About that FEC Inspector General’s “nothing to see here, folks” Report …

About that FEC Inspector General’s “nothing to see here, folks” Report …

On March 3, 2017, the Federal Election Commission’s Office of Inspector General issued a formal report on its investigation of whether FEC staff, acting without authorization from the Commission itself, violated federal laws in contacting Lois Lerner, then head of the IRS’s Exempt Organizations Division, about obtaining confidential information concerning several conservative organizations. Almost no media picked up the FEC OIG report, probably because it offered no “click-bait” news.

And that’s a shame, for a variety of reasons.

The report found no violations of federal law in the many e-mails between FEC staff and IRS staff. The report’s conclusion:

In pre-RTB [i.e., before the Commission voted to commence an investigation] communications with the IRS, FEC personnel did not violate the statutory provision that the Commission must find RTB before an investigation may be commenced, and did not violate any regulation, directive or policy concerning pre-RTB activity.

No evidence was developed to indicate the communications between FEC employees and the IRS were made for the purpose of improperly coordinating the targeting of tax exempt political organizations for political reasons.

For incredibly detailed background on the IRS scandal, check Paul Caron’s blog. But even Caron, Dean of the Pepperdine Law School, didn’t cover the FEC OIG report.

Was the report really “nothing to see here, folks. Move along.”? Actually the report itself was internally consistent, in that it showed that much of what the IRS gave the FEC staff was public information, then or eventually made available to the public. The IRS made available, for example, several organizations’ Form 990 annual returns, but the Schedule B list of donors appropriately redacted the names and addresses of donors.

But that wasn’t what the FEC OIG should have looked at. Its focus was too narrow, like a spotlight that fails to illuminate the corners that a floodlight would expose.

In context, including by looking beyond the walls of the FEC itself, and in particular, the flood of e-mails once hidden by the IRS and now making their way into the public records, a lot more is shown. Look, for example, at only one small part of this enormous area: the access, and why the particular channel of access matters.

The FEC staff first said that the third-party complaint referenced the particular organizations’ tax-exempt status. So, being diligent staffers, the FEC Office of General Counsel wanted to know whether, in fact, the organizations were exempt from tax. Like the vast majority of people, they knew nothing about tax exemption, including where to look to find that readily-available information. So someone had the bright idea to go to Lois Lerner, the head of the EO Division at the time.

Lerner was a surprise pick for IRS EO Division chief. She had no tax background. She had been a lawyer at the FEC, though, where she was the head of “outreach,” meaning the agency’s attempt to educate the political advocacy community on the hugely-complex campaign finance and reporting rules. And “outreach” was a big push at the IRS at the time she was hired.

But beyond that, Lerner was also a dogged researcher about conservative organizations, not content to allow mere statutes, or even losses in court, stand in her way. For example, Cong. Peter Roskam (R-IL) reported on April 17, 2015, that way back in 1996, Lerner was on the warpath:

I want to take you back to 1996. A friend of mine in Illinois, my former law partner, Al Salvi, was running for the United States Senate. He loaned himself some money to his campaign. The Federal Election Commission—different agency than we’re talking about—but stick with me. This is like a Seinfeld episode—it’s all going to come together at the end. The Federal Election Commission said, ‘You did that the wrong way. You violated federal election law.’ They placed him under investigation. World War II headlines in the Chicago papers. He goes on and he loses the election for the United States Senate. Now, political scientists can debate whether he would have won or whether he would have lost. But let’s face it: being under investigation by the Federal Election Commission generally does not help you in a political campaign.

At the end of that campaign, the Federal Election Commission came and they made a very large settlement demand—I don’t remember off the top of my head how many hundreds of thousands of dollars they were demanding from him. But he said, ‘I didn’t do anything wrong and I’m not going to pay you any money.’ Federal Election Commission said, ‘That’s fine. We’re going to sue you,’ which they did. They filed a lawsuit in federal court. The federal judge reads the pleadings [and] dismisses the case against the Federal Election Commission—finds in favor of Al Salvi. You would think that this drama all ended there. No, no, no. No, the Federal Election Commission came back. They said, ‘Well, we know you won, but we’re still going to make a settlement demand of you. We’re going to lower the amount, but we’re still going to make a demand. Because if you don’t pay us we’re going to appeal the judge’s ruling.’

Al Salvi’s a pretty sophisticated lawyer and he talked to the lawyer at the other end of the line and said to that person, ‘Give me the person, and let me talk to the person who had authority on this case. Because you don’t understand—I won, you lost, I’m not going to pay any money. Let me talk to the person with authority on the case at the Federal Election Commission.’ That person got on the phone with Al Salvi and said this, ‘If you pledge never to run for office again, we’ll drop this case.’ Al Salvi said, ‘Put that in writing.’ The person said, ‘We don’t put that in writing and we never lose.’ That person was Lois Lerner.

