ProPublica: Articles and Investigations

Six Facts Lost in the IRS Scandal

2013-05-22T13:44:21-05:00

In the furious fallout from the revelation that the IRS flagged applications from conservative nonprofits for extra review because of their political activity, some points about the big picture -- and big donors -- have fallen through the cracks.

Consider this our Top 6 list of need-to-know facts on social welfare nonprofits, also known as dark money groups because they don’t have to disclose their donors. The groups poured more than $256 million into the 2012 federal elections.

1. Social welfare nonprofits are supposed to have social welfare, and not politics, as their “primary” purpose.

A century ago, Congress created a tax exemption for social welfare nonprofits. The statute defining the groups says they are supposed to be “operated exclusively for the promotion of social welfare.” But in 1959, the regulators interpreted the “exclusively” part of the statute to mean groups had to be “primarily” engaged in enhancing social welfare. This later opened the door to political spending.

So what does “primarily” mean? It’s not clear. The IRS has said it uses a “facts and circumstances” test to say whether a group mostly works to benefit the community or not. In short: If a group walks and talks like a social welfare nonprofit, then it’s a social welfare nonprofit.

This deliberate vagueness has led some groups to say that “primarily” simply means they must spend 51 percent of their money on a social welfare idea -- say, on something as vague as “education,” which could also include issue ads criticizing certain politicians. And then, the reasoning goes, a group can spend as much as 49 percent of its expenditures on ads directly advocating the election or defeat of a candidate for office.

Nowhere in tax regulations or rulings does it mention 49 percent, though. Some nonprofit lawyers have argued that the IRS should set hard limits for social welfare nonprofits -- setting out, for instance, that they cannot spend more than 20 percent of their money on election ads or even limiting spending to a fixed amount, like no more than $250,000.

So far, the IRS has avoided clarifying any limits.

2. Donors to social welfare nonprofits are anonymous for a reason.

Unlike donors who give directly to politicians or even to super PACs, donors who give to social welfare nonprofits can stay secret. In large part, this is because of an attempt by Alabama to force the NAACP, then a social welfare nonprofit, to disclose its donors in the 1950s. In 1958, the Supreme Court sided with the NAACP, saying that public identification of its members made them at risk of reprisal and threats.

The ACLU, which is itself a social welfare nonprofit, has long made similar arguments. So has Karl Rove, the GOP strategist and brains behind Crossroads GPS, which has spent more money on elections than any other social welfare nonprofit. In early April 2012, Rove invoked the NAACP in defending his organization against attempts to reveal donors.

The Federal Election Commission could in theory push for some disclosure from social welfare nonprofits -- for their election ads, at least. But the FEC has been paralyzed by a 3-3 partisan split, and its interpretations of older court decisions have given nonprofits wiggle room to avoid saying who donated money, as long as a donation wasn’t specifically made for a political ad.

New rulings indicate that higher courts, including the Supreme Court, favor disclosure for political ads, and states are also stepping into the fray. During the 2012 elections, courts in two states -- Montana and Idaho -- ruled that two nonprofits engaged in state campaigns needed to disclose donors.

But sometimes, when nonprofits funnel donations, the answers raise more questions. It’s the Russian nesting doll phenomenon. Last election, for instance, California’s election agency pushed for an Arizona social welfare nonprofit to disclose donors for $11 million spent on two California ballot initiatives. The answer? Another social welfare nonprofit, which in turn got the money from a trade association, which also doesn’t have to reveal its donors.

3. The Supreme Court’s Citizens United decision meant that corporations could pay for political ads, anonymously, using social welfare nonprofits.

In January 2010, the Supreme Court ruled that corporations and unions could spend money directly on election ads. A later court decision made possible super PACs, the political committees that can raise and spend unlimited amounts of money from donors, as long as they don’t coordinate with candidates and as long as they report their donors and spending.

Initially, campaign finance watchdogs believed corporations would give directly to super PACs. And in some cases, that happened. But not as much as anyone thought, and maybe for a reason: Disclosure isn’t necessarily good for business. Target famously faced a consumer and shareholder backlash after it gave money in 2010 to a group backing a Minnesota candidate who opposed gay rights.

Many watchdogs now believe that large public corporations are giving money to support candidates through social welfare nonprofits and trade associations, partly to avoid disclosure. Although the tax-exempt groups were allowed to spend money on election ads before Citizens United, their spending skyrocketed in 2010 and again in 2012.

