Issa: Cincinnati IRS employees say direction came from Washington

Updated 5:56 p.m. ET Sunday 6/2

(CNN) – In an exclusive interview Sunday on CNN's “State of the Union” with Candy Crowley, Republican Rep. Darrell Issa said interviews with workers in the Cincinnati IRS office show targeting of conservative groups was "a problem that was coordinated in all likelihood right out of Washington headquarters - and we're getting to proving it."

“My gut tells me that too many people knew this wrongdoing was going on before the election, and at least by some sort of convenient, benign neglect, allowed it to go on through the election,” he said. “I’m not making any allegations as to motive, that they set out to do it, but certainly people knew it was happening.”

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A bipartisan group of investigators from two House committees – Ways and Means, and Government Reform and Oversight – interviewed two front-line employees from the tax-exempt office last week.

One of the employees hit back against accusations that lower-level employees were responsible for the scrutiny of conservative groups seeking tax-exempt status in 2010, telling congressional investigators that the Ohio employees were being “thrown underneath the bus.”

A second "more senior" Cincinnati IRS employee said they began seeking other jobs when they were assigned to look out for applications from tea party groups, because they felt it was inappropriate.

According to excerpts released to CNN by the oversight committee, one of the employees said their supervisor told them the direction to single out conservative groups came from the Washington headquarters in March 2010.

By April, seven hard-copy versions of applications had been sent to Washington, the employee said. In addition, the employee said Washington had requested part of an application by two specific groups, though the excerpts do not disclose the names of those two groups.

Shortly after news of the scandal broke and IRS Commissioner Steven Miller announced his resignation, the IRS said two "rogue" employees in the agency's Cincinnati office were principally responsible for the "overly aggressive" handling of requests by groups with the words “tea party” and “patriot” in their names, a congressional source told CNN.

Issa’s committee released only excerpts and not the full transcripts of the interviews, citing the fact that the investigation is ongoing. CNN asked for the full transcripts, but the committee did not agree to the request. CNN has not seen the full transcripts or the context of the questions and answers.

Read the excerpts below.

However, Rep. Elijah Cummings, ranking member on the House oversight committee, described Issa's remarks based on the interviews as "reckless" and "unsubstantiated."

“So far, no witnesses who have appeared before the Committee have identified any IRS official in Washington DC who directed employees in Cincinnati to use ‘tea party’ or similar terms to screen applicants for extra scrutiny," Cummings said in a statement.

"Chairman Issa’s reckless statements today are inconsistent with the findings of the Inspector General, who spent more than a year conducting his investigation," he continued. "Rather than lobbing unsubstantiated conclusions on national television for political reasons, we need to work in a bipartisan way to follow the facts where they lead and ensure that the IG’s recommendations are fully implemented."

Cummings' spokeswoman Jennifer Hoffman said it was not "standard practice" for the majority in the committee to keep the transcripts rather than share it with the minority.

"The standard practice would have been for them to provide the transcripts to us when they got them. We have requested them, but have not gotten them," she said.

Issa said the full transcripts would be made public, and he has also subpoenaed the administration for more documents that he says will support claims made in the employee interviews. “As we get those documents ... we will learn the whole truth,” he said.

The oversight committee clarified after the interview that subpoenas have not been issued to the IRS.

For now, however, he has not said he has evidence to verify there was a direct link between Washington and the over-scrutinizing of tea party groups. But he points to the interview, in which one of the employees named an IRS attorney in Washington, D.C. (the name was redacted in the excerpts), who was heavily involved in the process of applying further scrutiny to conservative groups. The employee expressed frustration with the attorney’s “micromanagement,” according to the excerpts.

Citing the decision by IRS tax exempt director Lois Lerner to plead the Fifth in her recent congressional hearing appearance, Issa said “This is a problem that's coordinated in all likelihood right out of Washington headquarters, and we're getting to proving it. We have 18 more transcribed interviews.”

As the IRS began to disclose information about its admitted mistake, Lerner told reporters that the Cincinnati office, which handles the tax-exempt applications, was overwhelmed with applications in 2010 and began funneling documents from conservative groups into a file that called for further review as a “shortcut,” chalking it up to more of a clerical error.

