we wanted her to stay home and I needed more income. It
didn't seem like much, but I planted four 1-acre boxes of
silver queen sweet corn. Over the next few years that grew to
almost 100 acres of hand-picked sweet corn, four produce stands
of our own, other vegetables, and about 20 teenagers to get
things harvested and sold, which can be a circus. We take
seriously our role as a first employer, trying to teach them to
be good employees. We try to help them understand the business,
the fact that all of the money coming in is not profit, that we
have invested money long before they get there to start working
for us.
When they come in June, late June, we have about a 12-week
window to get our income. I was surprised, September 16, 2011,
my wife called and said IRS agents were at the house and wanted
to talk to me. I went straight home.
When I got there, they told me the same thing they told her
when she invited them into the house and offered them ice tea,
that they didn't think we were in trouble, they didn't think we
had done anything wrong, but they had some questions to ask
about our banking practices. I have always felt like if you are
running your business honest and above board, you should be
able to sit down and talk to anybody about what you are doing
and get it straightened out.
So we sat down. They asked questions and we answered
questions all about our bank deposits. I had heard years ago
from a friend that was in the automobile business, and I have
heard since then from businesspeople, that if you deposit over
$10,000 there is a form filed to the IRS. Nobody wants their
name reported to the IRS, even if you are as honest as you can
be. So we had kept deposits under $10,000.
They then told us that we were under investigation for
structuring. We didn't know what structuring was or smurfing.
They briefly explained it. Then they told us that they had
already been to our bank and seized all of the money in our
bank account, which left us with nothing. I thought of the
bills that needed to be paid, the teenagers that hadn't cashed
their checks yet. What kind of employer bounces checks off
employees? My wife gasped because we just sent the invitations
to my daughter's wedding the day before.
We called around. We got a recommendation. We hired Mr.
Gremminger.
As those guys were leaving, one of them said, you need to
hire a lawyer, and if you are innocent, you may get part of
your money back. We were just dumbfounded after they left.
Mr. Gremminger then met with the attorney from that point
on, the prosecutor. They wanted 4 years of financial
information. We got that to them in the required time. He said,
if they found anything wrong with our taxes, that we would be
prosecuted.
After a few weeks, there was another meeting. The agents
said they could find no evidence of wrongdoing on our taxes.
And they also added that, ``We don't think the Taylors knew
they were doing anything wrong.'' And then the prosecutor
turned and said, ``Well, we won't prosecute if you will sign a
civil forfeiture, asset forfeiture.''
We are not just talking about the expense of defending
myself against the government or the fact that jail time would
very much likely be involved. I was just realistically looking
at losing what I worked my life for and what my father worked
his life for.
So there was no choice. I had to sign. We signed it. We
went home. We went back to work. We tried to put it behind us.
Last February, we read of the meeting that you had here in
2015. We thought maybe this is a chance for justice. We sent
letters to the Department of Justice and the IRS and we
recently filed a petition. One thing that is really upsetting
to me is we have a letter from the U.S. Attorney's Office after
we sent our initial letter. The sentence that jumped out at me
was when they told me they could still prosecute me for this.
Thomas Jefferson said something about a government being so
big that it could take everything you have. It just seems very,
very real to me right now.
Thank you for having me. If any of you ever want to visit
us on the farm, you come on down.
[The prepared statement of Mr. Taylor follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman ROSKAM. We will take you up on it. Thank you, Mr.
Taylor.
Mr. Sowers.
STATEMENT OF RANDY SOWERS, SOUTH MOUNTAIN CREAMERY
Mr. SOWERS. Good morning. Mr. Chairman, thank you for
inviting me back for a second time. My story is about the same
as Mr. Taylor's. We have been over this a lot of times.
My wife Karen is here today, and we have been working 35
years for this business that we have. It is a tough business.
Just to get here this morning, I milked cows this morning at
12:30. We left home and came down here at 4 o'clock because I
didn't want to miss the meeting and didn't want to get into
traffic. I don't like driving in traffic, so we slept in the
garage for 2 hours just to make sure we got here on time.
But we work every day. I mean, in 35 years we get very few
days off. And we haven't had a day off since November except I
was in the hospital, I had appendicitis that busted the other
day and I got 4 days off. It is a nice vacation. They wouldn't
let me out of the hospital.
But the same thing, I mean, these people come into your
business, place of business. And farmers always try to do
things the way we are supposed to do it. We don't need more
trouble than we already have. The regulations change so often,
you never know when you might be doing something wrong.
I don't disagree with the government coming in and looking
at things, but they need to be more--like Mr. Taylor said. I
mean, they come in. They make demands. They don't come in like
they are just in there to check on you or to make sure you know
what is going on and how to do it to keep yourself out of
trouble.
And they do it in front of your employees, flashing their
badges, demanding this and demanding that, instead of calling
ahead and saying, ``Look, this is what is going on. We need
this information. Get it together. You know, we will meet and
we will talk about it.'' But that is just not the way it
happens.
And we were scared. We were scared from the beginning about
being thrown in prison. I mean, we didn't know what to do. My
lawyer didn't know anything about it. And how we got ahold of
Paul Kamenar, I don't know. I mean, just an act of God, I
guess, that he dealt with this kind of stuff before.
Our agent said too, I mean, you could tell they were
besides themselves. They didn't, you know, want to be out there
doing what they were doing, but it was their job. And they said
this has gone this far, you know, you are going to have to
continue this through the process.
So our lawyers called Cassella, who was the prosecutor, and
he kind of walked through things and said this is the way it is
going to happen. And that is the way we figured it was going to
happen. I mean, we already had a date set for a grand jury. I
mean, if we wanted to present our case we had to go to the
grand jury. But they had what they needed. I mean, the bank
teller told my wife to put the keep it under 10. That is what
she did. We never had over 10 too often. Once in a while she
did, and that day she actually did have more than 10.
So she had no clue of what she was doing. We process milk,
we do farmers markets, so we get a lot of cash. I mean, we just
handle a lot of cash. And every Monday she deposits whatever it
was, minus what she needed for what she had to have cash for
her farmers market. So she couldn't deposit it all.
I wanted to tell everybody about it and I did tell
everybody at the farmers markets, whoever I talked to, because
I was upset and I wanted other people to be upset too. So I
told everybody. But my lawyers told me I should keep my mouth
shut, except for Paul.
And Paul, he is a go-getter like I am, wanted to tell
everybody and do something about it. And everybody said,
``Well, you know, you do that, they are going to send every
agent they got in there to harass you. If you are going to do
this, make sure you understand that that is what is going to
happen.''
So I really didn't do anything until we get the call from
Baltimore City Paper, wanted to do a story, and I said, ``You
know, I really would love to tell you. I can't tell.'' He said,
``Well, you know, I am going to do a story. It is not going to
look good on your part.''
So the reporter did a beautiful job. He just did a
beautiful job. He put it just the way it was. And I think that
is what started a lot of this rolling, because he did a good
job.
We didn't have any choice but to take the $29,000
settlement. I mean, I couldn't have hired lawyers and defended
myself for less money than that. But when the paperwork came
through, it wasn't the same as the Taylor's. We already knew
what the Taylor's was and we asked, ``Well, why is ours
different?'' And they said, ``Well, because you went to the
press.'' And we have an email from Cassella to my lawyer that
it is because you went to the press, is why, you know, we are
going to be tougher on you.
Like I say again, we scared to death. I mean, to think that
they could throw my wife in jail for depositing cash in a bank.
I mean, it was just unbelievable. Unbelievable.
We continue today to try to pay the bills. I mean, I am
paying bills this week with money I am depending on getting for
tonight's deliveries yet.
You know, farming is a tough job. Any business you run on
your own, it is a tough job. I mean, this government needs,
this country needs people like us. That is why the country is
in bad shape. And they just need to let us do our jobs. I mean,
we need some, you know, once in a while we need some guidance
and we don't mind that, but it has got to come different than
what this has come.
We filed to get our money back because they changed their
mind and said, ``Yeah, we were wrong.'' That is why we filed
petitions. I haven't heard anything. I mean, I could use the
$29,000 right now for sure.
[The prepared statement of Mr. Sowers follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman ROSKAM. Mr. Sowers, thank you. We are going to
have a chance to have many members that want to inquire of you,
so why don't we leave it there for now.
Let me turn to Mr. Johnson.
STATEMENT OF ROBERT JOHNSON, INSTITUTE FOR JUSTICE
Mr. JOHNSON. Good morning. Chairman Roskam, Ranking Member
Lewis, thank you for inviting me here to testify about the IRS'
use of civil forfeiture to take money from small businesses
that are accused of nothing more than doing business in cash.
My name is Robert Johnson. I am an attorney at the
Institute for Justice. It is a nonprofit law firm that
litigates cases across the country to protect property rights.
As the committee is aware, there has been a series of cases
where the IRS has taken money, often entire bank accounts from
small businesses, simply because they deposited cash in the
bank in amounts under $10,000. The IRS calls this structuring
and it treats these businesses like criminals. But these are
legitimate businesses that have done nothing wrong.
In October 2014, the IRS announced a policy change where
they said they would no longer apply the structuring laws to
these kinds of legitimate businesses. Henceforth, they would
only apply the laws to real criminals engaged in real criminal
activity. And in February of 2015, the IRS Commissioner
appeared before this committee and actually apologized to
people who had their money taken before that policy change.
Despite all of that, the IRS continues to hold money that
was seized from property owners before these policy changes.
Between 2007 and 2013, the IRS seized about $43 million from
over 600 people in cases where they alleged no criminal
activity apart from the mere act of under-$10,000 bank deposits
or withdrawals. Those people are still waiting to get their
money back.
One of those people is Randy Sowers, who is here to testify
today, and you heard his story about how the IRS took $29,500
from his business for no real reason. Randy joined with the
Institute for Justice in July of 2015 to file a petition
demanding the return of that money. Ten months have gone by.
That petition is still pending with the Department of Justice
and we have received no answer apart from a letter stating that
they received the petition and are considering it.
Now, the IRS would not take that money today. They admitted
they were wrong when they changed their policies. Now they need
to do the right thing and they need to give that money back.
At the same time, the IRS also is continuing to take money
and to try to force small businesses to forfeit money under the
structuring laws. Just yesterday, the Institute for Justice
announced a new lawsuit on behalf of Vocatura's Bakery, a
third-generation family business in Norwich, Connecticut, that
had $68,000 seized for structuring in May 2013.
For the 3 years that followed that time, the IRS and
Department of Justice held possession of that money and they
did nothing to bring their case before a court. They didn't
file criminal charges. They didn't file civil charges. They did
nothing. But what they did do was attempt to pressure the
Vocaturas to agree to the voluntary forfeiture of those funds.
The structuring issue received significant attention in the
press and the government dropped the issue for 18 months. But
then in February of 2016, they sent the Vocaturas a proposed
plea agreement demanding that they plead guilty to criminal
structuring charges. And that is just earlier this year. And
under this proposed plea, the Vocaturas would have agreed to
forfeit $68,000 that was seized from the bakery, as well as an
additional $160,000 in personal assets, and they would have
faced between 3 to 4 years' time in prison.
The brothers rejected that plea agreement because they
believed they had done nothing wrong, and immediately after
they rejected the plea agreement the IRS served them with a
subpoena, a criminal grand jury subpoena, demanding 8 years of
financial records for the business, practically every record
that has been generated by this business since January of 2008.
Yesterday, after the Institute for Justice filed suit on
behalf of the Vocaturas, the IRS announced within hours that
they were giving back the $68,000 that they had seized, but
they are continuing to go forward with their grand jury
investigation.
In short, this is a problem that is far from solved. The
IRS' change in policy needs to be codified in statute so that
it is judicially enforceable and so that property owners, like
the Vocaturas, can actually rely on it when their rights are
not respected, and the IRS needs to give back money back that
it took before its policy change. Again, this is money that the
IRS would not take today if it was following its policy and it
needs to give that money back.
Thank you again for the opportunity to testify.
[The prepared statement of Mr. Johnson follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman ROSKAM. Thank you all for your testimony.
We will now turn to member questions. Mr. Meehan is
recognized.
Mr. MEEHAN. Thank you, Mr. Chairman.
And I want to thank each of the witnesses here for your
testimony.
Mr. Sowers, your explanation of just your day today and
what you have already done, it appears to me you worked harder
in 1 day than the United States Senate has done in the month of
May.
But I am grateful for your being here with Mr. Taylor and
telling your story. It is also a very revealing story. And you
run a small business. Is this a family business?
Mr. SOWERS. Yes.
Mr. MEEHAN. How many generations have been associated with
this?
Mr. SOWERS. We are the first.
Mr. MEEHAN. First generation, but this is farming. When you
are working during the course of the week, it is using other
students? You have produce stands and other kinds of things
along the side of the road?
Mr. SOWERS. We are dairy farmers. We have a processing
plant and home deliver milk in the tristate area here.
Mr. MEEHAN. Okay.
Mr. SOWERS. So it is something we started--we started
farming in 1981, but we started processing 15 years ago.
Mr. MEEHAN. During the course of each week is it likely
that you will generate more than $10,000 that will be----
Mr. SOWERS. It is still cash in that neighborhood. It is
not normally over 10. It can be, depending on what is going on
and----
Mr. MEEHAN. Well, that is an important point. So you were
dealing in an economy which is a local economy, which by
tradition is a cash-based economy. Is it not?
Mr. SOWERS. Well, the farmers markets are cash based. Now,
we do home delivery. Home delivery is mostly through credit
card, so that is not----
Mr. MEEHAN. But that is not part of it. But at the end of
the week, the point being, with this cash business that is what
is----
Mr. SOWERS. We do farmers markets and we have a store on
the farm, and a lot of that money is cash.
Mr. MEEHAN. But in many weeks will you have proceeds that
will be less than $10,000.
Mr. SOWERS. Most weeks it is less than 10.
Mr. MEEHAN. Most weeks. And so even if you want to, you
wouldn't be able to put in more than $10,000?
Mr. SOWERS. No. It just happened that day. We had a
festival and we had extra cash.
Mr. MEEHAN. Had you ever heard of structuring before?
Mr. SOWERS. Never in my life, no.
Mr. MEEHAN. When the agents came to your home, did they
ever talk to you about representation of an attorney?
Mr. SOWERS. Our attorney actually had just left, and I
tried to call him and he didn't answer the phone. I didn't
think it was a problem because I just wondered how long it
would be before they show up wanting to know where all of the
cash came from.
So I didn't have any problem talking to them. But they kind
of shut down the investigation when I said, ``Well, you know,
sometimes I have $12- or $15,000 in cash.'' And then they kind
of didn't talk anymore and showed me the paperwork that they
had already seized my account.
Mr. MEEHAN. Mr. Taylor, you run a similar kind of business?
You are a small farmer with produce stands?
Mr. TAYLOR. Yes, sir.
Mr. MEEHAN. And would it be your experience during the
course of each week that you would generally generate more than
$10,000 worth of income to be deposited?
Mr. TAYLOR. Generally, yes, sir.
Mr. MEEHAN. Generally.
Mr. TAYLOR. During the summer, in the 12 weeks of the
summer, I do generate a lot of cash.
Mr. MEEHAN. Okay. You generate the cash. But your interest
then in depositing in the bank is to get it in there on a
timely basis. But were you aware of structuring laws prior to
that point in time?
Mr. TAYLOR. I had never heard of structuring laws, no.
Mr. MEEHAN. Okay. So this is, once again, you deal on a
cash basis, which is generally the economy of the region?
Mr. TAYLOR. Yes.
Mr. MEEHAN. Mr. Taylor, when you were confronted with this
and your money was seized, what kind of impact did that have on
you and your business?
Mr. TAYLOR. Well, my daughter paid for more of her wedding
than she should have.
Mr. MEEHAN. So you had a wedding coming up but you did not
have the resources?
Mr. TAYLOR. Yes.
Mr. MEEHAN. What did it do to your reputation in the
community?
Mr. TAYLOR. I believe it hurt--it didn't hurt it with
people that really know me, but the general public that I ideal
with, we had a family member in a restaurant and heard a
comment from the booth next door: ``Well, I used to think those
Taylors were pretty honest, but I guess not.''
Mr. MEEHAN. So there is a presumption, if the government is
looking at, there must be doing something that you are doing
wrong.
Mr. TAYLOR. You get known as the people that had the
problem with the IRS.
Mr. MEEHAN. Have you ever had any problem before that with
any governmental entity or any other criminal justice issue in
your lifetime?
Mr. TAYLOR. No, sir.
Mr. MEEHAN. So this is the first time that you found out,
is when the agents from the IRS walk into your--meet your wife,
she offers them ice tea?
Mr. TAYLOR. Yes, sir.
Mr. MEEHAN. Did you ever have any opportunity to consult a
lawyer prior to the questioning by these agents?
Mr. TAYLOR. No, sir.
Mr. MEEHAN. Did they ever at any point in time suggest to
you that you ought to consult a lawyer?
Mr. TAYLOR. As they were leaving.
Mr. MEEHAN. As they were leaving. You had spoken to them
for some period of time.
Mr. TAYLOR. We talked to them for over an hour. When they
let us know that they had seized our money already, then we
stopped answering questions and we said we need to get a
lawyer.
Mr. MEEHAN. But by that point in time they had told you
that they had seized your money and you now need a lawyer in
order to be able to deal with them?
Mr. TAYLOR. Yes.
Mr. MEEHAN. Mr. Taylor, Mr. Sowers, thank you for your
testimony, and I regret that you are in this situation.
Mr. TAYLOR. Thank you.
Mr. SOWERS. Thank you.
Chairman ROSKAM. Mr. Lewis.
Mr. LEWIS. Thank you very much, Mr. Chairman.
I want to thank you for being here.
I grew up on a farm. Farming is hard work. It is very
difficult. It can depend on the weather, whether you produce,
what type of living you make. I am very sympathetic toward what
has happened to the two of you.
Mr. Taylor, I want to know, how has this affected not just
your business, but your life and your family, the life of your
family?