A New York Times article based on rare cases in which donors have been disclosed, sometimes accidentally, explored the issue of corporations giving to these groups last year. Insurance giant Aetna, for example, accidentally revealed it gave $3 million in 2011 to the American Action Network, a social welfare group founded by former Sen. Norm Coleman, a Republican, that runs election ads.

Groups that favor more disclosure have so far failed to force action by the FEC, the IRS, or Congress, although some corporations have voluntarily reported their political spending. Advocates have now turned to the Securities and Exchange Commission, which is studying a proposal to require public companies to disclose political contributions.

The idea is already facing strong opposition from House Republicans.

4. Social welfare nonprofits do not actually have to apply to the IRS for recognition as tax-exempt organizations.

With all the furor over applications being flagged from conservative groups -- particularly groups with “Tea Party,” “Patriot” or “9/12” in their names -- it’s worth remembering that a social welfare nonprofit doesn’t even have to apply to the IRS in the first place.

Unlike charities, which are supposed to apply for recognition, social welfare nonprofits can simply incorporate and start raising and spending money, without ever applying to the IRS.

The agency’s nonprofit wing is mainly concerned about ferreting out bad charities, which are the biggest chunk of nonprofits and the biggest source of potential revenue. After all, the IRS’s main job is to collect revenue. Charities allow donors to deduct donations, while social welfare nonprofits don’t.

Most major social welfare nonprofits do apply, because being recognized is seen as insurance against later determination by the IRS that the group should have registered as a political committee and may face back taxes and disclosure of donors. A recognition letter is also essential to raise money from certain donors -- like, say, corporations.

But some of the new groups haven’t applied.

The first time the IRS hears about these social welfare nonprofits is often when they file their first annual tax return, not due until sometimes more than a year after they’ve formed.

In many cases, the first time the IRS hears about these groups is a full year after an election.

5. Most of the money spent on elections by social welfare nonprofits supports Republicans.

Of the more than $256 million spent by social welfare nonprofits on ads in the 2012 elections, at least 80 percent came from conservative groups, according to FEC figures tallied by the Center for Responsive Politics.

None came from the Tea Party groups with applications flagged by the IRS. Instead, a few big conservative groups were largely responsible.

Crossroads GPS, which this week said it believes it is among the conservative groups "targeted" by the IRS, spent more than $70 million in federal races in 2012. Americans for Prosperity, the social welfare nonprofit launched by the conservative billionaire brothers Charles and David Koch, spent more than $36 million. American Future Fund spent more than $25 million. Americans for Tax Reform spent almost $16 million. American Action Network spent almost $12 million.

Besides Crossroads GPS, each of those groups has applied to the IRS and been recognized as tax-exempt. (You can look at their applications here.)

All of those groups spent more than the largest liberal social welfare nonprofit, the League of Conservation Voters, which spent about $11 million on 2012 federal races. The next biggest group, Patriot Majority USA, spent more than $7 million. Planned Parenthood spent $6.5 million. VoteVets.org spent more than $3 million.

None of those figures include the tens of millions of dollars spent by groups on certain ads that run months before an election that are not reported to the FEC.

6. Some social welfare groups promised in their applications, under penalty of perjury, that they wouldn’t get involved in elections. Then they did just that.

Much of the attention when it comes to Tea Party nonprofits has focused on their applications and how the IRS determines whether a group qualifies for social welfare status.

As part of our reporting on dark money in 2012, ProPublica looked at more than 100 applications for IRS recognition. One thing we noted again and again: Groups sometimes tell the IRS that they are not going to spend money on elections, receive IRS recognition, and then turn around and spend money on elections

The application to be recognized as a social welfare nonprofit, known as a 1024 Form, explicitly asks a group whether it has spent or plans to spend “any money attempting to influence the selection, nomination, election, or appointment of any person to any Federal, state, or local public office or to an office in a political organization.”

The American Future Fund, a conservative nonprofit that would go on to spend millions of dollars on campaign ads, checked “No”in answer to that question in 2008. The very same day the group submitted its application, it uploaded this ad to its YouTube account:

Even before mailing its application to the IRS saying it would not spend money on elections in 2010, the Alliance for America’s Future was running TV ads supporting Republican candidates for governor in Nevada and Florida. It also had given $133,000 to two political committees directed by Mary Cheney, the daughter of the former vice president.

