Treasury Secretary Jack Lew Defends Handling of IRS Scandal

(Evan Vucci/AP Photo)

WASHINGTON - Treasury Secretary Jack Lew called the unfair scrutiny the Internal Revenue Service gave some tea party groups "outrageous methods," adding that while the "conduct was not politically motivated it was unacceptable and inexcusable."

"Administering the tax code without any hint of bias is a solemn obligation that must be carried out with the highest of standards," Lew said in a Senate Banking Committee hearing today. That was why once he learned of the practice he took steps, including asking for the resignation of acting IRS Commissioner Steven Miller, he said.

Miller was subject to a term limit that would have forced him out of the job in three weeks anyway.

Lew said he has directed incoming Acting Commissioner Daniel Werfel, who begins Wednesday, to "carry out a thorough review," including "making sure that those who acted inappropriately are held accountable for their actions," as well as "examining and correcting any failures in the system that allowed this behavior to happen," and "taking a forward-looking view in determining whether the IRS has systemic problems that need to be addressed."

Werfel will report back to him within 30 days so he can report back to the president "to make sure that nothing like this ever happens again," Lew said.

Throughout the mostly respectful, but at times contentious questioning, Lew denied over and over again any political motivation for the IRS' behavior.

Lew also said he had no idea that the IRS was planning on revealing the scandal the way it did: by planting a question at an American Bar Association conference.

He said it was the "discretion of the IRS to decide how to manage the matter" and it is the "guiding principle for the Treasury Department in IRS investigations … to not interfere in any way," but it's not a strategy he would have supported.

"I wasn't asked about this," Lew told the committee. "I would have advised against doing that, but it was a decision for the IRS to make."

Lew told the committee that he first became aware of the targeting of tea party groups on March 15, when he first met with Treasury Inspector General for Tax Administration J. Russell George, who told him there was an audit of 501(c)(4) activity and "there might be troubling findings," but he said the inspector general "did not describe them in detail."

"I then did not learn any more about it until it became public," Lew said, noting that it was Friday, May 10, when he was attending the G-7 meetings in the United Kingdom. He said he was "outraged" when he found out and did not get a copy of the IG report until Tuesday, May 14, the same day it became public.

Sen. Richard Shelby, R-Ala., was one of the senators most persistent with Lew, asking him what steps he took after his initial meeting with the inspector general when he first learned of the audit.

"The practice at Treasury, quite appropriately, is when you're notified of an IG investigation, you allow the IG to do their work," Lew answered. "You don't get in the way. You make sure that they have access to whatever they need access to to complete their audit. And that is what Treasury was doing. I don't think he expected me to take any action at that time, because I was awaiting his report, which I received last Tuesday."

Shelby noted that before Lew became secretary of the treasury he was President Obama's chief of staff at the White House, beginning that position in January 2012.

"So when this was going on in Cincinnati, you were the chief of staff at the White House," Shelby said, which Lew replied was correct.

"And you had no knowledge whatsoever of anything amiss dealing with the IRS approval, disapproval, delay or anything of specific groups," Shelby asked referring to Lew's time at the White House. Lew answered again that he was not made aware of the scrutiny until March 15.

"I know that questions had been raised," Lew said. "The fact is, this audit was a publicly posted audit in October 2012. So the fact that an audit was going on was a matter of public record. I had no specific knowledge."

Shelby then asked Lew if he believes, as the IRS has said, that the targeting was done solely by the Cincinnati office or if it is "part of a culture at the Obama White House."

"I've read the IG report quite carefully, and I think it's very important to note that there's no suggestion of any political interference with the process of making these determinations," Lew said. "There is unacceptable behavior that happened at the IRS. That has to stop, and it can't happen again. But there was no suggestion of any political intervention."

When Shelby pressed again, Lew repeated his assertion.

"I have seen no suggestion of any political involvement at all," he said. "What I've said and what I believe is that it was unacceptable, and whoever is responsible should be held accountable. … What I think is that the Cincinnati office exercised very poor judgment and used criteria that are unacceptable. And we've made it clear that the IRS has to be beyond any suspicion of bias."

Although Lew promised reform, he also stressed that he "will not cross that line into the administration of the tax system, because the cure could be worse than the disease."

"We need to make sure that there's no political involvement in the administration of the tax system," Lew said. "And the management of the IRS is very much the responsibility of the Treasury secretary. The administration of the tax system has to be within the IRS and apart from politics."

When Sen. Bob Corker, R-Tenn., questioned Lew, he blamed the scandal on the "culture" at the White House, saying "the indignation that you showed on the front end, to a degree, is kind of laughable in that, when you have the president of the United States and the vice president and other leading folks in our administration using the type of language to describe the folks that were targeted - demonizing, villainizing - I think it's - you would expect that bureaucrats at lower levels are going to act in a way that they acted."

Lew answered that "the president's reaction to this was exactly the same as mine. It was outrage" and "he has taken no step ever to condone this kind of behavior."

Sen. Dean Heller, R-Nev., also took exception with Lew not asking the inspector general for more details and said the "IRS has violated the trust of the American people."

Heller ended his questioning by calling for a special counsel to investigate the scandal.

Committee chairman Sen. Tim Johnson, D-S.D., began the hearing with an offer of condolences to the people of Oklahoma, which was struck Monday by a horrific tornado, saying his "thoughts and prayers are with the families of Moore, Oklahoma, and our colleague here on the committee, Senator Coburn. It is a difficult time as families mourn the loss of loved ones and begin rebuilding their community."

Lew also expressed his condolences as did others including Sen. Elizabeth Warren, D-Mass., who is originally from the state.

"I will hold them all in my prayers," Warren said. "It's a terrible catastrophe there."