Panel Hears IRS Horror Stories

IRS horror stories echoed through a Senate hearing room for a second day Wednesday, with three taxpayers describing how armed IRS agents appeared at their businesses with search warrants and seized records, even though the raids didn't result in criminal cases.

W.A. Moncrief Jr. of Fort Worth, Texas, described how Internal Revenue Service agents surged into his oil company in September 1994, "like an army landing on an enemy beachfront."

"My employees heard the agents shout, 'IRS! this business is under criminal investigation! Remove your hands from the keyboard and back away from the computers. And remember, we are armed'!" he said.

Moncrief's testimony came as the Senate Finance Committee continued a second day of oversight hearings into the IRS. The hearings come as the full Senate next week is scheduled to vote on a bill to revamp the tax collection agency and boost taxpayers' rights.

"While I am prevented from speaking to these specific cases because of federal disclosure and privacy laws, I can say that I will ask Judge William Webster to thoroughly review these cases as part of his review of our criminal investigation division," said Charles O. Rissotti, IRS commissioner.

Though Moncrief's story was dramatic, few members of the committee explored or challenged issues raised by his testimony. Moncrief said he was investigated by Justice Department criminal investigators, although, he said, "we had committed no crime."

Moncrief also agreed to pay $23 million in what he described as a "settlement" but didn't provide further details.

"I did that for the welfare of my family so I could get back to running a successful oil business," Moncrief told the committee.

The IRS had no immediate comment on the case, and the agency generally doesn't comment on individual taxpayer cases unless they have a legal waiver to discuss the matters.

Sen. Kent Conrad, D-N.D., later warned the committee they panel was not getting both sides of the story.

"I do think we have an obligation before we reach judgment," Conrad said.

Also testifying Wednesday was Leroy Warren, chairman of the NAACP criminal justice committee, who charged the IRS management refused to fairly address complaints of racial discrimination involving employees. Warren said allegations of racial and sexual discrimination are a "severe and increasing problem."

Senate Finance Chairman William V. Roth Jr., R-Del., said the panel will hear from IRS Commissioner Charles O. Rossotti on Friday, the final day of the hearings.

Roth defended the proceedings as the hearings opened for a second day Wednesday.

"Our work here is also having a very positive influence on the administration's commitment to addressing problems within the agency," Roth said. He referred to the Clinton administration's appointment Tuesday of former CIA and FBI chief Webster o investigate the IRS criminal investigations division.

The panel heard from John Colaprete, co-owner of the Jewish Mother restaurants in Norfolk and Virginia Beach, Va., whose business was the target of a botched raid by IRS and state law enforcement agents. No criminal charges were ever brought following the raid, which was based partly on statements of a bookkeeper the restaurant had fired for embezzlement.

"Unfortunately, rather than make restitution, [the bookkeeper] sought shelter with the IRS and told them a fantastic tale of money laundering, gun running, and drug dealing by my partner and me," Colaprete testified.

"I have never been in any sort of trouble with the law, and I believe that every American has an obligation to pay their fair share of income taxes," Colaprete said. He described how the manager of his restaurant had his home raided by IRS and state agents, and the manager was "pulled at gunpoint from the shower and forcibly restrained when he attempted to call an attorney," Colaprete said. He said the man's teen-age son was forced to the floor at gunpoint.

Colaprete and his business partners are suing the IRS and state law enforcement agents for $20 million, alleging violation of their civil rights.