WASHINGTON — Congressional investigators are focusing less on the origins of the Internal Revenue Service's scrutiny of tea party groups and more on how flagging one application led to delays for hundreds of groups.
In the next phase of inquiries, lawmakers will seek to figure out why the applications of groups seeking tax-exempt status were stalled throughout 2011, who developed questions the agency later said were inappropriate and why senior IRS executives didn't tell Congress what they knew.
"We still have many questions about why tea party applicants faced inappropriate questions, delays and scrutiny," Rep. Darrell Issa, R-Calif., chairman of the House Committee on Oversight and Government Reform, said in a statement. "There's a litany of things that happened and a lot of unknowns, including why officials were denying targeting to Congress as it was happening."
More than one month into the investigation of the IRS, the first round of hearings and transcripts show a bureaucratic attempt to flag potentially controversial issues and consolidate similar cases. The inquiries have turned up ample evidence of miscommunication and mismanagement at the agency and no proof of a political plot.
Many details bolster the IRS's argument — that front-line employees decided to start looking at tea party groups' applications in 2010 and that the highest-ranking IRS executives had no idea what was happening until after lawmakers started complaining in 2012.
"I personally am very prepared to believe that the origins of the problem resulted from incompetence," said Robert Kelner, who runs the election and political law practice at Covington & Burling in Washington and who has represented the Republican National Committee. "There are much more interesting questions about whether the investigation was slow-rolled and why there wasn't a more brisk reaction to it" from the IRS and the Treasury Department.
Congressional investigators have interviewed eight IRS employees, including several from the Cincinnati office that processes applications for tax-exempt status. They've requested millions of pages of documents from the IRS and held a flurry of hearings.
Daniel Werfel, the temporary official running the IRS, is expected to testify before the Ways and Means Committee next week. Werfel, who took over May 22, has said he will release what he called a "progress update" by the end of the month.
Lawmakers emphasize that their inquiries are far from complete.
"It will take time but we will get the facts," Rep. Dave Camp, chairman of the House Ways and Means Committee, said at a tea party rally at the Capitol Wednesday. "And we will follow them wherever they lead."
Since the IRS disclosed that it had given the applications of tea party organizations and other small-government groups extra scrutiny, six congressional committees have opened inquiries and the Justice Department has begun a criminal probe.
At least four IRS employees have been replaced, including Lois Lerner, who was director of exempt organizations, and Steven Miller, who was acting commissioner.
Lerner, who refused to testify and asserted her constitutional right against self-incrimination, is at the center of the inquiries. Issa and Rep. Jim Jordan, R-Ohio, wrote a May 14 letter outlining statements she made to Congress that they say were false or misleading, which could be a crime. She has been placed on paid administrative leave.
The investigations so far haven't uncovered evidence that the effort was directed or managed by anyone outside the IRS exempt organizations division, and don't show involvement by the White House or the Treasury Department.
That's not to say that the IRS has come away from the past month's inquiries looking great. Interview transcripts have laid bare the frustrations that employees had with ineffective management and inadequate guidance while top executives' defensiveness stoked ire from Congress.
The agency also was forced to acknowledge that it stage- managed its May 10 disclosure of the scrutiny with a planted question at a tax conference and that it spent months in 2012 — including Election Day — sitting on politically sensitive information that congressional Republicans wanted.
Suggestions by Lerner and White House Press Secretary Jay Carney that the scrutiny was concentrated in the Cincinnati office that processes tax-exempt applications have been undermined. The transcripts show that Washington-based lawyers within the IRS's exempt organizations division were involved in 2010 in formulating questions to groups and requesting reviews of several cases.
"There are also fundamental questions about IRS efforts to crack down on 501(c)(4) organizations and what role that played in targeting," Issa said.
There is still the potential for criminal charges, particularly for any IRS officials who may have made statements to Congress that were false or misleading.
"If there's any criminal prosecution, it will have to do with misrepresentations to Congress," Kelner said. "Now, I haven't seen anything to suggest that the attempt to focus on tea party groups resulted from conscious and intentional partisanship."
FBI Director Robert Mueller said the federal criminal investigation into the IRS is a "high priority" and that he has more than a dozen agents working on the case.
"It's a high-priority investigation and it needs to be handled with care, but it also needs to be pushed aggressively because it's an important case," Mueller testified before the Senate Judiciary Committee Wednesday.
Lawmakers are seeking more interviews with IRS employees and piles of internal documents while pursuing links between the tea party cases and items such as the release of other groups' confidential information.
Rep. Charles Boustany, R-La., said the interviews conducted so far will guide the rest of the inquiry. He's particularly interested in why senior IRS executives, including Lerner, Miller and former Commissioner Douglas Shulman, didn't disclose what they learned about the scrutiny in 2012 even though Congress was interested.
"Why were they so evasive with us?" he asked.
The hearings and transcripts have added detail to the account set forth by the IRS inspector general May 14, which found mismanagement without evidence of political motivation.
The controversy started with one case in February 2010, the transcripts show. An IRS employee flagged the case to his manager, John Shafer, as a potential issue because of media attention.
Shafer, a self-described "conservative Republican," said that was a typical procedure for addressing issues that might deserve managers' and lawyers' attention.
In those first few months, tea party groups were so much the focus of efforts that Elizabeth Hofacre, who was handling the tea party cases, told investigators that she sent conservative and liberal groups back to a broader pile for other employees to examine.
Meanwhile, public opinion has outpaced the facts that have been proven. A CNN poll released this week found that 47 percent of Americans say they think the White House directed the IRS activity.
Republican lawmakers stoked that anger at the tea party rally yesterday, which featured such signs as "Jail 4 Lois Lerner" and "1984 was not supposed to be an instruction manual."
— With assistance from Phil Mattingly in Washington.