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POWER TO DESTROYThe Political Uses of the IRS from Kennedy to Nixon
By John A. Andrew III
Ivan R. DeeCopyright © 2002 Roz Andrew
All right reserved.
THE EARLY 1960S: A NEW ROLE FOR THE IRS?
On January 20, 1961, a bitter cold but sunny day in the nation's capital, John F. Kennedy took the oath of office as the thirty-fifth president of the United States. His soaring rhetoric that noon-the promises to "bear any burden" and "pay any price"-led many Americans to believe that a new generation and a new era had arrived, that the reins of power were now in the hands of an idealistic activist interested in exercising power to address social problems. It marked the beginning, many later believed, of Camelot. John Kennedy, however, was a professional politician, more practical than idealistic. His rhetoric often exceeded his intent. He addressed social problems more directly than had Dwight Eisenhower, his predecessor, but he also intended to make government responsive in other ways. With his brother Robert installed as attorney general, one of the powers he sought to mobilize was that of the Internal Revenue Service.
His first move was to use an old colleague and family friend, recently named special consultant to the president, Carmine Bellino, to look inside the IRS. Bellino, undoubtedly the foremost investigative accountant in American history, is perhaps the most important "unknown"in the Kennedy administration. A former agent of the FBI, where he headed the accounting division, Bellino served with Robert Kennedy on the McClellan Committee (Senate Investigations Subcommittee) in the late 1950s. There he was instrumental to the prosecution of labor leaders Dave Beck and Jimmy Hoffa, as well as the Teamsters Union. Bellino later became the Kennedy family's personal accountant, and his cousin (Angela Novello) served as Robert Kennedy's secretary. During his long career in government he held staff positions on many key committees, including service as chief investigator for the Ervin Committee (Senate Select Committee on 1972 Presidential Campaign Activities) during the Watergate hearings, and then later for the Senate Judiciary Committee.
Less than one week after Kennedy's inauguration, Bellino called IRS Commissioner Mortimer Caplin and asked to inspect IRS files on various individuals, including tax data for Teamsters Union boss James R. Hoffa. Hoffa had long been a nemesis of the Kennedys and remained the object of extensive prosecutorial activity throughout Robert Kennedy's tenure at the Justice Department. That same day, January 26, 1961, the attorney general asked the IRS to grant Bellino access to all "files, records, and documents requested by him," presumably to coordinate investigations by the IRS, Justice Department, and other government agencies. Six days later, on February i, IRS Commissioner Caplin (who had been Robert and Edward Kennedy's law professor at the University of Virginia) authorized Bellino to review the files. Neither the request nor the authorization was in writing.
By then Bellino was not only working as an investigator for the White House but for the Justice Department and for at least one congressional committee. Caplin later recalled that he had "triple credentials." Bellino had offices in the IRS as well as in the White House and the Justice Department. Although Caplin later asserted that the IRS denied the investigator access to much of what he wanted, Bellino was able to scrutinize various tax returns without any written authorization from the president (as the law required). A dozen years later Caplin maintained that "not a single tax return was sent to the White House." Perhaps he is correct; perhaps they went only to the Justice Department. But in a later memo Caplin indicated that the IRS granted Bellino permission to examine returns precisely because he was "the representative of the President."
The record in fact reveals a more disturbing pattern. On January 30, four days after Bellino first appeared at the IRS, Caplin received a written request from Robert (not John) Kennedy asking that Bellino be permitted to review tax returns of various individuals connected with Justice Department investigations. Not until May 23, four months after Bellino first gained access to tax returns, did Caplin write a memorandum to IRS General Counsel Robert Knight formally authorizing Bellino to examine the files. Surprisingly, the IRS had apparently never before addressed this issue.
Bellino was not only looking at tax returns, he intended to photocopy them and keep the copies. Notes from a March 31, 1961, meeting of Treasury Secretary Douglas Dillon's staff reveal that as a White House consultant Bellino was also looking at labor union problems for the McClellan Committee and had requested the returns of labor unions and labor leaders. For some reason he also examined returns from the New York Times. Bellino chafed at Treasury regulations, especially the requirement that a full congressional committee must adopt a resolution before its representatives could inspect tax returns. Bellino argued that it was too burdensome to obtain a quorum of the full committee. He also sought to bypass the policy against photocopying returns. Treasury General Counsel Knight advised against changing existing policies, though he admitted that changes could be effected without amending any laws. As later events revealed, these early forays of Bellino heralded the beginning of the Justice Department's organized crime drive.