Now, you take that disposition. You take that attitude. You take that long arm of a bureaucrat and reach into the sanctity of the ballot booth. And you’ve got a real problem. And you up the wattage on that, and you move her over, and you give her the type of authority not that the Federal Election Commission has, but the Internal Revenue Service. To grab somebody by the throat and do whatever they want with them with the possibility of imprisoning them.

So back to the FEC OIG report: note that the FEC inquiries started in 2008, five years before Lerner’s revelation of the targeting scandal, two years before the Supreme Court’s decision in Citizens United and the D.C. Circuit’s decision in SpeechNow, and two years before the IRS EO Division decided to target advocacy-oriented conservative organizations based on their names (and also dragged in numerous other “innocent” organizations). People at the FEC knew Lerner, and could get her attention, which is always critical in dealing with a government agency, and certainly true at the IRS.

And they got her attention, repeatedly. And Lerner then pushed her staff whenever, as those of us who work in this area know happens all the time, they slowed or were non-responsive. Lerner’s inquiries, and her push to get the answers, probably sowed the seeds of concern in her IRS staff about her priorities and pointed the way to the distrust of conservative organizations that undergirded the later targeting.

Now enforcement agencies working together is probably a good thing in most cases, avoiding duplication and increasing compliance. Some have even suggested that statutory barriers between IRS cooperation with other agencies be dropped, especially because the IRS collects a huge trove of information not available elsewhere; that is, after all, why the FEC staff went to Lerner in the first place. Former Assistant Attorney General Mythili Raman told Senate Democrats in 2013 that greater cooperation between the IRS, FEC and the Department of Justice would be helpful to her prosecution of federal law violations. But this type of cooperation between the two government agencies whose job it is to police and stamp out campaign speech and other First Amendment activity can also be dangerous.

In the later context of the inter-agency meetings between various enforcement arms of the federal government to decide whether and how to prosecute the alleged miscreants at the heart of these conservative organizations’ supposed attempts to violate federal law governing their advocacy, however, this push from “outside” is just the sort of trigger that tickles the ponderous federal bureaucracy into action. Indeed, as e-mails provided to Judicial Watch in a release in 2015 showed, Lerner, Judy Kindell (a legendary figure in IRS EO political determinations), and other IRS EO Division personnel met in 2010 with the Section Chief of the Public Integrity Section of the Dept. of Justice’s Criminal Division to discuss then-“recent” political activity of exempt organizations. The EO Division provided the Dept. of Justice with 1.25 million documents on EOs.

As she told the House investigative committee and as she said in a Duke University speech in 2010, Lerner was under tremendous pressure to “do something” about these organizations. “They want the IRS to fix the problem.”

“So everybody is screaming at us right now: ‘Fix it now before the
election. Can’t you see how much these people are spending?’”

– Lois Lerner, October 19, 2010, Duke University

The pressure doesn’t absolve Lerner from her actions, nor does it suggest that the FEC staff were behind the IRS targeting scandal. The IRS did what it did, and got itself into trouble. But the IRS was not operating in a vacuum.

The timing suggests that the FEC inquiries, repeated with an increasing sense of urgency, and the Dept. of Justice requests, and several other things, combined to push the IRS off its traditional neutrality and into the maelstrom of the partisan targeting scandal. That there wasn’t any express direction from the White House (as there had been in the 1990’s Clinton White House audit requests), doesn’t really mean what was done might have been done to relieve the relentless pressure on the IRS EO Division. After all, at about the same time, in 2010, the IRS began auditing donors to conservative organizations in response to letters from Senators.

There’s a lot more that could be said about this report and the evolution of the targeting scandal. But it’s enough for now to say that someone should be looking at all of this again, and not with as narrow a focus as the FEC OIG took.

This was not, as the FEC OIG report suggests, just a routine request for publicly-available information. It was a successful attempt to get highly-confidential information quickly from a person with a known predilection toward the FEC staff’s working hypothesis that RTB existed and would ultimately justify their investigation. It was a trigger and accelerant for Lerner’s — and ultimately the IRS staff’s — concern about a growing conservative effort to change the direction of government. And it started long before Citizens United. And it resonates long afterward, with IRS budget problems in Congress and numerous calls for investigations and more legislation.

This is really esoteric stuff, and highly-“inside baseball.” But it does suggest that this report should have received more attention than it did. And the subject is not something to be swept under the rug.

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