[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
THE IRS CONTRACTS WITH STRONG CASTLE, INC.
=======================================================================
HEARING
before the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
JUNE 26, 2013
__________
Serial No. 113-43
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee MATTHEW A. CARTWRIGHT,
TREY GOWDY, South Carolina Pennsylvania
BLAKE FARENTHOLD, Texas MARK POCAN, Wisconsin
DOC HASTINGS, Washington TAMMY DUCKWORTH, Illinois
CYNTHIA M. LUMMIS, Wyoming ROBIN L. KELLY, Illinois
ROB WOODALL, Georgia DANNY K. DAVIS, Illinois
THOMAS MASSIE, Kentucky PETER WELCH, Vermont
DOUG COLLINS, Georgia TONY CARDENAS, California
MARK MEADOWS, North Carolina STEVEN A. HORSFORD, Nevada
KERRY L. BENTIVOLIO, Michigan MICHELLE LUJAN GRISHAM, New Mexico
RON DeSANTIS, Florida
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Stephen Castor, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
C O N T E N T S
----------
Page
Hearing held on June 26, 2013.................................... 1
WITNESSES
Mr. Brad Flohr, Senior Advisor for Compensation Service, Veterans
Benefits Administration, U.S. Veterans Administration
Oral Statement............................................... 7
Written Statement............................................ 10
Mr. Michael A. Chodos, Associate Administrator, Office of
Entrepreneurial Developmnet, U.S., U.S. Small Business
Administration
Oral Statement............................................... 25
Written Statement............................................ 27
Ms. Beth Tucker, Deputy Commissioner for Operations Support,
Internal Revenue Service
Oral Statement............................................... 32
Written Statement............................................ 34
Mr. William A. Sisk, Acting Deputy Commissioner, Federal
Acquisition Service, General Services Administration
Oral Statement............................................... 39
Written Statement............................................ 41
Mr. Braulio Castillo, President and Chief Executive Officer,
Strong Castle, Inc.
Oral Statement............................................... 44
Written Statement............................................ 46
APPENDIX
U.S. Small Business Administration, Notice of final
Decertification................................................ 96
THE IRS CONTRACTS WITH STRONG CASTLE, INC.
----------
Wednesday, June 26, 2013
House of Representatives,
Committee on Oversight and Government Reform,
Washington, D.C.
The committee met, pursuant to call, at 9:04 a.m., in Room
2154, Rayburn House Office Building, Hon. Darrell E. Issa
[chairman of the committee] presiding.
Present: Representatives Issa, Mica, Duncan, Jordan,
Walberg, DesJarlais, Gowdy, Woodall, Meadows, Bentivolio,
DeSantis, Cummings, Maloney, Norton, Tierney, Connolly,
Duckworth, Kelly and Davis.
Staff Present: Alexia Ardolina, Assistant Clerk; Jen
Barblan, Counsel; Kurt Bardella, Senior Policy Advisor; Richard
A. Beutel, Senior Counsel; Will L. Boyington, Press Assistant;
Molly Boyl, Senior Counsel and Parliamentarian; Lawrence J.
Brady, Staff Director; Ashley H. Callen, Senior Counsel; Steve
Castor, General Counsel; Drew Colliatie, Professional Staff
Member; John Cuaderes, Deputy Staff Director; Carlton Davis,
Senior Counsel; Kate Dunbar, Professional Staff Member; Adam P.
Fromm, Director of Member Services and Committee Operations;
Linda Good, Chief Clerk; Tyler Grimm, Senior Professional Staff
Member; Christopher Hixon, Deputy Chief Counsel, Oversight;
Justin LoFranco, Digital Director; Mark D. Marin, Director of
Oversight; Ashok M. Pinto, Chief Counsel, Investigations; Laura
L. Rush, Deputy Chief Clerk; Jonathan J. Skladany, Deputy Chief
Counsel, Investigations; Rebecca Watkins, Deputy Director of
Communications; Meghan Berroya, Minority Counsel; Susanne
Sachsman Grooms, Minority Chief Counsel; Jennifer Hoffman,
Minority Press Secretary; Elisa LaNier, Minority Deputy Clerk;
Dave Rapallo, Minority Staff Director; and Donald Sherman,
Minority Counsel.
Chairman Issa. The committee will come to order. The
Oversight Committee's mission statement is that we exist to
secure two fundamental principles: First, Americans have a
right to know that the money Washington takes from them is well
spent; and second, Americans deserve an efficient, effective
government that works for them.
Our duty on the Oversight and Government Reform Committee
is to protect these rights. Our solemn obligation is to hold
government accountable to taxpayers, because taxpayers have a
right to know what they get from their government. It is our
job to work tirelessly in partnership with citizen watchdogs to
deliver the facts to the American people and bring genuine
reform to the Federal bureaucracy.
A few days ago the acting IRS Commissioner, Danny Werfel,
issued a 30-day assessment on his plan of action for the future
of the IRS. The report stated that in many instances across the
IRS, we had efficient, effective management, or effective
management that is leading positive organizational performance.
Unfortunately, we are here today because failures within
the IRS are not isolated to just Tax-Exempt Division. The
revelation that a company called Strong Castle was able to
acquire more than $500 million in potential contracts, or in
contracts for potential sales, with no previous track record
completely undermines the IRS narrative that just one branch or
department within the IRS failed the American people.
Our report, we believe, shows a cozy relationship between
Strong Castle's president and the IRS Deputy Director for
Information Technology Acquisitions, Greg Roseman, and it is
the heart of this issue. Included in the--included in our
report are exchanges of text messages that we believe are
shockingly inappropriate, and in some cases offensive.
Furthermore, the fact that Mr. Castillo was able to
successfully manipulate the system--and we are not alleging a
crime--but successfully manipulate the system to acquire
contracts exposes staggering vulnerability in the IRS's
acquisition process and jeopardizes billions of taxpayer
dollars in this situation.
Quite frankly, we are not sure that we have criminal
element here, that we have criminal violations. What we are
sure of is that the intent of Congress and the stated intent of
this and each administration before has been thwarted.
The intention of, without a doubt, that disabled military
veterans receive preference flies in the face of a small injury
in 1984 while attending the Military Academy Prep School, one
so minor that it had no effect on college football
participation for years to follow, and that took 27 years to
conveniently ask to have this put in as a disability not
because of a true disability or inability to perform a job,
but, in fact, in order to qualify for a preference statement.
Additionally, the use of HUBZones, and in this case one
that was a legacy HUBZone that actually the Verizon Center and
the other parts of Washington, D.C., are moving out of that
into thriving areas; the use of that in order to gain a
contract and then creating absolutely no jobs within that
district that were directly related to or in support of this
$500 million contract.
Our investigation is still in its infancy. Today we are
working with the IG and hope to work with others within the IRS
to end this problem. As we speak, many of these contracts
continue to be in force. And perhaps that's the most
distressing is that the IRS officials immediately--excuse me--
initially denied and then repeated their denial that there was
a problem. They failed to take action after this was brought to
their attention, and the IRS is still allowing a $266 million
contract with Strong Castle to stand.
The action by the inspector general when he was notified of
these allegations almost a year ago was a lack of urgency that
the American taxpayers deserve.
In our evaluation we find no value added performed by
Strong Castle. I repeat, no value added performed by Strong
Castle, although profits flow to that company over and above
the full payment to the companies who actually provide the IRS
with those services.
No hearing related to the IRS would be complete without
mentioning that under Obamacare, the task of the IRS to
implement at least 47 new provisions, including 18 new taxes
expected to raise $1 trillion over the next decade, and the
hiring of thousands of new employees, the need for computer
systems to work and work accurately begs the question of can we
afford to implement Obamacare if we cannot get the systems and
controls in place for existing requirements.
Just this year the IRS has requested nearly $500 million,
the same amount of money the IRS plans to award to Strong
Castle, to enforce Obamacare, including 2,000 new full-time
employees.
We are not trying to say that one is interchangeable with
the other, but it's very clear this is a lot of money, and it's
a lot of money that could for a fraction, 2 or 3 or 4 percent
savings, be passed on to the American people.
Often on this dais we applaud, appropriately, Federal
workers. And I want to take a moment to make it clear the vast
majority of people involved in contracting in the Federal
workforce take contracting seriously. They scrutinize the
contracts and most often try to get the best value for the
taxpayer. Because the best value is not always the lowest
price, this is a difficult job, and it requires absolute
integrity. If we do not have full confidence in our procurement
integrity, then we must choose the lowest price. The lowest
price is not always the best value for the taxpayer, but the
analytics of lowest price versus lowest value depends on an
independent, non cozy relationship between the contracting
officers and their superiors and the contractor. This committee
has over the years applauded and will continue to applaud that
most contracts have that characteristic. They are not always
awarded the way contractors would like, but they are based on
best value to the taxpayer.
In this case, at least for this chair and our draft report,
we don't believe that occurred, and that is the reason that we
are continuing our investigation.
Chairman Issa. I would now like to recognize and thank the
ranking member for being my full partner in this investigation.
Mr. Cummings. Thank you very much, Mr. Chairman. And I want
to, first of all, thank you for calling this hearing. It is
indeed a very important hearing.
And it is interesting, this hearing is to examine
allegations against a company named Strong Castle, Inc., that
has been awarded $51 million in obligations under information
technology contracts with the Internal Revenue Service. The
first allegation made against Strong Castle last December was
that the company's owner, a local businessman from northern
Virginia named Braulio Castillo, took improper advantage of the
Historically Underutilized Business Zone program, the HUBZone,
while setting up his companies here in Washington, D.C.
Let me say from the outset that I have a tremendous
interest in HUBZones. I have lived in what would consider to be
a HUBZone for 32 years in the same house, where I would imagine
that black unemployment, male unemployment, is probably 35
percent unemployment; where businesses struggle trying to
become a part of this economy and trying to do well. And I have
lived long enough and seen enough to be able to tell you that I
have worked with a lot of those small business people who have
felt quite often that they weren't on the playing field. As a
matter of fact, they felt that they weren't even in the
stadium. And they have lived long enough and struggled long
enough, and now I have seen many of them die chasing a dream,
trying to get there, looking for a playing field that is simply
level, but they can't even get on the field.
And so the purpose of the HUBZone program is to help small
businesses increase employment, investment in economic
development in historically underutilized business areas. As
part of this program, which is overseen by the Small Business
Administration, companies may receive preferred status when
bidding on Federal contracts.
In order to qualify, Mr. Castillo opened one small office
in a HUBZone near Chinatown, the Chinatown neighborhood of
Washington, D.C. He then worked with the head football coach at
Catholic University, his former college roommate, to hire
college students living in a different HUBZone near that
school.
Mr. Castillo's former employer and current competitor,
Government Acquisitions, Inc., filed protests with SBA and the
Government Accountability Office. The company accused Mr.
Castillo of engaging in, ``shell game,'' with multiple
businesses and employees. It also accused him of,
``manipulating the facts to gain the preferred status.''
SBA investigated these allegations and decertified Mr.
Castillo's company as a HUBZone contractor on May 23rd, 2013. I
ask unanimous consent that the SBA's decertification letter be
placed into the hearing record.
Chairman Issa. Without objection, so ordered.
Mr. Cummings. Thank you, Mr. Chairman.
SBA determined that Mr. Castillo's company submitted
employee records that were, ``false and inaccurate.'' It also
concluded that the company, ``does not have the adequate
internal controls to independently verify employee records.''
Despite these findings, I credit Mr. Castillo for appearing
before the committee today. He participated in a 9-hour
interview with committee staff, he provided documents to us and
to SBA, and he is here to explain his actions. A committee
staff also conducted extensive interviews with almost all of
his employees.
Another major allegation involves Mr. Castillo's personal
relationship with an IRS employee named Greg Roseman. Mr.
Roseman did not disclose his relationship to the contracting
officers who awarded contracts to Strong Castle, to his direct
supervisor at the IRS, or to the IRS Office of General Legal
Services. This certainly concerns everybody on this dais.
Mr. Roseman was not the contracting officer ultimately
responsible for awarding the contracts to Mr. Castillo's
company, but he participated in the contracting process as a
voting member of the Contracting Review Board for two of these
contracts.
No IRS officials reported having any knowledge of Mr.
Castillo's relationship with Mr. Roseman. In addition, no
contracting officials or other IRS employee interviewed by the
committee reported any inappropriate influence by Mr. Roseman
on the contracting process; nevertheless, the evidence obtained
by the committee indicates at least an appearance of
impropriety because Mr. Roseman did not disclose this
relationship or recuse himself from the contracting process.
Regarding their personal relationship, Mr. Castillo stated
during his interview with the committee staff, ``Greg Roseman
and I are friends''
In addition, on May 15, 2013, the Treasury Inspector
General for Tax Administration reported that Mr. Castillo and
Mr. Roseman had exchanged text messages on their personal
cellphones that, ``contained inappropriate language and lacked
professional decorum.'' Three hundred of these text messages
included both work-related and personal communications. They
also included obviously inappropriate communications with
juvenile and offensive homosexual slurs and mocking references
to another IRS employee.
Mr. Roseman has been reassigned pending the completion of
the inspector general's review and is no longer overseeing
procurement matters. Earlier this week his attorney wrote to
the committee indicating that Mr. Roseman is invoking his Fifth
Amendment right not to testify today. I am not here to defend
his actions, but this is his right under the Constitution, and
as Members of Congress we are bound to respect that right.
And just one other note. The chairman talked about the
tremendous responsibility that the IRS will now--has been
facing with regard to the Affordable Care Act. And I have said
it from this dais before, but I will say it again: We, all of
us, everybody up here has fired people, all of us. And bad
actors does not stop the show. This is the United States of
America. We have problems in an institution, and if people are
not doing their jobs, they have to go, but that doesn't mean
that the law, the law, the Affordable Care Act, should not and
cannot be administered by that agency.
We are a can-do Nation. We are a can-do Nation, and it is
part of our obligation, all of us, to make sure, as the
chairman has said, that we put right this ship and make sure
that it sails so that it can accomplish the things that the
Congress had voted for, and that we have stood up for, and that
is the law.
And with that, Mr. Chairman, I look forward to hearing from
our witnesses, and I yield back.
Chairman Issa. I thank the gentleman.
Chairman Issa. All Members will have 7 days to submit
opening statements for the record.
Chairman Issa. And we now recognize our panel.
Mr. Brad Flohr is Senior Advisor for Compensation Service
for the Veterans Benefits Administration at the U.S. Veterans
Administration.
Mr. Michael Chodos----
Mr. Chodos. Yes.
Chairman Issa. --is the Associate Administrator of the
Office of Entrepreneurial Development at the U.S. Small
Business Administration.
Ms. Beth Tucker is the Deputy Commissioner for Operations
Support at the Internal Revenue Service.
Mr. Gregory Roseman is the Deputy Director for Enterprise
Networks and Tier Systems Support at the Internal Revenue
Service. And I believe that is a previous title, but we will
use it for now.
Mr. William A. Sisk is the Deputy Commissioner for Federal
Acquisition Services at the General Services Administration, or
GSA. Welcome.
And Mr. Braulio Castillo is the president and chief
executive officer of Strong Castle.
Pursuant to the committee regulations, would you please all
rise, raise your right hands to take the oath.
Do you solemnly swear or affirm that the testimony you are
about to give will be the truth, the whole truth and nothing
but the truth?
Let the record reflect--please be seated. Let the record
reflect that all witnesses answered in the affirmative.
Before I continue, and because this committee is acutely
aware that one or more on the panel may choose to assert their
Fifth Amendment rights, and because this chair does not want to
have anyone waive that right accidentally, involuntarily or in
any other way, does anyone here at this time intend to evoke
their Fifth Amendment rights?
Mr. Roseman?
Mr. Roseman. Yes, sir. I do intend to waive my Fifth--I
intend to invoke my Fifth Amendment right to be silent.
Chairman Issa. Mr. Roseman, you have not provided any
written testimony today; is that correct?
Mr. Roseman. Yes, sir.
Chairman Issa. Okay. I understand from your counsel that
you may want to assert your constitutional privileges, and
you've already said that's correct.
Mr. Roseman, today's hearing will cover topics including
waste, fraud and abuse of government contracting set-asides. As
Deputy Director, Enterprise Networks and Tier Systems Support
at the Internal Revenue Service, you are uniquely qualified to
provide testimony that will help the committee better
understand information technology acquisition practices at the
IRS. To that end, I once again must ask you to consider
answering questions that will bear on that subject with us.
Mr. Roseman, what is your title at the IRS?
Mr. Roseman. Mr. Chairman, my title is what is--was Deputy
Director of Enterprise Networks and Tier Systems Procurement.
Chairman Issa. Mr. Roseman, to whom do you report at the
IRS?
Mr. Roseman. Mr. Chairman, on the advice of counsel, I
respectfully decline to answer any questions, and invoke my
Fifth Amendment privilege to remain silent.
Chairman Issa. Would you do that once again? I apologize.
Mr. Roseman. Mr. Chairman, on the advice of counsel, I
respectfully decline to answer any questions, and invoke my
Fifth Amendment privilege to remain silent.
Chairman Issa. Mr. Roseman, when did you first become aware
of a company known as Strong Castle, Inc.?
Mr. Roseman. Mr. Chairman, on the advice of counsel, I
respectfully decline to answer any questions, and invoke my
Fifth Amendment privilege to remain silent.
Chairman Issa. Mr. Roseman, are you currently employed by
the IRS?
Mr. Roseman. Mr. Chairman, on the advice of counsel, I
respectfully decline to answer any questions, and invoke my
Fifth Amendment privilege to remain silent.
Chairman Issa. Lastly, Mr. Roseman, are you prepared to
answer any questions here today about your role in the IRS
acquisitions and information technology products and services
from Strong Castle, Inc.?
Mr. Roseman. Mr. Chairman, no.
Chairman Issa. Mr. Cummings, do you have any--any questions
before I dismiss the witness?
Mr. Cummings. No, I have no questions. And I--as we respect
the witness' right to remain silent, consistent with the Fifth
Amendment, Mr. Chairman, so I have no objections with the
chairman dismissing this witness.
Chairman Issa. Given that the witness has indicated that he
does not intend to answer any questions, and out of respect for
his right under the Constitution, I will now ask the committee
to excuse the witness, take away his name, and we'll take a
short recess so that we can reset the table.
Mr. Roseman, you're excused.
[recess.]
Chairman Issa. The committee will come to order.
I'd like to thank all the witnesses for their forbearance.
The chair would like to make sure we allow sufficient time, and
even though we're slightly smaller now, there's still a large
panel, so I'd ask you to recognize that your entire opening
statements will be placed in the record, and to stay within the
5 minutes or very close to it.
And with that, you're recognized, Mr. Flohr, for 5 minutes.
WITNESS STATEMENTS
STATEMENT OF BRAD FLOHR
Mr. Flohr. Thank you, Mr. Chairman, Ranking Member Cummings
and members of this committee. I appreciate the opportunity to
appear before you this morning to discuss the Department of
Veterans Affairs' processes for granting service connection for
disabled veterans and verifying Service-Disabled Veteran-Owned
Small Businesses and Veteran-Owned Small Businesses.