Another example of this is the Government Integrity Fund, a conservative nonprofit that ran ads in last year’s U.S. Senate race in Ohio. Its application was approved after it told the IRS that it would not spend money on politics. The group went on to do just that.

For more on the IRS and nonprofits active in politics, read our story on how the IRS's nonprofit division got so dysfunctional, Kim Barker's investigation, "How nonprofits spend millions on elections and call it public welfare" and our Q&A on dark money.

A Prolonged Stay: The Reasons Behind the Slow Pace of Executions

2013-05-22T11:23:59-05:00

by Raymond Bonner, Special to ProPublica

States that impose the death penalty have been facing a crisis in recent years: They are short on the drugs used in executions.

In California, which has the country's largest death row population, the chief justice of the state supreme court has said there are unlikely to be any executions for three years, in part due to the shortage of appropriate lethal drugs. As a result, state prosecutors are calling for a return of the gas chamber.

Ohio, which is second only to Texas in the number of executions carried out since 2010, said it will run out of the drug it uses in executions, pentobarbital, on Sept. 30. The state has two men scheduled for execution in November, and eight more set to be killed after that. Every state's supply of pentotbarbital, which has been the principal execution drug, expires at the end of November.

The shortage has forced death penalty states to scramble on two fronts: They are hunting for new suppliers or different drugs to use, and enacting changes to public records laws to keep the names of suppliers and manufacturers of those alternative drugs secret.

The lack of lethal drugs, and the fight over keeping new ones secret, are partly the result of a remarkably effective campaign by opponents of the death penalty, who have, in effect, taken their efforts from the court room to the boardroom.

Each time a state has found a new source for a drug to use in executions, Reprieve, an anti-death penalty organization based in London, in collaboration with death penalty lawyers in the United States, has used freedom of information laws, the local news media and the powers of persuasion to compel the drug's manufacturer to cut off the supply.

"Who's easier to persuade? The Supreme Court or a corporation that has financial interests?" said Clive Stafford Smith, a British-American, who was a death penalty lawyer in the South for many years before founding Reprieve. "You can make it not worth their while to allow their drugs in executions."

The effectiveness of Reprieve's campaign might well be behind the action taken last year by the state of Texas, which leads the nation in executions.

When a reporter for the Austin American-Statesman, Mike Ward, using the state's Public Information Act, sought information about the drugs used in executions, the Texas Department of Criminal Justice fiercely resisted.

In one legal filing, Patricia Fleming, the agency's assistant general counsel, said revealing the information about the drugs and who made them would invite "financial intimidation and negative publicity," as well as "intensive lobbying" and "unrestrained harassment." Referring to death penalty opponents, Fleming asserted that "essential to their strategy is knowledge of the private companies" that supply the drugs used in lethal injections.

The state attorney general ruled against her, and the department disclosed that it had enough pentobarbital at the time for 23 executions, Ward reported.

Death penalty states are now taking measures to keep anti-death penalty activists, and journalists, from learning the identity of suppliers. A Georgia law enacted in March provides that any information about a "person or entity that manufactures, supplies, compounds, or prescribes the drugs, medical supplies or medical equipment" used in an execution shall be considered a "confidential state secret." Already this year, at least three other states — Arkansas, South Dakota and Tennessee — have amended their public records laws to exempt the names of suppliers from disclosure.

Lethal injection was first proposed as a method of execution in the 19th century by a New York doctor who argued it would be cheaper than hanging. It took 100 years or so for it to be used, but every state that set out to execute people eventually adopted it as the chosen method.

Generally, states have used a three-drug protocol. The first was an anesthetic, sodium thiopental, intended to render the prisoner unconscious so that he or she does not experience the pain and suffering from the drugs to come. The second drug, pancuronium bromide, paralyzes the diaphragm and lungs, making it impossible for the condemned to breathe. Finally, potassium chloride is injected, causing death by cardiac arrest.

In 2008, the Supreme Court, in Baze v. Rees, held that lethal injection did not run afoul of the Eighth Amendment proscription on "cruel and unusual punishment."

But the Court recognized care had to be taken in the killing, so that it wasn't unconstitutionally "cruel." The most critical drug, it emphasized, is the anesthetic.

"It is uncontested that, failing a proper dose of sodium thiopental that would render the prisoner unconscious, there is substantial, unconstitutionally unacceptable risk of suffocation from the administration of pancuronium bromide and pain from the injection of potassium chloride," Chief Justice John Roberts wrote.