Mr. TAYLOR. Well, you are always looking over your
shoulder. When you think you are doing the right thing you are
still wondering, ``Am I going to hear from somebody that I am
doing the wrong thing?''
I have always tried to be very honest and upright in
everything I do. And I just really--well, I don't have much
faith in the government.
Mr. LEWIS. You have lost faith?
Mr. TAYLOR. In the government.
Mr. LEWIS. Really?
Mr. TAYLOR. Yes, sir.
Mr. LEWIS. You feel like you have been mistreated, that you
have been wronged?
Mr. TAYLOR. Yes. They took my money with no notice and then
they kept it, even though they found nothing wrong. They just
kept it because they could. It is just not right.
Mr. LEWIS. What is the total amount that you feel like----
Mr. TAYLOR. They kept from me $41,790. They seized $93,000
that day. They kept $41,790. My son quit taking wages for the
rest of the year. He lived on some savings that he had built
up. We didn't have any cash to start the next year with. We had
to start using an operating loan which adds $5,000 to $8,000 to
my interest expense each year. And I just this year got my son
reimbursed for the wages he gave up in 2011.
Mr. LEWIS. Mr. Sowers, you testified before the
subcommittee some time ago. Was it last year?
Mr. SOWERS. In February.
Mr. LEWIS. February.
Mr. SOWERS. Yes.
Mr. LEWIS. Has anything changed, anything you would like to
tell us today that you didn't tell us before? Have there been
any changes?
Mr. SOWERS. Well, I still think sometimes I am being
harassed by the government when Department of Labor showed up
the day before Christmas, you know, same thing, flashing their
badges to my employees and demanding things. Those records are
public record. I mean, there is nothing like we could hide
anything. I mean, again, we weren't doing anything wrong, we
didn't think.
But it has been 4 months, and the last thing we got out of
them was they show up 1 day and say, ``Here is the settlement
that we think you ought to take, and if you don't agree to do
this today, then we are going to start proceedings against
you.''
Mr. LEWIS. How long have you been farming?
Mr. SOWERS. Thirty-five years.
Mr. LEWIS. Mr. Taylor, how long have you been in business?
Mr. TAYLOR. Well, officially, about 40 years. I have been
there all my life.
Mr. LEWIS. So it has been a way of life, and this is the
first time something like this happened to you in 35 years or
to you in 40 years?
Mr. TAYLOR. Yes, sir.
Mr. SOWERS. First time, yes.
Mr. LEWIS. So you are reaching out to your government for
help.
Mr. SOWERS. Yes. I mean, we shouldn't be afraid of the
government. We should depend on you. I mean, like I say, we
don't do things wrong to do things wrong. Sometimes we do and
we have to be told about it. But when they come out and fine
you and don't care whether they put you out of business or not
with what they are doing, it is not right.
Mr. LEWIS. Thank you both for being here. Thank you.
I yield back, Mr. Chairman.
Chairman ROSKAM. Thank you, Mr. Lewis.
Mr. Holding.
Mr. HOLDING. Thank you, Mr. Chairman.
Mr. Johnson, I understand that Mr. Sowers and Mr. Taylor
and others have submitted petitions to get their money back,
even though their cases have been closed. Is that correct?
Mr. JOHNSON. That is correct.
Mr. HOLDING. So would you explain the process by which they
are trying to get their money back now? How does this work?
Mr. JOHNSON. These are called petitions for remission or
mitigation. There is a statute that actually dates back to the
first Congress that has been on the books for a long time that
says that the government can give back money that was taken
through civil forfeiture. This is a very well-established
process. It is kind of like a pardon petition. It allows, even
if you have a case where a case has been settled or decided by
a court, just as the President may decide to pardon somebody
who has been convicted, the agencies or government entities
that have forfeited money can, as a matter of grace, return
money to people that should not have been taken.
Mr. HOLDING. So, I mean, to be absolutely clear here, the
IRS and DOJ have the authority to return these funds, correct?
Mr. JOHNSON. There is no question that they have the
authority and there is also no question that they have the
means. In 2015, the IRS put out a report saying that the
Treasury Forfeiture Fund, the fund where these funds are
deposited, currently holds about $6.1 billion.
Mr. HOLDING. And we know of a case where the IRS has,
indeed, returned these funds, correct?
Mr. JOHNSON. That is correct.
Mr. HOLDING. Can you explain a little bit about that case
for me?
Mr. JOHNSON. Yes. So that was another petition that was
filed by the Institute for Justice on behalf of a property
owner named Khalid Quran, who runs a convenience store in North
Carolina, and he had over $150,000 taken by the IRS,
permanently forfeited. We filed a petition saying that in light
of the policy change, this money should be returned, and they
did so. The IRS returned in full all the $150,000.
And yet, what is surprising is that although the IRS has
done the right thing for Ken and returned his $150,000, the
Department of Justice still has not done the right thing for
Randy. And there are many other property owners who are still
waiting for justice as well.
Mr. HOLDING. Mr. Johnson, you are probably aware that under
this administration the guideline sentences for certain drug
offenses have been revised down, particularly the crack cocaine
sentencing guidelines. You know, if you are convicted today for
possession or distribution of crack cocaine, your sentence is
going to be much lower than it would have been in times past.
You are aware of that, aren't you?
Mr. JOHNSON. Yes.
Mr. HOLDING. Are you also aware that U.S. Attorney's
Offices around the country are spending a tremendous amount of
time going through, finding convicted criminals who are in
prison serving sentences and seeing if those new guidelines
will apply, thereby reducing their sentences and letting them
out of prison early?
Mr. JOHNSON. Yes.
Mr. HOLDING. So, obviously, the Department of Justice has
the time and bandwidth to do that. But we are wondering here
today whether the Department of Justice has the time and
bandwidth to go back and return the funds that have been seized
under rules that they have now disavowed, correct?
Mr. JOHNSON. Yeah, I think that is a great point. I mean,
all we are asking in Randy's case or in the Taylors' case is
for them to give back money to people who have actually gone
ahead and filed a petition. But what the Department of Justice
really should be doing is much more. They should be identifying
people who are eligible to file a petition and they should be
sending those people notice, informing them that they have the
right to try to get their money back.
Mr. HOLDING. Thank you Mr. Johnson.
Mr. Chairman, I yield back.
Chairman ROSKAM. Mr. Rangel.
Mr. RANGEL. Thank you, Mr. Chairman, for holding this
hearing.
And I am so embarrassed in being part of a government--I am
proud to be an American and being a Member of Congress, but
these horror stories, it is hard to believe that this could
happen in our country. The whole idea that the Justice
Department is taking time out to right the wrong for people
that have been in prison for committing crimes--it doesn't
justify it--has absolutely nothing to do with them not
fulfilling their moral responsibilities to treat Americans and
taxpayers with the dignity that they deserve.
Mr. Chairman, it is painful for me to see that this torture
continues without coming to a shrieking halt, finding out who
is responsible for it, and we, as Members of Congress and the
Ways and Means Committee, not being able to guarantee these
citizens that this should not have happened and we are going to
correct it.
I am a former prosecutor. The law makes a lot of sense when
you are dealing with criminals, drug dealers, with millions of
dollars in cash and not being held accountable so they put it
in the bank. It is less than $10,000 so they don't have to
report it. We are talking about criminals.
The opposite side of that coin are hard-working Americans
that make us proud to have a family of people who do different
things to make the country greater, and, historically, the
farmers have been the heart of this great Nation.
Mr. Johnson, you have a list of American taxpayers that
have been almost criminally treated by the Federal Government.
As a lawyer, what have you done besides cause these people to
be able to come here and to tell us, what are you suggesting,
because, to me, we should as a committee and as a Congress
bring the Treasury Department here with a list of these names
and not ask for justice between now and the next hearing, but
to have justice now and return of these funds with the
penalties that are involved, with the inconvenience and the
pain it has caused to your business and your reputation, and
more importantly, to find out who made these decisions.
You don't have to be a lawyer or a lawmaker to know this is
morally wrong. This amounts to stealing somebody's property by
using coercion and the power of government. Just because it is
the government doesn't mean that it is right. It makes it even
worse.
So, Mr. Chairman, I hope that we have enough self-esteem in
terms of our influence to be able to tell these gentlemen they
don't have to worry about this happening to them or anybody
else, that we feel the obligation, because it is our reputation
that is tarnished, we are part of this government, and that we
have to exonerate ourselves in finding out who caused this
horrible thing to happen to you two and the members of the
list.
And I promise you, Mr. Chairman, that these heroes that
have gone through all of this pain on behalf of the people that
don't have the time and cannot come here with likeable stories.
So thank you for your courage. This is what makes you great
Americans. And I can assure you that as I leave this Congress,
I cannot think of anything that I would want to do except to
set this record straight and to have you, Mr. Taylor, to
restore your confidence in the government. As we say in the
neighborhood, we just screwed up. And someone should pay for
this. And you should be proud at the end of the day that we
dedicated ourselves to restore your dignity as well as that of
our great country.
And thank you for these hearings, Mr. Chairman.
Chairman ROSKAM. Thank you, Mr. Rangel.
Mr. Smith.
Mr. SMITH. Thank you, Mr. Chairman.
Mr. Chairman, thank you for hosting this hearing.
Wow. That is the most I can say. But we have uncovered a
lot of disturbing items in this subcommittee, but this one
definitely tops the icing on a lot of items.
One of the things that is the most troubling to me is that
in these cases it looks like government attorneys handling the
forfeitures have threatened to bring criminal charges to the
businesses, to the business owners, if they did not agree to
forfeit your money.
Mr. Taylor, did that happen to you?
Mr. TAYLOR. Yes, I believe it did.
Mr. SMITH. Mr. Sowers, did that happen to you?
Mr. SOWERS. Yes, definitely. And if I wouldn't have taken
the settlement, they said they would have gone after the whole
amount that we deposited for that summer, which was somewhere
around $300,000. So----
Mr. SMITH. And Mr. Sowers, in your situation, is it true
that the U.S. attorney even tried to push harder settlement
agreements because you spoke to the media?
Mr. SOWERS. Yes, that is true.
Mr. SMITH. Mr. Chairman, I would like to submit into the
record the email that documents that from the U.S. attorney in
this situation.
Chairman ROSKAM. Without objection, so ordered.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. SMITH. Thank you.
It is absolutely unacceptable. It is absolutely ridiculous.
And no American should ever be treated that poorly by their
government in any situation.
Mr. Johnson, have you heard of government attorneys
threatening criminal charges in other cases like this?
Mr. JOHNSON. I absolutely have. As I was mentioning
earlier, we recently launched a lawsuit on behalf of Vocatura's
Bakery, whose owners, the Vocatura family, were threatened with
criminal structuring charges bringing a criminal forfeiture of
over $200,000, as well as up to 4 years in prison. And David
Vocatura, one of the Vocatura brothers, is here with me today.
He is in the audience. This is shocking, it is wrong, and it is
still going on today, and it has to stop.
Mr. SMITH. Have there been threats of IRS audits of
people's businesses if they don't settle the cases?
Mr. JOHNSON. Again, in the Vocatura case, this is shocking,
but the day that they refused to agree to this plea agreement,
to plead guilty to structuring, they were told that they would
be subjected to a criminal tax investigation of their business.
Mr. SMITH. Can you think of any others?
Mr. JOHNSON. So one case that I found shocking, it is
slightly different, but in the Ken Quran case, for instance,
after they got their money back, the day after they got their
money back, they received a letter from the IRS saying that
they were being subjected to a money laundering audit for their
compliance with money laundering laws.
Mr. SMITH. Thank you.
Mr. Chairman, this is absolutely egregious. It is horrible.
I look forward to asking the IRS some further questions in the
second panel. I yield back.
Chairman ROSKAM. Mr. Davis of Illinois.
Mr. DAVIS. Thank you, Mr. Chairman. And I, too, want to
thank you for calling the hearing. And I want to thank our
witnesses for coming.
Yes, we are indeed a part, if only a small part, of this
government. And I, for one, want to apologize to both of you on
behalf of that part of the government that I am. Your
experiences should have never happened.
Let me ask you, did you feel any sense of concern for you
on the part of those who were investigating or interacting with
you in telling you what your situation was?
Mr. Taylor.
Mr. TAYLOR. No, sir, no. When we expressed concern about
the bills that were due, the checks that were outstanding, the
wedding coming up, they said it politely, but they said, ``That
is none of our concern.''
Mr. DAVIS. Mr. Sowers.
Mr. SOWERS. Well, the bank that sent the money to the IRS,
I mean, we had checks bouncing, and we tried to get some
answers from them on what are we supposed to do about that. And
we couldn't find anybody that could give us an answer. So we
were just like in limbo. We didn't know what to do.
Mr. DAVIS. And after it was determined that you had not
committed any kind of criminal offense, did anybody ever
express any sense of discomfort or any sense of, ``We are sorry
this has happened,'' or, ``It is unfortunate that this has
happened''? Did you ever get any of that from anybody?
Mr. SOWERS. I mean, from the first two agents that showed
up, and, like I say, you could tell that they weren't really
interested in being there, it was just their job. And they knew
that it was wrong, they knew what we were going to have to go
through. But there wasn't anything they could do about it.
Mr. DAVIS. Well, at least that is one feeling, that they
were doing their job.
Mr. SOWERS. Yeah.
Mr. DAVIS. And that is what they had to do.
Mr. Taylor.
Mr. TAYLOR. No, sir, I did not hear any concern of anyone
involved about what had happened.
Mr. DAVIS. You expressed that you had lost some confidence
in the government. Is there any way that that breach can be
repaired, in your mind?
Mr. TAYLOR. Well, certainly, if I get my money back, I
would feel a lot better about it. If you see that there is a
problem and it gets corrected, that would serve to restore your
confidence in the government as a whole.
Mr. DAVIS. Well, I certainly hope that you are going to be
able to get your money back. And I can assure you that anything
I can be supportive of or can do to help make sure that that
would happen for not only the two of you, but others who have
fallen into this situation, we would do it. I certainly
empathize with you in terms of just the feeling, and I am sure
there are others who have had that feeling, that somehow or
another you have been unjustifiably treated. And the only way
that justice can be restored is that you do, in fact, get your
money back, as you say.
And, Mr. Chairman, again, I thank you for the hearing, and
I yield back.
Chairman ROSKAM. Mr. Reed.
Mr. REED. Thank you, Mr. Chairman.
And thank you to our witnesses here today. As echoed by my
colleagues, I share the anger, the frustration that has been
put on evidence here today.
I join with my college from New York, Mr. Rangel, in saying
we should join together and find justice for these individuals
and the thousands that they represent across America.
And I hope you stick around, Mr. Sowers and Mr. Taylor,
because we have the IRS Commissioner come in right after you
are done, and we will ask him this question. So we are going
right to the top to see if we can't get justice for at least
you here today.
And, Mr. Johnson, I look forward to getting that list also
from you so that we can go after other folks and get justice in
this situation.
I think it is important to read this email that was entered
into the record and take a moment to reflect on what is being
said here. So, Mr. Sowers, this is an email between your
attorney, David Watt, and Stefan Cassella, who was the U.S.
attorney who was in charge of your case, Correct?
Mr. SOWERS. Yes.
Mr. REED. And in working with Mr. Cassella from the U.S.
Attorney's Office, your attorney is trying to work out the
terms of your agreement, et cetera, and finalizing the
agreement. That is correct?
Mr. SOWERS. Yes.
Mr. REED. All right. So he says, ``I have obtained''--this
is Mr. Watt talking on your behalf--``I have obtained a
settlement in the Taylor case''--which is Mr. Taylor's case,
Taylor Produce case--``attached to this email, which is very
similar to the Sowers case and there is no language regarding
the Taylors' acknowledgement that there was reasonable cause
for the seizure. We would even be satisfied with the same
`whereas' clause as those in the Taylor agreement. I have a
hard time''--and your attorney put this in bold and
underlined--``I have a hard time explaining to my client why he
is being treated differently.''
Mr. Cassella's response is very telling, because in that
email, it says, in bold and underlined in response to your
attorney, ``As a representation of the United States
Government,'' this U.S. attorney has the audacity to use the
power of his office to tell you, Mr. Sowers, ``Mr. Taylor did
not give an interview to the press.''
So when you heard that, is that your government telling you
to shut your mouth, don't exercise your freedom of speech
rights? Is that your government with a badge and a weapon
telling you to shut your mouth as we will take more of your
money away? Is that how you interpret it? Because that is the
way I interpret it.
Mr. SOWERS. That is exactly the way I interpreted it.
Mr. REED. That is appalling in this day and age that we
have got people in power abusing that power like that.
So I am going to give the benefit of the doubt to maybe
some of these agents that were there who said that they didn't
want to be there. It sounds like you treated them kindly. You
opened your home to them.
Mr. SOWERS. That is what God taught me to do.
Mr. REED. Amen.
So when you were having that conversation did you ever ask
them, ``Then why are you here?''
Mr. SOWERS. They have a job to do. They have families too.
Mr. REED. So did they tell you who told them to be there?
Mr. SOWERS. They were from the Treasury is all I knew. They
didn't say anything else about it.
Mr. REED. Did they give you any indication as to why they
were coming after you, why they were there in the room, even
though they didn't want to be there?
Mr. SOWERS. Well, they never gave me an indication of what
they really were after until the comment about the $12,000 to
$15,000, and then I learned what they were there for.
Mr. REED. Okay.
Mr. Taylor, how about that hour conversation that you had
in your testimony to them? Did the agents give you any
indication as why they were there, what they were trying to do?
Mr. TAYLOR. No, sir, they were just asking questions. As I
say, they started off by saying I was not in trouble hadn't
done anything wrong, they just had some questions.
Mr. REED. So these agents who we are trying to believe are
just innocent participants in this, just doing their job, there
was no pressure. You don't think these guys were under any
pressure maybe from their higher-ups to achieve something there
by coming into your home to take your money? Any speculation as
to maybe why they were there?
Mr. SOWERS. I think that it is not the first time they did
it so they knew exactly what was going to happen.
