IRS
Confidential
Most Americans know behavior that deserves to
be called "poor judgment" when they see it. But at the Justice
Department, the definition evidently doesn't include smearing innocent
taxpayers or throwing a stink bomb in the middle of a contentious
gubernatorial race.
That's the remarkable word from Justice's
Office of Professional Responsibility, finally answering a complaint
filed last year by the Landmark Legal Foundation. The complaint stems
from an IRS dispute with the accounting firm KPMG over tax shelters the
IRS says are illegal.
As part of an attempt to bully KPMG and
embarrass its clients, Justice attorneys suing on behalf of the IRS
last July made public the names of KPMG clients -- including Bill
Simon, then in the thick of his campaign for governor of California --
who'd asked for or received information about these shelters. The leak
made a big media splash, including on the front page of this paper, and
tarred numerous private individuals guilty of nothing more than getting
KPMG advice.
Now we learn, from an August 15 letter to
Landmark from counsel H. Marshall Jarrett, that Justice investigators
not only have found no evidence of professional misconduct here but
that the bar at Justice and the IRS has been so lowered that even the
disclosure of private information doesn't rise to poor judgment.
"Accordingly," Mr. Jarrett writes, "we are taking no further action on
this matter which we consider to be closed."
Remember, Mr. Simon and the others whose names
surfaced in the headlines attached to these allegedly illegal tax
shelters had not been accused of any wrongdoing. They were simply third
parties, collateral damage if you will, of an action really aimed at
KPMG. In an editorial entitled "The IRS Out of Control," we called for
the "firing or sending to Siberia [of] whoever was responsible for this
abuse of confidential power."
In a letter to the editor published five days
later, both the chief counsel for the IRS and the assistant attorney
general for the tax division of the Justice Department agreed with our
concerns about taxpayers being "gratuitously humiliated" and conceded
the names should not have been released. In his own letter published in
the Journal that same day, David Aufhauser, chief counsel for Treasury,
went even further, declaring that the lack of protections for these
taxpayers was "inexcusable."
The damage, alas, had been done -- especially
for Mr. Simon. At the time these KPMG clients surfaced in the
headlines, the Republican challenger had cut incumbent Gray Davis's
lead to only seven points in the polls. Ultimately he would lose by a
mere five points to the man now facing a recall election.
Did the release of Mr. Simon's name in
connection with an allegedly illegal tax "scheme" spell the difference
between victory and defeat? We'll never know. But certainly Governor
Davis, in the post-Enron hothouse that was the summer of 2002,
recognized the potency of linking his challenger's name to the charge
of business impropriety. A Davis ad shot in the immediate wake of the
KPMG release ends with this voiceover: "Simon -- if we can't trust him
in business, how can we trust him in the Governor's Office?"
Even without the California gubernatorial
election, Justice's breach of trust here was an abuse of federal power.
It may well be that not enough evidence exists for a finding of
professional misconduct. But to find no one guilty of even "poor
judgment"?
Attorney General John Ashcroft might consider
that he'd find more support for his Patriot Act enforcement if his
Department were willing to acknowledge and punish its mistakes.
Justice's see-no-evil response in this case tells us that it's not only
the Enrons, Tycos and WorldComs that need lessons in accountability.
Updated August 27, 2003