The problems for death penalty states, and the opening for opponents of the death penalty arose when the only company that had governmental approval to make the anesthetic, Hospira, announced in 2011 that it was suspending production because of manufacturing problems at its plant in North Carolina.

Arizona, with two executions pending in late 2011, managed to find another source of sodium thiopental; but it didn't want the public to know what it was or where it came from.

When lawyers for Jeffrey Landrigan, one of the men facing death, sought the name of the supplier, Arizona's state attorney general refused to say. Ultimately, on the eve of Landrigan's execution, the attorney general disclosed that the drug had come from Britain. He did so, he said, to allay fears that the drugs had been made in a Third World country and might be contaminated and unsafe.

Tennessee also acknowledged that one of its execution drugs had been made in Britain but refused to divulge the company's name.

At Reprieve, Maya Foa, head of the lethal investigation project, searched through medical and pharmaceutical directories to identify British companies that made sodium thiopental.

The British company selling sodium thiopental to Arizona, Tennessee and other states turned out to be a tiny wholesaler that operated out of the back of a driving school in a working class neighborhood in West London.

It was called Dream Pharma, and it was basically a one-man operation. It also suddenly became more profitable, as states in America moved to improvise. Stafford Smith, Reprieve's director, wrote a letter to Dream Pharma.

"You have played a significant role and hold responsibility for the potential deaths of many people in the United States," he wrote.

Reprieve sent the letter, along with Dream Pharma's address and phone number, to journalists, and articles appeared in British newspapers and on the BBC. Dream Pharma shut down. The company has declined to comment on its battles with Reprieve or the sale of drugs to the U.S. for executions.

Reprieve then successfully lobbied the British government to ban exports of any drugs to the U.S. for executions. Capital punishment for murder was abolished in Britain in the early 1960s even though polls showed the public supported it.

With Hospira out of the business, states had become fairly desperate. That urgency was captured in government emails and documents obtained by death penalty defense lawyers.

"I have been given a task to obtain some Sodium Pentothal by any means available," the director of the pharmacy in the Nebraska department of corrections wrote to her counterparts in several states. "Does anyone know where I might start looking?"

She eventually found a small wholesaler in Mumbai, India, which operated out of two rooms on the ground floor of an apartment building; it had no air conditioning, raising doubts about the safety and efficacy of any drugs stored there.

Reprieve again went to work, alerting local reporters and holding a news conference in Mumbai. Officials from India's food and drug administration raided the offices. The company was quickly out of business.

In California, prison officials turned to hospitals throughout the state in search of sodium thiopental, without success. The warden at San Quentin explored buying some in Pakistan.

In the end, Arizona officials solved California's problems, supplying 12 grams of sodium thiopental from its limited supply, a happy exchange according to government emails unearthed by death penalty opponents.

"You guys in AZ are life savers," a California corrections officer wrote to his Arizona counterpart. "Buy you a beer next time I get that way."

Some death penalty states, looking to solve their drug supply problems in a more reliable way, switched drugs — opting for pentobarbital, an anesthetic commonly used in putting animals to sleep. The first state to use it for an execution was Oklahoma, in December 2010, and it quickly became one of the execution drugs of choice.

This time, however, Reprieve was not up against a small entity. Only one company had government approval to sell pentobarbital in the U.S., and it was a major international pharmaceutical company, Lundbeck Inc. Headquartered in Denmark, it had some 6,000 employees worldwide; its American plant was in Kansas.

When Reprieve approached Lundbeck, in early 2011, the company said it was "adamantly opposed" to its drugs being used in executions — its primary use is in the treatment of epilepsy — but it said it had no control over what happened after its products were sold to wholesalers or distributors.

Reprieve ratcheted up the pressure. Every time Lundbeck's pentobarbital was used in an execution, it issued a press release.

Anti-death penalty activists campaigned against Lundbeck on Twitter and Facebook, shareholders raised questions at the company's annual meeting, a pension fund sold its shares, and the company's place on an annual ranking of Denmark's best companies fell from 17 to 40.

Lundbeck then did what it had said it couldn't do: It devised a distribution system that would keep its pentobarbital from the states that conducted executions.

Last month, Hospira announced that it was putting controls in place so that three of its drugs — pancuronium bromide, potassium chloride and propofol — would not be used in executions.