"It was an error in judgment and it wasn't appropriate," Lerner said May 10 on a conference call with reporters. "But that's what they did."

But two Democratic congressional sources involved in the IRS investigation told CNN's Dana Bash that Issa's characterization of the interviews is misleading.

Their impression from the Cincinnati employees was that the Washington connection the employees were referring to were tax attorney specialists. These individuals answer questions from the tax-exempt division in Ohio about what level of political activity is acceptable for 501(c)(4) status, the sources said.

The tax attorneys work in what is known as the EO Technical Unit–which is in Washington.

According to the sources, an employee identified a tea party case in February 2010 with a problem: The group had checked the box saying it engaged in political activity, but the line agent was not sure how much political activity was allowed for tax exempt status.

(IRS rules dictate that tax exempt groups are allowed to do some type of political advocacy as long as social welfare is their primary activity.)

The employee's question was sent up through the line to Washington, the sources said, where the tax attorney experts were asked to develop future guidance to answer that question, as multiple tea party groups were beginning to take shape in 2010.

The Democratic sources said that's why Washington asked for more cases, like in the example of the Cincinnati employee who was asked to send two specific cases.

However, the sources maintained this was not when the actual targeting began, nor who did it. They're hoping to get more answers in interviews with two other employees next week.

When pressed by reporters in briefings last month, White House Press Secretary Jay Carney–whom Issa referred to as a "paid liar"–reiterated the IRS statement that the activity came from line employees in the Cincinnati office.

Asked by the congressional investigators about the allegations, one employee said, “It’s impossible.”

“As an agent we are controlled by many, many people. We have to submit many, many reports. So the chance of two agents being rogue and doing things like that could never happen,” the employee said.

Further pressed to give a reaction to reports that the blame lies within the Cincinnati office, the employee said: “Well, it's hard to answer the question, because in my mind I still hear people saying we were low-level employees, so we were lower than dirt, according to people in D.C. So, take it for what it is.”

The employee maintained that the office was following directions from Washington. Asked again if the directions to single out tea party applications specifically came from Washington, the employee gave a less certain answer, saying, “I believe so.”

The "more senior" employee told the investigators they were searching for another job in July 2010 after feeling uncomfortable with the task.

“The subject area was extremely sensitive and it was something that I didn't want to be associated with,” the employee said.

Ultimately, Issa said, the employees shouldn’t get a pass.

“Ethically, they clearly knew this was wrong. They should have become whistle-blowers. They should have done something on behalf of the American people,” he said.

The IRS has told House GOP investigators it has identified 88 IRS employees who may have documents relevant to the congressional investigation into targeting of conservative groups.

The agency has so far missed two deadlines to provide documents requested by Congress, but said in a statement Friday that the new acting commissioner, Danny Werfel, is “moving aggressively and taking the data requests very seriously.”

“As a precautionary measure, the IRS is casting a wide net to capture any potentially related materials. Our goal is to be exceedingly thorough during this process to ensure we identify any and all pertinent records," the IRS statement said. "The IRS has received numerous congressional requests involving an extensive set of questions and calls for data. Responding to these requests is a top priority for us. We have been in contact with committee staff, and we continue to provide them updates as we diligently work through these requests."

Read the excerpts below:

One Cincinnati IRS employee interviewed by the Oversight Committee rejects the White House assertion (that the Cincinnati office was responsible) and points to Washington as being responsible for targeting effort (from 5/30 interview):

Q In early 2010, was there a time when you became aware of applications that referenced Tea Party or other conservative groups?
A In March of 2010, I was made aware.

******

Q Okay. Now, was there a point around this time period when [your supervisor] asked you to do a search for similar applications?
A Yes.
Q To the best of your recollection, when was this request made?
A Sometime in early March of 2010.
******
Q Did [your supervisor] give you any indication of the need for the search, any more context?
A He told me that Washington, D.C., wanted some cases.

******

Q So as of April 2010, these 40 cases were held at that moment in your group; is that right?
A Some were.
Q How many were held there?
A Less than 40. Some went to Washington, D.C.
Q Okay. How many went to Washington, D.C.?
A I sent seven.

