FOR IMMEDIATE RELEASE Press Release # 105 - 306
April 28, 1998

IRS OVERSIGHT HEARINGS DAY TWO: BUSINESS OWNERS RECOUNT EGREGIOUS ENCOUNTERS WITH THE IRS; NAACP PRESENTS TESTIMONY ON RACIAL DISCRIMINATION; EXPERTS DISCUSS AGENCY'S USE OF EXAGGERATED STATISTICS

WASHINGTON -- The Senate Finance Committee plans to conduct tomorrow its second day of IRS oversight hearings. The hearing will begin at 9 am in room 216 Hart.

Witnesses

The Committee will hear testimony from the following witnesses:
Panel #1
John Colaprete of "The Jewish Mother" restaurant in Virginia Beach, Virginia.
William A. Moncrief, Jr., of Moncrief Oil Company in Fort Worth, Texas.
Richard Gardner of Gardner's Tax Service in Tulsa, Oklahoma.

Panel #2
Leroy W. Warren, Chairman of the NAACP Criminal Justice Committee.

Panel #3
David Burnham, Co-director of Transitional Records Access Clearinghouse (TRAC).
Susan B. Long, Co-director of Transitional Records (TRAC).

SUMMARY INFORMATION BELOW EMBARGOED FOR USE UNTIL 9 AM ON WEDNESDAY, APRIL 29

Summary of Day Two

The first panel consists of taxpayers who have experienced an IRS Criminal Investigations Division (IRS-CID) armed raid -- raids which were often based on

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flimsy evidence. These witnesses recount the embarrassment and humiliation of an IRS raid, and the toll taken on personal lives and businesses. The taxpayers themselves were not the only ones effected by the IRS-CID investigations -- in some cases, their employees were harassed, their clients were asked to assist in the investigations, and their children and employees were held at gunpoint.

Summary of John Colaprete's Testimony
€IRS-CID carried out simultaneous armed raids of his restaurant (with customers present), home and the restaurant manager's home on charges of money laundering, gun running and drug dealing (March 1994).
€Charges were based on allegations by his former bookkeeper, who had also embezzled approximately $40,000 from his business. The IRS spent less than 48 hours investigating her allegations before conducting the raid.
€In the process of the raid, the front door of Colaprete's home was torn from its hinges. Colaprete's personal papers were taken. Even his dogs were impounded.
€The manager was pulled at gunpoint from the shower and restrained from calling his lawyer. His teenage son was forced to the floor at gunpoint.
€Charges were never filed. After four months, a truck pulled up to the business and dumped the seized items on the sidewalk. Some of his personal possessions have yet to be returned.
€Colaprete and the restaurant manager both suffered deep depression as a result of the IRS raid.
€The bookkeeper has since gone to jail for embezzling other employers.

Summary of William A. Moncrief's Testimony
€His family-run oil company was raided by IRS agents in September 1994 based on the allegations of a disgruntled former employee. The agents prominently flashed their guns and even removed sheet rock from the walls.
€Someone alerted the media in advance of the raid -- though investigations are supposed to remain confidential -- so many reporters were on hand to report the raid. The publicity caused Moncrief's business to go into a tailspin, causing damages of $100 million to his business.
€His computer system and all his files were confiscated and stored in a warehouse. For a while, to check a file or have access to a checkbook for his business, Moncrief needed to receive permission from the IRS.
€After 16 months, though Moncrief had gathered evidence proving his innocence, the IRS would not drop the case without a monetary settlement.
Worn down, he paid $23 million in a settlement, though the IRS never did a civil audit to establish if he did owe any additional taxes.

Summary of Richard Gardner's Testimony
€Though his office property was seized in March 1995 by armed agents, it took nearly two years for the IRS to indict Gardner. He feels he was targeted by the IRS because he was one of the largest tax preparers in Oklahoma.

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€During his ordeal, the IRS-

lied to a grand jury on the indictments -- many clients listed on the indictment knew nothing of the proceedings; and-

tried to force his clients to wear hidden microphones, and hinted they, too, would have problems with the IRS if they did not comply; and-

the agent in charge of the investigation admitted to having a personal vendetta against Gardner.

€The IRS could not prove any wrong doing after a 33 month investigation. By January 1998, the IRS had dropped counts against him.

The second panel consists of testimony from the NAACP discussing racial discrimination problems within the IRS.

Summary of Leroy Warren's Testimony
€The NAACP has received a variety of complaints and allegations, including:-

IRS management refuses to fairly address valid complaints of racial discrimination;-

Retaliation against employees who file EEO complaints;-

Allegations of racial and sexual discrimination in promotions;-

Long-term career black employees train white employees -- who quickly become the supervisors of the black employees; -

"IRS management has frequently promoted marginally qualified or possibly unqualified individuals, including a few blacks, to higher level jobs or positions as a reward for supporting racism, racist policies, and/or whatever management does"; and-

"A new IRS Commissioner surrounded by senior level career employees who caused the problem will not solve IRS's internal problems. IRS senior management, legal staff and EEO staff are major contributors to the internal problems within the IRS."

The third panel discusses the IRS-CID's lack of internal oversight, consistency and accountability. Unable to keep accurate records, the IRS-CID claims an exaggerated level of effectiveness in its prosecution and conviction of tax fraud defendants.

Summary of Susan Long and David Burnham's Testimony

€ The CID is unable to keep track of the work of its 3,352 criminal investigators.
€ The nation's tax laws are enforced in an erratic way throughout the U.S.
€It is the lack of accountability inherent in the CID's faulty bookkeeping system that undermines the ability of the CID to enforce the nation's tax laws in an effective and fair way.
€ When the senior managers of the CID can't keep track of the activities of their agents, systematic supervision is impossible. Lacking effective internal oversight, genuine abuses by individual agents can easily go unnoticed.

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€ There is strong evidence that the IRS has engaged in an active public information campaign intended to substantially exaggerate its effectiveness in the CID area.
€ The IRS for several years has refused to examine the compelling evidence regarding the existence of this problem.
€ The IRS claims it prosecuted and convicted 50% more tax fraud defendants than are found in the records of the Department of Justice and the courts. The IRS asserted it sent twice as many tax fraud defendants to prison as the DOJ and courts say they did.

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