Once again, that has left states trying to figure out what to do. In Colorado, a man who killed three teenagers and their boss in a pizza restaurant in 1993 is set to be executed in August. But the state does not have the proper drugs, causing the director of prisons to send an urgent plea to the state's compounding pharmacies. At "compounding pharmacies," pharmacists mix, or compound, the ingredients for drugs on site.

Last October, South Dakota became the first state to use a compound drug in an execution, and it did so twice.

Lawyers for one of the men to be executed, Robert Moeller, who had kidnapped, raped and murdered a 9-year-old girl, filed a lawsuit to obtain information about the supplying pharmacy. The state resisted, and a federal judge sided with the state.

South Dakota was among the states to recently pass a law exempting the names of suppliers of lethal injection drugs from its public records law. The change was necessary, said South Dakota State Sen. Jean Hunhoff, "because there's been harassment that has occurred against non-protected manufacturers and pharmacists, thereby causing difficulty for the state in obtaining the necessary chemicals for the lethal injection."

South Dakota's law passed in the state senate without opposition, and the house by a lopsided 60-8.

Raymond Bonner, a lawyer and former New York Times reporter, is the author of "Anatomy of Injustice: A Murder Case Gone Wrong."

Charting Obama’s Crackdown on National Security Leaks

2013-05-22T10:59:31-05:00

by Cora Currier

Sound, Fury and the IRS Mess

2013-05-21T09:00:45-05:00

by Richard Tofel

ProPublica’s job is to report the news rather than to make news ourselves, but sometimes we find an article of ours to be itself a subject of public debate. Last week was such a time, when two articles we had published back in December and January became the subject of significant attention in light of the uproar over IRS oversight of the process for granting tax exemption to so-called “social welfare” groups under section 501(c)(4). We triggered that attention, with a third article we published on May 13, setting out everything we knew about the circumstances of our previous stories.

Largely ignored in a public outcry last week—radio rants, Twitter storms, congressional, presidential and prosecutorial posturing-- were the following:

Our pieces in December and January raised very serious questions about whether six different “dark money” political groups seeking tax exemption had made false statements on their applications. Those applications are signed under penalty of perjury . If any false statements were made knowingly, the groups— including Karl Rove’s Crossroads GPS —may have committed a crime. There is no indication, however, that either the IRS or the Department of Justice has done anything since January to investigate whether such crimes were indeed committed. The groups in question happen all to be conservative. Not one congressional Republican has, to my knowledge, expressed any concern about this possible criminality.

Even more remarkably, leading public figures have asserted as fact that they know how we came to receive nine documents in the mail—statements that appear to have little basis (and in some cases, no basis at all).

The former acting Commissioner of Internal Revenue said on May 17 that the agency’s inspector general had found that the disclosure to us was “inadvertent”—we had requested the applications, but they should not have been sent to us before they were approved. The IRS followed later the same day with a statement to the same effect—but then refused to answer questions about who had made the mistake, and why they should be believed when they denied having acted intentionally (and thus likely denied committing a crime).

What really seems to have happened at the IRS in Cincinnati, across the last three presidencies (a Democrat, then a Republican, then a Democrat), and across two turns of the partisan screw in the House of Representatives, from Republicans to Democrats to Republicans again, is that the agency has been starved of resources, and badly mismanaged.

But while it took the IRS four long days to tell people about their conclusion of “inadvertence” and the same four days for ProPublica to report out the dysfunction , people like Rush Limbaugh, and their followers and fellow travelers on Twitter and in the fringe press, rushed headlong to judgment. Here’s what Limbaugh said about the mid-level federal employees at the IRS in Cincinnati on Tuesday: “The people at these government agencies have been stocked with leftists for decades now, and they’re all activists.” What evidence did he offer for this? None. How could he know that someone in a large bureaucracy, shuffling thousands of pieces of paper, didn’t make a mistake? He couldn’t, and he didn’t.

Well, you might say, that’s Limbaugh. But it wasn’t just Limbaugh. Stephen Moore writes for the Wall Street Journal (where I worked for 15 years, and where Mr. Rove also writes). Yet, he called the documents we were sent “ illegally leaked .” He knew nothing more than Limbaugh. “What is the motivation,” Moore asked, “for leaking these documents? The answer is that the left is trying to dry up the money of tea party and conservative groups by intimidating donors.” He noted that another group, in another case, had its donor list released. But in our case, there were no donor lists, and we had redacted the limited financial information on the forms we published. Moreover, these applications are completed with the expectation that they’ll eventually be made public—because they are when they are approved. Never mind all that; presumably no need to mention it.

