By Brian Mahany
Americans are not always the greatest fans of the Internal Revenue Service but much of that dissatisfaction should really be aimed at Congress. The IRS is charged with the fair and impartial enforcement of the tax code despite the ridiculousness of some of our tax laws. When agents become a bit to cozy with the people they investigate, however, everyone loses.
According to a press release issued yesterday by the U.S. Attorney’s Office in Manhattan, Dennis Lerner, a former IRS agent, was arrested for corruption surrounding a bank he had previously audited. Prosecutors say that Lerner was actively negotiating a settlement with a bank that he audited while also trying to get a job from them. Although prosecutors haven’t named the bank, a CNN story identifies the bank as Commerzbank.
The bank was in negotiations to pay a settlement of $210 million dollars. The audit claims that the bank had failed to report approximately $1 billion in income. The bank had much at stake.
IRS personnel take an oath to support the laws and Constitution of the United States. Instead of simply doing his job and protecting American taxpayers, Lerner is accused of soliciting the same bank he was auditing to hire him as their tax director. It doesn’t take a rocket scientist to figure out that Lerner probably offered them a sweat deal in return for a nice, well paid job.
The complaint suggests that the bank was expecting to pay much more than the $210 million settlement. Everyone will always wonder if the bank saved millions by hiring Lerner. In the public’s eyes, the bank saved millions, Lerner got a sweet deal and taxpayers were left holding the bag. For every dollar in taxes the bank doesn’t properly report and pay, other taxpayers are forced to foot the bill.
All this just so Lerner could make a few extra dollars.
A criminal indictment or complaint is just a charge. Lerner remains innocent until proven guilty. The complaint suggests, however, that the government has plenty of information to implicate him. At one point he is accused of calling his former peers “fools” and said his IRS job was a “waste”.
If true, he is the real fool. Talking down to former co-workers is a never a great way to start in employment in private sector. Especially if you are doing something illegal.
Lerner has been criminally charged with four offenses. If convicted he faces 20 years.
We know that there are many fine men and women working for the IRS. Integrity is critical for an agency with such broad and sweeping powers. Rogue and corrupt IRS personnel destroy the public’s confidence in our taxing system. Many people already believe there is too much of a revolving door between the IRS and financial sector. Some say that the only reason no executives from big banks have yet been prosecuted is because of the prevalence of former IRS agents in finance sector jobs. Lerner’s arrest will only fan those flames.
Most of our tax stories are filled with helpful hints on how the tax system works and how to avoid problems with the IRS. Every now and then, however, we use this blog to tell stories that simply need to be told. This is one of those events. When public employees cross the line, everyone suffers. Whether guilty or innocent, we hope prosecutors get to the bottom of the mess quickly. The public deserves that much.
The tax lawyers at Mahany & Ertl offer a wide range of tax services for both business and individuals. For a small firm, we certainly have a national reputation and international reach. From criminal tax problems, to audit defense to offshore reporting questions, we can help.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; and San Francisco (tax only).