A Secret History of IRS Tax Cops

0 Comments | Insight on the News, Oct 4, 1999 | by Timothy W. Maier

Insight has obtained a copy of the Internal Revenue Service's top-secret, authorized history that reveals the agency's mistakes, investigations and (sometimes) arrogance.

From "Scarface" Al Capone to me "Dapper Don," John Gotti, IRS agents got their man. Despite the criticism the agency has suffered -- which prompted sensational hearings on Capitol Hill last year -- the IRS has a strong record of obtaining convictions, even against its own employees.

So says the agency's secret internal file, titled 75 Years of Criminal Investigation History 1919-1994. This 202-page report -- never before seen outside the agency and obtained by Insight under the Freedom of Information Act, or FOIA -- was not meant for publication. Not even Senate Finance Committee Chairman William Roth of Delaware has seen it; his investigators have asked for a look at Insight's copy.

"Caution," the cover of the report reads. "This document is for confidential use of authorized Internal Revenue Service officials only and not for publication."

When Insight asks how much it cost to produce this file, IRS official Marsha Proctor snaps, "FOIA it!" Perhaps such secrecy concerning the report reflects an IRS desire to limit access to its internal investigations. It did a lot to police itself in its early days and continues to do so today. Some of the IRS allegations against its criminal investigators are strikingly similar to what the public heard last year during Senate Finance Committee hearings on IRS abuses.

The secret files show "a large number of investigations of charges against [IRS] personnel involving attempted extortion, bribery, collusion and other irregularities." The report notes that "many revenue officers were in league with big bootleggers and others in tax-fraud conspiracies." In 1924, there was an all-time high of 535 investigations against IRS personnel, which dropped to an all-time low of 33 in 1932. The reason for such a drop, the secret IRS files say, is that part of its mission is to "clean house of dishonest employees." But in 1936, the number of charges involving IRS personnel shot up to 175.

Curiously, the revenue collectors had about a 50 percent conviction record against their own employees, compared to a 90 percent conviction rate against other taxpayers. Also curious is that no figures involving personnel corruption are available past 1936. Recently, the General Accounting Office, or GAO, tried to review allegations of IRS employee misconduct, but found it couldn't. Why? Poor record keeping, the GAO reports. Or the IRS may just be good at keeping a secret.

A review of the secret historical file obtained by Insight shows an IRS obsession with secrecy. Some sections simply are blacked out, leaving only a summary of a famous case such as that of Capone, or in some instances only the title of the case, such as Teapot Dome.

Even part of the title of the secret history was redacted; it is partially blacked out. The only legible words are 75 Years of (blacked out) 1919-1974. However, Insight learned the title from an attached page that also explained some information is withheld either because it involves taxpayer identifiers, invasion of privacy, discloses confidential sources or could endanger someone's life -- which might explain why the author's name is blacked out.

The IRS is very selective. Some cases are pending, others may deal with a confidential source or be considered an invasion of privacy, says Thomas Marusin, the IRS director of freedom of information. In places the report boasts that IRS goes after anyone who hasn't paid taxes, no matter what their standing or influence, but then cases involving such people are blacked out. For example, the IRS boasts it has investigated numerous movie stars, but redacts every such name mentioned in the report. Several high-profile cases are discussed, including that of Vice President Spiro Agnew, who pleaded no contest to one count of evading $13,551 of federal income taxes after having "extorted bribes for almost a decade," according to the IRS file.

Why write a secret report? Former IRS historian Shelley Davis, who wrote Unbridled Power, Inside the Secret Culture of the IRS, is candid. "They wrote it to feel good," she tells Insight. "To pat themselves on the back and for no other purpose. They don't toot their horn outside the agency. They just want to pat themselves on the back and look good."

Much of the file lavishes praise upon the Criminal Investigations Unit, providing lots of statistics on conviction rates and detailing investigative techniques such as sending undercover tax agents to infiltrate mobs and gambler trains -- and noting the daily danger these agents face. The secret history also reports the many roles IRS agents have played, from protecting the president after John Kennedy was assassinated to serving as sky marshals to combat the surge of commercial skyjacking under President Nixon.

Donald K. Vogel, chief of the IRS Intelligence Unit that changed its name to Criminal Investigations Unit, boasts that these tax detectives grew from a mere six special agents in 1919 to more than 3,200 today. "We follow the money that ultimately leads to the criminal," Vogel writes in the secret files.