Mr. REED. Are you aware that when they take your money
where that money goes?
Mr. SOWERS. Well, I have heard stories.
Mr. REED. What have you heard?
Mr. SOWERS. Some of it goes into local----
Mr. REED. Goes right back in their budget, doesn't it?
Mr. SOWERS. That they don't have to go to through a lot of
loopholes to get money. They just can get it and use it.
Mr. REED. Mr. Taylor, are you aware where the money goes
when they seize it?
Mr. TAYLOR. I have read articles.
Mr. REED. What is your understanding of it?
Mr. TAYLOR. It is used for police departments, for their
budget, for items they can't get from the government.
Mr. REED. How about those same agents? How about the same
IRS that is coming after you to take your money? Are you aware
that that money goes right back to the IRS to a large degree--
--
Mr. TAYLOR. Yes, sir.
Mr. REED [continuing]. For them to do this to other people?
Mr. TAYLOR. Yes, sir.
Mr. REED. Do you think that is right?
Mr. TAYLOR. No.
Mr. REED. Do you think that creates an incentive maybe for
the IRS to be in your room to take your money?
Mr. TAYLOR. Definitely.
Mr. REED. Think we should do something about that as
policymakers here in Washington, D.C.? With that, I yield back.
Thank you.
Chairman ROSKAM. Mr. Crowley.
Mr. CROWLEY. Thank you, Mr. Chairman. Thank you for holding
this hearing, as well, today.
Mr. Sowers, we have met before, the last time you were here
before the hearing. And I would say welcome back, but I know
you are not here to discuss a good experience--well, welcome
back despite that--but, rather, quite frankly, a bad experience
that you have gone through. I hope to get your situation
resolved as soon as possible, because law-abiding citizens like
yourself should not have the experience that you have had with
your government, with our government.
All of us up here are on the same page on this issue of
fixing and preventing these seizures from happening to law-
abiding citizens like yourself--and, Mr. Taylor, that would go
for you as well; I don't mean to exclude you--making sure that
you get full restoration and restitution of your assets.
The policy of the government seizing assets and never
charging people with a crime turns the basic principles of
American justice of innocent until proven guilty on its head. I
believe the IRS needs to go through its old files and return
all the funds wrongly seized from Americans. And I would work
with any and all of my colleagues on both sides to see that
that actually does take place.
I have a quick question about--is it ``Vocatura's'' Bakery?
Mr. JOHNSON. ``Vocatura's'' Bakery.
Mr. CROWLEY. Vocatura's Bakery. And that is in Norwich in
Connecticut?
Mr. JOHNSON. That is correct.
Mr. CROWLEY. When did the government seize their assets?
Mr. JOHNSON. The assets in that case were seized in 2013,
before the policy change.
Mr. CROWLEY. So the policy changed in October of 2014,
correct?
Mr. JOHNSON. Yes.
Mr. CROWLEY. And that is my understanding, as well, that
the policy did change in 2014.
What I would suggest, again, is we'll get to the bottom of
this and see to it that those moneys are restored to their
rightful place with the citizen of the United States.
So, with that, Mr. Chairman, I will just yield back the
balance of my time.
Chairman ROSKAM. Thank you, Mr. Crowley.
Mr. Rice.
Mr. RICE. Thank you, Mr. Chairman.
Mr. Johnson, I want to start with you. This institute that
you work with, are you limited to tax controversies?
Mr. JOHNSON. No. The Institute for Justice is a nationwide
public interest law firm that litigates in a number of areas,
one of which is property rights, which is what brings us to
this particular issue.
Mr. RICE. Yeah. With the cascade of scandals that have
arisen in the Federal Government and the level of incompetence
and outright wrongdoing over the last 5 years, I am not
surprised that Mr. Taylor has lost some faith in the
government. I sure as hell have.
How about you? You deal with the government all the time.
Mr. JOHNSON. It is very difficult dealing with Federal
prosecutors, in particular, in these cases, who have sworn an
oath to uphold the law and are supposed to be enforcing the law
but come across more like schoolyard bullies than law
enforcement officers.
Mr. RICE. You know, these folks, to my understanding, have
admitted that the money was taken wrongfully from these people.
Is that correct? With this change in policy, they have admitted
that.
Mr. JOHNSON. Exactly.
Mr. RICE. And what is their justification for holding the
money?
Mr. JOHNSON. Well, I would say, in these cases, they would
say that it is too late, that it is already over. But we have
filed petitions, and we have asked to get the money back. So,
really, they have no justification.
Mr. RICE. If these folks here had withheld money from the
IRS for the last few years and the IRS discovered it was their
money and they came to them and said, ``Too late,'' what do you
think the IRS would do?
Mr. JOHNSON. I don't think the IRS would be too keen on
that.
Mr. RICE. Let me ask you this. Mr. Taylor, when they came
to you, did they ask you to produce records to show that you
didn't have any underlying criminal activity?
Mr. TAYLOR. No, sir.
Mr. RICE. They didn't? They didn't want to look at your
receipts and your expenses to prove your income and all that
kind of stuff?
Mr. TAYLOR. Not the gentleman that came to the house.
Mr. RICE. Okay.
Mr. TAYLOR. But the prosecuting attorney did want 4 years
of financial records.
Mr. RICE. Okay.
Mr. TAYLOR. Which we got it there by the time that they
asked for it.
Mr. RICE. What do you think they would have done if you had
said, ``No, I'm not going to give you those records''?
Mr. TAYLOR. I might not be sitting here today.
Mr. RICE. Probably in prison, wouldn't you?
What do you think they would have done if you would have
said, ``Well, I lost them''?
Mr. TAYLOR. I don't know what they would do.
Mr. RICE. What do you think they would have done if you
just said, ``Oh, well, I destroyed my hard drive. It crashed''?
Mr. TAYLOR. I have heard that before.
Mr. RICE. You probably wouldn't be sitting here, would you?
Mr. TAYLOR. No.
Mr. RICE. You know, these public officials, they are
supposed to operate on a higher plane, right? They are not
supposed to abuse the public trust. But, by their own
admission, they are stealing from you.
Is it any wonder why people have lost faith in the
government? This level of--it is not incompetence. I mean, it
is certainly incompetent, but it is way beyond that. It is not
negligence, is it, Mr. Johnson? It is far beyond that. How
would you characterize this?
Mr. JOHNSON. I would say that the IRS is taking people's
money because the IRS wants that money to fund its own budgets.
Mr. RICE. It is malicious. It is wrongdoing. It is
criminal. Our government is acting as the criminal here. It is
amazing that people have what faith they do in the government.
And it is not just the IRS. Look across all these
bureaucracies. Look at the VA, for God's sake.
So, my friends, I sure am sorry for what you had to deal
with, and I will do my part, if offered the opportunity, to fix
this problem.
Thank you very much. I yield back.
Chairman ROSKAM. Mr. Marchant.
Mr. MARCHANT. Thank you, Mr. Chairman.
Mr. Sowers, Mr. Taylor, since this has happened to you, did
you get any guidance from these agents or the agency on how you
should conduct your business going forward? Did they say,
``Wait till you have $10,000 saved up and make your deposits''?
Did they offer any--for all those people listening out there
now that are conducting their business the way you guys have, I
mean, did you change the way that you did business?
Mr. TAYLOR. I have changed. I have a cash transaction
report filed every week when I deposit money.
Mr. MARCHANT. Yeah.
Mr. TAYLOR. The only advice I got was from a lawyer and
reading what I could about the whole idea of what I had done
and what I should be doing.
Mr. MARCHANT. So, now, most of your transactions are over
$10,000 so they get put into the system?
Mr. TAYLOR. I sometimes save it until I do have over
$10,000.
Mr. MARCHANT. Yeah. Yeah, that is what I was asking.
Mr. TAYLOR. Right.
Mr. MARCHANT. I mean, this has made you conscious, and it
has been something that now, every day, you have to think
about.
Mr. TAYLOR. I have had more tellers learn how to do a cash
transaction report.
Mr. MARCHANT. Yeah. Yeah. I would imagine.
How about you, Mr. Sowers?
Mr. SOWERS. I really hate to say, but I don't deposit cash
anymore. I am afraid to do it.
Mr. MARCHANT. Yeah.
Just for my information, if somebody gives you a check, do
they treat that differently than cash?
Mr. SOWERS. Checks don't make any difference. It is just
the cash.
Mr. MARCHANT. Yeah. So, on that deposit slip, they pick up
just the cash number. They don't treat a check as cash.
Mr. SOWERS. Yes. That is all. I mean, the cash is the only
thing they are concerned about.
Mr. MARCHANT. Yeah. Because I think there are millions of
Americans out there that are conducting their business
innocently, thinking that they are complying with every single
law, and, still, just an innocent mishandling or making a
deposit the way they don't want you to make it is subjecting
them to some criminal action.
Mr. Johnson, how many petitions are currently pending
before the government for reimbursement or forgiveness or
return the money?
Mr. JOHNSON. So I am aware of two, the Taylor and the
Sowers petitions. There was a third, the Quran petition. The
IRS granted that petition. And, again, it raises the question,
if they can grant one, why can't they grant the other two.
Mr. MARCHANT. So of the thousands of--how many billion
dollars did you say was in the fund?
Mr. JOHNSON. So there are $6.1 billion in the fund as of
the close of the 2015 fiscal year.
Mr. MARCHANT. Yet there are only three petitions pending to
get their money back?
Mr. JOHNSON. Well, so, in terms of the structuring cases,
we know that there are about 600 cases that fall into this
category of people who had their money taken who wouldn't have
it taken today. The problem is we don't know who those people
are. We know that they exist, but the records are anonymized so
that we can't identify them and speak to them, and they may not
know that they have the right to try to get their money back.
Mr. MARCHANT. And this fund where the money goes, is it a
general revenue fund or is it a dedicated fund that can't be
touched by anybody?
Mr. JOHNSON. It is the Treasury Forfeiture Fund, which is
available to the IRS to fund its own activities, its own law
enforcement activities. So what the IRS is doing here is it is
taking money from people and then it is using that money to
fund its own budget without having to come to Congress to ask
for an appropriation of funds.
Mr. MARCHANT. You suggested that there was a way for
Congress to statutorily stop this. Would you repeat that?
Mr. JOHNSON. Yeah, I think Congress needs to do two things.
One is it needs to codify the policy change that the IRS
has announced, to change the definition of ``structuring'' so
that in order to be convicted or have your money taken for
structuring you have to actually have been engaged in some
other crime.
The other thing that Congress can do is actually direct the
IRS to return funds in cases that don't meet the policy so that
people have a judicial right to get that property back rather
than depending on the petition procedure that we currently are
pursuing.
Mr. MARCHANT. Mr. Chairman, I hope that that is the goal of
our committee, to do that. And thank you.
Chairman ROSKAM. It absolutely is, and legislation is
imminent.
Mr. Kelly, bring us home.
Mr. KELLY. Thank you, Mr. Chairman. And thanks for holding
this hearing today and allowing me to be here.
To both Mr. Taylor and Mr. Sowers, thank you for standing
up and actually talking about your story. I am an automobile
dealer, and every time I get the chance to talk about the IRS,
my son calls me and says, ``Dad, please be careful. I don't
want them coming in the store.''
I know one thing for sure: The issue that we are talking
about today should be a national outrage. It just shouldn't be
a concern of this committee. The whole country should be
standing up and staying, ``Not in our country, not at this
time, not on our watch.''
It is stunning to me, the arrogance of the IRS. Now, I know
that we have to have a way of collecting revenue. And I am not
painting everybody with the same brush. But for you to sit
where you are sitting--and we have a form called the 8300 Form,
where, if it is 10 grand or more, we have to report it.
So I am talking to the garage today, and I said to
Stephanie, ``So tell me--for us to be in compliance.'' She
goes, ``You know what? I even watch for any other signs that
may look like somebody is structuring.'' And I am saying, you
are talking about guys that make steel down the street for us,
guys that make railroad cars, guys that stand on their feet all
day and girls that do stuff all day long to make a living, and
those are the people we are really worried about?
Just from where you are, Mr. Taylor and Mr. Sowers, talk
about the loss that you have incurred, not just in the fact
that they could shut you down, but you are not paid interest on
that money that was frozen. You don't have--your loss in your
communities of your reputation and how you have to go back and
try to repair that. This is the part, I think, that we are
missing. Because we are talking about people--real people,
people who get up every day with one reason and one reason
only, and that is to take care of their kids, their community,
their churches, and their schools. And then we have an agency
that comes in and says, ``Yeah, you're the guys we're looking
for because you don't know how to deposit money. You're the bad
guys.''
Mr. Taylor, tell me how that has affected you in your
community--Mr. Sowers, you in your community--and the arrogance
that this agency could come in to do it.
I don't give a damn if they said they were sorry or not.
They knew exactly what they were doing to you, and they knew
exactly where it was leading. And you know what else they knew?
They knew you didn't have the money to ante up to fight them,
and that is why you would settle.
Look at this up on the board. You know, we call it a
shakedown back home, but this is what I think they are doing.
If you can just take a look at--extortion is the practice of
obtaining money, property, or services through coercion, force,
or threats. It is synonymous with ``shakedown.''
Do either of feel like you got a shakedown?
Mr. SOWERS. Certainly I got a shakedown.
And I guess the biggest impact it had on me was a story the
local paper did that makes you sound like you are a criminal.
And my daughter just the other day told me, ``You know, you
must be doing something wrong; you're always in trouble.'' But
she has known me for 40 years, and she knows I have a big mouth
and I don't stand back when somebody is doing something wrong,
to tell everybody.
And that is what happened. I told everybody that walked up
to my table at the farmer's market what happened. And those
people are upset. I mean, people are upset.
Mr. KELLY. Yeah. Yeah.
Mr. SOWERS. I mean, I know I do everything the way I should
do it or--and I don't really care what other people think. But,
you know, that is just the way it is. I mean, people think----
Mr. KELLY. So let me ask you, because I know how badly you
were hurt, but so--now, checks were bouncing, right?
Mr. SOWERS. Yes.
Mr. KELLY. Okay. I live in a small town too. You bounce a
check, and I guarantee you those tellers say, ``You hear what
happened up at Kelly's? Their checks are bouncing.'' That goes
through that community like wildfire. I bet in your community a
guy that has been an upstanding citizen--you and your wife
raised a wonderful family, a wonderful business. I bet your
name went through that community so fast.
You know who couldn't give a damn about it? People in the
IRS. They don't care how much they crush you. They don't care
how much they demean you. They don't care what the grinder is
they put you through. You know why? Because they have absolute
power to do it, and it has corrupted them absolutely.
If you can, Mr. Taylor, tell me how this has affected you.
And, please, this is your day to tell your story to America of
what is happening right now on our shores. This is not Germany
with the Gestapo coming in or Russia with the KGB coming in.
This is right here in America, right here with our own
government.
So, Mr. Taylor, how much has this hurt you?
Mr. TAYLOR. I am not sure I can quantify how much it has
hurt me.
Mr. KELLY. And I know you can't.
Mr. TAYLOR. And all I know is I just have to live my life
the way I know how to live it, trying to do things right. And,
sooner or later, people will realize that something went wrong
there and it wasn't with me. I can't fight it. I just have to
move on.
Mr. KELLY. Okay. Well, I just want to offer you something--
and, Chairman, I want to thank you so much for this.
Because you know what? The truth of the matter is you can't
go in that arena and fight for yourself. But you know what you
can do? You can elect people to go and represent you in this
government that is looking out for your best interests. You
need champions that are going to rise up to say, ``You have
hurt our people. You have done terrible wrong to our people,
and it has to be remedied.''
The fact that we have a hearing is one thing. There is no
way we can go back and repair your reputations. There is no way
we can go back and repair the damage we have done to you just
as a person. Your wives are with you today. It hurts not just
you, your business, your family, but your grandchildren and
your children. It affects you in the community.
And this is all because of somebody thinking that you
structured a deposit in order to hoodwink the IRS. That is
absolutely preposterous, and it is not allowed to stand in
America, especially not at this time and certainly not on our
watch.
Thank you guys for having the gumption and the courage to
stand up and tell your story.
Chairman ROSKAM. Thank you, Mr. Kelly.
You know, as I have been listening and watching you both
and watching your wives here and just the chance to visit with
you before the hearing and so forth, your presence and your
willingness to tell your story is very encouraging, actually,
because what you are doing is you are bearing witness to a
deeper virtue of this country. In other words, you are standing
up for American ideals. And whether you realize it or not, you
are holding on to an American ideal and you are reflecting that
back to a lot of other people, saying, ``This isn't right.
There is something that is off about this.''
And, you know, when you were talking a minute ago, Mr.
Sowers, about trouble and one of your kids teasing you about
being in so much trouble, Mr.----
Mr. SOWERS. Oh, she wasn't teasing.
Chairman ROSKAM. Well, I take your point.
But Mr. Lewis kind of nudged me and--there was a hashtag
that he had yesterday; it is called ``good trouble.'' And he
knows something about good trouble. And you are sort of in good
trouble, in a way. And I am not trying to be dismissive or
cavalier about that or dismissive about the pain and the
difficulty that you are going through, but what I am telling
you is the strength that you are reflecting to us is a good
thing, and it is encouraging.
There is another thing that is important. We are on your
side. We are rooting for you. We are on your team. And we are
going to hear from the other team in a couple minutes. Stick
around. It is going to be an interesting discussion.
And, Mr. Johnson, I have a question for you, just to go
into a little bit more detail. You mentioned in your testimony
that, you know, there is data and so forth on lists and others
who have been impacted by this. Can you walk us through--
because we have to get to this. We need to sort this out, and
your insight on what is available and so forth is very
important.
So, in terms of scope and scale, I have heard you discuss
generally three numbers. One number was the number of people
that you have reason to believe have been similarly situated as
the Taylors and the Sowers. And that number was about 600
people, 600 cases?
Mr. JOHNSON. That is correct.
Chairman ROSKAM. How did you come to that number? How have
you come to that conclusion?
