Originally created 04/12/98

IRS practices to face scrutiny by Senate panel again



WASHINGTON -- A new report is challenging the fairness of Internal Revenue Service criminal prosecutions, spotlighting cases in which small U.S. cities had more convictions per capita than major business centers.

The Senate Finance Committee, which is preparing another series of high-profile hearings looking into IRS horror stories, is to review the report just two weeks after the April 15 tax filing deadline.

The committee also is expected to hear cases alleging IRS agents abused citizens' rights in criminal tax cases, according to several sources who have met with Senate investigators.

The study by the Transactional Records Access Clearinghouse, or TRAC, reported per-capita tax convictions were twice the national average in IRS offices in Pensacola, Fla.; Greensboro, N.C.; Memphis, Tenn.; and Charleston, W.Va.

But major business centers, including Los Angeles, Chicago, Boston and Detroit, reported lower-than-average criminal convictions, TRAC said.

The IRS said the TRAC data and the study's conclusions are flawed. But David Burnham, an author and research professor with Syracuse University who helped prepare the study, said the variation raises troubling questions about management of IRS criminal matters.

"You can see large and hard-to-explain variations on the criminal side that I think raise questions about fairness and effectiveness of the agency," Mr. Burnham said.

Mr. Burnham said he's been asked to testify about his findings during the Senate hearings this month; committee staff declined to discuss witnesses.

The TRAC statistics are drawn from Justice Department and Administrative Office of the Courts computer records; the IRS won't supply its records to Mr. Burnham, saying they contain confidential details of investigations.

A senior IRS official criticized the TRAC report.

"We think there are a number of issues there that make that data incorrect," said Ted Brown, IRS assistant commissioner for criminal investigations.Mr. Brown said problems with the TRAC data result in "conclusions that are misleading."

Mr. Brown said one problem is the study uses Justice Department computer records, which don't match IRS computer systems. An analysis of this Justice data might show regional disparities, because the districts of U.S. attorneys don't align with the 33 IRS districts nationwide, he said.

In addition, IRS criminal cases take several years to bring because of the complex analysis of financial records.

"We may invest a lot of time one year in the investigative stage so you don't have any prosecutions and convictions. And next year, they suddenly come out of the pipeline and the district jumps up," Brown said.

Burnham disagreed, saying his study showed variations among certain districts over time. The Charleston, W.Va., district, for example, has been in the top fifth of criminal convictions per capita since 1992.

But Los Angeles ranked in the bottom three-fifths during the same period, even though other highly populated areas such as Manhattan and the District of Columbia ranked about as well as Charleston.

The TRAC study also found wide variation in civil audits nationwide.

The upcoming four days of Senate hearings, scheduled to begin April 28, come after widely praised hearings into taxpayer abuses held last fall. The earlier hearings focused on an unresponsive IRS which allowed simple taxpayer problems to linger for years, causing great emotional and financial turmoil for taxpayers.

IRS defenders said while the cases described were inexcusable, they represented four of some 124 million individual tax returns expected to be filed this year.

For now, the committee is keeping a tight lid on the upcoming hearings. Senate Finance spokeswoman Ginny Flynn would only say the panel "will continue its examination of IRS practices and procedures."

"Strong oversight means the committee cannot walk away from any additional evidence of wrongdoing or other problems within the agency," she said.