The organized crime drive (OCD) became one of the first instances in which the Kennedy administration used the IRS for nontax-related purposes. That use of the agency for law enforcement later became controversial as well as a source of trouble for the IRS. The problems stemmed from the fact that when the Justice Department launched the OCD, the IRS also revamped its intelligence organization. A new, more centralized, structure bypassed IRS district directors. The Intelligence Division's national director became responsible for coordinating the OCD program, working with coordinators in the National Office and in each IRS region throughout the country. This was a radical shift in operational authority and contained the seed of future problems. Working with the Treasury Department and the FBI, Attorney General Robert Kennedy coordinated the OCD. Not only did he have the support of his brother, the president; as a senator his brother had served on the McClellan Committee during the 1950s when it "discovered" organized crime in America.
Despite its later reservations, the IRS embraced the task-force approach in large part because Robert Kennedy had secured Caplin's support for these efforts in a pre-appointment screening interview. On January 24, 1961, immediately after Caplin's appointment, the IRS created a special organized crime unit to work with the Justice Department. The attorney general rejected as "specious" arguments that the IRS should not be used to punish the underworld, and organized crime cases moved quickly to the top of tax prosecution case lists. From this emerged the strike force concept, with its extensive efforts to coordinate and exchange intelligence between all government intelligence agencies. These measures not only produced dividends in terms of prosecuting organized crime figures, they created innumerable procedural and legal problems for the IRS. On the organized crime strike forces, IRS agents worked with representatives from other government agencies (especially the FBI and Justice Department) to prosecute organized crime figures, contributing not only their tax expertise but access to tax returns. In the process, however, the IRS lost control over how these returns were used and found it impossible to resist requests to provide additional tax data. In this way the IRS often became an investigative tool in the hands of other agencies, asked to supply tax information to advance nontax law enforcement efforts.
Implementing the OCD also created internal security problems for the IRS. The Treasury Department feared that crime figures under scrutiny would use their financial resources to bribe IRS officials and gain access to confidential files and information. Arnold Sagalyn, director of Law Enforcement Coordination for Treasury, added that "these criminals control highly efficient, ruthless organizations experienced in the successful employment of coercion and violence." Intimidation of officials or their families was likely, as were efforts to flame key officials and quash investigations under way. High-level IRS and Treasury meetings in early November 1961 also targeted internal IRS leaks as a potential problem during the OCD. Some leaks may have already occurred, and the IRS pushed for an enhanced role for its seven-year-old Inspection Service, going so far as to ask that Inspection replace the FBI as the agency designated to investigate IRS corruption. The FBI, however, refused to relinquish that power.
The Organized Crime Section of the Justice Department quickly expanded from seventeen to sixty attorneys. Field units sprang up in major dries around the country. The OCD became a crusade, and indictments soared from 1961 through 1963. Many of these prosecutions for tax crimes, however, were the product of excessive zeal. According to former IRS Chief Counsel Mitchell Rogovin, they often reflected a "significant departure" from the agency's "historic standards." The Justice Department used its own intelligence unit to collect information and refer it to the IRS if it promised a productive tax investigation. LBJ's attorney general Ramsey Clark later noted, however, that Robert Kennedy's conviction that racketeering and political corruption went hand in hand meant that "these procedures also contemplated OCD investigation of public officials." This could be political dynamite. It also led to special appropriations to the IRS National Office for undercover informants and the purchase of information, appropriations that totaled $1.3 million in 1964 alone. So significant was the IRS role that 60 percent of all OCD investigations between 1961 and 1965 were developed by the IRS, and recommended taxes and penalties against OCD subjects totaled more than $200 million.