Mr. JOHNSON. So we came to that through a FOIA request to
the IRS where they provided us with access to some data about
structuring forfeitures. We sought additional data that could
help us to identify, you know, more information about what the
IRS is doing with civil forfeiture and to have even greater
information. And the IRS responded to us and said that, before
they could turn over all of the data that they would have, we
would have to pay a fee of a quarter-million dollars for access
to that data. They basically said that the Institute for
Justice, which is a nonprofit organization, falls within the
commercial-use category of FOIA requests, which is complete
nonsense.
And then when we tried to appeal that decision, they said
to us, ``Well, it is not final because we haven't actually
denied you access to the data, so you have no right to
appeal.''
Chairman ROSKAM. Good grief. I mean, the pattern that they
have run these folks through, they are just overlaying this
pattern on FOIA requests. Good grief. Judas, man.
So, by not giving you an answer, they deny you the capacity
to appeal. Is that right?
Mr. JOHNSON. Right. By saying that, ``Well, we will give
you the information, but you have to pay us this outlandish
amount of money,'' then they are claiming----
Chairman ROSKAM. Who lays awake at night at the IRS
thinking about this stuff? Who lays awake at night thinking
about, ``Hmm, how can we stick it to people and not give them
information to which they are entitled?''
Okay. That is new information for me. It is probably new
information for this entire panel. And we need to deal with it.
So that is the----
Mr. RANGEL. Mr. Chairman.
Chairman ROSKAM. Yes.
Mr. RANGEL. Could you inquire as to what information he
actually has?
Chairman ROSKAM. I will yield to Mr. Rangel.
Mr. RANGEL. Thank you.
I know what you can't get. And I agree with the chairman,
that is outrageous. But this 600 people have cases in front of
the IRS. Do you have that information for us?
Mr. JOHNSON. We know that there are----
Mr. RANGEL. No, no, no, no.
Mr. JOHNSON. Right, but we don't----
Mr. RANGEL. You know. But how can we know what you know? Do
you have a list of names?
Mr. JOHNSON. So we don't have a list of names. What----
Mr. RANGEL. What do you have?
Mr. JOHNSON. What we know is that the IRS' database
identified 600 cases between 2007 and 2013 where there is no
allegation of any criminal wrongdoing apart from structuring
and that, in those cases, they took about $43 million from
those people.
Mr. RANGEL. Well, you stick around too, because----
Chairman ROSKAM. That is right.
Mr. RANGEL [continuing]. It is very difficult for us to ask
for information when we cannot identify wrongdoing. But this
committee will be able to give you--without paying a fee, we
will get access to whatever you can help us to get that
information from. But we need your help in order to determine
whether these 600 cases--because what we have here, Mr.
Chairman, are two different cases. We have the Justice
Department, which we have cases that we have to call on them
separately, but we can handle the IRS part of it this morning.
Thank you.
Chairman ROSKAM. Mr. Johnson, to echo, then, on Mr.
Rangel's inquiry, so we have that 600 cases. Then the $43
million figure is the number that you came to understand was
captured by the IRS as a result of those 600 cases.
Mr. JOHNSON. Exactly.
Chairman ROSKAM. And then you mentioned a fund. And so I
just don't want us to be thinking that there is $6 billion out
there. So there is a fund generally at the IRS that has $6
billion in it that is what?
Mr. JOHNSON. That is called the Treasury Forfeiture Fund.
And that is the fund into which the Treasury Department puts
all of its forfeitures under the civil and criminal
forfeiture----
Chairman ROSKAM. Could be cases that we would be very
sympathetic to. In other words, it could be drug forfeiture
cases; it could be, you know, mafia front groups and all that
sort of stuff. So that would be also within that fund, that $6
billion?
Mr. JOHNSON. Right. That is all forfeitures by the entire
Treasury Department.
Chairman ROSKAM. I understand. So, for our purposes, we
want to focus in--based on your representation, we want to
focus in on the cases and the $43 million. Is that right?
Mr. JOHNSON. The point of mentioning the $6.1 billion is
that that is money that is available to the IRS to return
assets to people. The amount of money that needs to be returned
is by no means $6.1 billion.
Chairman ROSKAM. I understand. So, if we were to hear, for
example--so your point in raising that is, if we were to hear,
for example, from the Federal Government, DOJ or anybody else,
that we don't have the money, your point is, yes, you do have
the money, and that is an obtuse argument. Is that right?
Mr. JOHNSON. Exactly.
Chairman ROSKAM. Okay.
We have been joined by Mr. Renacci.
Mr. RICE. Mr. Chairman, can I ask one question?
Chairman ROSKAM. I will yield quickly, and then--yes.
Quickly.
Mr. RICE. Mr. Johnson, the 600 cases that you have
identified where there is no allegation of wrongdoing, how did
you identify those?
Mr. JOHNSON. So, again, what we requested from the IRS
through FOIA is data from what they call their AFTRAK database,
which just tracks the forfeitures of assets by the IRS----
Mr. RICE. And you specifically asked for those that had no
allegation of wrongdoing?
Mr. JOHNSON. So one thing that the database includes is a
box that they can either check or not check where it says that
they suspect criminal wrongdoing in addition to structuring.
And so we know that there are about 600 cases where they did
not check that box. In other words, they themselves indicated
in their own database that the only reason they were pursuing
those funds was because there was structuring.
Mr. RICE. But there very well could be, and probably are,
thousands of other cases that, like in these guys' cases, they
signed these agreements to avoid criminal prosecution, but
there could be no validity to it.
Chairman ROSKAM. Let me reclaim the time. We will keep
moving. And this is a line of inquiry that we will have with
the second panel.
Mr. Renacci has joined us.
Mr. Renacci.
Mr. RENACCI. Thank you, Mr. Chairman. I am just going to
yield at this time.
Chairman ROSKAM. Okay.
Thank you all.
Mr. CROWLEY. Mr. Chairman, can I--just one more----
Chairman ROSKAM. I will yield.
Mr. CROWLEY [continuing]. Followup just in terms of the 600
cases.
Just following up Mr. Rangel's queries as well, do you have
a list of the 600 cases?
Mr. JOHNSON. So the data that we obtained from the IRS is
anonymized. So we don't know----
Mr. CROWLEY. No. Okay.
Mr. JOHNSON [continuing]. Who those people are. We just
know that they exist.
Mr. CROWLEY. Okay.
Well, Mr. Chairman, I think, if that is the case, we should
inquire as to how we can access that information.
Chairman ROSKAM. Yes.
Mr. CROWLEY. Because I think, if that is the case, we would
like to have that information in terms of who those individuals
are.
Mr. JOHNSON. Absolutely.
Chairman ROSKAM. Perfect segue to the second panel.
Mr. LEWIS. Mr. Chairman.
Chairman ROSKAM. Mr. Lewis.
Mr. LEWIS. Before we leave these two witnesses, I just want
to take a moment to thank you for being brave and courageous,
joining Mr. Johnson to come before us today. I think we learned
a great deal that could be helpful not just to you but to
taxpayers all across our country. So thank you.
Chairman ROSKAM. I know that every member reflects Mr.
Lewis's sentiment.
And, Mrs. Sowers and Mrs. Taylor, thank you for your role
in this as well.
Thank you to the witnesses.
And we will reconvene shortly with the second panel.
[Recess.]
Chairman ROSKAM. Thank you.
We would now like to invite the second panel of witnesses
to the table.
Our second panel is comprised of three witnesses from the
government who are responsible for the IRS' use of its civil
asset forfeiture authority and who handle these cases when they
go to court. So it obviously doesn't start and end with the
IRS. These cases have started with the IRS, but they obviously
are turned over to the Department of Justice to be pursued. And
that is the nature of this inquiry today.
IRS Commissioner John Koskinen is with us; IRS Civil
Investigation Chief Rich Weber is with us--I am sorry, Criminal
Investigation Chief Richard Weber is with us; and DOJ
Department Assistant Attorney General Kenneth Blanco.
The committee has received your written remarks.
A little bit of the back story: We had hoped that you were
able to hear the testimony of the prior panel, and it is my
understanding that you were able to hear the overwhelming
majority of it. That was important to us.
And I also just want to clear up one thing, and that is, in
terms of the Commissioner's participation today, there was a
press story that was involving the other committee of interest
right now. There was a press story that sort of put this
committee in a position of taking a disproportionate amount of
time and attention.
We had invited Mr. Weber to come as a witness. Commissioner
Koskinen, you had said you would like to come. You are always
welcome, obviously, as the Commissioner of the IRS, to come
here. I just wanted it clear that it was at your request that
you are here today, and you are always welcome.
And, at that, let's open it up for 5 minutes. And I am
pleased to recognize you, Commissioner Koskinen.
STATEMENT OF JOHN KOSKINEN, COMMISSIONER, INTERNAL REVENUE
SERVICE
Mr. KOSKINEN. Thank you, Mr. Chairman.
First, yeah, we talked about this a couple weeks ago, about
this hearing. So my only point was I had committed to be here.
I am delighted to be here. You are our oversight committee, and
when you hold a hearing, I am anxious to be here as we go.
I am sorry for the miscommunication about whether we should
be here or not. Your staff was very helpful, and so we were
able to hear about an hour and 10 minutes of the first panel.
So we got, I think, the bulk of the issue. And we do take this
very seriously, and I am delighted to have the opportunity to
testify here again before this committee.
As you know, over a year ago, about a year and a half ago,
we changed our policy in this area and made it clear that there
would--even though structuring still remains a crime on the
books, if you have structured your deposits in a way that
avoids the reporting requirement but it is not with illegal
source funding, as of a year and a half ago, there are no more
seizures by the IRS. And I think that is important to know,
that we have reached out to do that.
As I said when I testified here last February, I guess it
was, we apologize to anybody who had innocently gotten
themselves into the middle of this and committed that we would
do whatever we could to work this forward. And I am delighted
to do that.
I would clarify one other thing before I get into my
statement, which is: There has been a lot of talk about the
forfeiture fund. Those funds don't come directly to the IRS. We
get less than 2 percent of those funds. It is about, on
average, over the last 5 years, it has been $20 million or $22
million, you know, out of an $11 billion budget. So we don't
have a direct incentive that if we get more money it comes to
us. We don't see the money at all. And if it goes to the TEOAF
fund, we get a very small percentage of it, and it goes to law
enforcement purposes.
So I think it is important to understand IRS agents don't
have a financial incentive. They are not measured in any way
under the Restructuring Act, either on the civil or criminal
side, according to whatever collections are taken as a result
of their activities. Those are not performance measures
anywhere. I sign a quarterly authorization and statement that
no one is measured by the amount of money they collect in any
part of the IRS.
So we do take this very seriously. The need to support the
Federal Government's efforts against financial crimes, such as
money laundering and terrorist financing, are important. And in
our efforts, though, we strive for a balanced approach designed
to ensure fairness and respect for the rights of individuals
under the law.
The balanced approach extends to our efforts in regard to
the crime of structuring, in which cash transactions are
intentionally manipulated so they fall below the $10,000
reporting threshold established under the Bank Secrecy Act.
This reporting requirement is one of several used by law
enforcement agencies to uncover illegal activities in the U.S.
and abroad.
Structuring may occur for any number of reasons.
Individuals may want to conceal cash generated from illegal
activities, such as drug dealing, or the cash may come from a
legal source but the person is trying to evade taxes. Whatever
the reason, the law is clear that structuring cash transactions
to evade the reporting requirements is a crime.
Under the law, the IRS and every other Federal law
enforcement agency has the authority in structuring cases to
investigate criminally and seize assets involved in the
structuring. But the law also includes procedures we must
follow to safeguard the rights of individuals and ensure that
the seizure action is appropriate.
Before any action can go forward, before any IRS agent can
take an action, Federal agents must first prepare a seizure
warrant affidavit that is reviewed by the appropriate U.S.
attorney's office, and then the warrant is presented to a
Federal judge who approves or denies it. Only if the judge
authorizes the warrant and the activity by finding there is
probable cause to believe the property is involved in a crime
can the seizure and forfeiture proceedings take place.
As I noted, after reviewing our activities, we did a year
and a half ago change the policy and note we would no longer
pursue the seizure and forfeiture of funds, while illegal under
the structuring act, that were solely legal-source structuring
cases, not derived from illegal sources, unless there were
exceptional circumstances, and there haven't been any since the
policy.
By concentrating on illegal-source structuring violations,
we are now able to devote more of our resources, obviously, to
investigating the most egregious Federal violations, including
those cases where structuring activity is indicative of more
serious crimes.
The change in policy doesn't render prior seizures
unlawful, as structuring is still today a Federal felony
regardless of the source of funds. We will continue to
investigate structuring violations as they relate to other
financial crimes, including tax and money laundering
violations. But we believe that our policies change will help
ensure consistency in how IRS structuring investigations and
related seizures are conducted and ensure, to the extent we
can, fairness to the taxpayers.
As I noted earlier while I was here a year and a half ago,
we have apologized to anyone innocently caught up in this, and
we are doing our best, going forward, to make sure that we
remediate those conditions.
The question has arisen as to how the IRS is treating cases
where legal-source funds were seized prior to the October 17
policy. And, since that date, we have considered approximately
75 cases, including petitions from property owners for
mitigation.
In administrative cases, where we have control, where it
did not actually go--the taxpayer didn't take it to court, we
make a decision at the senior level within our Criminal
Investigation Division, not at the level of the IRS agent
involved in the case, on the merits of whether to return the
funds to the property owner. In judicial cases--that is, where
the seizure went to court for one reason or another--the
Department of Justice has control. And, in those cases, we make
recommendations after reviewing the case to the Department of
Justice about how the case should be handled.
We recognize that seizure and forfeiture, as noted, are
powerful law enforcement tools and must be administered in a
fair and appropriate manner. We understand we have a duty not
only to uphold the law but to protect the rights of individuals
as well.
We look forward to working with property owners who come
forward and file petitions--we are processing those to this
day--and will continue working to ensure that we handle all the
cases with fairness and respect for taxpayers' rights in every
instance.
Mr. Chairman, that concludes my statement, and I would be
happy to take questions.
[The prepared statement of Mr. Koskinen follows:]
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Chairman ROSKAM. Mr. Weber.
Mr. WEBER. No statement, sir.
[The prepared statement of Mr. Weber follows:]
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Chairman ROSKAM. Mr. Blanco.
STATEMENT OF KENNETH BLANCO, DEPUTY ASSISTANT ATTORNEY GENERAL,
CRIMINAL DIVISION, U.S. DEPARTMENT OF JUSTICE
Mr. BLANCO. Good morning, Chairman Roskam, Vice Chairman
Meehan, Ranking Member Lewis, and Members of the Subcommittee.
Thank you for the opportunity to appear today to discuss the
important topic of civil asset forfeiture and structuring.
As a 27-year veteran prosecutor and Deputy Assistant
Attorney General overseeing a variety of areas, including asset
forfeiture and money laundering, I am honored to represent the
Department of Justice today and to address the Department's
commitment to ensuring the Federal asset forfeiture laws are
appropriately and effectively used and consistent with the
civil liberties and the rule of law.
Asset forfeiture and the structuring laws are a critical
tool that serves a number of compelling law enforcement
purposes, including detecting and deterring other illegal
activity. The Bank Secrecy Act assists law enforcement in the
detection of criminal conduct by requiring financial
institutions to file reports concerning financial transactions
in excess of $10,000.
The criminal structuring laws, as enacted by Congress, are
intended to prevent individuals from evading these important
reporting requirements. The government is required to prove
three elements for a structuring charge, namely that the
defendant structured his transactions, knew of the reporting
requirements, and intended to evade the reporting requirements.
It is important to note that structuring is not a strict
liability crime, and an individual who inadvertently divvies up
his money to deposit or withdraw cannot be liable simply for
structuring because he lacks the intent to evade the reporting
requirement.
Congress has authorized a variety of sanctions, both civil
and criminal, for structuring violations, including forfeiture
of the structured funds. In a civil action to forfeit property
linked to crime, including a structuring violation, the
government has the burden to prove by a preponderance of the
evidence that a crime occurred and that the seized property was
connected to that crime.
Even after the government has proven its case, the law
entitles any individuals with standing to assert a claim that
they are innocent owners of the property at issue and defeat
the government's claim.
After a forfeiture is competed, a petitioner can seek the
return of property by filing a petition for remission or
mitigation. Remission and mitigation do not contest the
forfeiture. In effect, those petitions are tools to request a
pardon for the forfeited property. The Department has
procedures in place for considering and fairly resolving each
of these petitions.
Those who commit structuring violations do not qualify for
remission because they are not innocent owners under the terms
of the law. Such petitions might, however, qualify for
mitigation, which is a decision to pardon some portion of the
forfeited property based on a holistic view of the case.
The factors the Department considers when evaluating
mitigation include: the existence of a prior record or evidence
of similar conduct; whether the violation includes a drug
offense or drug crime; the violator's cooperation with law
enforcement on the related matter; was the violation isolated
and not part of a larger scheme; and the necessity of the
forfeiture to achieve a legitimate forfeiture purpose.
In order to protect and maintain the integrity of the work
our career prosecutors and career agents do, I cannot comment
on any pending litigation or specific case today. But I can
tell you the Department continues to thoroughly review and
appropriately rule on any current and newly filed petitions for
remission or mitigation, including those involving structuring
violations.
I would also like to highlight the Department's ongoing and
comprehensive review of forfeiture practices and policies over
the past 18 months. As part of that review, on March 31, 2015,
the Department issued a policy limiting the use of asset
forfeiture to authorities in connection with structuring
offenses in most cases to instances where a defendant has been
criminally charged or there is evidence of additional criminal
activity beyond the crime of structuring.
The new policy also imposes important protections after a
seizure has taken place, including a directive to return the
funds if the prosecutor at any time determines there is
insufficient evidence to prevail at trial and imposing a
deadline for filing a criminal indictment or civil complaint
against the forfeited funds.
