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IRS called harsh, out of control

The IRS goes easy on a few of its managers accused of pilfering and sexual harassment, but it comes down hard on whistle-blowers and pursues regular taxpayers like it was busting the mob, witnesses told Congress on Tuesday.

The first of four days of hearings by the Senate Finance Committee got an immediate response from the Clinton administration:

New IRS Commissioner Charles Rossotti named former FBI and CIA Director William Webster to conduct an independent review of the agency's criminal investigations division, part of a plan to improve accountability.

"This is an agency badly in need of a change of culture," said committee Chairman William Roth, R-Del., whose staff organized the hearings. "One common theme is the problem of retaliation. Retaliation is a fear for employees and attorneys representing taxpayers."

Despite criticism from some Democrats that the hearings were one-sided, the senior Democrat on the panel, Sen. Daniel Patrick Moynihan of New York, agreed that the IRS needs closer supervision.

Much of the information presented could not be independently verified. In most cases, names, dates and places were not given, and neither was the IRS' side of the story. Yet the lead-off witnesses were not tax protesters or well-known government critics, but two civil servants who provided a glimpse of the agency's inner workings:

+ Yvonne DesJardins, a senior personnel officer with the IRS chief counsel's office, testified that she referred complaints of travel account abuse, mistreatment of employees and improper manipulation of personnel rules to higher ups. However, she said cases that involved managers were allowed to languish with no action by IRS Deputy Commissioner Michael Dolan.

DesJardins said she has paid a price for insisting on action and for taking her concerns to the Treasury inspector general.

"I have suffered retaliation and continue to suffer retaliation," she said. "When I attempted to seek employment outside of the IRS, my efforts were stopped through false and misleading information. I have been told that my first and second line managers no longer have "trust and confidence' in me, and my attorney was told by the executive for whom I work that I am a "liar and manipulator.' "

Senators sympathized with DesJardins' descriptions of bureaucratic hell.

Commissioner Rossotti said he will ask DesJardins for a personal report on her testimony. Deputy Commissioner Dolan said he welcomes a review of his decisions on disciplinary matters.

Harry Patsalides of the Treasury inspector general's office testified that top IRS managers initially ignored complaints of sexual harassment by an executive who served for a time as the agency's director of affirmative action.

"His manager did not want to address that complaint, because he didn't want to detract from this person's development," said Patsalides. The man eventually was reprimanded and moved to another job, but not demoted.

Patsalides also testified that he believes someone inside the IRS sent an anonymous note threatening a raid to a witness in the first round of Finance Committee hearings last fall. He said that the agency could do more to help identify the writer.

In another case, Patsalides told of a high-ranking supervisor of undercover operations who took seized cars for his own use. The man was prosecuted but later allowed to retire after paying $20,000 in restitution. Up to 20 cars were unaccounted for, but only two or three could be tied to the supervisor.

However, an IRS reform bill that would improve taxpayer rights and create an independent board of directors for the agency remains bogged down in disputes between the House and Senate.

A panel of four lawyers who represent taxpayers around the country testified that IRS criminal investigation tactics have become more heavy-handed in recent years, perhaps as a result of the agency moving into drug and money-laundering investigations. The lawyers concurred that in most cases, the agency disregards complaints of abuses by its own agents.

Robert Davis of Dallas, a former Justice Department tax lawyer, told of a 45-year-old client whose house was raided at 7:30 a.m. on a June day four years ago. She was confined to a bedroom, under the watchful eye of an agent, as a squad of 10 tax collectors searched the home for eight hours. The agents eventually left, after seizing 86 family pictures, many of which had been snapped around the Christmas tree.

His client eventually found out the real story: Much of the furniture in the house had belonged to her dead grandmother. The IRS believed that the woman's father _ as executor of the estate _ had undervalued the furniture. The raid was staged so IRS agents could get a furniture appraiser into the house, and the photographs were confiscated to keep the family guessing about the true motive. No criminal case was brought, but it took years to get the photos back.

"We see too many "cowboy' agents, who are undisciplined and uncontrolled, and who think the end _ putting away the bad guys_ justifies the means: intrusive, intimidating and oppressive investigations," said Davis.

The committee also heard about:

An unidentified IRS employee arrested for drunken driving who threatened to arrest a state trooper. The employee wasn't disciplined but was warned he would face harsh discipline if he was involved in further misconduct.

Ray Cody Mayo Jr., a lawyer from Shreveport, La., who said he was audited by the IRS because he was defending taxpayers. Mayo said it appears the IRS "in some instances directly targeted lawyers who represent taxpayers in an effort to intimidate and harass."

The hearings resume today with testimony about businesses that have been raided by the IRS.