VA is committed to making accurate decisions in claims for
disability compensation, as reflected in our goal of 98 percent
accuracy by 2015 and monitoring the VOSB program. Oversight for
these programs ensures that qualified veterans receive the
benefits and business qualifications they have earned through
their service to our Nation.
Disability compensation is a monthly benefit payable to
veterans who have a disability or disabilities resulting from
injury or disease incurred in or aggravated by Active military
service. Such service includes Active Duty, Active Duty for
training during which the individual concerned was disabled or
died from disease or injury incurred or aggravated in the line
of duty, and in that Inactive Duty for training during which
the individual concerned was disabled or died from injury
incurred or aggravated in line of duty.
Service consisting solely of attendance at any one of the
preparatory schools of the service academies may constitute
Active Duty or Active Duty for training for VA purposes,
depending on the circumstances of the individual service.
VA's Office of General Counsel held in a precedent opinion
issued in 1994 and 1995 that characterization of an individual
service at a United States academy preparatory school for
purposes of entitlement to veteran's benefits depends upon the
status in which the individual enters the school. Service by a
person entering the school as a reservist called to duty for
the sole purpose of attending the school or by one who is
enlisted from civilian life or National Guard duty to attend
the school constitutes Active Duty for training.
In contrast, persons who enroll directly from Active Duty
under a prior enlistment remain on Active Duty within the
meaning of Title 38 during their attendance. Those individuals
selected for enrollment in these preparatory schools are in the
military. They wear the uniform, are paid based on their
military rank, are subject to the Uniform Code of Military
Justice, and upon release from that period of training, they
are issued a DD-214 with either honorable service or other than
honorable, or whatever the characterization may be. In November
of 1995, the VA amended its regulations to reflect our general
counsel's statutory interpretation concerning this type of
service.
VA's statutory authority to compensate veterans for
disability resulting from service, stated in 38 United States
Code section 1110 is not limited to providing compensation for
disabilities caused by military service. VA's statutory
authority is to compensate veterans for disability incurred in
or aggravated by service.
Once an individual takes the oath to serve and protect the
United States, they are on duty 24 hours a day 7 days a week.
If he or she is injured or develops a chronic disease, whether
in combat or during routine activities, VA claims processors
prepare a disability rating decision that determines
entitlement to service connection and the amount of any
disability benefits that may be payable.
In determining whether a disability is related to military
service, there must be evidence of an injury or disease or an
exposure in service; medical or, in certain circumstances, lay
evidence of a current disability; and evidence of a medical or
scientific nexus or link between the current condition and the
in-service event.
VA has a statutory duty to assist claimants in gathering
the required evidence. This includes obtaining certain
supporting evidence and ordering a VA examination or requesting
a medical opinion as necessary. VA reviews documents pertaining
to military service and service treatment records obtained from
the particular military service. VA also requests evidence
identified by the claimant that may be pertinent to the claim
and medical records from any private providers that we are made
aware of.
VA carefully evaluates all available evidence to determine
if entitlement to service connection is established and, if so,
the level of severity of the disability. VA's standard of proof
in making these determinations is reasonable doubt.
In addition to requesting and revealing records from
military service departments, newly hired claims processors are
provided training on military records, which includes
identifying any noted alterations or suspected fraudulent
records. Each regional office also has a military records
specialist with expertise in military records who serves as a
liaison with other government agencies. VA employees are aware
of their responsibility to ensure that benefits are awarded to
those who are entitled to them.
Upon a determination that fraud has occurred, a preliminary
decision is made with respect to adjusting or terminating an
award. The beneficiary is provided due process rights,
including notice of the action to be taken, the reason for the
adjustment, the right to representation, and the right to
present evidence to rebut the evidence serving as the basis for
the proposed adjustment.
If no evidence is presented, the award is adjusted, and the
case is referred to the Office of the Inspector General for
review and any further action that office may deem necessary.
The Office of the Inspector General coordinates
investigation with the United States Attorney's Office, State
and local prosecutors----
Chairman Issa. Mr. Flohr, could you summarize, please?
Mr. Flohr. Yes, sir. That actually summarizes my statement
on service connection.
Chairman Issa. Thank you very much.
Mr. Flohr. You're welcome.
[Prepared statement of Mr. Flohr follows:]
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Chairman Issa. Mr. Chodos.
STATEMENT OF MICHAEL A. CHODOS
Mr. Chodos. Chairman Issa, Ranking Member Cummings and
distinguished members of the committee, thank you for inviting
me to testify about the Small Business Administration's, or
SBA's, role in the awarding of certain contracts to Signet
Computers, Inc., and its successor, Strong Castle, Inc., a firm
recently decertified by SBA as a Historically Underutilized
Business Zone, or HUBZone entity.
Before discussing the specifics of the SCI case, I would
like to briefly describe the HUBZone program and some of its
recent successes. Its aim to is help small firms in underserved
communities gain access to Federal contract opportunities.
Generally HUBZones are urban or rural areas with very low
median household incomes and/or very high unemployment. The
program requires certified companies to have their principal
office in a HUBZone and to employee individuals who reside in
HUBZones, with the intention of spurring economic growth within
the community.
As of May 31, 2013, there were 5,029 certified HUBZone
small businesses. In fiscal year 2012, over 8 billion--over $8
billion were awarded to certified firms for work performed in
all 50 States, including D.C., Puerto Rico, Guam, the Virgin
Islands, and the Northern Mariana Islands.
In the case of the SCI, the firm applied for HUBZone
certification on March 11, 2012, and was certified on June 22,
2012. SCI was awarded a blanket purchase agreement by the IRS
on or about December 7th, 2012. A HUBZone status protest was
filed with SBA by a competing firm on December 19, 2012.
SBA could not process the protest, based on applicable
jurisdictional rules; however, SBA believed the information
contained in the protest called into question SCI's HUBZone
eligibility. As a result SBA promptly began its investigation
into the eligibility of SCI for the HUBZone program in late
December of 2012. Based on the facts and evidence found during
this investigation, SBA proposed SCI for decertification on
January 31, 2013.
It is important to note that this investigation and the
resulting proposed decertification took place before and
independent of the committee investigation of SCI.
After a thorough review of the information provided to SBA
in response to the proposed decertification, SBA decertified
SCI on May 23, 2013.
SBA takes very seriously its duty to root out fraud, waste
and abuse in all of the Federal small business contracting
programs, including HUBZone. Our top priority at SBA is to
ensure that the benefits of our programs flow to the intended
recipients. Our government contracting programs are a critical
and effective toolkit for small businesses; however, we have no
tolerance for fraud, waste and abuse in those programs.
For this reason we have implemented a comprehensive three-
pronged strategy to identify, prevent and pursue noncompliance
or fraud across all our government contracting programs. First
is effective certification processes. Clear and comprehensive
eligibility screening on the front end ensures that only
qualified, eligible firms participate in our programs.
Second, continued surveillance and monitoring. Targeted and
thorough examinations, reviews and on-site visits identity
potentially fraudulent firms or those that no longer qualify.
And three, robust and timely enforcement. Prompt, proactive
enforcement removes bad actors, deters wrongdoing, and provides
integrity to our contracting programs.
We are especially proud of our core partnership with the
SBA's Office of Inspector General, whose assistance is critical
to the excess--to the success of our improvement efforts.
Through ongoing and proactive collaboration with the
Government Accountability Office and our stakeholders, SBA
intends to protect the Federal Government commitment to aid and
assist small business.
The strategy and efforts described in my testimony reflect
an integrated approach that utilizes resources across our
Office of Government Contracting and Business Development, our
General Counsel's Office and our 68 district offices and
others.
As demonstrated by the initiatives and efforts described in
this testimony, SBA has taken great strides to strengthen the
small business contracting programs and implement a robust
strategy to combat fraud, waste and abuse. Work remains to be
done to completely eliminate fraud, waste and abuse in our
programs, as bad actors, regretfully, still attempt to take
wrongful advantage of government benefits.
While we have made significant progress, we continue to
look for ways to identify further opportunities for improvement
and to maximize small businesses' access to this important
source of revenue so they can do what they do best: start, grow
and create jobs.
Thank you for the opportunity to testify before you today,
and I am happy to answer any questions you may have.
Chairman Issa. Thank you.
[Prepared statement of Mr. Chodos follows:]
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Chairman Issa. Ms. Tucker.
STATEMENT OF BETH TUCKER
Ms. Tucker. Chairman Issa, Ranking Member Cummings and
distinguished members of the committee, my name is Beth Tucker,
and I'm the Deputy Commissioner for Operations Support at the
Internal Revenue Service. I appreciate the opportunity to
appear before you today.
I have been an IRS employee for 29 years. I started my IRS
career in 1984 as a revenue agent. I am very proud of my
government service, and it is an honor for me to work alongside
the dedicated men and women of the Internal Revenue Service.
Our agency is vital to the functioning of government and
keeping our economy strong. In our role as tax administrators,
we collect 92 percent of all Federal receipts, and last year we
issued more than $330 billion in refunds to individual
taxpayers.
In my role as Deputy Commissioner, I oversee the support
functions of the Internal Revenue Service, including
technology, human capital, budget, real estate, physical
security and procurement.
In February, the committee sent the Department of Treasury
a letter raising questions about two contracts that the IRS
awarded in December 2012 to Strong Castle, one of the thousands
of vendors that IRS does business with. One of the contracts
was for computer equipment. Let me be clear: We have made no
awards or purchases under that contract. The other involves
licensing and product support for IBM software that is in use
across the enterprise at IRS.
Upon receipt of the committee's letter, I immediately
referred the matter to the Treasury Inspector General for Tax
Administration. It's important to note that investigation is
still ongoing.
In mid-May, I was informed by TIGTA about inappropriate and
unacceptable personal text messages sent by one of our
procurement managers, Greg Roseman, to contractors doing
business with the IRS from his personal phone. As soon as I
became aware of this situation, I took steps to have Mr.
Roseman reassigned to a nonsupervisory position that does not
involve the awarding or administration of contracts, pending
the outcome of the TIGTA investigation. And then just yesterday
the committee released information related to this matter that
the Internal Revenue Service had not been previously apprised
of. This new information is deeply troubling, and it raises
additional questions that TIGTA and the Internal Revenue
Service must investigate.
Let me be clear: These types of communications should not,
should not occur between a procurement employee and a
contractor. We expect all of our employees to act with
professionalism and integrity.
We are taking steps to separate the IRS from any ongoing
business relationship with Strong Castle, subject to our need
to safeguard our mission-critical resources.
Under the teaming agreement with IBM that has been talked
about in the days since the report was mis---was issued,
there's a number that--that's rolling around about Strong
Castle receiving $500 million potentially in award from that
contract. Let me be clear: Strong Castle has not received
anywhere near that amount of money from the software teaming
arrangement. In fact, 98 percent of the value of that contract,
if--if it was awarded, would go direct to IBM. But as I
mentioned, we are taking steps to sever this relationship with
Strong Castle.
In response to the committee's February letter, I also
directed officials within our procurement office and Office of
Chief Counsel to review the documentation and correspondence
related to these two contracts.
In addition, as a result of the issues that have surfaced
from the committee inquiry, we're doing a top-to-bottom review
of procurement policies and procedures, everything from
internal controls to business processes and staffing practices.
I've also asked the Department of Treasury to expand its
routine assessment of IRS procurement to include a review of
small business programs.
Based on the troubling information that we have received,
we will also further enhance employee training with regard to
ethics, with a focus on gift rules, conflicts of interest,
impartiality and the appearance of impropriety, and issues of
official position.
Let me be clear that I have not seen anything within our
procurement organization, and I think this is also backed up by
the extensive interviews the committees have done with a host
of IRS procurement officials, inappropriate behavior on the
part of any other IRS procurement employee. These are 400
hardworking--and, Mr. Chairman, as you mentioned, our
procurement community has a strong ethics and wants to support
our agency.
Bottom line, we will continue to work with the committee to
provide you with updates on the results of our continuing
review in partnership with TIGTA. And we also--we also would
implore the committee to please share with us the full set of
information that you have obtained in your interviews, because
I do believe it would greatly assist the Internal Revenue
Service as well as the Treasury inspector general in bringing
this matter to conclusion.
With that, I conclude my statement, and I'm happy to answer
any questions.
Chairman Issa. Thank you.
[Prepared statement of Ms. Tucker follows:]
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Chairman Issa. And I will break with tradition just to
note, since you made a direct request, that it is our intention
to share fully with the IG this information. I must admit that
it's been a one-way street. We're still waiting on an awful lot
of documents from the IRS that are long overdue.
Mr. Sisk.
STATEMENT OF WILLIAM A. SISK
Mr. Sisk. Good morning, Chairman Issa, Ranking Member
Cummings and members of the committee. My name is Bill Sisk,
and I am the Acting Deputy Commissioner of GSA's Federal
Acquisition Service. I have spent over 20 years at GSA. I
started at GSA's regional office in Atlanta in 1990, and I have
served in a number of management positions, including Assistant
Regional Administrator and Regional Commissioner. In my
capacity as Regional Commissioner, I represented GSA's Assisted
Acquisition Services, Network Services and Personal Property. I
have also served as Assistant Commissioner in the Office of
General Supplies and Services within the Federal Acquisition
Service and was appointed to the U.S. AbilityOne Commission,
which is a unique program that provides employment
opportunities for individuals who are blind or other--or who
have other significant disabilities.
I appreciate the opportunity to appear here today to
discuss GSA's information technology Schedule 70 program and
the process by which GSA reviews Schedule 70 applications.
IT Schedule 70 is the largest, most widely used acquisition
vehicle in the Federal Government. Schedule 70 is an indefinite
delivery/indefinite quantity multiple award schedule, providing
direct access to IT products and services from private-sector
partners around the country.
There are currently 4,853 businesses under Schedule 70, and
4,172 of these, more than 85 percent, are small businesses.
Many of these small businesses have socioeconomic designations:
720 are 8(a), 128 are HUBZone, 381 are Service-Disabled
Veteran-Owned, 333 are Veteran-Owned, and 1,027 are Women-
Owned.
Through June of fiscal year 2013, about $11.5 billion worth
of procurement has gone through Schedule 70, and $4.5 billion
of that, 39 percent, went to small business.
Schedule 70 has helped Federal agencies save time and money
while ensuring a good value and the avail--in the available
goods and services. In addition, Schedule 70 is one of the two
schedules that is available to State and local governments
through the cooperative purchasing program, allowing them to
leverage the buying power of the Federal Government to procure
IT goods and services at competitive prices.
By allowing our partner agencies to purchase from
preapproved vendors, they can receive goods and services
faster. While having a schedule contract is not the only way to
do business with the government, having a schedule contract
allows both vendors and agencies to cut down on administrative
costs.
Cost savings are also generated through prenegotiated price
ceilings, which provide significant discounts from commercial
pricing and serve as a starting point for additional
competition and negotiations.
GSA has an established process by which to evaluate
applications and make a determination of whether or not to
approve businesses to get on schedule. Over the past 3 years,
GSA has processed appropriately 2,800 applications for Schedule
70. Currently the average application processing time is
approximately 110 days.
Contractors can apply through GSA's eOffer system. eOffer
provides an online, paperless contracting environment and a
step-by-step process that complies with the Federal acquisition
regulation. After an offer package is submitted electronically
in your system, it is then assigned to a contracting officer or
contract specialist who reviews the package for completeness.
After the initial review, the contracting officer or contract
specialist sends the offerer an administrative letter
identifying any areas for which additional information is
required.
When a package is complete, the contracting officer or
contracts--contracting specialist conducts a responsibility
determination using FAR Part 9, together with GSA's in-house
pricing tool, or by submitting a Standard Form 1403 to GSA's
Office of Credit and Finance for review and approval.
In the review the contracting officer or contracting
specialist will also utilize the system for award management to
review an offerer's representations, certifications, past
awards and performance, and to ensure that all information is
correct, accurate and complete.
After the responsibility determination is complete, the CO
or CS prepares a prenegotiation memorandum outlining
negotiation strategy and any remaining deficiencies. If
negotiations are successful, a final proposal revision letter
is sent to the offerer.
If the offerer accepts the FPR, the CO or CS conducts a
final review of the offer and prepares and finalizes the price
negotiation memorandum. After all the required forms and
additional information are completed and signed, the CO or CS
enters the offer into our system and prepares a package to send
to the vendor.
GSA's Schedule 70 can be an important tool in meeting the
IT needs of Federal agencies, and GSA has an established
process to thoroughly review these applications in a timely
fashion.
I appreciate the opportunity to be here today, and I would
be happy to answer any questions you have. Thank you.
Chairman Issa. Thank you.
[Prepared statement of Mr. Sisk follows:]
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Chairman Issa. Mr. Castillo.
STATEMENT OF BRAULIO CASTILLO
Mr. Castillo. Chairman Issa, Ranking Member Cummings and
members of the committee, my name is Braulio Castillo. I am
president and CEO of Strong Castle, Inc.
In January 2012, my wife and I purchased a small company
called Signet Computers, Inc. At that time Signet had over 15
years of experience as a government contractor. Because I have
significant experiencing serving the IT needs of IRS, our plan
was to transform Signet into a small business that initially
focused on IRS IT procurements.
When we considered how we could best position the company
to support the agency, we came to learn that the IRS desired to
award contracts to small businesses, and decided to pursue
HUBZone and Service-Disabled Veteran-Owned Small Business
credentials. We have never received any improper preferential
treatment, and we have competed fairly for every IRS contract
that we have received.
In the short time frame that we've owned Strong Castle, our
company has made meaningful contributions to the IRS mission
and offered the government cost-effective solutions to very
difficult problems. We've also been instrumental in forming
teams with large software and hardware suppliers and the IRS.
In order to improve the company's competitive posture, in
early 2012, as we began working with the Department of Veteran
Affairs and the Small Business Administration to have Strong
Castle qualified as a Service-Disabled Veteran-Owned Small
Business Concern and a HUBZone Business Concern. We understood
that these credentials were important because the IRS's
increased focus on awarding contracts to small business. In
order to achieve small business participation goals, the IRS
drafted some solicitation to give favorable consideration to
qualified SDVOSB and HUBZone concerns.
In order to compete, we approached the VA and the SBA to
apply for SDVOSB verification and HUBZone certification. We
worked closely with the VA and the SBA throughout the
application process. For example, we attended multiple HUBZone
boot camps, presentations at which representatives of the
HUBZone office were speakers. After meeting them, we continued
to communicate frequently and regularly with them, often on a
daily basis. The SBA advised us on all aspects of our HUBZone
qualification, including the establishment of our principal
office in a HUBZone and the hiring of college student
employees. Because we believed the HUBZone status would be a
significant benefit to the company, we consulted with the SBA
on every detail of our application and plans.
We worked diligently, at enormous personal and financial
expense, to cooperate with the investigation and to respond to
all of the committee's requests for documents. So far we've
produced over 20,000 documents, including business records,
email communications, text messages and personal information.