This policy is a significant change that exceeds the
requirements of the law, and it underscores the Department of
Justice's commitment to fighting crime and returning money to
victims while protecting civil liberties and ensuring due
process.
I thank the subcommittee for their interest in this matter.
I look forward to fielding any questions from the committee.
[The prepared statement of Mr. Blanco follows:]
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Chairman ROSKAM. Thank you both for your statements.
Just as a little bit of a prelude--and I will come to Mr.
Meehan very, very quickly, but we are having this hearing
because of a briefing that I found just incredibly
dissatisfying in February of this year. And, you know, the
Internal Revenue Service made a decision that I think is a
fantastic decision, and that was, look, don't treat these
underlying offenses that are not criminal cases in this way.
And they made a good decision, and people said, ``Terrific.''
Mr. Weber made the announcement. It was in The New York Times
and so forth. And, across the aisle, there was a sense of,
``This is a good thing.''
Then I asked for a briefing. Because, you know, it just
sort of occurs to one, well, what happens if that was then and
this is now? So, in other words, somebody is caught up in this,
and are they just going to go through the legal meat grinder of
getting caught up? And isn't there a way out for people who
wouldn't--this wouldn't apply to them in the future?
And in this room in February, I thought it was going to be
a 15-minute meeting. I thought it was going to be, ``Hey, Mr.
Roskam, you know, we've disposed of these cases, and here's
this process, and it's all done, and all is good,'' and that I
was going to get on my plane and go home to Chicagoland and
that was it.
But it was just one of these meeting that I came out of an
hour and a half later, and I was completely dissatisfied. And I
told the three representatives from the IRS and I told the
three representatives of the Department of Justice, I said, ``I
am more fearful of you now than I was when I walked into the
room.'' And the fear that I was manifesting was kind of
reflected in my own constituency, and that is: Look, there is
no pursuit of justice here. And it was obtuse. It was this--it
was like a weird Kafka novel script, frankly. I thought, ``We
can do a lot better than that.''
And so, if you listened to the first round of questions,
what you are hearing is a wide range of political opinion, a
wide range of life experience, a wide range of geography that
is all saying one thing: ``Do justice. And pursue it and make
it happen and be aggressive about it.''
And there is always, you know, sort of one reason or
another, or we can't talk about this, and we can't talk about
that. And we are not asking anybody here to do anything that
they don't have the authority to do. But you have the authority
to fix this, and you have the authority to do something
extraordinarily great here.
And the extraordinary greatness would be to restore the
confidence of Mr. and Mrs. Sowers, to restore the confidence of
Mr. and Mrs. Taylor, and all kinds of people out there, where
they say, ``You know what? This government, it responded. And
when it was brought to a level where people said this is an
important thing, the government responded.''
And we have to get this done. There is an urgency to this.
Because if we don't, then what happens? The government becomes
delegitimized in people's eyes. Really, it becomes very, very,
very corrosive. So this is something we have to deal with.
And I am convinced that we can do some good here. I am
convinced that our subcommittee and those in the executive
branch with authority have the capacity together to do justice.
I yield to Mr. Meehan.
Mr. MEEHAN. Thank you, Mr. Chairman.
Mr. Blanco, you cannot comment on specific cases, but we
can. And we sat here and listened to the testimony of two
farmers. And as you go through the litany of the kinds of
issues--whether there was prior conduct, whether it is drug
proceeds, whether they were cooperating, whether it may be an
isolated incidence, whether it is necessary to effectuate a
criminal purpose--I purposely elicited testimony from them
about their experience, and on every factor there is a complete
absence of the kind of aggravating circumstances associated
with their matter.
Now, we are going to talk about policies moving forward,
but we are in this gap of time in which the Department of
Justice, which has been handed a great percentage of the
responsibility to deal with these issues, it now lies with you
and those who work with you.
Now, you talk about cases in which there is a preponderance
of the evidence. We have also heard testimony from the
individual who was here before about some 618 cases in which
the Department of Justice, by it is own identification, from
the Freedom of Information request, identified that that file
contained by the DOJ's failure to check off the box that they
had no suspicion of criminal activity. That is $43 million
worth of dollars that have been seized from American citizens,
small-business owners, in which IRS agents showed up.
Now, I am aware today because of public information which
was made about the extreme activity going on in the Department
of Justice as we speak. Whether it is a policy decision, others
can argue about. But there are scores of attorneys, maybe more,
throughout the Department of Justice voraciously going through
the records of convicted criminals, who are currently sitting
in prisons, trying to find ways in which we can suggest that
somehow those convictions weren't completely just and we have
to undo some percentage of that.
We will let that issue go. What I want to stand for is the
fact that, as we speak today, there is significant effort going
on in this Department of Justice to go through the records of
convicted criminals to see if we can change their load. And yet
we have before us people, no criminal suspicion, assets which
have been seized, 618 cases. What is being done to look at the
cases for those 618? Because in the same case, justice delayed
is justice denied. We are looking at years of delay for some of
these individuals.
Mr. Blanco, what do you know about the efforts looking into
the 618 cases for individuals who have not been suspected of
criminal activity, one of the criteria that you have for a
seizure?
Mr. BLANCO. Congressman, my understanding is, with the
testimony this morning, is those cases were IRS cases. Not all
of these cases would have come to the Department of Justice.
Some of those cases could have been handled administratively.
So I don't think all those cases are ours.
And, also, the $43 million would have gone into the TEOAF
and not necessarily to the Department of Justice.
Mr. MEEHAN. That is not what I am--where it goes, the
money, I am not interested in. Well, maybe we will have--since
we have Mr. Weber, Mr. Koskinen, the three of you can sit and
resolve this issue.
But, Mr. Koskinen, you testified that you have had 75
cases, but that falls woefully short of the 618 which have been
reported, and those only because we have been able to have a
FOIA request to identify those. 75, 618. What do you know about
what efforts have been undertaken to fairly and appropriately
resolve these outstanding issues?
Mr. KOSKINEN. My understanding of the 618 is the box hasn't
been checked, therefore they are going to be criminally
prosecuted. But they doesn't mean that those cases don't have
illegal sourcing being used as part of the structuring.
And our files don't distinguish, at this point, looking
backwards, is which of those would in fact meet the criteria we
are talking about here and which of them actually, while there
is not a criminal prosecution, did have evidence of----
Mr. MEEHAN. But why wouldn't somebody be required to
identify the potential criminal nature for the seizure in the
record?
Mr. KOSKINEN. Remember, these were cases that were filed
before our policy was changed. And, ultimately, the Department
of Justice files----
Mr. MEEHAN. Well, I know that. This is why this is of
concern. I go back to the point, justice delayed, justice
denied. That is fine, we move forward, and we can talk about
the policy moving forward. But you see we are talking about
cases from 2007 to 2013.
We have a farmer here who is looking to pay for a wedding.
We have somebody, the bills have not stopped coming in for the
$49,000 that this farmer is looking to get back which has been
wrongfully seized.
Mr. KOSKINEN. Yes. And as I have noted, we have looked at--
we have received petitions, more than just the couple that were
referred to. As noted, as I said, if they were administrative--
that is, they didn't go into the court system--we have control.
If they went into----
Mr. MEEHAN. My time is up, but I know----
Mr. KOSKINEN. I would be happy to answer the question,
though. I think we can----
Mr. MEEHAN. Well, but IRS is blaming it on Justice, Justice
is blaming it on IRS. Let's----
Mr. KOSKINEN. I am not blaming it on anybody. I am just
telling you what we can do. And what we can do is we have
reviewed 75 cases either with petitions or that were caught in
the middle and----
Mr. MEEHAN. Can you get back to us on the status of 618
which are part of our record correctly?
Mr. KOSKINEN. I would be delighted to do that to the extent
we have that information.
Mr. MEEHAN. Thank you.
Chairman ROSKAM. Mr. Lewis.
Mr. LEWIS. Thank you very much, Mr. Chairman.
Let me thank the witnesses for being here today.
I have been on this committee for some time, and I have
never, ever seen in a very long time this degree, this spirit
of togetherness. On this issue, we are on one accord.
Citizens, taxpayers, landowners, farmers coming, pleading
with their government to help them. They feel like they have
been wronged. This is not their first time coming in to testify
before us. They have invested their livelihood, everything they
have. And they have been told by their government, by the IRS,
Department of Justice, by somebody that we are coming to get
you. They feel like they haven't done any wrong.
So I understand that both the IRS and the DOJ updated their
policies for assets being seized without proving criminality.
In general, is it fair to say that, unless there is evidence of
criminal activity, that your agency would not bring seizure
charges that are solely based on structure of bank deposit?
Mr. KOSKINEN. That is correct.
Mr. LEWIS. Well, Mr. Commissioner, DOJ, tell me, how do you
inform these people that are hurting, that are suffering? How
do you inform them? When do you make it right for them? How
long does it take? How long must people wait?
Mr. BLANCO. Is your question directed to me?
Mr. LEWIS. Any member of the panel.
Mr. BLANCO. Great.
Congressman, prior to a petition for mitigation, a couple
of things have already occurred. And what has already occurred
is that agents, prosecutors, and a judge has found that the
individual has structured funds and that those funds were
structured to a crime of structuring.
So, at this point, when somebody comes for mitigation, what
we are looking at is evaluating the case under the factors that
I have seen. And what ends up happening, Congressman, is it is
not just one person making that decision. There are career----
Mr. LEWIS. But how long does it take for one person or two
or three people to make the decision?
Mr. BLANCO. Good question, Congressman.
What I have seen in my 27 years is, with respect to Justice
and all matters of law enforcement, it does take time. There is
a thorough review of the matter to make sure that we are doing
the right thing, as the Congressman has mentioned earlier. It
is about doing the right, and it is always about doing the
right thing.
Clearly, the government should never be in the business of
taking money from people who have never violated the law. That
is very clear. And I think everybody in this room believes the
same thing.
But it is a process that we must go through. There are
career agents who are looking at cases that are pending before
the Department of Justice, career prosecutors. And it will be
made--the decision will made by a career prosecutor. And there
are layers.
Mr. LEWIS. When we find out that the people didn't do
anything wrong, do we amend? Do we say we are sorry? How do you
make them whole again?
Mr. BLANCO. Congressman, at the point that we are at right
now in many of these pending cases, there has already been a
finding that there was probable cause that the funds used were
attached to a crime, and this crime was the crime of
structuring. It is still a Federal crime.
And so, given that, there is mitigation in this process.
And what we are talking about is pardoning the rest of the
money that was not already given back to the individual. And
that takes some time. Mr. LEWIS. Well, I don't want to get
involved in maybe a particular case, but I am not sure--maybe,
Mr. Chairman, you can help me out here somewhat--that a letter,
an email was sent to someone saying we are treating you
different because you did an interview. Is that right in
America? Don't we have--people are free to say what they want
to say during an interview with a member of the press? Because
you did an interview, so we are going to go after you. I mean,
we are not going to be--we are going to be hard on you.
Mr. BLANCO. Congressman, I will tell you this. My family
are immigrant exiles in this country, and my grandmother always
said one thing to me: ``We didn't come to this country to be
silent.'' So nobody believes stronger in the ability of U.S.
citizens or anybody else to speak up against their government.
And I think everybody in this room feels the same way.
I am not going to comment on any particular case that is
standing before the Department of Justice. You know I can't do
that. But I can tell you that people have a right to be able to
say what they want when they want and to whom they want in this
country. And I think that is something that we all can stand
by.
Mr. LEWIS. Mr. Chairman, I yield back. Thank you.
Chairman ROSKAM. Mr. Blanco, just for your benefit, Mr.
Lewis and I wrote to the Attorney General, brought this to the
Attorney General's attention, the issue that Mr. Reed raised.
And it is part of this, you know, larger contours of these
people who are just run roughshod by this process. And so we
will have an opportunity to inquire further----
Mr. BLANCO. Okay.
Chairman ROSKAM [continuing]. After we hear from all the
members.
Mr. Holding.
Mr. HOLDING. Thank you, Mr. Chairman.
Mr. Weber, will you restate your title, please?
Mr. WEBER. Sure. Chief of Criminal Investigation at the
IRS.
Mr. HOLDING. And you are a sworn law enforcement officer,
correct?
Mr. WEBER. I am not a law enforcement officer. As Chief, I
am not an 1811 special agent.
Mr. HOLDING. Okay. But the agents that work for you are
sworn----
Mr. WEBER. They are, yes.
Mr. HOLDING. They are 1811s, which--an 1811 in kind of the
parlance of the law enforcement community means that you have a
badge, carry a gun, serve warrants, and so forth, correct?
Mr. WEBER. That is correct. I have a badge. I don't have a
gun.
Mr. HOLDING. Got it.
So the actions of your department, you know, IRS Criminal
Investigations, who is ultimately responsible for your actions?
Mr. WEBER. Well, as Chief of CI, I would be responsible for
the actions of my agents. I report up to a deputy commissioner
and then to the Commissioner, who ultimately oversees the
entire IRS.
Mr. HOLDING. But you, as Chief, report to a deputy
commissioner, correct?
Mr. WEBER. I do.
Mr. HOLDING. So that is your direct report.
Mr. WEBER. Yes, sir.
Mr. HOLDING. This deputy commissioner, does he have any law
enforcement background?
Mr. WEBER. I don't believe so. I believe he was with the
IRS for 30-plus years on the civil side, but he may have had
some supervisory responsibility over the criminal side before
the Restructuring Act.
Mr. HOLDING. So this deputy commissioner is a longtime IRS
employee, but he is not a Presidential appointee, is he?
Mr. WEBER. No.
Mr. HOLDING. Can you think of any other Federal law
enforcement agency that directly reports to a non-Presidential
appointee other than you?
Mr. WEBER. I am not aware of one.
Mr. HOLDING. So how often do you have to report to this
deputy commissioner?
Mr. WEBER. Often, in terms of meetings, in terms of
communication----
Mr. HOLDING. Let me ask, what is the protocol?
Mr. WEBER. I have a monthly meeting with the Deputy
Commissioner. I have a monthly meeting with the Commissioner. I
routinely report on the activities of everything that is going
on within CI.
Mr. HOLDING. So if you need additional resources for your
department, what do you do? Who do you talk to?
Mr. WEBER. That would be the Deputy Commissioner and the
Commissioner. And, actually, the entire senior executive team
is involved in decisions regarding budget appropriations.
Mr. HOLDING. So have you had any difficulty getting
additional resources when you have asked for them?
Mr. WEBER. That is probably a difficult question for me to
answer. You know, I think the budget cycle for the IRS has been
especially difficult during the 4 years that I have been here.
So I think it has been difficult for every part of the IRS, not
just Criminal Investigations.
Mr. HOLDING. So, I mean, your criminal investigation
department, it competes for resources with the rest of the IRS
and the other things that they do, correct?
Mr. WEBER. We do.
Mr. HOLDING. So how much of your work, your criminal
investigations, are on tax-related investigations versus, you
know, other types of investigations?
Mr. WEBER. Approximately 70, 73 percent of our work is
related to tax investigations. The other work would be on the
money-laundering side, public corruption, terrorist financing,
money laundering connected to drug trafficking, identity theft,
cyber crimes.
Mr. HOLDING. And I can speak from personal experience that,
you know, the agents of the IRS Criminal Investigations, you
know, are top agents. I mean, when I was a United States
attorney, we always wanted to have an IRS CI agent, you know,
on our most difficult cases, whether it is a corruption case,
terrorism case. They are very, very capable agents.
Mr. WEBER. Thank you. Thank you, Congressman. I have worked
with all of the agencies as a former Federal prosecutor. I have
a lot of respect for the other agencies, but I do believe that
IRS CI special agents are the best financial investigators in
the world. So I appreciate that comment.
Mr. HOLDING. Well, it is borne out by a lot of experience
and results.
Mr. Chairman, I will tell you, this investigation of IRS'
civil asset forfeiture authorities has brought to light to me
some problems that I didn't know of with IRS CI regarding the
resources they have and the supervision and so forth. And I
don't think that housing a criminal investigative agency that
investigates a wide variety of crimes, as we have heard here--
everything from tax crimes to public corruption, terrorism--
under the IRS makes much sense.
And as this committee and this Congress examine ways to
improve the Tax Code and the structure of the IRS, you know, I
think it is important to give the Criminal Investigations of
the IRS the resources it needs, as well as accountability. And
I don't think this can be done in an agency, like the IRS, that
is scandal-ridden, that is plagued with a bureaucracy that
seems to be somewhat unaccountable.
And that is why I have introduced the CI Realignment Act,
which would create an independent bureau of criminal
investigation housed under main Treasury, taking the criminal
investigations out from under the IRS. So I look forward to
working on that.
Thank you.
Chairman ROSKAM. Mr. Rangel.
Mr. RANGEL. Thank you, Mr. Chairman.
I thank all of you for giving us your understanding of the
law, but, quite frankly, that is not the problem we have today,
Mr. Blanco. We all understand the law. We, together, are a part
of government. We answer to constituents. They are our
political family. And when one of them are mistreated, they
come to us for a solution to that problem.
You are part of this family. So to say that it takes a long
time to right a wrong--no, it doesn't. Because we are the
political structure of that government, and we have a 2-year
contract. And so, therefore, it is not your love and respect
for a person's right to speak out against government. We have a
problem. And the best way we can handle it is to come together
to share it and not to talk about how long it takes to resolve
it.
I would like to believe that this is one of the things, the
terrible things, that fell between the cracks because some
agent, some person misunderstood and made one big mistake. But
no. Someone said there are 600 cases, and then I think the
answer was, ``Not exactly.'' Someone said that this is
happening to millions of people, and they said, ``Well, that's
the different between IRS and Treasury.''
You know, as a former assistant U.S. attorney, when a judge
asks, was the government ready, they don't ask whether IRS is
ready or whether Justice is ready. They say the United States
Government. That is us.
So please don't talk about how long it is going to take in
the regular course of procedure to determine whether or not our
government committed a crime, made a mistake, or that you need
our help in order to change the law.
