Grassley Letter to IRS Commissioner

As we have discussed in our previous article, Whistleblowers and the IRS, the IRS is often reluctant to utilize the whistleblower provisions available to them under the False Claims Act. This apparent reluctance has come to the attention of an important person, the ranking member of the Senate Judiciary Committee, Senator Chuck Grassley. While Mr. Grassley is not the greatest supporter of the extensive use of whistleblower provisions by the SEC (referring to the attitude of the SEC as "the sky-is-falling"), he does acknowledge that the IRS is not making use of the tools available to combat fraud.

In a letter dated September 13, 2011, Senator Grassley wrote to IRS Commissioner Douglas Shulman detailing how he believes the agency could make better use of the 9,500+ tips from over 1,400 whistleblowers that have come forward since 2006. Five of the most important points of concern raised by Senator Grassley include the following:

• 1. Timeframe. Senator Grassley noted that claims tended to "languish in review" for extended periods of time. As of the date of this letter, over 1,000 claims have been awaiting determination regarding whether a taxpayer audit is necessary for over one year. Two hundred claims have been awaiting review for over two years. Further, Grassley found the fact that over 500 cases from the fiscal year 2007 were still in the audit phase "very worrisome".
  2. Prioritization. Grassley comes out directly and says that it appears that the IRS does not prioritize whistleblower-initiated audits over other audits, hence the long delays. In light of both the large dollar amounts potentially recoverable and the complications raised by expiring statutes of limitations, Grassley has asked that the IRS reprioritize whistleblower claims and train IRS employees regarding their importance.
  3. Coordination. The Whistleblower Office is meant to be more than a "delivery service" which brings potential claims to the IRS for them to sit on for several years. Before the 2006 reforms, these "deliveries" would end up lost in file cabinets and mailrooms, never again to see the light of day. Even now, after the Whistleblower Office was given more autonomy, cooperation between the agencies is minimal. Grassley has requested that procedures be put in place to enhance cooperation between the IRS and the Whistleblower's Office.
  4. Outside Assistance. Other offices, such as the DOJ, use outside attorneys to prosecute FCA claims with much success. However, IRS Rule 25.2.2.7(10) envisions only the most minor information delivery roles for outside help. Grassley states that such an interpretation runs contrary to the 2006 Whistleblower reforms and asks that the IRS reevaluate its position on the use of outside counsel.
  5. Reporting. Grassley was particularly disappointed in the annual whistleblower reports issued to Congress. Not only are they unreasonably delayed (often by several months), but the thin content of the reports leave much to be desired. Grassley goes on to describe the annual reports as "vague and unclear."

The letter also includes a reiteration of the "roadmap" provided by the Government Accounting Office and by the 2006 Whistleblower reforms regarding how to efficiently process whistleblower claims. We'll have to wait until November, 60 days after the end of the current fiscal year, to know whether the IRS has heeded any of Senator Grassley's words of warning.

Source:
Senator Grassley Letter to IRS

See Our Related Blog Posts:
Whistleblowers and the IRS
Primer on the Foreign Corrupt Practices Act