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IRS Criminal Enforcement Collapses

As Reports of Corporate Crime Multiply, IRS      Prosecutions Slide

IRS Criminal Investigators Not Recruited for Bush
     Administration's Corporate Fraud Task Force

Syracuse, N.Y.— April 13 — Criminal enforcement of the nation's tax laws by the IRS has plummeted to an all time low, according to an analysis of very timely Justice Department data obtained by the Transactional Records Access Clearinghouse (TRAC).

Tax prosecutions brought as a result of IRS investigations currently are running at about half what they were only ten years ago. The sharp decline has continued at the same time that the nation has been swept by a flood of reports about corporate fraud studded with such names as Enron, Arthur Anderson, WorldCom, Adelphi Communications and Health South.

The apparent surge in big-time white collar crime prompted President George Bush to travel to Wall Street last summer and announce the launching of what he said would be a broad new federal program "to expose and punish acts of corruption, move corporate accounting out of the shadows and protect small investors and pension holders."

Curiously, however, government enforcement records show that criminal investigators of the IRS -- long considered the government's most sophisticated sleuths when it came to serious financial fraud -- apparently did not get the word. In addition, other records show the Bush Administration did not include the tax agency in its new plan to "punish those who refuse to play by the rules."

Here are the highlights:

In FY 1993, the Justice Department credited the IRS with being the lead agency for 1,064 tax prosecutions. In FY 2002, there were 512 such prosecutions, about half of the 1993 total. If current trends continue, annual tax prosecutions may fall as low as 360 based upon data covering the first four months of FY 2003.

Criminal prosecutions for nontax crimes where IRS was the lead agency drug offenses, money laundering, currency violations, etc. have also collapsed from 1,705 in FY 1993 down to 667 for FY 2002.

• Civil suits filed by the IRS in federal courts dropped off even more sharply, from 2,172 in FY 1993 to 575 in FY 2002.

 The Justice Department data show that, despite the concerns expressed by President Bush in the summer of 2002, securities fraud prosecutions brought each year on the basis of IRS investigations are minimal: 10 in 1993, 6 in 1994, 4 in 1995, 2 in 1996, 7 in 1997, 6 in 1998, 22 in 1999, 12 in 2000, 9 in 2001 and 10 in 2002.

The collapse of IRS criminal and civil enforcement actions brought in district court do not appear to be explained by changes in IRS staffing levels. While there have been some recent ups and downs, IRS figures show special agent staffing for tax fraud and financial investigations today are about the same as a decade ago when criminal prosecution levels were much higher. In 1990 there were 2,794 IRS criminal investigators employed; in 2002 there were 2,907.

The centerpiece of President Bush's plan to combat what many believe has been a business crime wave is the Justice Department's Corporate Fraud Task Force. Headed by the Deputy Attorney General, the other members of the new Justice Department task force include the FBI director, the assistant attorneys general in charge of the department's criminal and tax divisions and six U.S. Attorneys. An interagency group working with the task force includes the Secretary of Treasury, the Chairman of the Securities and Exchange Commission (SEC) and the Chief Inspector of the Postal Inspection Service. The IRS, however, is not listed as a member of the task force or its interagency group.

(TRAC, associated with Syracuse University, is a non-partisan organization established in 1989 to provide the American people with comprehensive information about the operations of the federal government. Its operations have been supported by the university and a number of philanthropic organizations including the Knight Foundation, the Rockefeller Family Fund, the Open Society Institute, the Beldon Fund, and the New York Times Company Foundation. For detailed information about where the latest data are now available go to http://trac.syr.edu/media.)

WWW: http://trac.syr.edu
E-mail: trac@syr.edu
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Tel. (202) 518-9020
Syracuse: 488 Newhouse II, Syracuse, NY 13244-2100 Tel. (315) 443-3563