So when someone asks how long does it take and you knew we
were coming, why wasn't this put on the special detail? No,
don't take away agents--people away from those that are trying
to bring some justice to the statutory situation. That is not
what we are talking about. But when you know we have a problem
and you know you are coming before this committee, why in God's
heaven didn't you have somebody get on these 600 cases?
Are there 600 cases, Mr. Blanco, or do you know?
Mr. BLANCO. Congressman, I don't know. That is----
Mr. RANGEL. Did you hear that there was an accusation that
it could be 600 cases?
Mr. BLANCO. I heard that today during the testimony.
Mr. RANGEL. That is the first time you heard about it?
Mr. BLANCO. First time I heard about it.
Mr. RANGEL. Did anyone, did you ever hear that there was
accusation that what happened today with these two witnesses
was the tip of the iceberg and that some people got caught in
this before you changed the policy? Did you know that there was
this accusation?
Mr. KOSKINEN. I noted, when we changed the policy--and we
were the first law enforcement agency that changed that
policy--a year and a half ago, we understood that there would
be some cases that were in process.
Mr. RANGEL. Did you go out of your way to pull out those
cases because you felt that the policy was wrong, an injustice
has been done, not to these 2 people, but to--I think you used
70.
Mr. KOSKINEN. Seventy-five.
Mr. RANGEL. Seventy-five.
Mr. KOSKINEN. And we looked at all the cases that were
caught where they had not----
Mr. RANGEL. As far as those 75, aren't you in a position to
come before this committee and say that, ``Yes, some mistakes
were made, we changed our policy, 75 people we looked into, and
this is our report,'' without violating any--can't you tell us
that--you know, I cannot believe that two farmers had deposits
less than $10,000, and someone reported it or someone found out
about it, they technically violated the old law, they milked
cows and whatever farmers do--pray to chickens--and someone
said that we are going to have to look into this from a
criminal or even a civil thing.
Now, you and I know why we have this structure. Law is for
people who want to avoid the law. And so, if you know that we
have 75 cases, why don't we have 75 explanations of what
happened? Why can't you make us feel like we made a mistake and
we are correcting it?
And this 600 figure, Mr. Blanco, is that we are supposed to
have--and, Mr. Chairman, you may have to help me--600 cases
that the forfeiture bureau said that they have and where they
have checked off a box that is saying that, to their knowledge,
there is no criminal activity involved to refer it to be
prosecuted. And no one seems to know where these cases--you
don't know about these 600 cases?
Mr. KOSKINEN. As I noted, of those 600, there is a box that
is whether they are going to be criminally prosecuted. The box
does not explain to you whether, in fact, there is illegal
sourcing as part of that.
Mr. RANGEL. Listen, you have 600 cases----
Mr. KOSKINEN. Right.
Mr. RANGEL [continuing]. That are in question. You know
where they are. And Mr. Lewis said, how long, how long, how
long is it going to take? Now, let me make it abundantly clear.
This is not going to take as long as you think it is going to
take. I have never seen the bipartisanship on this committee on
anything, and I am going to take advantage of it. I am going to
take advantage of it. It is not going to take the regular
length that it takes to investigate the so-called 600 cases,
period. And we are not going to do injustices to other
investigations that Justice has.
Now, you may come and throw up your hands and say, ``We
don't have resources to do it.'' This is just one of those
things. Six hundred cases is bigger than you ever would think.
But you have to tell us something. You have to find those 600
cases. You are going to find out which one of these people were
suggested to be a drug dealer.
You know, you couldn't pull these farmers out of central
casting in terms of representing what America wants to look
like, you know. And so they didn't come from my neighborhood, I
know that. Because I could understand why you would be giving
them a hard time for that. But we have a case now for America.
We could not have done better in picking out two Americans that
got a bad deal from our government. That is our government.
And so, whoever follows me, you tell them what you are
going to do. Don't tell us what the law is. It is good law.
Mr. KOSKINEN. We can give you the exact response to all 75.
Mr. RANGEL. What happened to the 600?
Mr. KOSKINEN. The 600, as I noted, a number of those do not
meet these criteria. A number of those were people where there
was not enough evidence to convict them of crimes----
Mr. RANGEL. Okay.
Mr. KOSKINEN [continuing]. But there was clear indications
that the money was illegal-sourced.
Mr. RANGEL. Okay. Somebody just told us that they have to
pay you to find out whether or not there is evidence of
criminality. This committee doesn't have to pay you to find
that out, do we?
Mr. KOSKINEN. No.
Mr. RANGEL. No, right?
Mr. KOSKINEN. The FOIA----
Mr. RANGEL. No, no, no. We don't want to know the names,
but someone is going to say that it may not be a sufficient
violation of the law for it to be prosecuted, but there is
sufficient evidence that some wrongdoing is there. We want to
know. Someone else wanted to know, and they said that you told
them that, in order to get the 600, they had to pay a quarter
of a million dollars. Now, we don't have to pay for that,
right?
Mr. KOSKINEN. No. And nor does----
Mr. RANGEL. Forget him.
Mr. KOSKINEN [continuing]. Most people.
Mr. RANGEL. Us. We don't have to pay for it.
Mr. KOSKINEN. You don't have to pay for that.
Mr. RANGEL. So we are going to be able to determine, with
your help, how many of these 600 people have some evidence of
wrongdoing, right?
Mr. KOSKINEN. Right. It will be, as I say, because the
file--you will have to go through every file----
Mr. RANGEL. I understand that.
Mr. KOSKINEN [continuing]. Because a number of--our
experience is----
Mr. RANGEL. Listen, if this was our grandkids that was
going through this, we will find some way to expedite it. These
are our grandkids. They vote, you know?
Mr. KOSKINEN. Our experience is the hearings that this
committee held a year and 14 months ago, the work that has
gone, the visibility, the visibility that has gone when we
remitted, there aren't many people out there who don't know
that, in fact, we are entertaining petitions. And so the people
who have any claim at all----
Mr. RANGEL. We are not waiting for them to petition.
Mr. KOSKINEN. We can----
Mr. RANGEL. We want to know how many of these cases there
is some evidence of wrongdoing, whether it is criminal or not.
And we want, categorically, immediately, the disposition of the
75 cases.
Mr. KOSKINEN. We can give you that.
Mr. RANGEL. And we are going to have a press conference. We
will do all of the notification. And you are not going to
embarrass us any further. Because we have to find some way to
get the weight off of us. You know that.
So please help us to help our constituents, to help our
country. And then on the question as to whether you don't have
the resources to do it, because we know how badly the Congress
has treated you, talk about that. But don't say it can't be
done. We expect for it to be done.
Thank you for your patience.
Chairman ROSKAM. Thank you, Mr. Rangel.
Just for the record, people don't know that money is being
remitted. We had to tell some of our own witnesses about this
process. So there is work to be done, to Mr. Rangel's point.
And, Mr. Blanco, just for the record, every member of this
subcommittee wrote to the Department of Justice in March of
this year and requested a complete and thorough review. So, at
the end, one of the inquiries I will make of you is what is
happening on that.
So I would like to yield to Mr. Smith.
Mr. SMITH. Thank you, Mr. Chairman.
Like the chairman said, in October 2014, the IRS announced
a new policy, that it would only seize structured assets that
came from an illegal source.
During our hearing last year, Mr. Koskinen, you agreed with
Congressman Holding that, if the IRS seizes assets of a person,
they could go to court and argue the government doesn't have
cause if the document doesn't show the funds came from an
illegal source. You said, and I quote, ``Private citizens
should have the ability to do that.''
A few weeks later, though, you said in a letter to the
committee that, quote, ``Decisions above what specific evidence
is included within a warrant affidavit ultimately falls within
the discretion of the U.S. Attorneys Office, in consultation
with law enforcement agents. In the interest of operational
considerations, the assistant U.S. attorney and case agents may
have sound reason for not including certain evidence in a
seizure warrant affidavit involving illegal-source
investigations. So the evidence of a legal source may not be
included in every seizure warrant affidavit.''
I would like to enter your letter and the letter that the
committee sent in response into the record, Mr. Chairman.
Chairman ROSKAM. Without objection, so ordered.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. SMITH. Thank you.
I take it that your revised version is correct?
Mr. KOSKINEN. The revised version is correct, but I think
the original statement was correct. What I said was, under the
process, no matter what the evidence is in there, anyone whose
assets are seized has the right to, in fact, go to court.
And, in fact, that is the distinction of, if they come to
us and it is an administrative proceeding, we can, when they
make a petition, remit the funds directly. If they have gone to
court or the process has gone to court, it is within the U.S.
attorney's jurisdiction.
And that is what my letter says, that it is up to the U.S.
attorney as to how much evidence is in the case. But the
citizen, as I said at my hearing, has the right to come to
court and challenge the validity of the seizure, challenge any
other claims that are being made.
Mr. SMITH. Citizens have due process, of course.
Mr. KOSKINEN. Yes, of course.
Mr. SMITH. Absolutely. Thank goodness for the Constitution.
But, Mr. Weber, this question is for you. You are the one
implementing this policy. If the IRS does not include evidence
that money came from an illegal source in an affidavit,
shouldn't the property owner be able to argue that the
affidavit was deficient and his property shouldn't have been
seized?
Mr. WEBER. So it is not required, Congressman, for the
specific allegations of illegality of the source of funds to be
in the affidavit. So there are circumstances where the agent
and the prosecutor make a determination that the source of
funds is tied to an illegal activity. And those are the only
cases and investigations that my agents are allowed to work
with respect to structuring seizures now.
But there may be a decision by the prosecutor working that
case that they are not going to include certain evidence and
information with respect to the illegality within the
affidavit. That doesn't necessarily mean that that case is not
an illegal-source structuring case.
Mr. SMITH. So, without requiring that information, you all
can present an affidavit to any citizen without proof or
documenting that it came from an illegal source. So that is
what you are saying.
Mr. WEBER. Under our current policy----
Mr. SMITH. Under your current policy, you could go after
any citizen and not provide in the affidavit that it is from
solely an illegal source?
Mr. WEBER. Under the current policy, yes, there is no
requirement that----
Mr. SMITH. Unacceptable.
Mr. WEBER [continuing]. That information would be detailed
in the affidavit.
Mr. KOSKINEN. I am not a law enforcement person, but there
are cases----
Mr. SMITH. The question is to Mr. Weber.
Mr. KOSKINEN. Okay.
Mr. SMITH. That is interesting.
Okay. I have another question then. The IRS' October 2014
policy includes an exception for exceptional circumstances.
What happened to due process? What counts as exceptional?
Mr. WEBER. So a couple things, Congressman.
So, in the year and a half that that policy has been
implemented, we have had not--we haven't had one situation
where a special agent in charge has requested from headquarters
the exception to be applied in their case. So we have not had
one of those cases.
In my view, what we have told our field offices--we have 25
field offices across the country, and we have told our SACs
that it would be in the rarest of situations that we would
approve--and that has to be approved by Washington, in
executive and headquarters--under the rarest of situations.
If it was a case that hypothetically could be connected to
terrorism, where there is information or evidence where the
property may be going overseas, we may not have the specific
evidence or proof that it is tied to terrorism or illegal
activity, they have committed the crime of structuring, but
that property is going to be heading over to another country,
that may be a situation--with the approval of the U.S.
Attorneys Office and the approval of a headquarters executive,
that may be approved.
We haven't had a single case in the 1\1/2\ years that the
policy has been implemented.
Mr. SMITH. Okay.
Mr. WEBER. And I don't think there will be any of those----
Mr. SMITH. One quick question for Mr. Blanco. In my prior
questioning of the folks that testified, I submitted into the
record an email that showed that a U.S. attorney, it seemed
like, was giving harsher penalties in a settlement agreement
because an individual went and spoke to the media.
Is there any policy in the Justice Department that makes
harsher penalties to anyone that you are investigating or
researching if they speak to the media?
Mr. BLANCO. Not that I am aware of.
Mr. SMITH. Okay. Thank you.
Chairman ROSKAM. Mr. Crowley.
Mr. CROWLEY. I appreciate especially Mr. Smith's last
question, because I think that pertains to two of the witnesses
in the first panel that made that allegation.
It wasn't as definitive. It is just, to your knowledge, you
don't know of that. But you don't know if that does--that that
may very well happen within the Justice Department is what you
may have also suggested.
Mr. BLANCO. Without commenting on any pending case in any
part of the Department of Justice, in my 27 years I am not
aware of any policy that would treat any citizen or noncitizen
in this country differently because their voice was heard in a
publication.
Mr. CROWLEY. I will yield.
Chairman ROSKAM. Mr. Blanco, in light of that, what would
your recommendation be to the Department of Justice if it came
to your attention that somebody did something like that that
shouldn't have ever happened in your 27 years of experience?
Mr. BLANCO. Congressman, you are really close to me
commenting on a particular----
Chairman ROSKAM. I am not asking you to comment on a
particular case.
Mr. BLANCO. Congressman, I can't comment on that. You know
that.
Chairman ROSKAM. I yield back.
Mr. CROWLEY. I would suggest not in any case, but if you
became aware, hypothetically, that someone in your department
had done that or made that statement, would you believe that
they were in violation of the law, that they themselves were
being oppressive?
Mr. BLANCO. You are putting me in a bad spot, Congressman.
You know I can't talk about those issues.
What I can tell you is the following. I can say this, that
no citizen or noncitizen should ever been treated differently
because their voices were heard. That is what I will tell you.
You can take from that----
Mr. CROWLEY. That is interesting. That is interesting.
For a point of information, just to clarify for the
committee's sake, Mr. Johnson requested a FOIA request with the
IRS and not with the Justice Department. Is that correct?
Chairman ROSKAM. I think that is right, yes.
Mr. CROWLEY. Mr. Johnson, you are nodding yes.
Okay. So I don't necessarily expect that you would have
that request before you, et cetera. Because Commissioner
Koskinen has mentioned 75 cases. They may very well be a part
of the 600 that Mr. Johnson is speaking of. Is that correct?
Mr. KOSKINEN. I am reasonably confident that they are.
Mr. CROWLEY. That they are.
In terms of when a case is deemed as being structure alone,
with no criminal intent, just that a person who is a farmer has
$8,000 sitting in their house, they are not comfortable with
that, they will bring it to their bank, and it happens a couple
of times, and the bank reports it, therefore that is what
brings the attention and focus, so there is no--they are not
drug dealers, they are not terrorists, not doing anything else,
and it is a structure--you could be deemed as structuring, but
that is not the intent, they don't have that intent----
Mr. BLANCO. May I just quickly, Congressman?
Mr. CROWLEY. Uh-huh.
Mr. BLANCO. You wouldn't be a structurer, because you would
have to have the intent to evade.
Mr. CROWLEY. Understood. But what they may be doing and
what your interpretation of what they were doing may be two
different things.
But you then deem that it is not really criminal activity,
and they are pardoned, right? You mentioned something about
pardoning?
Mr. BLANCO. There is a procedure that we use. It is a
petition to file, and it is called mitigation.
Mr. CROWLEY. Do they get all their money back?
Mr. BLANCO. It depends. They could. They could get nothing
back. They could get part of it back. They could get all of it
back.
Mr. CROWLEY. So, if they did nothing--if they had no
criminal intent, what they were doing was they just simply were
uncomfortable having the money in their house, putting it in a
bank so it is more secure--but they could potentially be
found--they could be pardoned for it because there was no
criminal intent, but they may not get any money back. So the
question of do they get their money back with interest is not
even a--shouldn't even be in query at this point, I suppose.
The key job of this committee is to determine wrongs or
injustices and use all of our abilities address those wrongs
and injustices. And I think, in the spirit of Mr. Lewis, I
haven't seen it done in such a bipartisan way as I have today,
myself. So I want to thank my colleagues on the other side of
the aisle.
A lot has happened since we last met on this topic back in
February, as was mentioned earlier. I still think that a lot
more needs to be done.
At our last hearing, I think we were all disturbed to learn
that the IRS, as well as the U.S. attorney and the Federal
judges, had the ability to seize American's bank accounts while
never charging the account holders with a particular crime.
This policy turns the basic principle of American justice of
innocent until proven guilty, as I mentioned earlier, on its
head.
At that hearing, the Commissioner did apologize for the
past abuses of the agency, abuses that did not occur on his
watch, and took quick and early action in his tenure as the
Commissioner of the IRS to reverse the rules used by the agency
in civil asset forfeitures. And for that, we are very, very
grateful. But we also learned that Congress must also get
involved to change the underlying laws that allowed these past
seizures of legally acquired funds to happen.
Yesterday, Mr. Roskam and I, Chairman Roskam and I,
introduced bipartisan legislation to fix the law and prevent
the seizures of bank accounts of law-abiding citizens. Our bill
would prohibit the IRS from undertaking any civil asset
forfeiture related to structuring unless the funds were derived
from an illegal source or the funds were structured to conceal
other criminal activity, which got to my initial question to
you, Mr. Blanco.
We also require the IRS to notify an account holder of a
seizure within 30 days of that seizure and guarantee a post-
seizure hearing within 30 days to see if there was
justification to seize the assets and, if not, to return them
forthwith to the account holder.
But passage of this bill won't solve all of the problems
particularly for the past victims of asset seizures, such as
the people as we had with us in panel 1 or behind you today.
The people in panel 1 are victims and not criminals. And they
need to be made whole of any funds that were wrongly seized
and, I would suggest, with interest.
That is why this subcommittee also needs to make sure the
IRS goes through its old files and returns all the funds
wrongly taken from law-abiding citizens in these civil asset
forfeitures, and done swiftly and quickly.
Civil asset forfeiture is an important tool, as we have all
recognized, that the IRS and other Federal agencies need in
order to go after ill-gotten funds from drug dealers, human
traffickers, terrorists, and other criminals. But we need
strong protections in place to ensure that these seizures never
target law-abiding citizens. It has become oppressive. We also
need to correct past seizures. And I look forward to hearing
from you in the future as to how we can further strengthen the
law to make sure that law-abiding American citizens are not put
through this oppression in the future.
