Originally created 05/26/98

Top IRS official investigated for travel advance



WASHINGTON -- The No. 2 official at the Internal Revenue Service, who last fall apologized to senators for abuses at his agency, recently was investigated for a $12,000 advance for moving expenses that he hadn't fully accounted for, according to documents and interviews.

IRS deputy commissioner Michael Dolan says he cooperated with the Treasury Department inspector general's probe and provided receipts to verify he spent more on moving expenses than the $12,000 advance he received more than five years ago.

The IRS does not require its employees to immediately account for moving advances, giving them six years to do so.

Dolan said he had filed a report accounting for some of the advances years ago, and now has accounted for all of them. "I provided records to substantiate expenses in excess of the $12,000 travel advance," Dolan said.

He said he had not been contacted since his interview earlier this year. IRS spokesman Steve Pyrek said the service is barred by privacy rules from saying whether it has received a report from the Treasury department detailing its findings.

Now congressional investigators want to know whether the Dolan inquiry -- which one investigator described in a memo as "fishing for a tougher violation" -- may have been retaliatoy or abusive.

"It would be ironic if an inspector general that has not only investigated the IRS for abuse but has testified before the Senate concerning the dangers of investigative abuses has in fact abused its own power," said Rep. Spencer Bachus, R-Ala, chairman of the House Banking Committee's investigative subcommittee.

Treasury Department spokesman Howard Schloss declined comment.

News of the Dolan inquiry comes amid allegations that the IRS, under fire for conducting armed raids on nonviolent taxpayers and other questionable tactics, has not done enough to correct employee misconduct and punish wrongdoers.

In Senate hearings last month, Harry Patsalides, deputy assistant inspector general for investigations at the Treasury Department, said the IRS has been slow to take action against IRS employees and meted out weak punishments in some cases.

A memo obtained by The Associated Press shows that last fall Patsalides pressed an IRS agent to open an investigation of Dolan and look into whether he avoided paying taxes on the advance.

The memo states that last October Patsalides went to Emily Coleman, head of investigations for Treasury's eastern region, with concerns about the advance, the memo shows. The Treasury inspector general has authority to investigate senior IRS officials but cannot probe tax cases, a job left for the IRS.

The meeting came a month after highly publicized Senate hearings aired allegations that the IRS employees harassed taxpayers with abusive investigations and browsed through secret taxpayer records. Dolan, who was then acting IRS commissioner, apologized and promised reforms.

Coleman wrote in her memo that she thought the complaint should be referred back to the IRS and noted that, according to the agency's own rules, Dolan still had several months to turn in paperwork to justify the advance.

Dolan moved to Washington from Atlanta in 1992, when he was named deputy commissioner. He had until this year to provide the documents, according to IRS officials.

"Patsalides stated that he thought I did not see the entire picture as he felt there were income tax violations," Coleman wrote in her memo. "I felt that Patsalides was fishing for a tougher violation against Mr. Dolan than just what IRS submitted."

The inspector general does not have the authority to investigate tax violations, she told him, and probing Dolan's tax records would be "violating his privacy when we have no reason to substantiate" Patsalides' charges, the memo said.

Coleman wrote that the Treasury IG agent also told her that Dolan previously had been investigated for failing "to pay personal property taxes in Virginia."

Two Treasury officials familiar with the matter who spoke on condition of anonymity said the department looked into an allegation of tax evasion in 1993 and found only that Dolan failed to register his car in Virginia.

Patsalides did not return two calls to his office seeking comment. Coleman declined comment.