New Chief Vows to End IRS Ethics Violations

The commissioner of the Internal Revenue Service, acknowledging that congressional hearings have exposed ethics problems within the agency, pledged Thursday to tighten procedures to ensure that IRS employees are held to “the highest standards” of conduct.

Fred T. Goldberg Jr., who took command of the agency only last month, said during an interview that “the public has a right to be concerned” about recent disclosures by the House Government Operations subcommittee on commerce, consumer and monetary affairs.

In shedding the defensive attitude he had projected in testifying before the subcommittee two weeks ago, Goldberg expressed gratitude to congressional investigators who “grabbed us by the scruff of the neck . . . and made the points that needed to be made.”

Testimony by Agents

The House panel, headed by Rep. Doug Barnard Jr. (D-Ga.), heard past and present IRS agents testify that some agency supervisors had misused their offices to achieve financial gain for themselves or their friends. The abuses occurred largely because the agency’s internal inspection procedures were flawed, witnesses said.

Ronald Saranow, the former Los Angeles regional chief of the IRS criminal investigation division, was described as an arrogant and powerful man who took official actions to favor his friends and associates.

Company Dispute

In particular, witnesses cited Saranow’s efforts on behalf of the Marciano family, principal owners of Los Angeles jeans manufacturer Guess? Inc., which was involved in a bitter dispute with its chief competitor, Jordache. At Saranow’s behest, the agency opened an extensive investigation of Jordache.

Saranow, who has denied any improprieties, showed favoritism toward alleged tax evaders who were represented by an attorney who was a friend, the subcommittee charged also.

The House inquiry found evidence of ethical problems in other areas of the country as well. The committee reported instances of nepotism, misuse of expense accounts and abuses of IRS summons power by some IRS managers. Most of the cases cited allegedly went unpunished.

In his first public remarks since the conclusion of the congressional hearings, Goldberg said that his review of the reported abuses will continue for some weeks.

But the new commissioner, leaning forward in his shirt sleeves from an armchair near his desk, expressed determination to take firm action “to tighten up procedures” in the agency’s inspection division, which polices internal problems such as those investigated by the panel.

Goldberg said the rules governing internal investigations must be spelled out more carefully. And IRS whistle-blowers who accurately report instances of improper conduct by their supervisors or co-workers must be rewarded and given “positive reinforcement,” he said.

“Our employees must be sure that management is paying attention to them,” Goldberg said.

“We cannot have a double standard. We cannot shoot the GS-7 (lower-level employee) who has violated our rules but only slap senior executives on the wrist.”

Differing Treatment

The subcommittee found that IRS whistle-blowers sometimes were harassed and threatened with retaliation for reporting on their superiors, whereas high officials accused of wrongdoing sometimes were allowed to retire with no blemish on their records.

Without mentioning Saranow or others by name, Goldberg said that he was taking a critical look at procedures used in the cases of some tax evaders represented by Los Angeles attorney Richard Trattner, a friend and former colleague of Saranow.

Those tax evaders reimbursed the IRS anonymously. Trattner placed their tax returns in a safety deposit box to prove their identities in case the criminal division ever investigated them.