I would like to ask specifically, or just real quickly, in
terms of the bakery issue in Connecticut. I have been in
communication with Congressman Joe Courtney. He has assured me
that he will address this issue, adding his weight to make sure
that full restitution takes place.
And, finally, Mr. Chairman, I want to also address the
larger issue that is outside the purview of this committee but
not of our Congress: the need for comprehensive criminal
justice reform overall.
You know, this is just another portion of it that doesn't
get as much highlight in terms of the media today. As this
hearing shows, the government can seize your money without
pressing charges. But there are too many cases of the
government seizing not only people's money but their freedoms
as well.
We need to address and clean up the problems in civil asset
forfeiture. Representative Roskam and I have a bill that would
do that. But we also need to enact comprehensive criminal
justice reform across the board, both civilly as well as
criminally.
And, with that, I yield back the balance of my time.
Chairman ROSKAM. Mr. Reed.
Mr. REED. Thank you, Mr. Chairman.
And, Commissioner, you and I go way back, and I have always
given you the benefit of the doubt.
And, first of all, Mr. Taylor is behind you, over your
right shoulder. Mr. Sowers I think you have already apologized
to, if I got your testimony at the last hearing correct. You
may want to have a conversation with Mr. Taylor. An apology
goes a long way still in America. So maybe, on behalf of the
IRS, you may have that conversation.
Second, I appreciate you taking the bait. When I talked
about the financial incentive of the IRS, you made it perfectly
clear in your testimony that that had in no way influenced any
of your agents or any of your activities in the IRS. Now, I
don't concede that point. I think that may still be there. And
I haven't been in D.C. that long, but $22 million, as you
testified to, that 2 percent of those recovery funds going into
the agency's budget, is still a lot of money to a lot of
Americans. $22 million is a lot of money. Maybe you have been
in D.C. quite some time and to you that is chump change, but I
will tell you, to most Americans, that is a lot of money.
And, at the end of the day, that leads me to the conclusion
that, if there is not a rational reason why the agents are
doing this for financial purposes for the budget, that I still
believe is potentially there, then what you are conceding is
that these agents are abusing their authority, they are abusing
their position.
And so I want to go to one thing here. Because after the
last testimony, or last hearing, there was an additional
exchange. And I would like to offer in preparation for my
testimony an email that was between Steve West, Assistant
United States Attorney, and a Michael Petty, who represented an
individual in the prior testimony.
And so I seek unanimous consent to enter that into the
record.
Chairman ROSKAM. Without objection, so ordered.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. REED. So this is the attorney for one of the other
individuals that was involved in the last hearing. And this was
after the hearing, and this is from Mr. West, United States
attorney, to Michael Petty, the attorney for the individual
involved in that case.
And what it says in here was--they were sharing some
information about the hearing. And Mr. West indicates, ``My
intent was for you and your clients to be able to actually know
the facts so you could review them and have an intelligent
discussion with me. Whoever made it public may serve their own
interests, but it will not help this particular case. Your
client needs to resolve this or litigate it, but publicity
about it doesn't help. It just ratchets up feelings in the
agency. My offer is to return 50 percent of the money.''
That is the exact email from one of your U.S. attorneys,
Mr. Blanco.
Mr. BLANCO. I would imagine it is an assistant U.S.
attorney.
Mr. REED. Assistant U.S. attorney.
When it says ``ratchets up feelings'' because someone is
talking about their case publicly--and you heard my questioning
previously and Mr. Smith's questioning about the email that was
sent in the other case. These are two different cases, but it
seems like there is a theme developing here.
So if it is not for financial purposes, as I may think--and
my opinion is still there, but the Commissioner doesn't believe
it is going on--it sounds like a U.S. attorney is a little
upset people are talking about their situation publicly.
And I know, as you indicated in your response to testimony,
that puts you in a bad spot. And you know what? I don't give a
damn.
Mr. BLANCO. Not a bad spot. An inappropriate spot,
Congressman.
Mr. REED. Inappropriate. No, I think your testimony was a
bad spot.
Mr. BLANCO. Okay. It is inappropriate.
Mr. REED. Inappropriate.
So if a U.S. attorney is chastising someone from a previous
congressional hearing that discussed their case publicly, would
you say that is appropriate behavior by the United States
Attorneys Office?
Mr. BLANCO. So I am not going to comment on that. I don't
know where that is in----
Mr. REED. Not about this case. But just publicly talking
about it.
Mr. BLANCO. I am not going to comment on that.
Mr. REED. Not going to answer the question. Not going to
answer the question to the American people.
Mr. BLANCO. As I mentioned earlier, I think when people
speak up they should not be punished. That is what I told you.
Mr. REED. So if someone is using their position to go after
somebody for speaking up publicly, your official testimony to
this is that is not appropriate. Right?
Mr. BLANCO. Congressman, if that is the way you want to
interpret it, that is fine. I don't think power of the
government should be used against anybody if they speak up. I
think I have been pretty clear about that.
Mr. REED. And if you uncover that, if we uncover that, what
would you recommend we do about that?
Mr. BLANCO. I can't recommend on behalf of the Department,
Congressman. That is something that I will take back with me
now that you have mentioned it today.
Mr. REED. Mr. Commissioner, how about your IRS agents?
Would you feel that is an appropriate action by some of your
IRS agents dealing with these cases?
Mr. KOSKINEN. No. And I have no evidence that there is a
case of that. And if there is a case of that, it is
inappropriate. I think Mr. Blanco is right. We spend a lot of
time training, in particular, as Congressman Holding knows, our
revenue agents, officers, and criminal investigators about the
importance of their work and the seriousness of protecting
taxpayers' rights.
Mr. REED. One last point, if I could, Chairman.
Chairman ROSKAM. Sure.
Mr. REED. The other thing that is frustrating here is you
all are hiding behind due process and saying that individuals
can take their case to court. But you understand; these are
hardworking Americans. It is going to cost them tens of
thousands of dollars to hire a lawyer, go win their day in
court and stand with you. And you know what your agents are
telling them? I will give you 50 cents on the dollar.
Mr. KOSKINEN. I have not----
Mr. REED. That is legal? That is a shakedown.
Mr. KOSKINEN. I have not suggested these people need to go
to court. As I say, we have entertained petitions and will
continue to entertain them and treat them quickly and
efficiently.
Mr. REED. No, but you said that is what is available to
them and they can pursue that as their avenue of recourse. But
you understand, these people have to pay money to lawyers. They
have to take time away from their farms. They have to come here
to D.C. to meet with you. And then what you guys do--what you
guys do is you have their cash. And what you say to them is,
``You know what? I'll be kind to you today. I'll give you 50
cents on your dollar.''
Mr. KOSKINEN. That is not----
Mr. REED. You don't have a right to the money. You don't
have a right to the money.
Mr. KOSKINEN. That----
Mr. REED. Because as what is indicated here, you don't have
an illegal basis--or you don't have a basis in law where you
can say these guys are engaged in illegal acts. Mr. Taylor and
Mr. Sowers, they are just farming.
Mr. KOSKINEN. Right. We do not have----
Mr. REED. And what you are doing is telling them, ``We'll
settle it up with you.''
Mr. KOSKINEN. We don't have a position of giving people 50
percent of their money back. That is not our case.
Mr. REED. With that, I yield back.
Mr. KOSKINEN. And I would also state, just to make sure the
record is clear as to why we may have a disagreement, of that
$6 billion, the vast majority of that is illegal funds from
drug traffickers, money launderers, terrorists trying to
finance it. The vast majority of that is there. It has been
seized so that it would not continue to be used for----
Mr. REED. But $22 million goes back into your coffers.
Chairman ROSKAM. Mr. Rice.
Mr. KOSKINEN. And $22 million of that comes to us subject
to the jurisdiction of the Treasury Department, about 2 percent
of those funds. So it is clearly not what we are chasing.
Mr. RICE. Thank you, Mr. Chairman.
These 600 cases where the box hasn't been checked that
there is any--I am speaking to you, Mr. Commissioner--the box
hadn't been checked there is any underlying criminal activity--
--
Mr. KOSKINEN. That is not what the box is. The box is
checked that there is a not a criminal prosecution. It doesn't
tell you what the underlying circumstances are.
Mr. RICE. Okay. Is there an ongoing process where you are
reviewing those 600 cases right now?
Mr. KOSKINEN. No. The ongoing process we have had is we
have reached out and reviewed any case that was decided before
the policy was implemented and has not been concluded. And
there are a number of those. And then we have reviewed the
petitions that have come in, of which there have been a number.
And all of those reviews----
Mr. RICE. Okay.
Mr. KOSKINEN [continuing]. Have been handled----
Mr. RICE. But the 75 cases you mentioned, that is the
petitions?
Mr. KOSKINEN. That 75 is, in effect, included--we didn't
make--those aren't new cases. Those are part of the inventory.
Mr. RICE. So how many of these 600 cases has the IRS taken
upon itself to review, determined that they were in the wrong,
that the taxpayer's money was taken illegally, and has returned
the money to the taxpayer?
Mr. KOSKINEN. We have reviewed, as I say, the ones that
were pending before and not concluded.
Mr. RICE. Okay.
Mr. KOSKINEN. There are about 50 of those. We have reviewed
those and either made remissions or recommendations.
Mr. RICE. Okay. So those were already pending, or the
taxpayers brought them to your attention. How many, again--
let's ask the question again----
Mr. KOSKINEN. No, we reached out to the bulk of those.
Mr. RICE. How many of these 600 cases that weren't pending,
okay----
Mr. KOSKINEN. All right.
Mr. RICE [continuing]. That were decided before this policy
change, has the IRS taken it upon itself to go on and check and
make sure we didn't take these people's money illegally and
decided that we were wrong and returned the money to the
taxpayer? How many?
Mr. KOSKINEN. At this point, the 75 are part of that 600,
those are the cases----
Mr. RICE. Those were the ones that were already pending.
Let's throw those out.
Mr. KOSKINEN. No, those are actually some reasonable number
of petitions. So anyone who has petitioned we have taken and
given an appropriate response.
Mr. RICE. Okay, I understand if they are petitions, but----
Mr. KOSKINEN. Beyond the 75 that we have reviewed, we have
not reviewed the other part of that inventory.
Mr. RICE. Okay. Is there a plan to start? I mean, are we
going to start that soon? Or are we going to--are we just going
to wait until these taxpayers come to us, realize, figure it
out, I don't know, somehow, by magic, that we have changed our
policy and wait for them to come to us? Or are we going to
aggressively go out and try to locate where we have taken these
people's money inappropriately?
Mr. KOSKINEN. At this point, again, these are part of the
reason the FOIA request for the entire files is there, massive
files. A big chunk of them, a majority of them, are initially,
when we looked at them, as cases come in, criminal sourcing. So
we do not have a plan at this point.
Mr. RICE. Mr. Johnson here from the Institute for Justice,
he is worried about these 600 files, and he has filed a FOIA
request, and you have told him, ``Yeah, we'll give you the
information if you pay us a quarter of a million dollars.''
Mr. KOSKINEN. The FOIA charges--the media pay no charges.
The FOIA charges, we are obligated to charge the cost of
production. So I don't know what his FOIA request was, but for
the amount to be that much, that large, he must have asked for
a lot of material. Because it is just simply a question of what
does it cost to produce. We actually----
Mr. RICE. All right. So what we have done here--he has
identified 600-plus cases where there is apparently no
underlying criminal activity, that people's money has been
seized. I think the Fourth Amendment says that you can't seize
people's money without probable cause.
Mr. KOSKINEN. Yes, that is correct. And probable cause
was----
Mr. RICE. And before your policy change, I guess you were
relying for probable cause on the act of structuring in itself
and not any underlying crime. But we have decided that is
wrong. So maybe what we should do is kind of reverse the
presumption here and say, if we don't have probable cause to
seize based on some underlying crime, these people need to be
getting their money back. And we need to be notifying these 600
people that, hey, perhaps we acted wrongfully here.
Because I will tell you--how long have you been the
Commissioner of the IRS now?
Mr. KOSKINEN. Two and a half years.
Mr. RICE. Uh-huh. And we had this discussion last time you
were here, that we just continue to see scandal after scandal
after scandal after scandal.
Mr. Johnson, I believe it was, said earlier--you know,
whose faith in the government has been eroded. I think that is
absolutely justifiable. I think the American people's faith in
the government has been eroded. I think that is a lot of the
frustration you see in the election, in the primaries in both
parties right now. People are sick of it.
And you guys, particularly you guys with the badges, you
have an elevated level of duty to the public. You hold the
public's trust, and you are eroding that trust.
How long does it take, Mr. Koskinen, to stop the scandals?
You have been there 2\1/2\ years. How much longer is it going
to take?
Mr. KOSKINEN. Again, as the chairman noted, we changed the
policy on our own a year and a half ago dealing with this.
Mr. RICE. Yeah.
Mr. KOSKINEN. It has not been a scandal. The law is clear.
If you intentionally structure deposits, it is a violation of
the law. The issue here is not that that is not a violation of
law. The issue here----
Mr. RICE. These fellows have been trying to get their money
back longer than that. I mean, we have 600 people who we are
sitting here saying today we don't know if we took their money
wrongfully or not. And we are not actively going out to try to
determine that.
Mr. KOSKINEN. We will pursue that, but I would stress that
it was not wrongfully taken at the time. The law is clear--the
law is clear today--that if you intentionally structure your
deposits you are violating the criminal law.
The fact that the policy before that allowed a seizure when
no illegal source of the funding has been changed does not mean
that structuring is no longer a crime. Now what we are saying
is, if you intentionally structure but the source of the funds
is legal, so you are simply hiding the assets or trying to
protect yourself or avoiding taxes, we won't seize the funds.
That doesn't mean intentionally violating the law is no longer
a violation of the law.
Chairman ROSKAM. Mr. Marchant.
Mr. MARCHANT. Commissioner, what is the conduit that the--
--
Chairman ROSKAM. I am sorry, Mr. Marchant. I made an error.
It is Mr. Davis' turn, of Illinois. I regret that.
Mr. Davis, I apologize. I recognize you.
Mr. DAVIS. That is quite all right, Mr. Chairman.
And thank you, gentlemen, very much.
Commissioner, the policy was changed because of recognition
that there were individuals who might be unduly penalized. And
now we are hoping that, with this policy change, individuals
who fit that category will no longer have this problem.
But we also have the problem of trying to retrieve the
assets that individuals have already had forfeited, taken from
them. And I guess, no matter what it is that we do in the
future, those individuals are still going to feel that their
money was taken from them without just cause.
And so I guess we are trying to figure out a way----
Mr. KOSKINEN. Right.
Mr. DAVIS [continuing]. How do we legally--how do we get
their money back in their pockets, back in their family
accounts.
We have indicated that, of course, the courts are a refuge
of last resort, that you can end up in court.
Mr. Blanco, let me ask you, is it not true that prosecutors
oftentimes make recommendations to the court? And so it
occurred to me that there might be a way that the agency,
through its prosecutors, makes some recommendations to the
court that might get these individuals their money back, and,
at the very least, they would feel a different way or a greater
sense of not having been violated.
Does that sound like any kind of possibility that
prosecutors could take in court situations?
Mr. BLANCO. Congressman, we actually have a process where
the agencies, in particular the IRS, and also the U.S.
attorneys offices get together to decide whether or not those
factors that I mentioned earlier exist in mitigation cases,
whether or not the money should be returned.
Those recommendations come to the Asset Forfeiture Section
of the Criminal Division of the Department of Justice, where a
career prosecutor makes the decision whether or not the
mitigation--taking into account the recommendation--whether or
not these funds should be mitigated.
So there is that process in place, and we are working that
process in every matter or every petition that we receive,
whether from the IRS or other agencies. So there is that
possibility, yes.
Mr. DAVIS. Could that also include court costs, in terms of
expenses for the individuals who have had to come into court to
try and get the matter resolved?
Mr. BLANCO. Congressman, I am unaware of us doing that in
the past. But let me look into that and see whether we have
done that in the past, and I can get back with you on that.
Mr. DAVIS. It seemed to me that all of us are actually in
agreement that there are two things we want to do. One, we want
to prevent these instances from ever reoccurring or from
happening again; and find a way to compensate the individuals
who have been or, at the very least, feel that they have been
violated.
And I think, if there is--I have been told, if there is
righteousness in the heart, there is beauty in the character.
And I think the character of our government should be that we
would find a way to make sure that we don't leave any citizens
with the feeling that they have been violated by their
government.
I thank you gentlemen and yield back.
Chairman ROSKAM. Mr. Marchant.
Mr. MARCHANT. Thank you, Mr. Chairman.
Before we leave the issue of how a person files a petition,
Commissioner, do you know how many people are actively filing
petitions now to get their money back, of this group? It might
be 600, it might be 1,000, or it might be 75.
Mr. KOSKINEN. As I was saying, the 75 include people who
have filed petitions as well as those that we actually reached
out ourselves to review out of that 600.
Mr. MARCHANT. And then, so that I understand exactly how
the process works, it never gets to the U.S. Attorneys Office
until you have gone through that complete process?
Mr. KOSKINEN. Yeah. They can petition to Justice if they
like. As I said, if the process itself initially, in the past,
before the policy, was one where the taxpayer came to us to
mitigate or negotiate, that is an administrative case, and we
have total control of that, and those are the ones we have
mitigated.
To the extent that the taxpayer went to court or the case
went to court and became judicial, handled by the U.S.
attorney, who originally has to obviously review it to allow
the seizure, that then is a case where we will make a
recommendation but the case is within the control of the
Justice Department.
Mr. MARCHANT. But Mr. Blanco testified earlier that, in the
cases that get to you, it is strictly a mitigation. It is
strictly, you used the word ``pardon.'' It is assumed that the
party was guilty of structuring, and it is purely a pardon/
forgiveness mitigation, not--we are no longer trying the fact
that they didn't structure.
Mr. BLANCO. That is correct, Congressman. And making a very
short version, because there is also remission that has to do
with victims and innocent owners. But what we are talking about
today is mitigation, and you are right about that.
