Fear And Cover-Ups in the IRS

By Richard Behar/Washington

"Now, let me say to you, you're not dealing with ignoramuses on this committee. The IRS world that you describe . . . it's like the land of Oz, and you are the wizards." Georgia Democrat Doug Barnard Jr. delivered that blistering rebuke last week to Michael Murphy, deputy commissioner of the Internal Revenue Service. What provoked Barnard was Murphy's upbeat assessment of his agency's zeal for rooting out cases of misconduct among its own employees. But dozens of current and former IRS workers painted a different and disturbing picture of the agency in three days of testimony before the House Commerce, Consumer and Monetary Affairs subcommittee.

What the subcommittee found was that while the largest and most feared civilian bureaucracy (total employees: 123,000) routinely clamps down on its low-level miscreants, it is prone to ignore wrongdoing by members of its old- boy network. At the same time, IRS managers appear to be so concerned with the agency's public image that they would rather suppress whistleblowers than root out unethical and illegal activity. Last week's hearings explored the results of a year-long probe by the subcommittee, which found evidence of misconduct and cover-ups involving more than 25 top IRS officials in ten cities. Among the allegations:

-- In the best-known case of alleged IRS duplicity, details of which were reported exclusively in TIME last May, the subcommittee found that the agency was "inept" in probing the activities of staffer Ronald Saranow of Los Angeles. Saranow is suspected of using his influence as one of the most powerful officers of the IRS Criminal Investigation Division to encourage two tax probes against foes of Los Angeles-based jeansmaker Guess, Inc., for whom Saranow planned to work after his retirement in 1987. Saranow has denied any wrongdoing.

-- The IRS has admitted that an agent "discarded" many internal documents concerning an IRS raid in 1986 that Saranow initiated against Guess's nemesis, Jordache Enterprises. The Justice Department is investigating the incident.

-- Saranow and his personal lawyer, Richard Trattner, a former IRS employee, carried out an unauthorized "amnesty" program for Trattner's tax-evading clients. For years, Trattner supplied the IRS with anonymous, remedial tax payments from the clients, as well as keys to hidden safe-deposit boxes containing the unfiled tax returns of the cheaters. The purpose: to reduce the culpability of Trattner's clients in case they were investigated. If that happened, Trattner would steer the IRS to the tax returns as evidence of his client's participation.

-- Anthony Langone, until recently the IRS assistant commissioner of criminal investigation, allegedly flew repeatedly around the U.S. at the agency's expense to visit a mistress. He also is suspected of taking thousands of dollars' worth of IRS training materials for use in a private-investigation network that he started with Saranow and other retired IRS kingpins. Langone denies the charges.

The subcommittee will be watching closely to see how well the new IRS commissioner, Fred Goldberg Jr., who stepped in after the abrupt resignation * of Lawrence Gibbs last March, will follow up on the allegations. "I think all of us understand that we have a big challenge ahead of us," testified Goldberg near the conclusion of the hearings. Last week's uncomfortable spotlight may have supplied the IRS with some much needed motivation. Said Edward Habecker, a former IRS official, in testimony at the hearings: "What is lacking today within the IRS is not the tools, but the desire to maintain high ethical standards."