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Monday, June 20, 2011

Audit Decisions Were Political Decisions That Were Made at the Top

Here is one of David Cay Johnston's "Close Encounters of the Tax Myth Kind":

Close Encounters of the Tax Myth Kind, by David Cay Johnston, Tax.com: ...Now let's turn from the body politic to the IRS... Remy Welling, the auditor who blew the whistle on backdated stock options to me and Tax Notes's Warren Rojas seven years ago ... was fired and barely escaped prosecution for revealing taxpayer secrets...
When Welling ran into one of her old bosses at a bookstore, he asked how she was doing and then told her in no uncertain terms that she was a fool for going public about the backdated stock options.
As Welling put it, he "started saying how stupid I was to have objected to the backdating. He said everybody knew that was how large cases were worked at the IRS -- that audit decisions were political decisions that were made at the top and that everyone went along. He said that was just how big business and government operate all the time." And then, Welling said, her old boss told her, in the context of the Madoff Ponzi scheme that went undetected despite warnings, that "financial statements given to the SEC are filled with lies."
Other IRS managers I have spoken to over the years about Welling and other whistleblowers have made similar, although far less blunt, assessments. ...
That the IRS was made aware of backdating and did nothing remains scandalous. So is the lack of congressional inquiry into how the IRS knew about the backdated stock options and, except for Welling, looked the other way.
How are we going to raise sufficient money to finance our government if the cynical attitude that organizations can lie with impunity on their disclosure statements and tax returns pervades tax law enforcement? And why would anyone do what Welling did if the result is to be fired, threatened with having your CPA credentials pulled, and threatened with prosecution? ...

    Posted by on Monday, June 20, 2011 at 09:18 AM in Economics, Taxes | Permalink  Comments (25)


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