Mr. MARCHANT. So the people that actually prevail at the
end, if they can afford it or have the perseverance to do it,
still are very stigmatized. Because the assumption going into
your department was that they were guilty of structuring----
Mr. BLANCO. Congressman, there was a----
Mr. MARCHANT [continuing]. In the strictest terms.
Mr. BLANCO. There was a finding that there was probable
cause that the person did the structuring and did it knowing
that there was a rule against structuring and did it to evade
that rule. So there is that probable cause that was found. So
you are right. They do come into that process, and, in coming
into the process, those funds have already been seized and
forfeited.
Mr. MARCHANT. And getting past that filter, coming to your
filter, is it 10 cases, is it 20, I mean, out of the United
States----
Mr. BLANCO. Well, I don't know that yet. We will see. We
have petitions that are already in place for mitigation. Some
of them are pending positions that we are looking at. This
process has been in place for a number of years. This is
nothing new. And we will see how many petitions we get.
Mr. MARCHANT. But to obviously address the concerns of this
committee, both sides, it isn't 600 or 700 cases that are
immediately before you. I mean, it is a manageable number of
cases that are before you that can be looked at in a reasonable
amount of time. And I know there are way different definitions
of ``reasonable amount of time'' in the government, but----
Mr. BLANCO. Right.
Mr. MARCHANT. And you heard me ask the previous witnesses,
you know, how have they altered their way of doing business
now. And, to me, the government actually puts itself at a
disadvantage when law-abiding citizens decide to alter their
way of doing business so that they don't fall into this great
filter, this funnel.
You know, we have this conduit that was--I mean, we don't
have IRS agents driving up and down rural roads in Virginia and
Maryland looking for people selling stuff on the side of the
road. That isn't the way they got into the system, right?
Mr. KOSKINEN. No. And, in fact----
Mr. MARCHANT. The system captured them----
Mr. KOSKINEN [continuing]. They can continue to do business
the way they did. What has to be filed simply is a simple bank
report. Structuring is if you intentionally avoid the
reporting. If you want to continue to deposit $10,000, $8,000
regularly, you can simply have the bank file the report.
So it is not as if you have to change the way you have done
the business. You can keep doing the business the way you did.
The question here is whether the report is being filed.
Mr. MARCHANT. And we appreciate the policy change. My
concern, with the chairman's, is that the next IRS
Commissioner, the next administration, can change that policy
and can go back to this kind of activity.
And, Mr. Chairman, I know that is a great concern of yours,
it is of mine, it should be of every American, that before we
end this subject, we have to kind of--we have to make sure that
this is just not a policy decision. It has to be the law.
Thank you.
Chairman ROSKAM. Mr. Kelly.
Mr. KELLY. Thank you, Mr. Chairman.
Mr. Koskinen, do you think a legal doctrine that allows law
enforcement officials at either the Federal or State level to
confiscate a family's cash, car, home, or business without ever
being charged with a crime is a good thing? It is just a yes or
no.
Mr. KOSKINEN. That is what the law is. The law says, if you
violate the----
Mr. KELLY. You don't need to build me a watch. Just tell me
what time it is. Is it a yes or a no?
Mr. KOSKINEN. I am sorry, the question----
Mr. KELLY. All right. Here is my point. We are seizing
people's assets because we think they may have done something
wrong. We are talking about due process here----
Mr. KOSKINEN. There has to be a probable cause finding by a
U.S. attorney, and----
Mr. KELLY. Somebody selling corn and tomatoes isn't the
same as a member of a terrorist group, okay?
Now, if you look up on the wall here--because this is what
I believe is going on. This is extortion. The practice of
obtaining money, property, or services through coercion, force,
or threats is synonymous with a shakedown.
Now, I know that really rankles the IRS. And it should. But
it should not just rankle the IRS; it should rankle every
single American. Because you know what? We all work for the
same people. We are all trying to get to the same end.
This isn't grilling you for the sake of grilling you. This
is a fact that Americans' rights have been taken from them by
an agency that somehow equates a guy who gets up at 12:30 in
the morning to milk cows is the same as a guy who structures
some type of a scheme in order to be a terrorist.
Mr. KOSKINEN. And that is why we have changed the policy.
Mr. KELLY. Listen, I am not asking you about that.
Mr. KOSKINEN. We have changed the policy.
Mr. KELLY. I am going to ask Mr. Weber.
So when you sit down, Mr. Weber, with the people you work
with, do you all sit down and say, sometimes we look at what we
do and I think that we are really far from where we are
supposed to be?
Mr. WEBER. Yeah. That is why I changed the policy a year
and a half ago.
Mr. KELLY. Okay. But, now, all those folks that you have
deemed under a possible structure, you seized their assets,
right?
Mr. WEBER. We don't seize based upon a possible
structuring, Congressman. What we do is we work with the U.S.
Attorneys Office----
Mr. KELLY. They haven't been convicted of anything, though.
Mr. WEBER. And they don't have to be, pursuant to the law
that has been on the books for 30 years.
Mr. KELLY. I understand.
Mr. WEBER. So what we do is----
Mr. KELLY. I understand.
Mr. WEBER [continuing]. We go to the U.S. Attorneys
Office----
Mr. KELLY. I understand.
Mr. WEBER [continuing]. There, we get a warrant signed by a
judge----
Mr. KELLY. Mr. Weber, I understand. It is wrong. It is
wrong. You can say it is--hey, just because it is the law
doesn't make it right.
Mr. WEBER. Right.
Mr. KELLY. It is wrong. You know it is wrong, and the
people you work with know it is wrong.
So what I would suggest is you do the same type of a look
inside that Congress does of what is it that we are doing that
is actually hurting people, how are we keeping people from
reaching the American Dream, and shouldn't we maybe turn around
and fix it.
I am not coming after you because I don't like you. I am
coming after you because this is absolutely insane, that we
have to have a committee meeting to talk about people who are
being wronged. Their assets are being seized. You keep their
money. In some cases, they get some of it back. In some cases,
they get none of it back. Who determines that? In some cases,
we say to them, ``Hey, you know what? Give me 50 cents on the
dollar, and you can go away.''
You are seizing money from real people. Real people.
Americans. These are not people who are terrorists. These are
not people who are running some kind of a drug chain. And you
know it. You know it.
There is an article in The Washington Post I would like to
put in, Mr. Chairman, and it does have to do with the asset
seizures fueling police spending.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. KELLY. And I know, Mr. Koskinen, it was only $22
million or $23 million. And, honest to God, back where I am
from, that is a lifetime of ultimate success, okay? So it is
not peanuts. But here is----
Mr. KOSKINEN. It is a very different situation than----
Mr. KELLY [continuing]. What I want to get to though.
Listen, I want to tell you something. When we can get to the
point that we look at each other and decide we are going to do
what is right for the American people, not that somehow people
are going to ask you ``gotcha'' questions--because I know that
is what happened to the Taylors and the Sowers. It was all
``gotcha'' stuff.
These people come in, sit down at your kitchen table, have
a glass of iced tea, talk a little bit about this, a little bit
about that. The next thing you know, you better have a lawyer
the next time we talk. And the meter starts to run. And it
continues to run, and it continues to run. And you know the
people who don't have to worry about picking up the tab on the
bill? You all. The same people that fund you fund all the
different legal activity. Every single penny comes from
hardworking American taxpayers.
Mr. Weber, please, I am talking to you. I know you don't
want to look at me on this. And, listen, I understand that. I
understand that. But here is what I want to get to. There has
to be some point in time that we do the right thing for the
American people because that is basically who we are. That is
the very fabric of who we are as a people.
Just as a biblical reference, you know why David went in to
fight the Philistines? Do you know why David went to fight the
Philistines? Because he went to feed his army, the Israelite
army that was afraid to go into the valley against Goliath
because Goliath was so big, Goliath was so intimidating. Nobody
would go out. David--his dad says, ``Hey, take corn, take
water. They need your help.''
He goes there, and you know what he finds? Nobody in the
army is willing to go into the valley. Nobody. You know what
David says? He goes out himself. You know what he declares?
``Is there not a just cause? Is there not a cause?''
And I would hope that each member of the IRS understands
that we are not painting you all as being bad people. But you
are having a dramatic effect and a negative effect on the
American people. And I think, as Kenny just talked about, when
we, as a government, no longer stand up for the rights of
individuals and freedom, we have turned our back on 1.4 million
people in uniform that gave their lives that we could practice
our type of government today.
This is not coming at the IRS because we don't like you.
This is coming after the IRS because you have hurt our people--
our people, together, all of us. And I think that is the thing
that we have to start understanding. It is not a me-versus-you.
It is not you versus the American people. But, at some point,
doesn't somebody say, is there not a cause? And can we not take
a wrong and make it a right?
You don't pay them for loss of income. You don't pay them
interest. You don't pay them for damage to their reputation.
What you do is say, ``Hey, we may give you some of it back.
Maybe we won't. Depends how I'm feeling.'' Okay.
And I am so sick and tired of hearing about it is legal.
There is a hell of a difference between what is legal and what
is right. You all know that. I know it. I have suffered it in
my personal business life.
And that is why we are here. This is America's House,
representing every single American, including every member of
the IRS, by the way. I do appreciate your service. But I think,
when we realize--when we realize that we are doing the wrong
thing, stand up and just say, ``We were wrong, and we're going
to make it right.'' That is so basic and what we believe as
Americans. It just is so fundamental. And there truly is a
cause.
Mr. Chairman, I yield back.
Chairman ROSKAM. Thank you, Mr. Kelly.
I want to thank the panel for your testimony today. I want
to thank our witnesses for your journey and your willingness.
As I said before, you really do exemplify and reflect some
things that are very, very powerful. And you evoke a very
strong feeling in all of us, and we are trying to sort out how
it is that we get to the right place.
I want to thank my members on this committee, who have
really risen to an occasion to try and do a right thing.
Let me just close by asking a couple of questions.
Mr. Blanco, I am trying to size you up, and I can't quite
figure it out, which is maybe, you know, part of one of your
gifts, but you are fairly sphinx-like. I can't figure out if
you are playing straight with me or if you are hustling me. And
I will continue to be mystified by it, and part of it is some
of your answers.
But here is a question that you can answer as it relates to
the allegations of misconduct. Mr. Lewis and I wrote to the
Department in March of 2015. We brought these questions to the
attention of the Attorney General. We made representations that
were really echoed by a number of other members today.
And way down deep, you know this stuff is wrong, but you
can't--you know, you have to put your game face on, and I get
that. But here is a question that you can answer. Have these
cases that we have brought to your attention, have they been
reviewed? The attorney misconduct cases, have they been
reviewed?
Mr. BLANCO. Let me say two things.
Yes. One is that we have our review process, which is an
independent part of the Department of Justice, our OPR section,
Office of Professional Responsibility. I know via letter that
you have been informed that at least one of those cases that
you spoke about, maybe two--I am not certain, and I don't want
to say that they all have or they haven't been referred to OPR
for review.
I can tell you this--and you are going to size me up, which
is great. I can tell you that every allegation of misconduct by
any employee of the Department of Justice is taken very
seriously.
Chairman ROSKAM. Okay. That is not my question.
Mr. BLANCO. And I can tell you that OPR is going to do
their review of cases that you have referred to Department of
Justice.
Chairman ROSKAM. Okay. That is why I can't figure you out.
Because I have given you a complete opportunity to say,
``Congressman Roskam, I've got good news for you. Every
allegation, everything that you've brought to the attention
with Mr. Lewis has been reviewed and disposed of and we have
dealt with it.'' And you can't give me a straight answer on
that.
Mr. BLANCO. I will tell you this. I can get back to you on
those answers. I just don't want to give you the information
that is inaccurate.
Chairman ROSKAM. All right. That is fair.
Mr. BLANCO. And I am happy to do that.
Chairman ROSKAM. Can we have the answer by the end of the
week?
Mr. BLANCO. You can have it probably by the end of the day.
Chairman ROSKAM. Fantastic. Thank you. That is helpful, and
I appreciate that.
So this is a question now, just more broadly. You have
heard that the Sowers are pending for 10 months. And, listen,
there is not a person here that is going to--if you are asked
to describe the Sowers' case--and you don't have to acknowledge
this, but I just know intuitively. If you are describing the
Sowers' case in other circumstances and the Taylors' case in
other circumstances, you are going to be pretty sympathetic to
it, upon the telling of this case.
And so the question then is, if you are sympathetic to it--
and I think you are, and you want this to go away--it doesn't
make any sense to me that this should take 10 months, that they
should just be hanging out there for 10 months.
So is there a date certain or can you make a representation
to this subcommittee about when you can have these cases, not
the process but the individual cases, reviewed so that they can
be disposed of?
Mr. Blanco.
Mr. BLANCO. You want a specific date? I can't give you a
specific date.
Chairman ROSKAM. Give me a frame of reference. Give me a
season of the year. Give me an epoch. You know, give me a--you
know what I am saying.
Mr. BLANCO. I do know what----
Mr. RANGEL. Mr. Chairman, would you yield?
Chairman ROSKAM. I will yield.
Mr. RANGEL. I am trying to be a friend, but maybe if they
can't----
Chairman ROSKAM. Turn your mike on.
Mr. RANGEL. If they can't give us any idea how long it
would take to repair this emergency situation--which stains the
government, it stains the executive branch, and it stains us--
maybe we should set a date for our next hearing. I hope they
don't want that. But we can have a press conference and let the
whole world know that we are having a hearing over 600
taxpayers. I don't know how many taxpayers we have, but that is
an infinitesimal number for the integrity of the Service.
So I just say that I hope they can come up with some
answer, but I will be encouraging the chair to help them
thinking--if they can't come up with an answer, ``I don't
know,'' we can tell them when they come back to tell us again
they just don't know.
Chairman ROSKAM. Mr. Blanco, what can you tell us about how
long this will take?
Mr. BLANCO. I can tell you that we are looking at those
matters that have been referred to us. We have, as I mentioned,
a process. We are working as expeditiously as possible. Nobody
wants to give an answer as quickly as I do, and we are trying
to work there as quickly as we can.
One thing I will say, Congressman--and I feel very deeply
about this--you know, justice should not be rushed. It is a
very thorough process. It is a process that I think is a fair
process and a just process. And, at the end of the day, we will
use those factors, we will follow the facts where they take us,
and we will make a decision.
Chairman ROSKAM. Okay, that is just not good enough. Do you
understand that? So let me just--because you are not going to
give me an answer today. What I am communicating to you, on
behalf of this whole subcommittee: That is not good enough. It
is obtuse, it is evasive, it is condescending--not to us, but
it is condescending to these people.
And can I just tell you that when we had the briefing with
DOJ and the IRS in February in this room, when I asked where
was the money, for example, for the people to whom everybody
agrees the money should be restored, by the way, I was told,
``Well, Congressman, the money has been dissipated into the
system.'' I said, ``Dissipated into the system? What does that
mean?'' Because if my constituents spend tax money that they
owe the government, what does the government do? The government
takes their house and puts them in prison. That is what
happens.
So do you understand the level of frustration? Sort of
these non-answers, obtuse briefings, the passive-aggressive
nature about trying to get information from your staff. We are
basically stiff-armed. You tell the chairman, you tell the
ranking member, you tell basically the entire subcommittee,
``We're not that interested in what you have to say.'' You pat
us on the heads. You say, ``Off with you. Be lively. We're
going to do our business.''
And now what you have done is you have brought a
subcommittee together that can't agree about what time of day
it is. We can't agree on the Affordable Care Act. We cannot
agree on the Iran sanctions deal. We cannot agree on tort
reform and tax reform and entitlement reform. But we are all
together in thinking you are the problem and they are the good
guys and that you are not bringing your game.
The same sense of urgency--Mr. Rangel said it best. If this
were our kids or our grandkids, if this was one of your kids or
my kids, we would be scandalized, we would be outraged, and
this wouldn't happen.
And so the capacity to treat people in the dismissive way
in which the departments have treated them is the part that all
of us really find just jarring, actually, just really, really
jarring.
And so it is very unsatisfying, the nature of where this
stands. The Internal Revenue Service made a decision to change
this policy, and we as a group said that is a good thing. Now,
it only goes to show that the review process needs to be
reevaluated, but not just the process, not just that feeling
of, ``Oh, we've got really sharp people working on this,
Congressman Roskam, we've got our A team all over this,''
because the A team is not all over this. It has clearly been
completely dismissed. It is off to the sidelines.
And the subtext or the notion that everybody is going to
lawyer up and come running? You wouldn't come running back in
if you got your head kicked in by a Federal agency that is
stomping all over your property and giving you a hard time and
threatening criminal prosecution. It is scandalous, it is
outrageous, and yet the remedy of this is, ``Make it go away.''
Do the right thing. Do the right thing according to the
Rangel standard. Go through case by case by case. Don't be
passive-aggressive and jerking the guys around who are told
this is a commercial enterprise. This is not a commercial
enterprise, their FOIA request. It is a group that is trying to
bring justice. They are not making any money. They are a
501(c)-something, and they deserve this information. And, as I
said, we are going to get to this information.
So why don't we do the right thing? And that is restore the
confidence in these people, where they go, ``You know what?
Yeah, it was a bummer. We really got jerked around by the
Federal Government. But we were able to bring attention to
things, and things were made right.''
And your disposition, in particular, as it relates to the
DOJ, is just completely unsatisfying. And so I find it simply
amazing that the simple response of, ``Hey, we're reviewing
every case, here's the date certain when they will be reviewed,
and we're going to give you an answer, and we're going to get
this disposed of and get it off our backs''--just let's be done
with this. But the simple remedy is let's do it and let's do it
with dispatch.
So, again, I want to thank the members for their
participation today.
To the Taylors and to the Sowers, we are sticking with you.
And you reflect a larger group. And we are going to do our best
to make sure that a coequal branch of government is held to
account, what we think is an abuse.
And, with that, the committee is adjourned.
[Whereupon, at 12:53 p.m., the subcommittee was adjourned.]
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