Donald Alexander, IRS commissioner under Richard Nixon, later criticized the OCD and argued that Robert Kennedy had used the IRS to circumvent the FBI. There is likely some merit to this charge. The relationship between Kennedy and FBI Director J. Edgar Hoover was one of mutual contempt. Hoover had long insisted that there was no organized crime problem in the United States, and the OCD gave Kennedy his own investigative unit. Alexander thought the whole concept was "terrible. I don't think the IRS should be taking orders about who it will investigate and who it will not investigate and how the investigation will be conducted from the political people in the Justice Department." Of course, by then Alexander had his own problems with the politicization of the IRS. In the 1970s the agency found itself under fire for the actions of overzealous agents, an apparent inability to control its own investigations, and its use of tax-return information. In the intervening years, moreover, the IRS developed (and abused) electronic surveillance capabilities and other undercover techniques. These later became the focus of an investigation by Senator Edward Long in the mid-1960s-an investigation aimed as much at freeing Jimmy Hoffa and embarrassing Robert Kennedy as it was at the IRS.
The organized crime drive represented just one aspect of the Kennedy administration's developing tendency to look to the IRS for law enforcement assistance. That many other efforts never developed as fully as the OCD does not diminish their importance. They often heralded efforts to use the IRS to advance social or political objectives.
The escalation of civil rights activists and protests in the spring of 1961 led to one such effort. Robert Kennedy used Burke Marshall of the Justice Department as well as special presidential assistant Harris Wofford and the popular entertainer Harry Belafonte to create a Voter Education Project (VEP) in the South. This sought to bring together various civil rights organizations, such as CORE, SNCC, SCLC, and the NAACP, under the umbrella of the VEP. In this way Kennedy hoped to replace public demonstrations with voter registration, thereby curtailing confrontations and harnessing movements for change to administration agendas, something that SNCC in particular resented. To advance his purposes, Kennedy asked his old law school professor, IRS Commissioner Mortimer Caplin, to issue a tax exemption for the VEP, and helped obtain almost $1 million in funding from the Taconic, Stern, and Field foundations. This project aroused some dissent from within Treasury. Under Secretary Henry Fowler complained that the IRS should not be used for such efforts unless it was part of a government-wide enforcement campaign involving other agencies such as the FBI. Bertrand Harding, IRS deputy commissioner, added: "I assume that the status of the FBI is not going to be readily resolved and it would be my thought that we side-step this issue."
If politics played some role in the VEP efforts, it loomed much larger in two other areas. One was the desirability of appointing politically responsive individuals to key positions in Treasury and the IRS, long an issue. According to an internal IRS report, it had been a source of considerable controversy during the Truman presidency, so much so that several embarrassing abuses in the early 1950s sparked a campaign to clean up the IRS. During the Eisenhower years a combination of civil service reform groups and Republican party officials led efforts to remove additional incompetents (especially Democrats) and schedule all of the top IRS positions under civil service. Political pressures nonetheless persisted. One district director, for example, had served as campaign manager for Helen Gahagan Douglas in her California Senate campaign against Richard Nixon; Republican loyalists insisted on his removal. (Since the individual was not demonstrably incompetent, IRS Commissioner T Coleman Andrews, a staunch conservative himself, refused to accede to those demands.) Efforts to place political appointees in the IRS also continued. As Assistant IRS Commissioner for Administration E. F. Preston observed in 1961, at times "it might seem that it would be smart politically to yield to these pressures." But he warned that if those pressures influenced "even one selection, knowledge-or at least suspicion-of this will quickly spread." Ambitious employees would be "tempted to encourage similar intervention on their behalf when future vacancies occur." Influential outsiders would seek greater political influence, exposing the IRS to the abuses of the past.
Excerpted from POWER TO DESTROY by John A. Andrew III Copyright © 2002 by Roz Andrew
Excerpted by permission. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
What People are Saying About This
Stunning and fascinating...based upon mind-boggling research and presented with the balance and insight that marked all of Andrew's work.
In this illuminating and shocking work, John Andrew knocks down the wall shielding the IRS from public scrutiny.
Powerful, trenchant, and ultimately wise.
An invaluable portrait of a renegade government agency seldom studied by researchers...kudos.
University of California at Santa Barbara, Project Muse