The cost of our effort to cooperate with the committee has
been tremendous. The mischaracterization of the facts have
caused Strong Castle to lose contracting partners, lines of
credit, and goodwill among our important customers. It has hurt
our reputation.
Having responded to the committee's request for
documentation, I believe that we've addressed the central
issues of the interests of the committee. First, it is not true
that Strong Castle received $500 million in IRS contracts.
Strong Castle successfully competed for blanket purchase
agreements, pursuant to which the IRS may or may not issue
subsequent orders.
In reality, Strong Castle's received from the IRS valued
contracts of approximately $50 million, for which, as Ms.
Tucker previously mentioned, 49 million went to the large
business providers. Of that amount--and approximately 1 million
to Strong Castle. Last year, our company lost approximately
$140,000.
Second, it is simply not true that Strong Castle had no
track record of past performance on government contracts. The
company that we purchased had experienced contracting with the
government, and I personally had worked with the IRS for almost
15 years. My prior experience is directly relevant to the work
that we perform at the IRS. As a company, Strong Castle is
uniquely qualified to serve the IRS based on our years of past
performance.
Third, Strong Castle has not received inappropriate
preferential treatment from the IRS. We competed fairly for
each blanket purchase agreement and any contract order that we
received. To my knowledge, Strong Castle has never received any
contract award to--as a result of inappropriate preferential
treatment.
Fourth, Strong Castle has been entirely open, truthful and
forthcoming with the SBA. Because obtaining HUBZone status was
significantly important to the company, we took extreme care to
work closely in consultation with the HUBZone office and sought
approval and guidance throughout the certification process.
Strong Castle has not sought, nor has it received, unfair
advantage in its pursuit of any government contract. We are a
responsible small business. Unfortunately, other companies are
able to use status challenges as competitive weapons against
us.
Despite these challenges, Strong Castle remains committed
to delivering results as a valued small business partner to the
United States and the IRS, as I have done for nearly 15 years.
Thank you.
Chairman Issa. Thank you.
[Prepared statement of Mr. Castillo follows:]
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Chairman Issa. Mr. Castillo, you talked about the
experience of your company in 15 years. How many common
employees do you have? In other words, how many employees at
the--at your firm have been there 15 years?
Mr. Castillo. No one has been there 15 years.
Chairman Issa. Ten years?
Mr. Castillo. Of the employees?
Mr. Issa. Ten years?
Mr. Castillo. None of them have been there 10 years.
Mr. Issa. Five years?
Mr. Castillo. I don't believe anyone--well----
Chairman Issa. One year?
Mr. Castillo. One year? All of them have been there 1 year
or less. We have----
Chairman Issa. Wait a second.
Mr. Castillo. --January of----
Chairman Issa. No, no. You made an assertion of prior
experience. The fact is, the company you bought and the
employees of your current company have nothing in common. So
where--I ran a company. I built a company over 20 years. Where
is that legacy experience that you are claiming your company
has?
Name an employee that, when you bought the company that had
never done more than $250,000 in contracting, name the employee
that is part of that experience that is with you here today.
Mr. Castillo. Of what timeline, sir?
Chairman Issa. Well, you claimed 15 years. You bought the
company a year and a half ago. How many employees came when you
bought the company?
Mr. Castillo. Two employees and the owner at the time.
Chairman Issa. And where are they today?
Mr. Castillo. The owner left in September of last year, and
one of the two--we bought a small company with two employees.
One of them is still there. One----
Chairman Issa. Okay. Well, I just want the public to
understand. You are claiming this experience and legacy, and
now you are claiming that, in reality, three employees gross,
one was the employer, only one of which is with you today. So,
quite frankly, you swore an oath to tell the truth and the
whole truth. That is shading the truth pretty close, to claim
15 years of experience with essentially no employees, for all
practical purposes.
Ms. Tucker, our committee, back when we sent the letter to
you, or to the Acting Treasury Secretary, and you got involved
in it back in February and March, we asked you about this. And,
at that time, you said there was no ``there'' there. Do you
stand by that today, in the case of this investigation?
Ms. Tucker. No, sir, I don't.
Chairman Issa. Turn your mic on, please.
Ms. Tucker. No, sir, I--let me just be clear. The
information that we have seen about the personal relationship
with Mr. Roseman and Mr. Castillo is inappropriate. Mr. Roseman
should have recused himself immediately from any involvement
whatsoever in any IRS interactions with Strong Castle.
Let me be clear also, and I think as your staff members
interviewed extensively IRS procurement officials, that they
all stated on the record that they were unaware of any
relationship with Mr. Roseman.
Chairman Issa. No, I understand. And, you know----
Ms. Tucker. And----
Chairman Issa. Ms. Tucker, you can't have it both ways. You
can't say you don't know what our people said while your
lawyers were in those interviews and then start saying what
your people said in our interviews.
So let me use my time more briefly. Just this past Monday,
you indicated you were not going to cancel the $266 million
contract to Strong Castle. My understanding a few minutes ago
is you now are going to cancel that and put it on hold; it is
not so important as to not be reworked. Is that correct?
Ms. Tucker. Mr. Chairman, what I told members of your staff
on Monday was that we were exploring options.
Chairman Issa. Okay. Well, now, let's get to this part
about the money. When you provide a contract, when the Federal
Government--and your other witnesses hopefully are helpful--you
provide a contract to a disabled veteran, like Mr. Castillo,
and in a HUBZone, the IRS, as I understand it, took full credit
for this hundreds of millions of dollars as though they went to
that company. Isn't that true? You didn't take credit for 1
percent of it going to a disabled veteran and a small business
in a HUBZone; you took credit for $500 million. Isn't that
correct?
Ms. Tucker. Mr. Chairman, Internal Revenue Service followed
the----
Chairman Issa. Ma'am, you're not a witness that I'm
terribly thrilled at today because you did ignore this until we
pressed and pressed and pressed. The fact is--and I will go to
either of the other two witnesses, Mr. Flohr or Mr. Chodos.
When the IRS awards $500 million, they don't do it on the
net that might go, if you will, the skimmed-off-the-top profit,
for absolutely no participation in the actual delivery of
services. They take the gross amount, don't they? This is
scored as hundreds of millions of dollars going to a HUBZone.
Isn't that correct?
Mr. Chodos. Mr. Chairman, the ultimate credit for the
contract is for the dollars incurred. And the dollars incurred
are gross, so----
Chairman Issa. Okay. So for the American people here today,
one of the frauds on the American people and for us on the dais
is we get these report cards talking about hundreds of millions
and billions of dollars going to our disabled veterans,
hundreds of millions and billions of dollars going into these
blighted zones that we are trying to encourage--I call them
enterprise zones; HUBZone happens to be one form of it. We are
scoring $500 million. And then somebody comes here--Ms. Tucker,
I'm picking on you for a reason--and tries to say, well, it is
minuscule.
Our indication is that this contract cost more than it
would have cost if it had been competitively bid to the
principals. And, clearly, every cent that Mr. Castillo got,
from what we can tell, without having a true principal
operation--and the witnesses did make it pretty clear they
don't go there. The people who had real money don't go there. A
few college students show up and surf the Internet looking for
potential new contracts. That, in fact, was scored as hundreds
of millions of dollars to help people in blighted areas and to
help a disabled veteran, who it turns out played college ball
for years and didn't limp or have a problem until he got ready
to apply for this special status.
I have a scoring problem here today, and I think my ranking
member and everyone on the dais--and, Mr. Flohr, you didn't get
a chance, and I'm going to go to the ranking member now.
But bear in mind, it's not about Mr. Castillo per se. He
may not have broken a single rule. That's for others to
determine under the law. But we were shocked to discover that
we are scoring as though we are doing a lot of good for
disabled veterans, not people who turn their ankle and have no
problem for 27 years until it's time to conveniently become a
disabled veteran.
And we were scoring impact to blighted communities, when,
in fact, that score is at best fraudulent. We are scoring
apparently $1 million but writing it in as 10 times or 100
times that. So that is part of what this hearing is here today.
That is why the ranking member and I are teammates on this.
This is an example of an agency that conveniently had a
large contract, may or may not have gotten the best value for
the American taxpayer. But, certainly, for the two gentlemen to
your left, or your right, Ms. Tucker, they're in a position
where, complying with the law, they're, in fact, not seeing you
deliver the value appropriately to the American people for
these set-aside-type events.
Mr. Cummings?
Mr. Cummings. Thank you very much, Mr. Chairman.
Ms. Tucker, I'm going to just pick up where the chairman
left off. Help me with this.
You apparently had not made a decision on an IBM contract
on Monday. Is that right?
Ms. Tucker. That's correct.
Mr. Cummings. And----
Ms. Tucker. We were exploring options. We were troubled,
but we had not immediately canceled the contract because the
IBM software is critical to our mainframe operation.
Mr. Cummings. I understand. So what happened, what
information came to you between Monday and this morning that
caused you to say what you said? And when was that decision
made to sever the relationships? If I'm misstating it, tell me.
I think that's what you said.
Ms. Tucker. Yeah. So, yesterday afternoon when we received
the report from the committee, the procurement executive team
and I met. And based on the email exchanges that we're seeing
in the report that we had not been made privy to--and,
candidly, based on the fact that Mr. Roseman was repeatedly
asked by his superiors if he had a personal relationship with
Mr. Castillo and Strong Castle and he denied it. And I believe
the detail that we saw excerpted in the report has raised
considerable concern, that we are in the process of separating
our relationship with Strong Castle.
Chairman Issa. Would the gentleman yield for a second? I
will give him additional time.
Mr. Cummings. Sure.
Chairman Issa. Ms. Tucker, I only want to make sure that
the ranking member understands the email you're so horrified
about you gave us. That was part of the discovery. Your
organization reads them before they deliver them to us.
Ms. Tucker. No----
Chairman Issa. Thank you, Mr.----
Ms. Tucker. No, sir, that's incorrect. That's not the email
that I'm referring to. We did provide emails from the Internal
Revenue Service system. The emails----
Mr. Cummings. So the emails that you provided did not lead
you--were not enough to get you to feel that there should be a
severing. Is that right?
Ms. Tucker. Correct.
Mr. Cummings. Now, some additional emails came in.
Ms. Tucker. It's actually text messages.
Mr. Cummings. Text messages, right.
Ms. Tucker. As I said in my opening statement, it's text
messages from----
Mr. Cummings. In the report.
Ms. Tucker. --Mr. Roseman's personal phone to Mr. Castillo
that had not been shared with the Internal Revenue Service and
that we were unaware of.
Mr. Cummings. So that basically was the straw that broke
the camel's back. Is that correct?
Ms. Tucker. Yes, sir.
Mr. Cummings. Mr. Chodos, tell me, just very briefly
because I've got to talk to Mr. Castillo, tell me how many
decertifications you have done, you all have done--do you
know?--over the last 4 or 5 years. Can you give us any idea?
I'm trying to figure out how unique this is, decertification.
Mr. Chodos. Thank you, Representative Cummings.
I can get you a full spread for the last 5 years of all
decertifications. I believe we decertified approximately 1,500
or 1,600 firms over the course of the last year. Some of those
have been due to changes in the HUBZone-qualified census tract
maps. Some of those have been due to specific issues with
particular companies.
Mr. Cummings. Now, Mr. Castillo, I reviewed your testimony,
and I have to admit that I'm troubled because you seem to take
no personal responsibility for any of your own actions. In
fact, you criticized everyone else but yourself. You even blame
your current problems on--let me quote this--``the volatile
business and political environment of the day,'' whatever that
means.
I would like to read from the letter that SBA sent to you
on May 23rd, about 1 month ago, formally notifying you that
your company's HUBZone status was revoked. Then I would like to
get your response.
The SBA letter says that you, ``admitted that records
provided were false and inaccurate.'' I want you to put a pin
on that. It says you, ``did not provide SBA with reliable and
accurate payroll records.'' It says you do not have, ``adequate
internal controls.'' It says that you tried to claim that your
program manager, ``is not an employee at all but rather a
contractor.'' It says you have, ``a facetious attitude with
regard to accuracy of records.''
You know, Michael Jackson had the song, ``Man in the
Mirror''? You need to look in the mirror. It says your
employees, ``can record time worked as they please.'' Wouldn't
we all like to have that job?
So with all of that, Mr. Castillo, let me now give you a
chance to respond. Do you admit that you submitted false
records to SBA?
Mr. Castillo. SBA did decertify us based on the records,
and we have put measures in place to address some of those
concerns.
Mr. Cummings. That's not what I asked you. Do you admit
that you submitted false records to SBA?
Mr. Castillo. Yes.
Mr. Cummings. How do you respond to the other allegations?
The SBA letter states that you only corrected these errors,
``after being confronted with conflicting evidence presented by
SBA.'' So they weren't problems you were identifying, were
they?
Mr. Castillo. No, sir. They identified them, and we
corrected them.
Mr. Cummings. And so, Mr. Chodos, let me turn to you. You
are here representing SBA, so what is your response to Mr.
Castillo? Do you stand by your findings?
Mr. Chodos. Yes, Representative Cummings, the SBA stands by
its findings that the decertification was justified under these
facts.
Mr. Cummings. And so, going back to you, Mr. Castillo, what
do you say about the SBA saying that you did not have adequate
internal controls? I mean, what is your response to that? I
want to give you an opportunity to respond----
Mr. Castillo. Sure. Yes, sir.
Mr. Cummings. --because you--there's some problems here.
Mr. Castillo. Yeah. Yes, sir. So they pointed out some
inaccuracies, and we've put some corrections in place from a
time-recording perspective.
Mr. Cummings. And so you admit that there were some
problems with internal controls?
Mr. Castillo. Yes, sir.
Mr. Cummings. Now, let me get to something that the
chairman talked about that is extremely troubling to me. You
know, I told you in my opening statement that I live in an area
where black male unemployment is probably 25, 30 percent. I
live in a HUBZone-type area where businesses are struggling. So
I want the programs to be work properly, as I know the chairman
does.
The question is, can you tell me, outside of the Catholic
University students and faculty, tell me how many other people
outside of those that you employed from the HUBZone?
Mr. Castillo. Of our 10 employees, sir, not counting the
college students, we have 1 other HUBZone residence.
Mr. Cummings. So you had 10 employees----
Mr. Castillo. Yes, sir.
Mr. Cummings. --and are you telling me 9 of them were from
Catholic University?
Mr. Castillo. No, sir. What I was saying, we have
approximately 10 employees. About five of them, per your count,
are from Catholic University. One of them is from--not counting
the Catholic students, is from a HUBZone.
Mr. Cummings. When did you hire that person?
Mr. Castillo. May of this year.
Mr. Cummings. Oh, so you--oh, you just hired her?
Mr. Castillo. Yes, sir. We disclosed that to the committee
during----
Mr. Cummings. Okay.
Mr. Castillo. --my transcribed interview, yes, sir.
Mr. Cummings. Then I guess if you were in my district, the
folks that I'm talking about would not--they wouldn't get a job
from you unless they were at Catholic University, huh? Hello?
Mr. Castillo. No, sir, I would not agree with that
characterization.
Mr. Cummings. All right.
Let me ask for a moment, just one other question, Mr.
Chairman.
Chairman Issa. Of course.
Mr. Cummings. Mr. Castillo, it seems clear from the
evidence that you wanted to take full advantage of the HUBZone
program, and not to help D.C. residents or underutilized
neighborhoods but to maximize your own profits. During your
transcribed interview with the committee staff, you said this,
``I knew that HUBZone was important, being from the industry.
And so we went at it that way.''
That's what you said; is that right?
Mr. Castillo. It's--I don't recall saying it, but, yes, I
stand by that.
Mr. Cummings. And now, finally, what does that mean? What
did you mean by that?
Mr. Castillo. We moved our operations from northern
Virginia to Washington, D.C., in a certified HUBZone and
established our principal office there. That's what I mean by
that, sir.
Mr. Cummings. All right.
Thank you very much, Chairman.
Chairman Issa. Would the gentleman yield for just one
moment?
Mr. Cummings. Of course.
Chairman Issa. Mr. Castillo, just straight yes or no,
because we have your interviews, your wife's interview, and so
on: Isn't it true that all the Type A people who potentially
sell or work on that contract live and effectively work
elsewhere, that the testimony of yours, your wife, and other
principals is that they don't often go to that principal
location, that in fact it isn't manned full-time and that when
it is manned it was mostly by college students who were looking
for other contract potential and not executing in this
contract, that your accounting operation and all those sort of
key operations somebody would think as corporate headquarters
were never located in that building?
Mr. Castillo. So there was a few things in there, so I will
try to address them, sir.
So you're right, the principal workers, I think you'd say
Type A workers, all work onsite, at the government site. They
don't report to an office like in many other companies----
Chairman Issa. Right. So the--maybe I will cut this down
because I'm really on borrowed time.
Mr. Castillo. Yes, sir.
Chairman Issa. You don't work out of that office. Your wife
doesn't work out of that office. Those previous individuals
that were from the previous company don't even live in the
area. One lives in Boston; one lives in Florida. That, in fact,
when we really look at it, the college--during the execution of
this contract thus far, until a few day ago, basically, college
students showed up there and surfed a few sites, which was not
a direct part of any execution of this contract. Isn't that
true, that the HUBZone headquarters was in name only, it was
not your principal place that you did business executing these
contracts?
Mr. Castillo. By ``you'' do you mean me, sir?
Chairman Issa. I mean you, your wife, or anybody other than
these college students.
Mr. Castillo. Yeah, I work out of our Leesburg HUBZone
location, and my wife works out of our home as her----
Chairman Issa. In the richest county in the country,
Loudoun, right?
Mr. Castillo. Yes, sir, I think I read that--tending to our
five children, four of them which are under the age of 10 or
under.
The college students and any other worker that reported to
an office reports to the Washington, D.C., office, which is why
SBA established that as our principal office. We did have, as
you mentioned, an employee from Florida, a former IRS
executive, who lived there, who retired to that area. And the
gentleman that you're referring to in Boston actually works on
a Top Secret facility in Hanscom Air Force Base. So that is
located in Boston and onsite at the client site.
Chairman Issa. Yeah.
Mr. Cummings. Can I ask just one last question----
Chairman Issa. Of course.
Mr. Cummings. --Mr. Chairman?
Just based on what the chairman just said, I want to remind
you that you're under oath, and I want to ask you this
question: Don't you think you manipulated this process and
frustrated the true purpose of this program?
Mr. Castillo. No, sir.
Mr. Cummings. And why do you say that?
Mr. Castillo. I don't feel I manipulated it. That's why I
said that.
Mr. Cummings. You just admitted that you lied with regard
to accuracy of the information.
Mr. Castillo. Well, to your point, in a direct yes/no, we
provided inaccurate information on our timesheets, not on our
payroll statements, which we shared and have corrected since
and put processes in place to correct them, sir.
Mr. Cummings. Thank you very much, Mr. Chairman.
Chairman Issa. Thank you.
Mr. Jordan? Oh, I'm sorry. Mr. Mica is here.
Mr. Mica. Thank you.
