Hey, IRS, Audit This!
June 19, 2013 by Michael Minns
“IRS Spent $50 Million On Staff Conferences,” “IRS Spent $4.1 Million On One Conference, Audit Finds” and “IRS Officials Face Grilling Over Lavish Spending”: So read the headlines. Fifty million dollars here, $50 million there… before long, a lot of money has been stolen.
After I read these articles, I found myself in an audit with a client who, ironically, is being questioned about travel expenses. The client moved 100 employees to an out-of-country convention. They all flew coach. They stayed in nice but regular hotel rooms. They ate at restaurants paid for by the company. And then, they went back to their jobs in the 48 States; the client does not do business in Alaska or Hawaii because of the travel expenses and management problems with the large time changes.
The client had negotiated the best rates he could get with the airlines and with the hotels. It was obviously a foreign concept. “Why?” asked the Internal Revenue Service auditor who had never held down a free-market job in her life time. “Yeah!” responded the auditor’s supervisor, who had taken off from whatever supervising he pretends to do in order to harass my client — which was likely why my firm had been hired in the first place.
“Mr. Supervisor,” I replied, “only one questioner to a witness.”
“I do this all the time,” he barked, “and if you don’t like it, we will serve you with a summons.”
I didn’t like it. I shared that feeling with him. He immediately got an IRS lawyer on the phone. To his dismay, he was told to cool off, that one questioner to a witness was enough. I had already told him that, but he accepted it from an “official” IRS lawyer on his side.
The rest of the audit took about two hours, and not a single useful question was asked. The supervisor sat there, the IRS lawyer stayed on the phone — saying nothing and doing nothing except using up taxpayer funds — to monitor, and the non-capitalist asked questions about a business she couldn’t even begin to understand. Although it sounds like a long time, the first meeting had lasted an entire day while the IRS auditor, on a surprise visit, asked questions unabated until a frustrated chief financial officer decided to hire counsel — my firm.
So, what was the cost of this audit to the American taxpayer? My guess is a couple grand — not much, in the scheme of things.
But a year ago, a raid by six armed, flak-jacketed agents on one of my clients’ golf courses in the middle of a Saturday cost considerably more. With the armed “officers,” the IRS special agent and a field attorney (for added government “protection”) drove four vehicles to the raid and to the jail, locking up a non-violent, unarmed citizen who is supposedly presumed innocent — causing me to fly from Houston to Phoenix, Ariz., and the IRS lawyer to fly to Phoenix from Washington, D.C. The cost to the American taxpayer was about $30,000 — a whole lot more than a couple grand.
However, considering the elimination of the presumption of innocence (at least until a jury could sort it out) and pieces of the 5th, 6th and 8th amendments, the cost is inestimable. Then add a bond hearing, a pre-bond report and a trial, and it all adds up to “cost” a great deal more. Add putting up the government’s star witness (a lawyer who had agreed to sell out his clients, and violate privileges, in return for his own freedom and some perks) in a hotel for a month-long trial and feeding him, and the price is unconscionable.
I’ll get back now to the current headlines and to our audit.
While this (I will not use the word “idiot” or a word that rhymes with “switch”) dedicated public servant is asking why my client, the CEO of a corporation, would pay $150 per room at a retreat in the Bahamas for his employees and $265 per employee, on average, for a plane ticket, the world-news headlines show that the IRS spent $50 million on their own staff conferences. They didn’t negotiate prices, like my client. And they didn’t settle for the little rooms, like my client’s employees. They had $3,500 suites. They paid the entertainment $135,000, one of whom lectured on “leadership through art” and was paid $17,000 for his “leadership.” In one conference alone, in August 2010, they spent $4 million. That was sort of funny to me (you have to laugh or cry) because 2,600 or so IRS employees spent $4 million at about the same time my client had his 100 employees out of the country in the Bahamas — and he was being quizzed about it. The big difference was he spent only about $50,000 to put on his conference. To be fair to the IRS, we’ll multiply the capitalist’s amount by 26 — the IRS had 26 times the people in attendance at its conference — and that comes to $1.3 million.
When my client was asked why he spent that amount of money, he responded: “It’s the best deal I could get. If you can get me a better deal, I’ll take it.”
I had to chime in, “Actually ma’am, it’s a lot better deal than you got at your seminar.”
I had to ask our friendly IRS auditor if she had been to the government leadership extravaganza and if it was reasonable to spend almost (not quite) 400 percent more on an in-country IRS leadership seminar than an exotic, out-of-country, capitalist-celebration ceremony for successful sales people.
She retorted, “We aren’t here to account to you.”
And, frankly, that’s about the only true statement we heard from the IRS auditor, her supervisor and their lawyer. So, I politely shared my agreement, “That’s for sure.”
Everyone wants to know how to get out of this program we are in, wherein innocent citizens spend time in jail before their trials and IRS employees spend our money like drunken sailors in a whorehouse using their boss’s credit card.
I have the answer; Sammy Lott, a quadriplegic, helped me come up with it.
About 15 years ago, Lott was ordered to appear in a Federal courthouse. It was storming, and Lott was using an electric wheel chair. It was no easy chore for Lott to make it through the puddles, lakes and buckets of rain; but he made it. The IRS lawyer didn’t make it, though.
After Lott and I (and the court) waited for an hour for the IRS lawyer, the court finally called him and he said he was sick. So we were reset.
When we met in court again, we asked for the government to be sanctioned. We were asking for $10,000. The IRS lawyer said it wasn’t the government’s fault. And guess what Lott said? “He’s right, judge. It’s that lawyer’s fault.” The very nice man on the bench thought that was reasonable and asked what we wanted. I asked him not to sanction the government but to sanction the IRS lawyer personally. And the judge did: $1,500.
As the hearing ended, the lawyer ranted and raved and asked the judgment to be changed to the government, not levied on him. He agreed to up it to $2,500 if it was changed. We said “no.” Then, he offered something better. The government was claiming Lott owed $250,000 in back taxes. If we would forgo the $1,500 against the government lawyer, he’d drop the whole $250,000. Such a deal! We took it.
That’s when it hit me: Make them personally responsible.
If government employees had to pay for their own leadership training, the price would drop. They might even call the whole thing off. As it is, the leadership ability of IRS agents is so poor that it costs four times as much to train an IRS agent to be a leader as it does someone in a grocery store.
If IRS agents, police officers and the people involved in the pre-trial arrest had to spend a weekend in jail every time they imprisoned for the weekend a presumably innocent person in prison who was subsequently found not guilty and who was clearly not a flight risk or a danger to the community, there would be a lot fewer innocent people in pre-trial incarceration.
And $50 million wouldn’t make headlines anymore, because we’d save $50 billion or more — perhaps this year, perhaps sooner.
One final thought: What would happen if everyone in government was personally held responsible for his wrongdoing? How much would we save then?