******

Q So you prepared seven hard copy versions of the applications to go to Washington, D.C.?
A Correct.

******

Q Did he give you any sort of indication as to why he requested you to do that?
[…]
A He said Washington, D.C. wanted seven. Because at one point I believe I heard they were thinking 10, but it came down to seven. I said okay, seven.
Q How did you decide which seven were sent?
A Just the first seven.
Q The first seven to come into the system?
A Yes.

*****

Q Did anyone else ever make a request that you send any cases to Washington?
A [Different IRS employee] wanted to have two cases that she couldn't ¬¬ Washington, D.C. wanted them, but she couldn't find the paper. So she requested me, through an email, to find these cases for her and to send them to Washington, D.C.
Q When was this, what time frame?
A I don't recall the time frame, maybe May of 2010.

******

Q But just to be clear, she told you the specific names of these applicants.
A Yes.
Q And she told you that Washington, D.C. had requested these two specific applications be sent to D.C.
A Yes, or parts of them.

******

Q Okay. So she asked you to send particular parts of these applications.
A Mm¬hmm.
Q And that was unusual. Did you say that?
A Yes.
Q And she indicated that Washington had requested these specific parts of these specific applications; is that right?
A Correct.

******

Q So what do you think about this, that allegation has been made, I think as you have seen in lots of press reports, that there were two rogue agents in Cincinnati that are sort of responsible for all of the issues that we have been talking about today. What do you think about those allegations?
[…]
A It's impossible. As an agent we are controlled by many, many people. We have to submit many, many reports. So the chance of two agents being rogue and doing things like that could never happen.

******

Q And you've heard, I'm sure, news reports about individuals here in Washington saying this is a problem that was originated in and contained in the Cincinnati office, and that it was the Cincinnati office that was at fault. What is your reaction to those types of stories?
[…]
A Well, it's hard to answer the question because in my mind I still hear people saying we were low¬level employees, so we were lower than dirt, according to people in D.C. So, take it for what it is. They were basically throwing us underneath the bus.

******

Q So is it your perspective that ultimately the responsible parties for the decisions that were reported by the IG are not in the Cincinnati office?
A I don't know how to answer that question. I mean, from an agent standpoint, we didn't do anything wrong. We followed directions based on other people telling us what to do.
Q And you ultimately followed directions from Washington; is that correct?
A If direction had come down from Washington, yes.
Q But with respect to the particular scrutiny that was given to Tea Party applications, those directions emanated from Washington; is that right?
A I believe so.

And another more senior IRS Cincinnati employee complained about micromanagement from D.C.:

Q But you specifically recall that the BOLO terms included "Tea Party?"
A Yes, I do.
Q And it was your understanding ¬¬ was it your understanding that the purpose of the BOLO was to identify Tea Party groups?
A That is correct.
Q Was it your understanding that the purpose of the BOLO was to identify conservative groups?
A Yes, it was.
Q Was it your understanding that the purpose of the BOLO was to identify Republican groups?
A Yes, it was.

******

Q Earlier I believe you informed us that the primary reason for applying for another job in July [2010] was because of the micromanagement from [Washington, DC, IRS Attorney], is that correct?
A Right. It was the whole Tea Party. It was the whole picture. I mean, it was the micromanagement. The fact that the subject area was extremely sensitive and it was something that I didn't want to be associated with.
Q Why didn't you want to be associated with it?
A For what happened now. I mean, rogue agent? Even though I was taking all my direction from EO Technical, I didn't want my name in the paper for being this rogue agent for a project I had no control over.
Q Did you think there was something inappropriate about what was happening in 2010?
A Yes. The inappropriateness was not processing these applications fairly and timely.

******

Q You have stated you had concerns with the fairness and the timeliness of the application process. Did you have concerns with just the fact that these cases were grouped together and you were the only one handling them?
A I was the only one handling the Tea Party's, that is correct.
Q Did that specifically cause you concern?
A Yes, it did. And I was the only person handling them.
Q Were you concerned that you didn't have the capacity to process all of the applications in a timely manner?
A That is correct. And it is just ¬¬ I mean, like you brought up, the micromanagement, the fact that the topic was just weirdly handled was a huge concern to me.