Ms. Tucker, your title is Deputy Commissioner for
Operations Support. So you oversee the procurement process for
IRS and personnel involved in that?
Ms. Tucker. Yes, sir.
Mr. Mica. Uh-huh. And you gave a statement I guess pretty
much waving the flag in support of some of IRS actions. And I'm
sure there are thousands of people who every day get up and do
a good job for IRS.
But representing people in a district in Florida, and just
anywhere I go, I hear more complaints about the IRS. I think
you have been in sort of a meltdown of scandals: the targeting
of certain political organizations. We held a hearing a few
weeks ago on conferences gone wild, spending with the IRS. I
think on the wire today there is a story about credit card
abuses. I don't know if you oversee that. Do you see that too?
Ms. Tucker. Yes. That's part of our procurement
organization.
Mr. Mica. Yeah. Well, that, again, is just an
embarrassment.
This hearing on the procurement process that, again, has
gotten out of hand. I think we have lost great confidence, and
probably for very good reason.
It sounds like Mr. Castillo has sort of gamed the system,
would you agree?
Ms. Tucker. Based on my understanding----
Mr. Mica. Well, okay, let me ask you a question. Let's go
back to--before the committee contacted you about this, had you
or any employees of IRS, had you all been contacted about what
was going on with Mr. Castillo and Mr. Roseman?
Ms. Tucker. Sir, let me--let me----
Mr. Mica. But wait. My question was, before the committee
contacted you on the matter of this relationship, were you or
any of the employees, if are you aware of them, notified that
something was going on with Mr.----
Ms. Tucker. No, sir.
Mr. Mica. Absolutely no?
Ms. Tucker. No, sir.
Mr. Mica. Okay. And since then, you have been rather
reluctant until you've had the awakening just in the last few
days that something was going wrong, had gone wrong here.
Mr. Chodos, does it sound like SBA was gamed by this
player?
Mr. Chodos. Congressman, it appears, from what we know----
Mr. Mica. Well, he just told you he provided you inaccurate
information.
Mr. Chodos. Yes. And as a----
Mr. Mica. Thank you.
Mr. Chodos. --result of learning that the information was,
in fact, inaccurate, I mean, it's a pretty fundamental----
Mr. Mica. All right.
Mr. Chodos. --principle that we have certified----
Mr. Mica. So you----
Mr. Chodos. --they have to provide us accurate information.
Mr. Mica. --you agree, he gamed you.
Now, Mr. Castillo, it appears you also gamed the Veterans
Administration. We want our veterans with disabilities to have
some special preference and standing. The only incident of
disability was in--was it prep school, was it? Was there
anything in active military service where you sustained a
disability or injury?
Mr. Castillo. The injury that I sustained was during my
time at the prep school.
Mr. Mica. But that wasn't my question. My question, did you
sustain an injury, again, in active military service, or were
you disabled during that time?
Mr. Castillo. So I--I'm not sure----
Mr. Mica. In active military service. Were you in combat
and had an injury where----
Mr. Castillo. No, my injury is not combat-related, sir.
Mr. Mica. Okay.
Mr. Castillo. It was during my----
Mr. Mica. Mr.----
Mr. Castillo. --Active Duty with the----
Mr. Mica. Mr. Flohr, it sounds like he's gamed the system.
Would you agree?
Mr. Flohr. Sir----
Mr. Mica. Come on, tell--yes or no? Has he gamed the
system?
Mr. Flohr. Based on discussions, sir, that we had with your
staff last week, we are not able to provide specific
information regarding this claim without the release----
Mr. Mica. Okay. It sounds to me, Mr. Flohr, like he has
gamed the system. That's not what we intended--what Congress
intended. I'm sad that VA can't make that determination and say
so publicly.
Let me just also say, Mr. Castillo, you had a few contacts
or a number of contacts, either by phone, by text, cell phone
text, or other contacts, with Mr. Roseman. How would you--cell
phone contacts, were they a few? Many? Texts, a few, many?
Meetings, a few, many?
Mr. Castillo. I probably have met with him over the last 5
years about 10 times or so. And there were--there were text
messages where we provided to the committee as part of the
investigation.
Mr. Mica. Well, Mr. Chairman, he just testified, again, a
few times--between May and October, you and Mr. Roseman
exchanged over 100 telephone calls. Don't you think that that
is in excess of what you just testified to?
Mr. Castillo. I don't believe they were telephone calls. I
think you're referring to text messages; is that right?
Mr. Mica. Well, again, we have phone calls or, through the
texting, over 100 messages.
And then, in particular, you had a 21-minute telephone
conversation between Mr. Roseman and yourself on the 7th of
June, 2012. And to refresh your memory, that was the night
before Mr. Roseman sent you the request for a quote for an $80
million laptop-desktop acquisition.
So, one, you testified or you just indicated you had very
few contacts, contrary to over 100 contacts by phone that we
have. And, secondly, did you want--and, finally, do you want to
comment on your 21-minute conversation with Mr. Roseman prior--
--
Chairman Issa. The gentleman's time has expired, but would
you please answer?
Mr. Castillo. I believe I testified that I met with him
about 10 times or so for the last 5 years. I didn't comment on
the number. I think I stated that I believe you're referring to
text messages versus--that we turned over versus telephone----
Mr. Mica. Mr. Chairman, may I----
Chairman Issa. Briefly.
Mr. Castillo. --cell or phone, text, and meetings--three
different.
Chairman Issa. Duly noted.
Mr. Castillo. So I don't know the number of telephone
calls. I believe the text messages I'm very much aware with
because I met with committee staffers and counsel last week or
so and we went over them, or the ones that we'd provided. And I
don't recall what the conversation was about on June 7th, sir.
Chairman Issa. As I go to Ms. Norton, Mr. Castillo, I know
Mr. Roseman said there wasn't a friendship. I believe you have
repeatedly said there was. You haven't been quite as--you've
been on the opposite side of that. So these texts are not
unexpected, in that you said you do have a long relationship
with Mr. Roseman.
Mr. Castillo. I've worked in support of the IRS for about
15 years or so. The last 10 years, I mean, since----
Chairman Issa. But since 2003 he has been what you would
characterize as a friend?
Mr. Castillo. I would say a customer. I met him through my
previous employer, where they were very, very good friends. And
we held a contract there at my previous employer, which was a
small business----
Chairman Issa. Okay, so customer, not friend, is your
testimony today.
Mr. Castillo. No, sir, I didn't say that. Because I think
I'm on record as saying--so we have a business relationship,
but I believe he is--that we're friendly or friends. So I'm not
changing my testimony that I believe that----
Chairman Issa. Well, I think Mr. Mica was trying to get to
the question based on this communication, because we do have a
witness, not here today, who has said to the IRS that you were
not friends.
Yes or no, are you friends under your definition of
``friends''?
Mr. Castillo. Yes, I would think I've been clear--I mean--
or I've stated that several----
Chairman Issa. Thank you. I just want to make sure because
I know the Treasury wants to understand the disparity in
interpretation of friends between an individual who did not
disclose and yourself. And I'm not trying to put anyone on the
spot. I just think Mr. Mica deserves a yes or no on that.
Mr. Castillo. I'm not sure he asked me if we were friends
or if I characterized it. So based on my 10 years of working
with him, I would say we have a good business relationship and
I would consider him a friend under my definition.
But to be clear, I wish he was here to testify. I'm a
small-business owner of 10 or so folks, and I'm here willingly,
and I've actively participated. I've attended everything that
you've asked me to attend. We've made every employee available
to you. We've turned over an immense amount of documents,
including the text messages that you reference. And I would say
that we fully have cooperated or have tried to do so.
Chairman Issa. Well--and this is not my time, so, Ms.
Norton, if you'd be indulgent for one more moment.
We have no objection to exactly that. From the get-go, you
have come in and asserted that you believe you did nothing
wrong. One of the reasons for this hearing today is we
believed, from an IRS execution of the contract, it was not
appropriate. And, you know, we intervened when we believe that.
And, obviously, we have the SBA here today and the Veterans
here today because we believe that there needs to be a reform
in a portion of the process under which you were given these
statuses. And those are the three points here today.
But I do appreciate and I want to note for the record that,
yes, from the get-go, you've come in and said, ``I don't
believe I did anything wrong, I will cooperate,'' and you have.
Ms. Norton, thank you for your indulgence.
Ms. Norton. Yes, and thank you, Mr. Chairman.
Let me preface my question by indicating that when this
program was initiated in the late '90s, I think 1997, it was
done without hearings. The Republican Senator from Missouri,
Chris Bond, inserted it into an SBA reauthorization. And it
seemed like a good idea. It seemed to bring together really
some of the visions of one of my good friends, the late Jack
Kemp, to marry his notions of the market system and capitalism
with his concern for the inner city.
By the time the Democrats took control of the Congress, its
chair, Nydia Velazquez, was so disgusted with the program
because there had been hearings in all of the major cities
showing terrible abuse by large companies of the HUBZone
program. And some of us went to Nydia and said, well, you know,
it's a new President, give him a chance to clean it up.
I don't have any evidence that the program is still like it
was when those hearings were held throughout the United States
showing that big companies had wholesalely abused the notion,
but, obviously--and so I do think the program must have
improved or else we would've heard more about that by this
time. But I can't say the same for what I'm hearing today.
I have to tell you, Mr. Castillo, that this hits a bit
close to home. You, of course, don't live in D.C. That's
allowed. You're from a wealthy Virginia suburb. That's allowed.
You rented a tiny office in Chinatown, and then you recruited
students from Catholic University to do the work after you
received the contract.
Why didn't you go to Wards 7 and 8, which, of course, is
the part of the city--if you were not going to do it in your
own HUBZone, which is a part of the city where unemployment is
high, it's classically a part of the city where you could've
found people to do the work, and fully met the notion embodied
in the HUBZone, that people who live in disadvantaged areas
would have some investment in the area and could get employment
whereas they could not before, why didn't you go to Wards 7 and
8 instead of going to Catholic University?
Mr. Castillo. So, ma'am, I don't know the wards very well.
I apologize. I'm not well----
Ms. Norton. Well, you know it well enough to go to Catholic
University.
Mr. Castillo. Yeah. So--and, ma'am, just to state, the
college employees that we hired were hired before we--the
awards. We put together two initiatives. One----
Ms. Norton. Whether they were hired before or after the
awards, the purpose of the HUBZone is to hire disadvantaged
people. Were these Catholic University students disadvantaged
people?
Mr. Castillo. They were residents of a HUBZone that we
employed.
Ms. Norton. You say in your testimony, all of our actions
were taken in consultation with the SBA, and we have never
sought to deceive the government.
Do you believe that hiring college students who go to an
expensive private university is in keeping with the goals of
this program?
Mr. Castillo. Yes, ma'am.
Ms. Norton. Mr. Chodos, do you believe that hiring students
who go to a private university, an expensive one at that, is in
keeping with the goals of the program?
Mr. Chodos. Thank you, Representative Norton.
The answer to your question is this: The HUBZone program,
as you have said, is designed to spur investment in and
economic development in place-based----
Ms. Norton. Do you believe that the hiring of students at a
private university meets the goals of the HUBZone program?
Mr. Chodos. We have seen many entities throughout time that
hire students. Many students, of course, take on great debt in
order to better themselves and their families----
Ms. Norton. He had hired no students except, until
recently--he had hired no employees except students from this
zone. And then we learned in May that he did, in fact, hire
someone who was not a Catholic University student.
Now, I love Catholic University. I'm trying to marry what
the zone is about with the actions that were taken here. And I
want to know whether you believe and whether SBA believes this
is in keeping with the goals of the program.
Mr. Chodos. So long as they are residents of the community
and----
Ms. Norton. So, as far as you know, throughout the United
States, people are going and finding--people who are, by
definition, advantaged because they've gotten to college, which
most Americans do not, and they may be hiring college students
all over the United States, rather than bona fide residents.
You don't even know that these Catholic University students
were residents of the District of Columbia. While they live
here, they of course are residents. They eat and live in the
dormitories or in a surrounding neighborhood. We're glad to
have them. But you don't even know that they are residents of
the city or that they meet the notions of ``disadvantaged''
embodied in the HUBZone itself.
Mr. Chodos. Well, what we know is what they certify to us,
which is that they are residents and are planning to live in
the HUBZone----
Ms. Norton. Well, I'm going to have to ask whether or not
you'd be willing to ask HUBZone recipients, HUBZone contract
recipients, whether they hire college students so that we will
know how widespread this practice is.
Mr. Chodos. Well, let me say this: We agree with you
completely. The purpose of the program is not to focus upon
college students; it's to focus upon employment in these
places. And----
Ms. Norton. But you can't say today that that isn't the
practice not only of Mr. Castillo but of many like Mr. Castillo
across the United States.
Mr. Chodos. I can say that the practice occurs in various
places at various times. I do not have the data, and I can see
if the data is available, about exactly how many employees----
Ms. Norton. I would very much appreciate your seeing if the
data is available. I think a simple questionnaire, how many of
your employees are college students, would help us to make sure
that--the chairman said we wanted to have the needed reforms,
but there may be no sense until this case came up that that
could amount to an abuse.
Look, I'm not against the college students. I'm saying if
it is a systematic practice, you can see what the effect would
be if the purpose was to make sure that disadvantaged people in
the neighborhood were employed.
So I ask that you submit within 30 days whatever you can
find on that.
And one more question, if I may?
Chairman Issa. Briefly.
Ms. Norton. Mr. Castillo, you indicated something about
most of the money went to the parent company or to the large
company, that you made $1 million, your company made $1
million. What's the value of your company?
Mr. Castillo. Last year we reported $8 million in sales,
and we lost $140,000 based on those sales.
Ms. Norton. But you just testified that $49 million, but
your company got $1 million of that.
Mr. Castillo. Yes, ma'am, in gross profits, not in net
profits. So----
Ms. Norton. I would just submit, for an $8 million company,
$1 million from one contract is very lucrative or, as you said
in one of your emails to your wife, pay dirt.
Thank you, Mr. Chairman.
Chairman Issa. Thank you.
And I might note for the record that, as a small-business
man for many years, if I chose to pay myself no salary, I might
make half a million dollars, and if I chose to pay myself half
a million dollars, I might make no money. So with Mr. Castillo
and his wife as principal employees, I wanted to be clear that
the balance sheet and the income statement are somewhat not the
same as, let's say, a Fortune 500 company's interpretation of
its profits.
Ms. Norton. That's why I wanted to know the worth of the
company.
Chairman Issa. Yeah. Well, you know, clearly, without these
contracts, it will be less.
With that, we go to the gentleman from Ohio, Mr. Jordan.
Mr. Jordan. Ms. Tucker, you've been at the IRS 29 years?
Ms. Tucker. Yes, sir.
Mr. Jordan. And you're Deputy Commissioner; is that
correct?
Ms. Tucker. Deputy Commissioner----
Mr. Jordan. How many Deputy Commissioners are there?
Ms. Tucker. Two.
Mr. Jordan. Is there anyone between the Deputy Commissioner
and the Commissioner?
Ms. Tucker. No.
Mr. Jordan. So you're right near the top?
Ms. Tucker. Yes, sir.
Mr. Jordan. One month ago, Inspector General Russell George
gave the committee information that he informed the IRS on May
30th, 2012, that targeting of conservative political groups was
taking place.
And, in fact, if we can put that up on the screen. This is
from the TIGTA timeline he gave this committee.
And he says in that meeting, these terms were used, ``Tea
Party,'' ``Patriots,'' ``9/12,'' that there were three people
in that committee, or in that meeting: Mr. Shulman, who is no
longer with the IRS; Steve Miller, who has been fired; and you.
Now, Mr. Shulman testified a month ago in this committee
that that was the first time he knew targeting was taking
place. Was that the first time you knew about the targeting at
the IRS?
Ms. Tucker. That was the first time I was aware of the
situation, yes.
Mr. Jordan. Now, Mr. Miller has also--we've also been
informed, the committee, through talking with Nan Marks, an
employee at the IRS, that there was an internal investigation
launched by Mr. Miller in March of 2012. Did you know about
that internal investigation?
Ms. Tucker. No, sir.
Mr. Jordan. And the results of that were Mr. Miller knew
about what was going on May 3rd of 2012. Did you know the
results on May 3rd?
Ms. Tucker. No, sir.
Mr. Jordan. So the earliest you knew about it was the same
time Mr. Shulman testified and what you're testifying to today,
was May 30th of last year.
Ms. Tucker. Yes, sir.
Mr. Jordan. And you're familiar with the fact that Mr.
Shulman testified in front of the Ways and Means Committee in
March of last year, where he said this. First, Mr. Boustany
asked him, ``Can you give us assurances that the IRS is not
targeting political groups?'' Mr. Shulman said, ``Yes, I can
give you assurances. We pride ourselves on being a
nonpolitical, nonpartisan organization.'' So just 2 months
prior to learning that targeting was going on, he gave
assurances.
Now, there's usually, when you give assurances, there's
some basis for assurances. Were you part of the basis for
assurances that Mr. Shulman gave the Ways and Means Committee
in March of 2012?
Ms. Tucker. No, sir.
Mr. Jordan. You did not have any conversation with Mr.
Shulman before he went and testified in front of the Ways and
Means Committee?
Ms. Tucker. No, sir.
Mr. Jordan. In the meeting that took place on May 30th, the
meeting that's highlighted there on the TIGTA timeline, when
you learned that the targeting was taking place, what was the
reaction in that meeting?
Was it, ``Oh, sugar, we've got to do something here?'' Was
it, ``We've got to correct the record?'' What was the reaction
when the three top people at the IRS learned that this was
going on?
Ms. Tucker. So, if I might, TIGTA, the Treasury Inspector
General, comes in once a month to meet with----
Mr. Jordan. Cut to the chase. What was the reaction? You
find out there's targeting of political groups 6 months before
a Presidential election. What was the reaction from the top
three people at the IRS?
Ms. Tucker. TIGTA reported the information that they were
looking into the audit. And then, at that point in time, IRS
waits for TIGTA to complete their investigation.
Mr. Jordan. That's not what they told you. They told you
``Tea Party,'' ``Patriot,'' ``9/12'' were identifying terms
used to put groups on a list who were never given the tax-
exempt status they sought. In some cases, they'd been trying to
get it for 3 years.
You learned that May--or, excuse me, May 30th, 2012. And
your reaction was, oh, we'll just kind of let it keep going and
see what TIGTA comes up with?
Ms. Tucker. No, sir.
Mr. Jordan. I mean, earlier in your testimony, you said to
the chairman, you know, it would be helpful if this committee
would share information with us at the IRS about the issue
that's in front of the committee today.
Well, it would've been helpful if, once you got that
information, you'd have shared it with this committee. We
would've liked to have--and, in fact, we are the committee who
asked for the audit in the first place. We would've liked to
have known 6 months before an election, May 30th of last year,
that targeting was going on.
Did you instruct Russell George to share this information
with the House Ways and--Ways and Means Committee and with the
House Oversight Committee?
Ms. Tucker. Sir, my----
Mr. Jordan. Well, that's a question. Did you tell Mr.
