-Caveat Lector-
Wednesday August 8 4:44 PM ET
IRS Chief Got Ethics Waiver
By CURT ANDERSON
AP Tax Writer
WASHINGTON (AP) - IRS Commissioner Charles Rossotti promised to divest his
millions of dollars of stock in an information technology business he
co-founded if it proved to be a conflict. Then he obtained an ethics waiver
allowing him to keep the stock and still take part in decisions affecting
IRS contracts with the company.
Then-Deputy Treasury Secretary Stuart Eizenstat granted the waiver in
December, though he said Rossotti's stock in American Management Systems
Inc. (AMSY - news) would normally have precluded his participation in a new
accounting project because ``certain decisions would have a direct and
predictable effect on your financial interest'' in the company.
But Eizenstat said the importance of modernizing Internal Revenue Service
computers and American Management Systems' limited role in the accounting
project led him to conclude Rossotti's involvement ``is not so substantial
as to be deemed likely to affect the integrity'' of his decision making.
Officials said the waiver was a technicality, that Rossotti played no role
in expanding his company's contracts with IRS and that both Congress and
the Office of Government Ethics were told about the waiver and raised no
objections.
``By any measure, it was a relatively minor thing,'' said Ken Schmalzbach,
assistant general counsel and chief ethics official at the Treasury
Department. ``It was important for him to have that waiver. It was
important to the service.''
Generally speaking, Schmalzbach said the work the company does under its
existing IRS contracts does not rise to the commissioner's decision-making
level, which was a key factor in Rossotti's ability to keep his stock in
the first place.
Rossotti was vacationing this week and unavailable for comment.
Some government watchdog groups question Rossotti's decision to keep the
stock and the propriety of the waiver.
``It's a conflict of interest,'' said Meredith McGehee, senior vice
president at Common Cause. ``I don't think the waiver will give people
confidence that he doesn't have a conflict of interest.''
Rossotti co-founded Fairfax, Va.-based AMS in 1970. He was its chairman
when tapped by then-President Clinton in 1997 to run the IRS for a
five-year term, which ends in November 2002.
On his most recent personal financial disclosure form, Rossotti and his
wife reported owning AMS common stock worth between $5 million and $25
million. He also reported sole ownership of other AMS shares valued at
between $1 million and $5 million.
AMS is one of the 20 largest business and information technology consulting
firms worldwide with 2000 revenue of over $1 billion. It has ongoing
contracts dating back to 1990 for a budget accounting system with the IRS.
The IRS has either paid or will pay AMS about $82.5 million under those
contracts, according to agency officials. They said there have been no new
contracts signed between the IRS and the company since Rossotti's
government appointment.
Rossotti's decision to continue holding stock in his company differs from
several recent Bush administration officials who chose to sell interest in
companies after facing conflict-of-interest questions.
Treasury Secretary Paul O'Neill in June sold almost $100 million of stock
in the aluminum company he ran for 13 years. White House political adviser
Karl Rove unloaded millions of dollars of stock he owned in various
companies with business pending before the administration.
>From the beginning, Rossotti sought to keep his stock. At his 1997 Senate
Finance Committee confirmation hearing, he promised that he would divest
his AMS holdings if the company bid on any IRS work during his tenure. He
also promised to recuse himself from any decisions involving existing AMS
contracts with the agency.
Rossotti said then that he wanted to make sure ``no one believes, at this
stage in my life, that I have taken this job in order to further any
particular personal interest of my own.''
Officials involved in last December's waiver said it didn't violate the
letter or spirit of Rossotti's pledge.
Rossotti's input had not been sought, they said, directly for AMS work but
for the design of a separate system, known as the Custodial Accounting
Project, that involves taxpayer account data. Because the project would
have an interface with the AMS system, AMS probably would be involved in
working out links or problems between the two.
Rossotti may have to seek additional waivers as the IRS continues a major,
long-term computer modernization project. AMS would be a likely bidder on
some of this work, which would again bring into focus his commitment to
sell his stock.
Judicial Watch, a conservative legal watchdog group, has asked a federal
judge to order the IRS to turn over documents related to Rossotti's ethics
waiver, AMS contracts and the new accounting project.
================================================================
Kadosh, Kadosh, Kadosh, YHVH, TZEVAOT
FROM THE DESK OF:
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The Best Way To Destroy Enemies Is To Change Them To Friends
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