Another Day in the Life of the IRS

A previous post of mine at International Liberty addressed the debate over whether Republicans should trim the IRS’s budget. The following case study should convince everyone that the answer is a resounding yes.

First, some background from a Joe Nocera column in the New York Times. The federal government made a rather troubling decision a few years ago to investigate, prosecute, and ultimately imprison a random home-loan borrower named Charlie Engle for the crime of mortgage fraud.

Mr. Engle is far from blameless in this saga, but I noted in another post that it was rather odd that the government would target a nobody while letting all the big fish swim away. This episode certainly paints a picture of a government that has one set of rules for ordinary people, but an entirely different set of rules for the political elite and those who make big campaign contributions to that ruling class.

But I also noted that I’m not a lawyer or legal expert and was unsure about the degree to which the big players actually broke laws, or whether they simply made stupid business decisions (often encouraged by bad government policy).

The most upsetting part of the story, though, is how the government wound up targeting Mr. Engle. It turns out that an IRS agent, Robert Norlander, must have been competing for the IRS’s Bully-of-the-Year Award because here are some of the things he did:

  • Norlander decided to snoop into Engle’s affairs because he saw a film about him training for a marathon. In other words, there was no probable cause, no reasonable suspicion, nothing. Just the perverse decision of an IRS bully to go after someone.
  • Norlander admitted a pattern of thuggish behavior, stating that he will snoop into someone’s private life simply because that person drives an expensive car.
  • Norlander continued to investigate and persecute Engle, subjecting him to undercover surveillance, even though his tax returns showed no wrongdoing.
  • Norlander even engaged in “dumpster dives” to look for evidence of wrongdoing in Mr. Engle’s garbage. Keep in mind that there is no probable cause, no reasonable suspicion, and Engle’s tax returns were legit.
  • Norlander used a sleazy KGB tactic by sending an attractive woman to flirt with Mr. Engle in hopes of getting him to somehow admit to a crime.
  • Norlander failed to find any evidence of a tax crime. He couldn’t even hit Engle with a money-laundering offense. But the undercover agent who was part of the “honey trap” was wearing a wire and supposedly got Engle to admit to mortgage fraud and Norlander used that extremely flimsy evidence to justify a Justice Department case against Engle.

In other words, this whole thing has a terrible stench. Assuming the details in the story are accurate, we have an IRS agent engaging in a random vendetta against someone, and then apparently justifying his jihad by figuring out how to nail the guy on a very weak charge of mortgage fraud. I would describe Norlander as a “rogue agent,” but apparently this behavior is business-as-usual at the IRS.

Here are the relevant passages from Nocera’s column:

Mr. Engle received $30,000 for his participation. The film, “Running the Sahara,” was released in the fall of 2008. Eventually, it caught the attention of Robert W. Nordlander, a special agent for the Internal Revenue Service. As Mr. Nordlander later told the grand jury, “Being the special agent that I am, I was wondering, how does a guy train for this because most people have to work from nine to five and it’s very difficult to train for this part-time.” (He also told the grand jurors that sometimes, when he sees somebody driving a Ferrari, he’ll check to see if they make enough money to afford it. When I called Mr. Nordlander and others at the I.R.S. to ask whether this was an appropriate way to choose subjects for criminal tax investigations, my questions were met with a stone wall of silence.) Mr. Engle’s tax records showed that while his actual income was substantial, his taxable income was quite small, in part because he had a large tax-loss carry forward, due to a business deal he’d been involved in several years earlier. (Mr. Nordlander would later inform the grand jury only of his much lower taxable income, which made it seem more suspicious.) Still convinced that Mr. Engle must be hiding income, Mr. Nordlander did undercover surveillance and took “Dumpster dives” into Mr. Engle’s garbage. He mainly discovered that Mr. Engle lived modestly. In March 2009, still unsatisfied, Mr. Nordlander persuaded his superiors to send an attractive female undercover agent, Ellen Burrows, to meet Mr. Engle and see if she could get him to say something incriminating. In the course of several flirtatious encounters, she asked him about his investments. …Unbeknownst to Mr. Engle, Ms. Burrows was wearing a wire. …No tax charges were ever brought, even though that was Mr. Nordlander’s original rationale. Money laundering, the suspicion of which was needed to justify the undercover sting, was a nonissue as well. As for that “confession” to Ms. Burrows, take a closer look. It really isn’t a confession at all. Mr. Engle is confessing to his mortgage broker’s sins, not his own.

Stories like this explain why I’m a libertarian.

As George Washington supposedly said, ”Government is not reason; it is not eloquence; it is force. Like fire, it is a dangerous servant and a fearful master.” Unfortunately, thanks to bad laws and thuggish bureaucrats, government is definitely now our master and no longer just a servant. The IRS is a grim example of this phenomenon. President Obama, not surprisingly, wants to increase their budget.