George, ``You know what, this is pretty important information.
We just now learned today,'' according to your testimony,
``that this is going on.'' Did you tell Mr. George, you know,
``You might want to share that with the Oversight Committee,''
specifically since Mr. Issa is the one who requested the audit?
Ms. Tucker. No, sir, that was not my responsibility. I have
responsibility at Internal Revenue Service for----
Mr. Jordan. Well, let me ask you this. What----
Ms. Tucker. --operation.
Mr. Jordan. But the point is, you were in the meeting. The
other two guys are gone. Mr. Shulman's gone, Mr. Miller's been
fired. You're the highest-ranking official at IRS in that
meeting. You knew about it a year ago. Didn't you think it was
incumbent upon you to set the record straight?
Your boss, Mr. Shulman, had just testified 2 months earlier
and told Congress nothing was going on. He finds out 2 months
later, in fact, it is going on. You're the highest-ranking
official still at the IRS. You didn't think it was appropriate
to come tell Congress what was taking place?
Ms. Tucker. The TEGE organization does not report to me.
Mr. Jordan. Why didn't you correct the record? Why didn't
you just come--why didn't you come to Mr. Issa and say, ``You
know what? What Mr. Shulman''--did you tell Mr. Shulman he
should correct the record?
Ms. Tucker. No, sir, I did not.
Mr. Jordan. And--well, let me ask you this. Have you been
disciplined by Mr. Werfel for not correcting the record?
Ms. Tucker. No, sir. It's not in my purview.
Mr. Jordan. Well, you're Deputy Commissioner. You're in the
meeting. You learned about it that day, right?
Ms. Tucker. Mr. George told us in his routine monthly
meeting that they were doing an investigation of TEGE.
Mr. Jordan. We understand that. All I'm asking is, there's
got to be some reason why--you didn't feel any obligation, any
reason that you should come forward and set the record
straight? The Inspector General told the IRS what was going on.
You didn't feel like he should tell us or you didn't feel
incumbent--that it was incumbent upon you to tell the
committee?
Ms. Tucker. Sir, at the Internal Revenue Service, we have
two Deputy Commissioners that have very clearly delineated----
Chairman Issa. The gentleman's time has expired.
Ms. Tucker. --roles and responsibilities.
Chairman Issa. The gentlelady may finish.
Ms. Tucker. At the Internal Revenue Service, we have two
Deputy Commissioners with very clearly delineated
responsibilities. I do not have responsibility----
Mr. Jordan. Mr. Chairman?
Ms. Tucker. --for the service and enforcement programs, as
Mr. Miller would not have----
Mr. Jordan. Well, then, Ms. Tucker, why were you in the
meeting? If it has nothing to do with you, why did Mr. Russell
George think it's important to tell us that you were in the
meeting?
Ms. Tucker. Mr. George and his deputies come into Internal
Revenue Service every month and brief on all of their
investigations, some of which are service and enforcement----
Chairman Issa. Okay, well, the gentleman's time has
expired. I'm sure we'll get back to this.
I would ask unanimous consent the man have 30 additional
seconds.
Mr. Cummings. I don't mind the 30 seconds, but I want her
to be able to answer the question. I mean, he's like a machine
gun, and she can't even get her answer out.
Chairman Issa. Okay.
The gentleman may have 30 additional seconds. The
gentlelady may then answer.
Mr. Jordan. In that meeting, did you discuss with Mr.--so
what you're saying is Mr. Miller had--that was his area of
jurisdiction.
Ms. Tucker. That is correct.
Mr. Jordan. Did you tell Mr. Miller he should come forward
and tell Congress what was going on?
Ms. Tucker. No, sir. At this meeting----
Mr. Jordan. Was that discussed?
Ms. Tucker. If I could, please.
The meeting--TIGTA comes in once a month to Internal
Revenue Service to brief the Commissioner and the two Deputies
about their audits, their open audits. On any given meeting
that they come in, they could be talking--I mean, there are
lots of oversight investigations that happen at Internal
Revenue Service. Those meetings are typically TIGTA coming in
and saying, we've opened an investigation on X program; we've
opened an investigation on another program.
If it's an issue that is under my jurisdiction, like
procurement, like the IRS budget, like our real estate
portfolio, then I am the responsible party. What I'm trying to
convey to you is I do not have oversight responsibility for the
TEGE program.
Chairman Issa. Thank you.
The gentlelady from Illinois, Ms. Duckworth, please.
Ms. Duckworth. Thank you, Mr. Chairman.
You know, this hearing is very troubling to me because this
case really shows how things can go wrong. I want to support
our small-business owners as much as possible. I want these
set-asides to be successful. But I am absolutely appalled by
the advantages that have been taken of the system.
Mr. Flohr, I know you cannot discuss Mr. Castillo's case
because you would need his permission to discuss his particular
case. That's why you could not answer the question earlier.
My understanding also is that the VA, or VBA specifically,
is bound by legislation that says a certain condition has a
certain disability rating. For example, a below-knee amputation
is 40 percent. It just is, correct?
Mr. Flohr. That is correct, ma'am.
Ms. Duckworth. So it seems like there is an opportunity
here for some legislative fixes to the system.
Mr. Chodos, is it true that any rating, even if it's just 5
percent, would qualify someone for a service-connected
disability--service-connected disability-owned business?
Mr. Chodos. So long as they qualify under the VA's rules
for service-connected disability, that is adequate for the
self-certification.
Ms. Duckworth. Thank you.
Mr. Castillo, how are you? Thank you for being here today.
Mr. Castillo. I am not well, but you're welcome.
Ms. Duckworth. All right.
So does your foot hurt, your left foot?
Mr. Castillo. Yes, ma'am.
Ms. Duckworth. It hurts. Yeah, my feet hurt, too. In fact,
the balls of my feet burn continuously, and I feel like there
is a nail being hammered into my right heel right now. So I can
understand pain and suffering and how service connection can
actually cause long-term, unremitting, unyielding, unstoppable
pain. So I'm sorry that twisting your ankle in high school has
now come back to hurt you in such a painful way, if also
opportune for you to gain the status for your business as you
are trying to compete for contracts.
I also understand why--you know, something can take years
to manifest themselves from when you hurt them. In fact, I have
a dear, dear friend who sprayed Agent Orange out of his Huey in
Vietnam who--it took 40 years, 40 years for the leukemia to
actually manifest itself, and he died 6 months later. So I can
see how military service, while at the time you seem very
healthy, could 40 years later result in devastating injury.
Can you tell me if you hurt your left foot again during
your football career subsequently to twisting it in high
school?
Mr. Castillo. Ma'am, I don't understand the high school
comment----
Chairman Issa. Would the gentlelady----
Ms. Duckworth. Prep school.
Chairman Issa. Prep school.
Mr. Castillo. I apologize.
Chairman Issa. Post-high school.
Mr. Castillo. I'm not----
Ms. Duckworth. Post-high school. Okay, post-high school,
prep school, before college, prep school.
Did you injure your left foot again after prep school?
Mr. Castillo. I'm not sure I understand the question,
ma'am.
Ms. Duckworth. You played football in college, correct?
Mr. Castillo. Yes, ma'am.
Ms. Duckworth. As a quarterback?
Mr. Castillo. Yes, ma'am, I did.
Ms. Duckworth. Did you hurt, did you injure that same foot
again subsequently in the years since you twisted it in prep
school?
Mr. Castillo. Not to my recollection, ma'am.
Ms. Duckworth. Not to your recollection. Okay.
Why didn't you, Mr. Castillo, tell the VA that your
doctor's note to them was inaccurate when you knew that it was?
Mr. Castillo. I don't feel that it's inaccurate, ma'am.
Ms. Duckworth. Okay.
Mr. Castillo. Would you like me to address that?
Ms. Duckworth. Yes. Go ahead.
Mr. Castillo. Yes, ma'am. So one of my doctors that
submitted letters--so as part of the injury you have to
establish that it's chronic and reoccurring. So when I returned
home to San Diego, my doctor from San Diego had also--had said
that he treated me for the foot injury that I suffered on
Active Duty.
When I moved to Las Vegas a couple of years later, that
doctor submitted that he continued to treat me for that left
foot, broken foot injury.
Finally, when I moved to Virginia, I went to a doctor, and
it continued to hurt. And he established that--so Dr. Sam
Wilson, who, ironically, was also stationed at Monmouth----
Ms. Duckworth. Okay. I have to cut you off because I'm
running out----
Mr. Castillo. Okay.
Ms. Duckworth. --of time. I'm sorry.
Mr. Castillo. Well, I just want to--so let me finish.
So in talking to Dr. Wilson, who himself was a disabled
veteran and very familiar with Fort Monmouth in that his son
had went there, as well, and played football, he actually was
the one that talked to me about, hey, this may be something
that is connected. And I believe I told him----
Ms. Duckworth. So let me----
Mr. Castillo. --that I was first----
Ms. Duckworth. Let me--I have to cut you off. I have to cut
you off. This is not an argument. I'm talking. I'm up here.
Mr. Castillo. Yes, ma'am.
Ms. Duckworth. Let me ask you this. Do you feel that the 30
percent rating that you have for the scars and the pain in your
foot is accurate to the sacrifices that you've made for this
Nation? That the VA's decision is accurate in your case?
Mr. Castillo. Yes, ma'am, I do.
Ms. Duckworth. You know, my right arm was essentially blown
off and reattached. I spent a year in limb salvage, with over a
dozen surgeries over that time period. And, in fact, we thought
we would lose my arm. And I'm still in danger of possibly
losing my arm. I can't feel it. I can't feel my three fingers.
My disability rating for that arm is 20 percent.
In your letter to a government official, I think it's the
SBA, ``Attention: Gina Mou,'' you said, ``My family and I have
made considerable sacrifices for our country. My service-
connected disability status should serve as a testimony to that
end. I can't play with my kids because I can't walk without
pain. I take twice-daily pain medication so I can work a normal
day's work. These are crosses''--these are crosses--``that I
bear due to my service to our great country, and I would do it
again to protect this great country.''
I'm so glad that you would be willing to play football in
prep school again to protect this great country. Shame on you,
Mr. Castillo. Shame on you. You may not have broken any law;
we're not sure yet. You did misrepresent to the SBA. But you
certainly broke the trust of this great Nation. You broke the
trust of veterans.
Iraq and Afghanistan veterans right now are waiting an
average of 237 days for an initial disability rating. And it is
because people like you, who are gaming the system, are adding
to that backlog so that young men and women who are suffering
from post-traumatic stress, who are missing limbs, cannot get
the compensation and the help that they need.
And I'm sure you played through the pain of that foot all
through college. Well, let me tell you something. I recovered
with a young man, a Navy corpsman, who, while he was running
into an ambush where his Marines were hurt, had his leg knocked
off with an RPG. He put a tourniquet on himself and crawled
forward. He is who played through the pain, Mr. Castillo. You
did not. You took advantage of the system.
You described these statuses just today, that other
companies were using these special statuses as competitive
weapons against you. You, who never picked up a weapon in
defense of this great Nation, very cynically took advantage of
the system. You broke the faith with this Nation. You broke the
faith with the men and women who lie in hospitals right now at
Walter Reed in Bethesda, at Brooke Army Medical Center, in
Landstuhl. You broke the faith with them.
And if this Nation stops funding veterans' health care and
calls into questions why veterans deserve their benefit, it is
because cases like you have poisoned the public's opinion on
these programs.
I hope that you think twice about the example that you're
setting for your children. I hope that you think twice about
what you are doing to this Nation's veterans who are willing to
die to protect this Nation. Twisting your ankle in prep school
is not defending or serving this Nation, Mr. Castillo.
Mr. Chairman, I'm sorry, I've gone--you've been very
indulgent. I yield back.
Chairman Issa. I thank the gentlelady. And the time was
well-spent.
And I cannot add on to that, except I want to make sure the
record is clear, since you are under oath, you said the word
``broken'' in your testimony just now, but my understanding
from staff is that the X-ray taken at the time of your injury
did not show a break.
Additionally, I want to make this clear for the record, and
you can clear the record up if we don't understand it
correctly. In your VA application and with a doctor's support,
you claim that your twisted ankle came from football, as the
gentlelady just said. However, in your transcribed interview
before this committee, you said you slipped on a rock while
orienteering.
For the record today, which one is the truth?
Mr. Castillo. So I believe that Dr. Wilson submitted that I
was hurt playing football, that I told him that. And so, when
meeting with the committee, I told them--and in preparation for
meeting with them, I noticed that the date of injury noted on
the--on my--from Patterson Hospital at Fort Monmouth was
November 19th, which was after football season. So my response
was that it could not have happened, that specific injury,
during football.
The letter that was submitted stated that he had said that
I had told him, and I think I told Mr. Davis that I would
check. I did go back to Colonel Wilson and asked him, you know,
what was his recollection of a conversation we'd had in 2005
that led him to write the letter in support of the VA
application, which was to be submitted by doctors who treated
me for my injury. And he'd said, to his best recollection, I
told him I was hurt playing football.
So I believe that he submitted that in truth. And, in
preparation, as I mentioned, the dates did not line up. So I
did suffer a subsequent injury. And so I believe that what he
had said is that, based on the injury I had suffered, it was
probably a relapse or it caused an aggravation of the injury.
So I think that answered one of your questions. I think you
had three in there. Did you have others? I apologize, I don't
remember all three of them.
Chairman Issa. VA, football, orientearing, and whether it
was a break. You said in your testimony just a few minutes ago
to the gentlelady that it was broken.
Mr. Castillo. Yes, and not--so, first and foremost, your
service to this great country is well-known. And so, just to
let you know, I didn't set my 30 percent disability or your 20
percent disability. And I think that----
Ms. Duckworth. But you're taking advantage of it. And you
went after that disability rating for the benefit of your
company because, as you said, other companies were using these
statuses as a competitive weapon against you. You said that
today.
Mr. Castillo. Ma'am, when I said that, I meant that they
were using the protest process of the procurements as
competitive weapons, not my disability. So I apologize if I at
all stated that they were using my disability as a competitive
weapon. I meant that they were protesting awards as competitive
weapons against our company. So thank you for allowing me to
clear that up.
And, again, I don't set the ratings. And in it was in
keeping and speaking with Dr. Wilson, Colonel Wilson, retired,
who was at Monmouth Hospital on Fort Monmouth, that he had said
that I may be able to qualify. And----
Ms. Duckworth. You made the decision to apply for a
disability rating for a twisted ankle from either football or
orienteering. You can't--you haven't even answered the
chairman's question. You were there. Did you twist your ankle
or did you break--or did you twist it playing football? Do you
not remember? Was it orienteering or was it football? Which was
it?
Mr. Castillo. Well, to answer your question, it was not a
sprained ankle. It was a broken foot. And I believe that the X-
ray technician wrote that there was a much--I don't--I'm not a
doctor--or that led to it. But it was--in essence, they X-rayed
it, and they showed a sufficient change in the malformation. I
forget exactly.
So, in speaking with the doctor, I said, can you really
just simplify that for me? He says, ``You broke your foot.''
That's what he told me.
Chairman Issa. I thank the gentlelady.
And I would trust that the VA can take note of testimony
here today and reopen the case to at least get to an accurate
record and then an accurate determination.
We now go to a medical doctor from Tennessee, Dr.
DesJarlais.
Mr. DesJarlais. Thank you, Mr. Chairman.
And as a former VA physician and someone who had the
privilege of treating many of our great veterans, both service-
connected and not, I do think that one thing that is very
important is a good history.
When did your injury occur?
Mr. Castillo. Around fall of--the initial injury, fall
1984. And the second injury, November 19th, 1984.
Mr. DesJarlais. Okay. So in 1984, how did the first injury
occur? What were you doing, and what was your title?
Mr. Castillo. I believe I was an E-2 enlisted soldier, sir,
and----
Mr. DesJarlais. Okay, in prep school. And how did the
injury happen?
Mr. Castillo. I believe the initial injury happened playing
football.
Mr. DesJarlais. Okay. So you were playing football, you
went and got an X-ray, and that's when they told you it was
broken?
Mr. Castillo. No, sir, the initial injury was not X-rayed,
and that's not when they named it broken foot. I was treated by
trainers----
Mr. DesJarlais. Okay. And when was the second injury?
Mr. Castillo. November 19th, 1984.
Mr. DesJarlais. How many months apart was that?
Mr. Castillo. Probably not a month.
Mr. DesJarlais. A month apart?
Mr. Castillo. Thereabouts.
Mr. DesJarlais. Okay, so you had a second injury, and you
were playing football at that time?
Mr. Castillo. No, sir, I was hurt in the field during an
orienteering exercise.
Mr. DesJarlais. Okay. And you got an X-ray at that time?
Mr. Castillo. Yes, sir.
Mr. DesJarlais. Okay. And that's when they thought it was
broken?
Mr. Castillo. Yes, sir.
Mr. DesJarlais. Okay. And so it healed in 6 to 8 weeks. You
were put in a cast, you were on crutches.
Mr. Castillo. On crutches and, well, orthotics or wrapped
up or whatever----
Mr. DesJarlais. Sure.
Mr. Castillo. I don't know----
Mr. DesJarlais. And by 8 weeks you were walking on it
again. And then when did you play football again, the next
year?
Mr. Castillo. Yes, sir.
Mr. DesJarlais. And how many years did you play football
after that?
Mr. Castillo. Four years after----
Mr. DesJarlais. Four years of football. What about your
athletic career after that? Did you play golf, any other
sports, tennis?
Mr. Castillo. I play golf very poorly----
Mr. DesJarlais. Okay.
Mr. Castillo. --but I played some softball.
Mr. DesJarlais. Okay, softball. Do you still play golf?
Mr. Castillo. No, sir.
Mr. DesJarlais. Okay. When's the last time you participated
in sports?
Mr. Castillo. A couple weeks ago, I went out with some
buddies and played some----
Mr. DesJarlais. Okay, so you can still get around on it
okay, despite having a 30 percent disability service connect
for this injury.
Mr. Castillo. Yes, sir, I have--since you're a doctor, you
probably--I have a fused, I think, navicular area that was
fused.
Mr. DesJarlais. And so, 27 years later, you decided that
this must've been from the original injury? That's what the
doctors decided?
Mr. Castillo. No, sir. After suffering for 20-plus years, I
went and saw a doctor, and he----
Mr. DesJarlais. Okay.
Mr. Castillo. --and he established the broken foot and did
the fusion--the three-fusion exercises--fusion surgery. Excuse
me.
Mr. DeJarlais. I'm sure that doesn't make you feel much
better, Ms. Duckworth, but thank you for updating us on the
history.
Ms. Tucker, at the beginning of the hearing this morning,
Gregory Roseman invoked his Fifth Amendment right against
incrimination, did not testify. As the Deputy Commissioner of
the IRS, is it your expectation that an IRS employee will
appear before the committee to testify about official action
taken within the scopes of his duties at the IRS?
Ms. Tucker. So we expect all IRS employees to cooperate
with Members of Congress.
Mr. DeJarlais. But he didn't.
Ms. Tucker. He did not. And----
Mr. DeJarlais. Ms. Lerner didn't.
Ms. Tucker. Each of these individuals, as Mr. Cummings
said, invoked their constitutional right.
Mr. DeJarlais. Okay. And this is an agency you've been with
29 years, and you stated in your testimony you're very proud of
your service there and very proud of this agency, despite, you
know, the multiple black eyes they have right now.
Has the IRS taken any disciplinary action against Mr.
Roseman as a result of this committee's investigation or
TIGTA's investigation?
Ms. Tucker. So when I became aware from the Treasury
inspector general of investigations in mid-May of hard evidence
that they had found regarding inappropriate texting by Mr.
Roseman, I directed the procurement organization, his
superiors, to reassign him from a management position.
Mr. DeJarlais. But you agree that he would be uniquely
qualified to testify about what we are wanting today?
Ms. Tucker. Yes, sir.
Mr. DeJarlais. Okay. So the fact that he invoked his Fifth
Amendment, that's his right, but the fact that Lois Lerner did,
too, and the American people wanting answers, what's going on
with the IRS? We've got targeting of conservatives, we've got
excessive spending, we've got situations like this. And I
understand you want to be proud of who you work for, and you
should be, but how are we going to get justice? Do you think
that the IRS needs to bring people to justice? You were in on
these meetings. Mr. Jordan asked you why you were in on those
meetings, and he asked you what was the initial reaction. And
nobody's given us a reaction, nobody was shocked, but we--you
agree that targeting conservative groups was wrong?
Ms. Tucker. So what I was told----
Mr. DeJarlais. Do you agree that targeting conservative
groups was wrong? That's a yes or no. Do you agree it was
wrong? Can someone in the IRS admit that this was wrong?
Ms. Tucker. I think the information that was released this
week by our Acting Commissioner shows that BOLO lists were
inappropriately used across multiple, multiple criteria. So,
yes, that criteria was incorrect.
Mr. DeJarlais. So the IRS is screwed up. Somebody needs to
be held accountable.
Who--who is in charge of appointing the Commissioner of the
IRS?
Ms. Tucker. That's a Presidential appointment.
Mr. DeJarlais. Okay. All right. Well, somebody needs to be
held responsible; do you agree?
Ms. Tucker. All of us at IRS have to be responsible for the
administration of our agency.
Mr. DeJarlais. Okay. The American people are going to be
very relieved when they get this news of who might be held
accountable. Do you have any idea as to who might be held
accountable? Do you think you should be?
Ms. Tucker. I think the investigation that's under way,
that's exactly what this is intended to do. As our Acting
Commissioner Danny Werfel has stated numerous times, we all
want to get to the truth.
Mr. DeJarlais. Well, the American people want us to get to
the truth, so thank you for being here today and helping us
on--in that process.
I yield back, Mr. Chairman
Chairman Issa. Ms. Tucker, the gentleman asked you did you
think it was wrong to target conservative groups, and you said
it was incorrect. Could you answer the gentleman's question,
was it wrong?
Ms. Tucker. So, Chairman Issa, I feel--I feel compelled
that I need to make sure that everyone understands the meeting
that I was in when Russell George and his team came in to share
just their routine, here are the audits we have under way, Mr.
George at that time basically said, we are initiating an
audit----
Chairman Issa. No, no. That's not the question. And I
apologize. The doctor asked you a fairly straightforward
question, which is, as one of the highest career professionals
in the IRS, you are now aware that these BOLOs were used to
target and delay for up to 3 years a legitimate answer to
people's applications based on their ideology. Do you think
that was wrong?
Ms. Tucker. No, sir. What I'm trying to tell you is that's
not what I was told in that meeting. In----
Chairman Issa. I'm not asking about the meeting. I'm asking
about what is now known.
Ms. Tucker. So when the--when TIGTA issued their final
report, what, in April, early May of this year, yes, I think
all of us at IRS that saw the report are troubled; thus the
investigation to get to the bottom of exactly what transpired.
Chairman Issa. Ms. Tucker, I'm just asking about right or
wrong, and that's what the doctor was asking about, not was it
incorrect. This is--this is virtually a simple question for
almost every citizen to answer. Was it right or wrong to do
what you now know from the IG's report? Was it right or wrong?
Ms. Tucker. Sir, I--here's--here's what I know based on
what was told to----
Chairman Issa. Okay. I'm not going to get an answer, and I
don't have any time.
I think, Mr. Davis, you are next up.
Mr. Davis. I think I am, Mr. Chairman, and I thank you very
much. And I want to thank all of the witnesses. But I also want
to thank you and the ranking member for holding this hearing. I
think we've learned a great deal, or we've had, for some of us,
reinforcement of thinking and thoughts.
Especially do I want to relate myself to the question, and
of the ranking member and that of Delegate Norton, whose
questioning revealed that so often in communities that are
designated to benefit from program activity, that there are
ways to manipulate, to scheme and get around to the point where
the designation means absolutely nothing to the community or
neighborhood that is supposed to benefit. And for those who
have helped create HUBZones, been advocates for them, they look
for the benefit that's to come. Didn't see much benefit from
this particular business transaction.
So, Mr. Chodos, let me ask you about the finding in the SBA
decertification letter that Mr. Castillo and his company tried
to pass off employees as contractors to skirt the HUBZone rules
and collect or earn millions of dollars. On May 23rd, 2013, SBA
sent a decertification letter to Mr. Castillo, and in that
letter the director of the HUBZone program found that Mr.
Castillo erroneously characterized individuals as contractors
rather than employees in order to maintain the 35 percent
eligibility requirement for the HUBZone program.
Mr. Chodos, how would you classify someone as a contractor
rather than an employee help Mr. Castillo's application?
Mr. Chodos. If I understand your question, Representative
Davis, it's when the facts came to our attention that the
people who were running the company essentially or in
managerial charge of the company were listed as independent
contractors rather than as employees, we look to the substance
rather than the form of whether or not they are actually
employees of the company, and we were able to determine that
under a totality test, that, in fact, they were, for all
meaningful purposes, employees of the company, and thus the
test was not met.
Mr. Davis. Well, let me read from the SBA certification
letter, if I might, and it says this: SCI is telling the
government two different stories. To the Internal Revenue
Service, the individual is a valued and key member of Signet's
management team and its proposed program manager, and to the
SBA she is merely an independent contractor. In SBA's view, a
firm's management team and its program manager are not roles
that are normally subcontracted out to third parties.
Ms. Tucker, let me ask you, why is it important to
procurement officials that they know who the proposed program
manager is for a particular contract?
Ms. Tucker. So from--from the folks in our procurement
organization, from--from what they tell me, as we are
interacting on contracts like the one that we're talking about
today, the project manager is indispensable in communicating
with the Internal Revenue Service business owners to make sure
whatever service or product we are contracting for is--is being
delivered appropriately. So that--that is very important.
Mr. Davis. Mr. Castillo, let me--and I agree with you that
you didn't make the rules, you didn't write the regulations,
you didn't pass the bills, so you did not create the
opportunities that existed for you to try and do business under
these arrangements. But let me ask, how do you explain telling
the Internal Revenue Service that someone would be the key
program manager for the contract, and then telling the Small
Business Administration that that person is an independent
contractor?
Mr. Castillo. So the person was--is an independent
contractor in that she works in support of several companies. I
think she supported our company and SAIC at that time and was a
1099 employee.
A program manager, while I understand that it's important,
it doesn't necessarily make that person an employee. And I will
tell you, being in the consulting field, that a program manager
can be contracted out and is often contracted out. As we serve
as a contractor on the IBM contract that Ms. Tucker----
Mr. Davis. But you knew that. But you knew that before it
was brought to your attention by either the SBA or the Internal
Revenue Service. I'm saying you knew that as a result of your
knowledge and experience and the work that you've done, but yet
you described it two different ways.
Mr. Castillo. Well, I think they're both consistent. I
think that they're an important member of the team, and we bid
them as a program manager on the job, as we bid programmer on
other jobs through other companies.
And the distinction we made with the other ones was that
one was a--the other person actually owned a company, supported
five other companies, and the other one didn't even work for
us, she supported us during her maternity leave. She did it as
a favor to me during her maternity leave.
Mr. Davis. My time has expired, so thank you very much. But
nevertheless, you described two different ways when you were
dealing with the procurement opportunity.
Thank you, Mr. Chairman. I yield back.
Mr. Bentivolio. [Presiding.] Thank you.
The chair now recognizes the gentleman from South Carolina
Mr. Gowdy.
Mr. Gowdy. Thank you, Mr. Chairman. I also want to thank my
friend from North Carolina for yielding me his time.
Mr. Chairman, I want to thank my colleague from Illinois
for her service to our country. Her moral standing to discuss
service and sacrifice is unimpeachable. So I want to publicly
thank you again for your service to our country.
Ms. Tucker, more people have invoked their Fifth Amendment
privilege against self-incrimination in this job than they did
my former job, and I was a prosecutor, so that's saying a lot.
And two of them are current government employees. And just so
there's no misunderstanding, they're invoking their Fifth
Amendment privilege in connection with their official duties.
We're not discussing bank robberies or narcotics trafficking;
we're discussing their official duties, and they feel the need
to invoke their Fifth Amendment privilege.
So I want to ask you to do something for me. Okay? Have you
seen the texts from Mr. Roseman?
Ms. Tucker. Yesterday when the committee released the
report----
Mr. Gowdy. Okay.
Ms. Tucker. --yes, sir, I have seen the text.
Mr. Gowdy. So you have seen these despicable homophobic
slurs.
Ms. Tucker. Yes, sir. I saw the information in the
committee report.
Mr. Gowdy. Well, here's what I'm going to ask you to do for
me and, frankly, for our fellow citizens: Before the close of
business today, if you can, issue a statement on behalf of the
IRS as to why he's still employed and still drawing a paycheck.
If you've seen the texts that I have seen, I would like an
explanation as to how you can keep your job if you say things
he said in your official capacity. Can you do that? Can you
explain to us how you can keep your job and your paycheck
despite these homophobic slurs?
Ms. Tucker. Sir, if I might, as I said in my opening
statement, based on the information in the committee report
yesterday, I am--I am sickened----
Mr. Gowdy. All right.
Ms. Tucker. --not only as----
Mr. Gowdy. I appreciate that, Ms. Tucker.
Ms. Tucker. --not only as an IRS official----
Mr. Gowdy. I----
Ms. Tucker. --but also as a citizen.
Mr. Gowdy. I appreciate that. My question was actually a
little more specific. Can you issue a statement by 5 o'clock
today as to how someone who used this language in their
official capacity as a government employee is still employed
and drawing a paycheck? Can you explain that to us by close of
business today?
Ms. Tucker. Sir, if I might, we are having discussions at
Internal Revenue Service----
Mr. Gowdy. And how long do you anticipate those discussions
are going to last? Because I just read the texts this morning,
and I have already reached my conclusion. So how long do you
think it's going to take y'all?
Ms. Tucker. So we are having discussions with our general
counsel.
Mr. Gowdy. How about close of business tomorrow?
Ms. Tucker. So we're going to do our very best to follow
due process, but, candidly, to also make sure we do this
appropriately, because I think the committee's aware of the
Federal personnel rules, and we want----
Mr. Gowdy. If this doesn't violate them, Ms. Tucker, then
we need to change them.
Ms. Tucker. Yes. So we are doing everything we can to make
sure----
Mr. Gowdy. All right. Well, rule----
Ms. Tucker. --that we follow the proper procedures.
Mr. Gowdy. I will be anxiously awaiting an explanation as
to how you can say what this person said in your official
capacity and keep your job and keep your paycheck. I will
anxiously await that explanation.
Ms. Tucker. Yes.
Mr. Gowdy. Mr. Castillo.
Mr. Castillo. Yes, sir.
Mr. Gowdy. Why did Mr. Roseman invoke his Fifth Amendment
privilege?
Mr. Castillo. I'm--I have no idea, sir.
Mr. Gowdy. You don't know? You don't know what conduct he
could be worried about?
Mr. Castillo. Well, I think you spoke about one of them,
but, no, sir, I don't know why he did, and I wish he was here
to speak about some of these things.
Mr. Gowdy. Well, we do, too, Mr. Castillo, but he's not, so
I'll direct my questions to you.
Mr. Castillo. Okay.
Mr. Gowdy. Did you discuss his invoking his Fifth Amendment
privilege with him before today?
Mr. Castillo. No, sir, I did not.
Mr. Gowdy. When's the last time you talked to him?
Mr. Castillo. Before February 20th.
Mr. Gowdy. Do you know what criminal exposure he's
concerned about?
Mr. Castillo. No, sir, I don't.
Mr. Castillo. You don't have any idea?
Mr. Castillo. No, sir.
Mr. Gowdy. Did he ever solicit gifts from you?
Mr. Castillo. No, sir, he did not.
Mr. Gowdy. Did you ever offer gifts to him?
Mr. Castillo. I think it's noted in the----
Mr. Gowdy. Well, humor me and answer it again.
Mr. Castillo. So we went to a ballgame around the 2005 time
frame when I worked at Government Acquisitions that he paid
for. I gave him a receipt. And----
Mr. Gowdy. Has he discussed employment with you post-IRS?
Mr. Castillo. No, sir, he has not.
Mr. Gowdy. Will you describe the nature of your
relationship with Mr. Roseman to us?
Mr. Castillo. I would say that it's centered on my doing
business with the IRS and his--for 10 years or so.
Mr. Gowdy. Did you discuss contracts that you were
competing for or interested in with Mr. Roseman prior to the
issuing of those contracts or the awarding of those contracts?
Mr. Castillo. Not to my--well, I'm not sure I understand
the question, sir. Did we discuss contracts beforehand?
Mr. Gowdy. I'm trying to figure out whether or not you
violated any of the bidding procedures, whether or not he gave
you an unfair advantage if you were seeking work that other
people were also seeking.
Mr. Castillo. No, sir. I'm not aware that I have an unfair
advantage in any of them.
Mr. Gowdy. How about any advantage, unfair or fair? Did his
relationship with you give you an advantage?
Mr. Castillo. No, sir.
Mr. Gowdy. You've never discussed future employment with
him?
Mr. Castillo. No, sir.
Mr. Gowdy. Well, this is my last question, because my time
has run out. Mr. Castillo, have you read the texts from Mr.
Roseman?
Mr. Castillo. I have--I have read them. Sir, I provided
them to the committee.
Mr. Gowdy. All right. And you still say he's your friend?
Mr. Castillo. So to be clear----
Mr. Gowdy. No. I want you to be clear, because--because I
just read them, and I--and I want you to be clear. You've read
them.
Mr. Castillo. I have----
Mr. Gowdy. You know what's in them, the homophobic slurs in
his official capacity. Y'all still friends?
Mr. Castillo. I'm deeply offended. As you're aware, those
were targeted toward--towards me----
Mr. Gowdy. Yeah. I----
Mr. Castillo. --towards me.
Mr. Gowdy. Yeah, I am. That's why I'm asking you.
Mr. Castillo. So I am offended. If you can appreciate that
he's the customer, and it's not my job to go around correcting
what the customer does or doesn't say. And I--and so----
Mr. Gowdy. Do you think it's appropriate for a government
employee to say those things about--about someone----
Mr. Castillo. No, sir.
Mr. Gowdy. --in their official capacity?
Mr. Castillo. No, sir, it's not.
Mr. Gowdy. How long would it take you to get rid of an
employee that said that?
Mr. Castillo. Well, I think it's well noted of the--some of
the employees that we've terminated, it would not take me----
Mr. Gowdy. Yeah, for a lot less.
Mr. Castillo. It would not take me until 5 o'clock time----
Mr. Gowdy. You did it a lot quicker for a lot less.
Mr. Castillo. Yes, sir.
Ms. Tucker. Mr. Gowdy, if--if I might, my folks that are
here in the room believe that the specific text message that
you're referring to we actually have not seen yet at IRS.
Mr. Gowdy. Would you like me to walk them down to you?
Ms. Tucker. I would--I would like to at some point receive
those. But let me just be clear, when I said that I was deeply
disturbed, that was based even on the mess---the text messages
that were already in the report.
Mr. Gowdy. Well, here. Let me make sure that you get them
before you leave----
Ms. Tucker. No. I----
Mr. Gowdy. --because if you had thought you were deeply
disturbed, you may reach a whole 'nother level of disturbia.
Ms. Tucker. Thank you, sir. I appreciate that.
Mr. Bentivolio. Thank you.
The chair now recognizes the gentlewoman from Illinois Ms.
Kelly.
Ms. Kelly. Thank you, Mr. Chair.
This committee serves two purposes, oversight and reform,
and I'd like to get to what reform your agencies are looking
at. We have seen how a contractor has been able to game the
HUBZone system to get an advantage on his competitors for
millions in government contracts, and I want to know how we're
going to prevent this from happening in the future.
Mr. Chodos, is the SBA taking any remedial steps in light
of the findings of this case?
Mr. Chodos. Thank you, Representative Kelly.
Let me say that the agency did take an immediate step when
it found out that there was a problem back in December and
January at the end of last year and the beginning of this year,
which was to decertify this firm after duly looking into the
facts and getting the correct facts.
So in terms of moving forward, the agency is always looking
for opportunities to make the program more effective and to
identify ways to work closely with our colleagues at VA and at
GSA to align and coordinate our different rules about
procurement so that they all work in the same direction.
So we have proposed rules under the JOBS Act that are in
process now as we speak that seek to make issues involving use
of the HUB--HUBZone program clearer, more straightforward, and
which will improve our opportunities for straightforward
oversight.
Ms. Kelly. Mr. Davis read the decertification letter
already, but is SBA considering asking applicants to provide
information identifying not only employees, but all other
individuals who work on behalf of the company, such as
contractors?
Mr. Chodos. Yes. And I believe that change has already been
instituted.
Ms. Kelly. Great.
As committee staff interviewed IRS procurement officials,
they also identified that those personnel needed additional
training about procurement ethics generally, as well as
specific training about the types of relationships that IRS
procurement officials are prohib---prohibited, excuse me, from
having with contractors.
Ms. Tucker, can you please describe the steps the IRS has
taken to improve its procurement ethics training?
Ms. Tucker. Yes, ma'am. We have a whole host of actions
under way, including an annual ethics training that will be
provided to all of our procurement employees in addition to
what they already have. It will be delivered by our chief
counsel organization. And, in fact, we're doing an all-employee
meeting today with our workforce to reemphasize that the
positions we hold, ethics is of the utmost importance. And so I
can assure you and give you personal assurance that our
training programs will be significantly enhanced in the days
and weeks ahead.
Ms. Kelly. Is there any other remedial action that you're
taking that you would like to share?
Ms. Tucker. You know, the--the--the findings of--regarding
the, what I believe, totally inappropriate relationship between
one of our procurement employees and Mr. Castillo, while I--I
believe at my core that the men and women of our procurement
organization are operating with the highest ethics and
integrity every day, I know that one bad actor can--can cast
disparity on our organization, and so as a result, we're doing
a top-to-bottom review of our entire procurement organization,
just reassuring ourselves that we're following proper policy
and procedures.
I've also asked the Treasury Department procurement
executive--they do routine reviews of IRS--I've asked them to
come in. I've also launched an independent review.
And in addition, I think, you know, that the focus that
we're going to be putting on, you know, more routine briefing--
we do a quarterly performance review of the procurement
organization--I think all of our existing internal controls we
just need to double down on to reassure ourselves that this--
this type of behavior is not prevalent. And I have no reason to
believe, ma'am, that it exists beyond what--the unfortunate
situation with Mr. Roseman.
Ms. Kelly. All right. Thank you.
How about, Mr. Sisk, anything to add?
Mr. Sisk. We are currently continuing our review of this
particular case to make sure all proper rules and regulations
were followed. In addition, we're taking a look at our internal
management controls to make--see if they need to be
strengthened in any particular areas in light of some of the
questions that came out of the committee.
Ms. Kelly. Okay. Mr. Flohr?
Mr. Flohr. Thank you, ma'am.
In my particular area of expertise is veterans benefits,
and so I don't have a lot of information about the SP--Veteran-
Owned Small Businesses, but I would be glad to take any
questions for the record and provide them to you.
Ms. Kelly. Okay. Thank you.
Ms. Kelly. Thank you. And I hope we continue looking at
this issue and make improvements to gain the public's trust
back. Thank you, Mr. Chair.
Chairman Issa. [Presiding.] Thank you.
Mr. Meadows.
Mr. Meadows. Thank you, Mr. Chairman.
Ms. Tucker, some of the testimony you've given recently is
very troubling, because it's in direct conflict with testimony
we've heard in this very room from Mr. George. And so with
that, to make sure that we have a continuity, I'm going to
yield some of my time back to Mr. Jordan at this particular
point. So I yield to the gentleman from Ohio.
Mr. Jordan. I thank the gentleman.
Ms. Tucker, so you're number two at the Internal Revenue
Service. You learn on May 30th from the inspector general that
political targeting of conservative groups is taking place. You
know the number one at the IRS 2 months prior to that testified
in front of Congress to just the opposite. And you told me in
my first round of questioning that because it didn't fall under
your jurisdiction, you didn't feel obligated to set the record
straight?
Ms. Tucker. Sir----
Mr. Jordan. I mean, what--how does that encourage
whistleblowers to come forward when they know something's been
done wrong, if you're the number two career professional at
IRS, and you don't come forward and set the record straight?
Ms. Tucker. Sir, if I might just--and maybe I'm not making
myself clear. The meeting that I was in, what Mr. George told,
to the best of my recollection, in the meeting was that his
team was opening an audit on the TEGE organization, and that
part of that audit is that they were looking at the--the BOLO
list.
Until--to the best of my recollection, sir, until Mr.
George issued the report in April where he revealed that
inappropriate targeting had appeared to have taken place based
on the BOLO list, sir, that was--that was the first time that I
actually had seen the results of Mr. George's investigation.
Mr. Jordan. Well, if--if I could, and if the gentleman
would cut me off when you need to, Congressman--according--this
is from the hearing. The chairman asked inspector general May
30th, IG function has briefed the IRS Commissioner Doug
Shulman, Deputy Commissioners Miller and Tucker specifically
the criteria targeting Tea Party Patriots, and 9/12 and other
words were used to--in reviewing applications for tax--you
briefed, and that was your notes. Mr. George response: Yes,
that's correct.
So it was very specific. You were briefed on it that day,
and yet you didn't feel compelled to do anything.
Ms. Tucker. Mr. George was briefing on the start, to my
recollection, of their audit. And obviously, as he talked about
that they were looking at these words being used, yes----
Mr. Meadows. Will the gentleman yield?
Ms. Tucker. --that seems to be inappropriate.
Mr. Jordan. Be happy to yield back.
Mr. Meadows. I thank the gentleman.
Ms. Tucker, that's in direct conflict with what Mr. George
said sitting on this end right here. What he said, that May
30th meeting he went over preliminary results of the
investigation that they've had and let you, Mr. Shulman and Mr.
Miller know in that meeting. It was not the start of an audit.
It was the preliminary results where targeting actually
happened. You don't recall that?
Ms. Tucker. Sir, I--to go back----
Mr. Meadows. Because I'm finding that a lot of members of
the IRS have very great detail on recalling things at certain
times, and at other they lack the memory. So you don't recall
that he said that?
Ms. Tucker. Sir, I recall the meeting, the monthly meetings
that we have with Mr. George and his team----
Mr. Meadows. And there was nothing unusual about this May
30th meeting? There was nothing unusual. This--it was a normal
routine update that he saw fit to go 4 days later to chief
counsel and let them know about it? That was Mr.--Mr. George's
testimony. Your testimony and his are not matching up.
Ms. Tucker. Sir, I--I'm--I do not recollect. And I have to
keep going back to this. In our monthly meetings with Mr.
George and his team, they cover a whole host of IRS audits----
Mr. Meadows. So there's nothing unusual about this
particular time? That May 30th meeting, there was nothing
unusual about that? This was just a normal routine update that
you get every month?
Ms. Tucker. Sir, obviously when Mr. George conveyed to the
Internal Revenue Service that in the course of their
examination, or their audit, that they were looking into----
Mr. Meadows. It wasn't--it was preliminary results, Ms.
Tucker, not looking into. It was preliminary results where
targeting was identified.
Ms. Tucker. And, sir, based on the testimony that I've seen
from Mr. Miller, following that discussion, to the best of my
recollection, is when he took action to ask for an independent
review.
Mr. Meadows. No. That happened actually before. So let me--
because we--you earlier on--if the chair will indulge me for
just a second. You earlier on said that this committee needs to
continue to give you information, but yet you're the one that's
paid for managing this whole organization. You're the one that
gets paid for it. We have oversight, and yet what we're finding
is we're having to discover and manage the process of which
you're getting paid for. And--and here we are, you've said
eight times, let me be clear. So let me be clear that the
internal investigation at the IRS happened actually before May
30th. It was concluded the first part of May. It was started
the day after Mr. Shulman gave testimony to the Ways and Means
Committee saying that there was--he could give assurances that
there was no targeting, and y'all started an internal
investigation the very next day. So your timelines don't match
up, Ms. Tucker.
So how do you--how do we respond to the American people,
because all they want, the ranking member has said it, they
want truth so then yet again they can trust. So how do we
respond to that?
Ms. Tucker. Sir----
Chairman Issa. The gentlelady may answer. The time is
expired.
Mr. Meadows. I thank the gentleman. I yield back.
Ms. Tucker. Sir, I am--I am trying to share with you the
truth from what I know and what programs I have responsibility
for. IRS is an organization of 100,000 people and multiple
programs. I am the Deputy Commissioner for Operations Support.
I do not have responsibility, sir, for oversight and
administration of the service and enforcement program.
Chairman Issa. I thank the gentlelady.
We now go to the gentleman from Virginia Mr. Connolly.
Mr. Connolly. Thank you, Mr. Chairman.
I might say to my colleagues, Mr. Meadows, Mr. Jordan, that
if we're going to cite the testimony of the inspector general,
I would cite the question-and-answer period between the
inspector general and myself in which I directly asked the
inspector general whether, in fact, progressive groups could
also have been targeted in the unidentified 202 organizations
that were looked at. And his answer, in light of recent facts,
is at best elusive. And I certainly think that if we want to
cite the inspector general, we ought to have him come back here
under oath, as he was that day we had him, and allow him to
clarify his answers, because they certainly look strange to
some of ours.
Chairman Issa. Would the gentleman yield?
Mr. Connolly. If the clock will stop.
Chairman Issa. Just--just if you could answer, what are you
asking to have the IG come back and answer?
Mr. Connolly. I--Mr. Chairman, I'd--I'd ask the clock to
stop.
Chairman Issa. We'll hold the clock, but I just want to
know----
Mr. Connolly. Mr. Chairman----
Chairman Issa. --if you're making a request what the
request is.
Mr. Connolly. Yeah. The request is that there is now
serious confusion about the answer the inspector general gave
to my direct questioning whether he knew that, in fact,
progressive groups, not just conservative groups, were also in
the filtering of the BOLO. Did he know that when he answered my
question? Because he inferred from his answer that he did not,
that the--that they--that those were all unidentified. We now
know that's not true. Now, did he know that, and did he know it
when he testified under oath before this committee----
Chairman Issa. Okay. We'll----
Mr. Connolly. --because----
Chairman Issa. We'll--we'll look at how we can do that.
Mr. Connolly. Thank you.
Mr. Jordan. Will the gentleman yield?
Mr. Connolly. I'm afraid my time is running out, so I'm
going to proceed with questioning, but I thank--thank my
colleagues.
During the course of the committee's investigation, it's
become clear that Strong Castle provided inaccurate information
to SBA on multiple occasions. Mr. Castillo, according to the
SBA's letter decertifying Strong Castle, the company provided
inaccurate payroll records for two employees. SBA's decision
stated that Strong Castle, ``admitted that the records provided
were false and inaccurate.'' Is that correct?
Mr. Castillo. They were inaccurate, yes.
Mr. Connolly. They were inaccurate?
Mr. Castillo. Yes, sir.
Mr. Connolly. And the SBA decision goes on to explain, SCI
confirmed the one instance identified by SBA and identified
another. The corrections were only made after being confronted
with the conflicting evidence presented by SBA. Strong Castle's
former C--COO, Michelle Castillo--I guess that's your wife----
Mr. Castillo. Yes, sir.
Mr. Connolly. --said that when she discovered errors in the
payroll records, she did not check to see whether there were
additional errors in other months. When she was asked, how do
you know there weren't other errors for the previous 6 months,
she replied, I don't.
Is that the kind of recordkeeping you kept at your company,
Mr. Castillo?
Mr. Castillo. Sir, I don't know of her testimony, but rest
assured, I am aware of the two that you're talking about where
a student worked 6 hours in 1 day and 8 hours in the other and
transcribed those in that week, and that student employee had
written that he had worked 8 hours on 1 day when he meant that
he worked the other day. So I'm aware of those.
And--and so we have put steps in place, including the
person that you'd mentioned, my wife, resigning from the
company. I've taken over that. We've put steps in place to
ensure that we have tighter recordkeeping around that----
Mr. Connolly. Well----
Mr. Castillo. --including assigning people on a day-to-day
basis that log in hours and report and supervise hours.
Mr. Connolly. Thank you.
Mr. Chodos, how can SBA base certification decisions on
payroll records from companies when they can't verify actual
employment, by their own admission?
Mr. Chodos. Companies have a duty to provide accurate
information to the SBA because, of course, the SBA needs
accurate information on an ongoing basis in order to originally
certify and then to decide if a company is still in compliance.
Mr. Connolly. So is there sort of an honor system? We rely
on them to be--to verify and to tell the truth?
Mr. Chodos. Well, we always expect folks to act in an
honorable way, but the regulations require that they provide
accurate information on an ongoing basis. So this is a
regulatory requirement, not just a trust system.
Mr. Connolly. In this case the certification provided
previously was the difference between, well, qualifying for a
HUBZone, but also the 35 percent residency requirement. Is that
right?
Mr. Chodos. I'm sorry, Representative, I just didn't
understand the question.
Mr. Connolly. The information provided by former employee
Michelle Castillo meant that Strong Castle made the difference
with the 35 percent residency requirement; is that correct?
Mr. Chodos. Yes. The--well----
Mr. Connolly. So this wasn't just an error; this was sort
of dispositive.
Mr. Chodos. Well, this went to two issues. It went to
whether--the status of employees and whether or not employees
were actually spending their time at the principal location, as
represented.
Mr. Connolly. Is SBA looking into the issue in this case of
fraud?
Mr. Chodos. The SBA is continuing to receive information,
and has had a number of communications with the committee, and
welcomes all information on this topic. And also, as we have
indicated to the committee, since at least March, the SBA has
been in regular communication with our inspector general and
has shared all of the information available to us with our IG.
So it's an ongoing process of evaluating information as it
becomes available.
Mr. Connolly. Thank you. My time has expired.
Chairman Issa. Thank the gentleman.
We now recognize the gentleman from Michigan for his round
of questioning.
Mr. Bentivolio. Thank you, Mr. Chairman.
Members of Congress are elected by the American people. We
are expected to answer to our constituents, and every 2 years
they have the ability to fire us. The American taxpayers do not
have the ability to do this with IRS officials, who have
repeatedly let them down. We saw this with the targeting of
tax-exempt groups, with the egregious waste of taxpayer dollars
on conference spending, and now again with the discovery of an
improper relationship between an IRS procurement official and a
contractor.
It is not very common for witnesses to assert their
privilege not to testify before Congress, but today, again, we
have an IRS official who has refused to answer questions about
actions he took in his official capacity. This is the second
time in the last month that an IRS official has refused to
answer this committee's questions. How many more IRS officials
are going to come before this committee and refuse to answer to
the American people? As it is, we are not learning all of the
necessary facts because of these refusals to testify.
This problem is not just about Strong Castle and Mr.
Roseman's refusal to testify today; this problem is bigger than
Strong Castle. This problem is about IRS mismanagement, the
agency's failure to the American people, and the agency's
refusal to answer for what it has done. And the American people
deserve better.
Mr. Chairman, I served in Iraq and Vietnam, and I am 50
percent disabled for a neck injury I suffered in 2007 in Iraq.
Mr. Castillo, I think Congresswoman Duckworth said it all
for me, so I'm just going to ask you one simple question: Mr.
Castillo, I understand that you have produced text messages
between yourself and Mr. Roseman that you have access to. There
are, however, text messages that you have stated were lost in
the iPhone migration. Will you agree to work with the committee
and with AT&T in an attempt to recover these messages?
Mr. Castillo. Yes. And I have.
Mr. Bentivolio. Thank you.
Mr. Chairman, I yield back.
Chairman Issa. Would the gentleman yield?
Mr. Bentivolio. Yes.
Chairman Issa. I thank you.
And thank you for helping us with AT&T, and we'll work on
that after the--this meeting.
I want to sort of dwell just a moment on--with Mr. Flohr on
the veterans' standing. In the transcribed interviews, which
we'll make available to VA, Mr. Castillo has some--little bit
of confusion in his statement, but essentially, and I'll
paraphrase, that he was aware that the doctor's view that this
was a football injury was inaccurate, but didn't think it was
material.
If we provide that transcript to you, does that empower you
to review and get accurate the original filing so that you can
make an assessment as to whether or not the sequence of events,
the injury and the doctor's opinion, would support all the
elements necessary for a 30 percent disability?
Mr. Flohr. Thank you for the question, Mr. Chairman.
We would certainly be willing to look at anything that you
might want to share with us. I'm not saying it would make a
difference. And as I said earlier in my testimony and written
and oral statement, it's--a veteran who suffers an injury in
service, and regardless of what type of injury or what caused
it, as long as it wasn't from willful misconduct, and it was in
line of duty----
Chairman Issa. No. I understand the line of duty. It's
really--I think Ms. Duckworth made it very clear that she
looked at a 30 percent and a $500-a-month or so payment for
life and questioned whether or not, in light of so many severe
injuries--and she was incredibly severely injured in--in the
line of duty--whether or not the assessment was correct. And I
think her view, and rightfully so, is there's a lot of veterans
on long waiting lists, and there's a lot of veterans who see a
30 percent disability for what appears to be a rather--
relatively minor injury a long time ago, and they question
that.
That's the only reason that--in light of the testimony and
the confusion, that we would expect that the VA would reopen,
reevaluate and then make a second accurate assessment based on,
if you will, reevaluating the doctor's statement, which
apparently was inaccurate.
Having said that, I served for 10 years on Active Duty and
10 in Reserves. Every one of us got something broken or bent,
so I'm very aware that, for better or worse, almost all of us
have a hearing loss or have something. Most people who served
as veterans are, in fact, to at least some small extent, and
the gentleman from Michigan is to a fairly large extent from a
serious accident in Iraq, service-connected disabled. And I
think that's the point you were making is Congress has left you
little wiggle room. If you're at the prep school, if something
occurs, and you were not in a criminal relationship, or you
were in the line of duty, you're not AWOL, that, in fact, that
is service-connected-disability-eligible.
We're not asking you to rewrite the law, that's our job,
but we do think that--that getting it right as to percentages
are important to so many veterans who essentially say, I can't
work, but they also often find themselves far below 50 percent.
Mr. Flohr. As I stated, sir, yeah, we'll be glad to look at
anything you have that you want us to look at, and we certainly
will--will make you aware of what we find.
Chairman Issa. I appreciate that.
We now go to the other gentleman from Michigan Mr. Walberg.
Mr. Walberg. I thank the chairman.
And, you know, I--just responding to one of our colleagues
who questioned whether we would be getting information from the
IG on targeting, certainly I think we've come to realize that
there were targeting BOLOs dealing with conservatives and
religious groups and also progressives. The difference is
progressives got their certifications; they were approved. The
issue with the targeting of the nonprogressive, supposedly, the
conservative, the religious organizations is they're still
waiting for approvals, and that's unconscionable.
Ms. Tucker, does Strong Castle's HUBZone decertification
affect the IRS contracts currently in place with the
organization?
Ms. Tucker. Sir, as I mentioned earlier, IRS is in the--the
process of separating ourselves from Strong Castle.
Mr. Walberg. So you plan to end--end the contracts with
Strong Castle?
Ms. Tucker. It's our--it's our intention to begin the
proceedings to separate ourselves from Strong Castle, yes.
Mr. Walberg. What would keep you from separating with
Strong Castle?
Ms. Tucker. I'm--I'm not aware of anything that would
prohibit us. That's what our folks in our--our counsel
organization are reviewing today.
Mr. Walberg. So we can expect that there will be a
separation?
Ms. Tucker. That is our intention, to separate ourselves
from a relationship with Strong Castle.
Mr. Walberg. So do you plan as well to stop ordering from
the $266 million IBM contract that was awarded to Strong Castle
in December of 2012?
Ms. Tucker. So as I--I mentioned earlier, the--the
contracts in question, the one with laptops, IRS has never
placed an order on that one, nor do we have any reason to do
so. And our team has already begun the process to separate
ourselves, the relationship with Strong Castle, on the IBM
contract as well.
Mr. Walberg. Will any of the dollars obligated to Strong
Castle count toward the IRS's small business goals?
Ms. Tucker. So as I believe my--my colleague from SBA
indicated earlier, the--the only time, and this is to my
understanding, that those obligations go against the goal is if
dollars are ultimately awarded to the contract.
So, no, based on the decertification, I'm looking to my
colleague from SBA, it's my understanding that, no, based upon
the fact that Strong Castle has been decertified. And this is
just my understanding, so I'm--I'm going to need some help from
SBA----
Mr. Walberg. Mr. Chodos?
Ms. Tucker. --that they would not count toward a small
business award.
Mr. Chodos. So ordinarily, Congressman, the
decertifications are prospective. From the date of the
certification, no further contract actions can occur with the
entity as though it's certified, but contracts which have
already been awarded or are being performed beforehand remain
in effect unless there is an independent reason to terminate
them. So if an award had been made and was performed, then they
will--it will be listed as a small business contract if it was
before the certification.
That also occurs with suspension and debarment when
wrongdoing comes to our attention. Ordinarily those actions are
prospective.
Mr. Walberg. Ms. Tucker, the Treasury Department recently
recognized Strong Castle as the 2012 small business prime
contractor of the year. In light of recent developments, should
this award be reconsidered?
Ms. Tucker. So----
Mr. Walberg. Just for the record.
Ms. Tucker. So the recognition was given by the Department
of the Treasury. Strong Castle was not nominated by Internal
Revenue Service, but I believe--this is my personal opinion,
because I cannot speak for Treasury--I do think what has been
revealed does cast doubt in my mind.
Mr. Walberg. Well, I would hope so.
And, Mr. Chairman, you know, I would say these hearings
that continue with the type of egregious culture of moral
vacuum, I think I'd call it, going on is just another example
of the--of big government and what we can expect to go amok
when we see a government so large that it is willing to allow
these types of things to happen, in fact, foster things like
this happen, foster things because of friendships or otherwise.
I mean, we've even seen it in the most recent Supreme Court
decision where we think more about personal desires than we do
about the best good for children, or the best good for
taxpayers, or the best good for our economy. We deal with
promoting entities like this, and this is a perfect example of
the worst case that can go on with big government.
I see my time has expired. I----
Chairman Issa. I thank the gentleman for his----
Mr. Walberg. --yield back.
Chairman Issa. -- his time and his comments.
We now go to the gentleman from Florida Mr. DeSantis.
Mr. DeSantis. Thank you, Mr. Chairman.
I got to tell you, just the upshot of these past couple
months, the IRS, to me, is an institution that is--that is
terminally ill. We had admission that the agency abused its
power by targeting conservative groups, which effectively
silenced a substantial number of Americans for the 2012
election. We had the IRS Commissioner at that time come before
us; when asked if he accepted responsibility for the
malfeasance said, well, it happened on my watch, but I'm not
responsible.
Now, that would not fly in virtually any other aspect of
American life. I'm a Navy guy. If a Navy ship runs aground, and
the captain of the ship were to say, well, yeah, we ran it
aground on my watch, but that's actually some E-5's
responsibility because he messed up, you'd be gone immediately.
Lois Lerner came in front of the committee, invoked her
Fifth Amendment right against self-incrimination rather than
answering questions for the American people. Now, I think she
waived her Fifth Amendment right. I think the committee's going
to have something to say about that this week. But she's been
placed on leave, but she's still with the agency.
We had an interesting hearing in which an IRS official was
crit---questioned about lavish spending at conferences, suites
$3,500 a night, $50,000-plus for a Star Trek parody video. And
it's interesting, they didn't know exactly how much the video
cost because they didn't keep receipts for the expenses, and
all we got was an apology tendered. If the IRS were
investigating an American, and the American said they just
didn't bother to keep receipts or offered an apology, that
probably would not be the end of it. I think the IRS would hold
them accountable and demand more, but yet, to my knowledge, we
haven't gotten any accountability for this lavish spending and
waste of taxpayer funds. It's, oh, we need more--better
procedures, more training, this and that.
And so here we are another day and another invocation of
the Fifth Amendment. We see, to me, a clear example of cronyism
and waste of taxpayer money, but again, as my colleague from
South Carolina Mr. Gowdy pointed out, no accountability.
Ms. Tucker, I appreciate when you mentioned due process,
but it seems to me, where's the due process for the American
taxpayer? You know, why does the taxpayer always have to take
the back seat? Why is there so little accountability in this
incredibly powerful bureaucracy? It's almost as if the IRS has
all this power, but some of their officials are held to a lower
standard than what we would expect in private business or
people even in other aspects of the government, such as the
military. And to me, that is not acceptable. And if that means
we need to change some of the laws that govern this, then I
think we absolutely have to do it.
So I think this is a profound culture of arrogance in the
IRS, and I think the American people are sick of it.
And with that, Mr. Chairman, I yield back----
Mr. Meadows. Will the gentleman yield?
Mr. DeSantis. --the balance of my time.
Mr. Meadows. Will the gentleman yield?
Mr. DeSantis. Yes, I will.
Mr. Meadows. I think we have a video that I would ask that
we queue up. It's a follow-up of some of the questioning, line
of questioning, that we had from Mr. Jordan and myself earlier.
And if we have that, if we can queue that up. I thank--I thank
the chair.
Chairman Issa. I thank the gentleman, and I think the
gentleman from Florida.
I would now recognize the ranking member for a closing
statement.
Mr. Cummings. Thank you very much, Mr. Chairman.
Chairman Issa. Hold it. Could you pause for a moment? I'm
being told--oh, I'm sorry. If the gentleman--if the remaining
time can be given to Mr. Meadows. It's a minute and 40, and go
ahead and use it as a close.
[Video shown from previous hearing.]
Issa: ``Based on the timeline you gave us, on May 29, 2012,
the audit briefed the IG in advance of the IRS Commissioner's
meeting. May 30th IG and function heads briefed the IRS
Commissioner, Doug Shulman, and the Deputy Commissioners, Steve
Miller and Beth Tucker, on the audit, comma, specifically that
criteria targeting Tea Party Patriots or 9/12, another keyword,
and other policies issues were being used to--used to in
reviewing applications for tax-exempt status.''
``You briefed, and that's your notes?''
George: ``Yes. That's correct, sir.''
Issa: ``And so what--what you say on May 30th is, yeah,
they're targeting these groups. That's confirmation you reached
the conclusion they're targeting using these keywords.''
George: ``Yes. Now, just to be rec---clear, I didn't take
these notes, but these are accurate.''
Issa: ``Right. And I'm just using these because they were
delivered to us from your staff. So on May 30th, there was a
``there'' there, and you briefed Mr. Shulman and two others. On
June 4th, you went up--"
[conclusion of video.]
Mr. Meadows. So, Ms. Tucker, your--your testimony does not
agree with that testimony. So who--who is right?
Ms. Tucker. Sir, when you asked me the earlier question,
you asked me was I present at the briefing that Mr. George gave
the Internal Revenue Service. I recalled being at that
briefing.
Mr. Meadows. Your testimony----
Ms. Tucker. I----
Mr. Meadows. What your testimony said, Ms. Tucker, was that
this was a normal briefing talking about an audit. This was
obviously results of which you said there were--that they were
just talking about going to conduct an audit.
Ms. Tucker. Sir, if I could, TIGTA comes in to Internal
Revenue Service monthly. Mr. George--and we will be glad to try
and produce this. Mr. George briefs the Internal Revenue
Service on multiple topics at each one of those meetings. To
the best of my recollection, his discussion of their
investigation of TEGE was only one of the topics that I
recollect from that briefing.
Let me also be clear. When Mr. George communicated to the
Internal Revenue Service, to the best of my recollection, about
concerns with the BOLO list and that--the terms that he was
talking about, it was then the agency's response, as the
investigation is under way right now, to say, yes, yes, use of
those BOLO terms are inappropriate. That's why there's an
investigation under way, to get to the bottom of what the facts
are, sir.
Mr. Meadows. But--but you had already had an internal
investigation that already indicated that that concluded on
May--the first part of May, so why would that be a surprise?
Ms. Tucker. Sir, I was not privy to any of the internal
investigation.
Mr. Meadows. But Mr. Miller was.
Ms. Tucker. Mr. Miller is the Deputy Commissioner--or was
the Deputy----
Mr. Meadows. My time's expired. I appreciate the
indulgence.
Chairman Issa. Would the gentleman yield for just a second?
Mr. Meadows. Yes.
Chairman Issa. Ms. Tucker, hopefully I can bring a common
answer here. So I'm not trying to put words in your mouth, but
let me try to paraphrase.
The IG said there was a ``there'' there in that meeting.
You saw the video. You were in the meeting, you heard it, but
your testimony today seems to be primarily that, regardless of
that, you said to yourself, there's a process, it's going to go
forward, and it's not my job, because it's not within my lane.
Is that a fair paraphrasing of the series of answers--
questions and answers?
Ms. Tucker. Yes, sir, because the Deputy Commissioner
structure at the Internal Revenue Service, just as if TIGTA was
there giving feedback on an audit or a report that's about to
be issued, then the responsibility for the follow-up actions,
just like the report someone referenced earlier today, the--the
purchase card audit. TIGTA briefed IRS a couple of months back
in one of these monthly meetings and said, we have done an
audit of the purchase cards. Here is what our findings show,
that 99.75 percent of the purchase cards used at IRS are
correct, but there are some concerns.
That is my take-away. I own that in my role at IRS. It is
my job to then follow up and----
Chairman Issa. Okay.
Ms. Tucker. --make sure corrective actions take place.
Chairman Issa. Go ahead, Mr. Cummings, with----
Mr. Cummings. Yeah. I just want to--just to clarify, I just
want to be real clear. First of all, Ms. Tucker, I--I have been
sitting here watching you, just listening, and I just want you
to know I believe you. I don't know what that means to you, but
it means a lot to me. I believe----
Ms. Tucker. It means a lot to me, sir.
Mr. Cummings. I believe you. And the reason why I say that
is, as I understand it, IRS, you got a top person, and then
you've got two deputies. And I think you tried to explain it to
us probably 10 times now is that you are on one side dealing
with IT and all this stuff, and I guess more like the nuts and
bolts--is that----
Ms. Tucker. Yes, sir.
Mr. Cummings. And the other side deals with things like
what?
Ms. Tucker. Like the----
Mr. Cummings. Tax exempt----
Ms. Tucker. --administration, audits, collections.
Mr. Cummings. And so I just--just going back to what the
chairman was just asking you, so when you hear--even when you
hear this stuff that's regarding tax-exempt and stuff like
that, I'm just--I'm just guessing, I guess you're sitting there
saying, okay, you know, that is not good, but let me--I'm
zeroing in on what I'm supposed to do. How many employees come
under you?
Ms. Tucker. Roughly 11,000.
Mr. Cummings. Eleven thousand, your 11,000 employees and
all your responsibility. So I just--so it's not that you didn't
care; is that right?
Ms. Tucker. No, sir. And I--I'm troubled if that is the
impression that some on the committee are taking away from
this.
To the best of my recollection--and, again, IRS is a very
large organization. TIGTA and GAO do multiple oversight audits
for Internal Revenue Service. They are in briefings, the
Commissioner and the two Deputies, monthly, if not more often.
In light of recent events, Mr. George and his team are now
coming in weekly to brief on issues.
Based on my recollection of what was shared at that
meeting, Mr. George was talking about an audit of TEGE. He also
was talking about concerns. It was my takeaway based on that
meeting that IRS would then be taking appropriate action to
deal with that, not that it was something that was in my
responsibility to leave the room and begin working with folks
in TEGE or elsewhere to take any action.
And I don't--I implore you, that is not me trying to shirk
responsibilities. That is me focusing on what my
responsibilities are at Internal Revenue Service.
Mr. Cummings. Thank you very much, Mr. Chairman.
Chairman Issa. Thank you.
Mr. Jordan, does that answer your question, or do you have
further follow-up?
Mr. Jordan. If I could, Mr. Chairman, I'd appreciate----
Chairman Issa. The gentleman is recognized for a last
round.
Mr. Jordan. I thank the chairman for his indulgence.
I appreciate what the ranking member said, but the gravity
of what took place here, it seemed to me everyone in a position
of influence would want to come forward and set the record
straight.
If I could quickly, Mr. Chairman, I just want to put up one
email that--this is an email from March 9th, 2012, Mr. Floyd
Williams, in response to an inquiry from Senator Hatch about
the 501(c)(4) situation. And the FYI--it's copied to all these
folks, but it says, ``Latest volley in the 501(c)(4) battle.''
And I think it's important to note who was copied on this
email. Ms. Tucker was copied, Sarah Ingram, Nancy Marks, Lois
Lerner, Steve Miller.
Ms. Tucker said she had no--this is not her area. She had
nothing to do with it. And yet, 2 months prior, she is getting
the latest in the battle about the 501(c)(4) scandal that's
going on. And yet today she continues to say it had nothing to
do with her.
If it had nothing to do with her, why is she copied in on
an email that focuses in on this very issue 2 months prior to
when she said she first heard about it?
And, with that, I'd yield back, Mr. Chairman.
Chairman Issa. Well, the gentlelady may answer. I think
there was a question there.
Ms. Tucker. Yes, sir.
So our legislative affairs function routinely copies the
Commissioners and Deputy Commissioners on correspondence that
is under way between Congress. That is not an unusual
situation.
Mr. Jordan. Why is the term ``battle'' used?
Ms. Tucker. I have no idea, sir.
Mr. Jordan. Okay. Thank you.
Chairman Issa. I thank the gentleman.
Mr. Cummings?
Mr. Cummings. Thank you very much, Mr. Chairman.
I want to thank all of our witnesses for being here today.
Mr. Castillo, I must tell you that your testimony is
alarming, and it concerns me greatly, and I'm sure as it does
other members of this committee.
While I said it in a kind of joking way when I referred to
Michael Jackson's song, ``Man in the Mirror,'' I really--and
when I read your testimony and then I listened to what you
said, I've got to tell you, you've got to look closer in the
mirror. And, you know, I tell my kids, I tell them, whenever
you're constantly complaining that people are doing you wrong,
I said, sometimes you need to look at yourself if you
consistently find yourself in that position.
And so I--but the main thing is that I think we need to try
to straighten this mess out. And I'm glad, Ms. Tucker, that you
all are taking the steps that you all are taking.
Our country is--I think we deserve a strong program. I was
just telling the chairman about how much I admired his ability
to do business and come from a small company and to make it
successful. And I want everybody to have those kinds of
opportunities to open the door, but they will never get there
if we abuse programs that are to help them get there.
And so I just hope that when you go back, Ms. Tucker, you
will reiterate that to your people looking at all of these
procurements, so that we can have that balance, so that we can
actually help people achieve their great dreams and not be like
the people that I talked about in my opening statement who
worked so hard for so long, pushing, knocking at doors, trying
to get to opportunity, and then they die before they get there,
and so their dreams are locked up in the casket with them.
And so, with that, I want to thank you, Mr. Chairman.
Again, I think it was a good hearing.
Chairman Issa. I thank you, Mr. Cummings.
In closing, often a hearing is about a specific action.
And, Ms. Tucker, it appears as though a great deal will come as
a result of the preparation for this hearing and the report we
put out. I'm going to work with the ranking member to turn it
into a full committee report. It's essentially a staff draft at
this point. And we will follow on with some of what we learned
here today.
But I'm going to include, in all likelihood, in that report
or an additional series of letters a number of things that I
could not help but recognize today.
Ms. Tucker, I think to say that the IRS is an organization
currently in crisis is a given. I have some confidence and a
lot of hope that the new Commissioner, Acting Commissioner,
will, in fact, be able to bring that about. And for the 100,000
or so career professionals that work at the IRS, I wish you
well in doing that. It's important to the American people.
Mr. Castillo, this is not about you, but, in fact, this
hearing, I believe, was illustrative of some problems that our
government has.
Mr. Flohr, I believe that our committee is going to be
sending a number of things, and Ms. Duckworth will undoubtedly
be working on it with us. And that is that, in a time of
limited resources, we do need to define service-connected
disabled in a way that doesn't automatically trigger virtually
every American who served, myself included, from qualifying.
We also need to be better and more consistent on whether or
not--and we can legally empower you to be more accurate. Ms.
Duckworth was correct that a strain, a crack, a twisted ankle
27 years later that clearly didn't impair the performance of
somebody going through their life--if we were dealing with
workers' comp, we would not be as generous as to turn that into
$6,000 a year for the rest of their life and other benefits.
There's no question this is far greater in the current dollars
than I think the taxpayers believe for what the record appears
to show.
That's not to take away from the legitimacy of an
application, but Congress has an obligation to work with the
Veterans Administration to get these numbers better. At the
same time, I know you're acutely aware that we are dismayed at
how long our Iraq veterans and Afghanistan veterans are waiting
to get a determination.
Mr. Chodos, the fact is you got a little bit of a pass here
today, but I must tell you that I'm disturbed that the process
and the numbers are such that, without either regulation
changing or coming to Congress with a series of changes that
you need, we are not accurately reflecting HUBZones, we're not
accurately reflecting the real benefit that is going to the
people that Mr. Cummings and I want to see get it.
Now, much of it may be legislative, but I would charge you
to go back to your Cabinet Secretaries and say, you know, we
owe Congress some proposed changes. Whether it's cost savings
or it's benefit being more targeted, you know, I believe that
this is part of what this hearing is showing.
There may have been--there clearly were some violations of
the rules, some incorrect statements made. But I think even if
none of those were made, we still would probably, from this
side of the dais on a unanimous basis, have seen a travesty of
what was intended versus what was allowed, what was achieved
versus what was scored.
So I would hope that as you go back today, recognize that
we will send, at a minimum, letters asking you to be part of
the process of getting the reform.
I thank Mr. Sisk. The GAO is our partner in our branch, and
it's critical that we have your support. You're constantly
bringing us some of these items and high risk. Perhaps you will
be and your organization, on behalf of those of us in Congress,
will be a hub for a lot of this.
But it's the intention of this chairman to bring to the
committees of jurisdiction specific recommendations for change
that could narrow or prevent this from happening in the future.
I want to thank you all for your testimony today.
Ms. Tucker, I'll close only with one thing: a message, I
think for the IRS, and it's a message for the IRS, for the
State Department, and for every part of government. This
committee, over my short tenure as chairman, has a consistent
frustration, and that is: Messages are received that should
alert people. Often it's not within their lane, it's not their
job, but it still bothers us that every single American worker
in the Federal Government doesn't say, ``Well, but we've got to
get the truth out there.''
The world is seeing this NSA crisis right now with a vague
suggestion that somehow it's because nobody was listening. This
committee is listening. We want to hear. Every Federal employee
owes it to Congress and to the American taxpayer to be a
whistleblower if they see something wrong, even if it's as
benign as an Acting Commissioner saying we're not targeting,
and then they become aware in some way that there's a
likelihood that they are targeting and that Congress is not
aware that they've been misled.
That was true for 10 months with Fast and Furious. It was
true for a similar period of time here with the IRS and the
targeting. And I believe that we're still dealing with trying
to get to the whole truth with Benghazi.
So those are outside of today's hearing, but I think you
get the point, that I'm calling on every Federal worker to
recognize that this Congress passed a major new whistleblower
legislation so that we could invite people to call your
Congressman, write your Congressman, or come to the committees
and tell us if you have some doubt. It's okay to be wrong as a
whistleblower; it's really wrong to keep a secret you think is
wrongdoing.
Lastly, I would be remiss if I didn't mention that every
part of government has an Inspector General. And the IGs are
the first and most logical report to by Federal workers, and I
hope they will always do that.
And, with that, I thank Mr. Cummings, and we stand
adjourned.
[Whereupon, at 12:11 p.m., the committee was adjourned.]
APPENDIX
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Material Submitted for the Hearing Record
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