And what of the investigators? Congressional committees leapt into action. The inspector general for the IRS had apparently already investigated. The President demanded another investigation; the Department of Justice said it had commenced a criminal inquiry.

Knowing that such is the way in Washington, we waited at ProPublica for someone to send us a subpoena, show up on our doorstep, or maybe just call. Nothing. Nothing since December 13, when we told the IRS we had these documents they weren’t supposed to have sent us—or since the next day, when we published that fact. Nothing before the inspector general reached his conclusion, nothing before the congressional hearings started televising their demands for answers and their righteous indignation, nothing since.

In point of fact, the investigators would have found out that we have nothing of value to them. But the fact that they didn’t even ask tells you a lot. And it reinforces the point that much of the heat generated last week on this subject is just the latest expression of Washington cynicism and its consequences—that the talk show hosts and their fellow travelers, and the representatives and senators and officials in the executive branch, aren’t really looking for answers here. They’re just putting on a show.

Podcast: ProPublica and the IRS Scandal

2013-05-20T12:59:47-05:00

by Mike Webb

Update: A transcript of this conversation was added to this post.

Last week, ProPublica's Kim Barker and Justin Elliott explained how the IRS sent us tax-exempt applications for nonprofit status from conservative groups. We also noted some of the dysfunction that exacerbated the problems at the IRS’s Exempt Organizations office in Cincinnati.

In-between those stories, ProPublica editor-in-chief Steve Engelberg sat down with Barker to talk about the burgeoning scandal and ProPublica’s role in it. The pair discussed who sent the documents to us, whether it was deliberate or a mistake, why we published some of the information, what was Barker’s first thought when she found out she got the Crossroads GPS application and whether we burned a source at the IRS? On that latter point, Barker told Engelberg, “I’d love to be able to say I have some Deep Throat source in the IRS that sends me stuff – that just isn’t the case. They don’t even return my phone calls.”

We hope this podcast clears up any questions you might’ve had about the situation.

Transcript:

Steve Engelberg: Hi, I'm Steve Engelberg and welcome to the ProPublica Podcast. As most of you know by now, the Internal Revenue Service recently admitted to targeting the tax exempt status applications of some conservative groups. According to an Inspector General's report in the matter, the IRS delayed approval and gave extra scrutiny to groups that had conservative sound names like "Tea Party," "Patriots," "We, The People," or "Take Back the Country."

Last year, ProPublica focused on the ways in which certain groups on the left and right told the IRS they were doing social welfare work but misled the agency about the extent of their political activities. During the course of that series, we made a number of public records requests to the IRS to see tax exempt applications ourselves.

In fact, in December 2012 the IRS sent us applications for Karl Rove's Crossroads GPS and other groups whose applications had not yet been approved and were not supposed to be made public.

Joining us in the podcast to talk about ProPublica's involvement in this story is the lead reporter, Kim Barker. We're going to set the record straight on what we received, how we got it, when it came in, and what we did with it.

Last year, Kim, you were covering the subject of campaign finance. You were focused on the issue of these dark money groups...so‑called "501(c)(4)s." What's dark money mean? What's dark about them?

Kim Barker: They don't have to report their donors to the FEC. Anybody can cover campaign finance. It's pretty easy to look at the FEC website and to see who's spending money on what, who's giving to who. The groups that I found particularly interesting were these groups that did not have to report their donors. That's really what we spent last year investigating.

Steve: OK, so a group is a 501(c)(4). They're chartered by the IRS. What makes them special? What's their tax status?

Kim: Well, chartered by the IRS. Interesting. Interesting point there because they're not, really. You can go out tomorrow, Steve, and form a 501(c)(4) and you don't actually have to be approved by the IRS to do so. A 501(c)(4) is simply a social welfare nonprofit. It is primarily supposed to be involved in improving the public good of the community and making things better. But it also is allowed to do a certain amount of lobbying and it's allowed to be involved in politics as long as it can prove that its primary purpose is, indeed, social welfare.

These groups essentially were allowed to keep their donors secret to the FEC because they were able to say, "I'm not a political action committee. My major thing that I'm doing out here is social welfare."

So the FEC typically might file a letter saying, "Who are your donors?" but then it doesn't really pursue things because the groups come back and say, "We're not a political committee," so they don't have to tell anybody where this money is coming from.

Steve: OK, let's say I want the IRS to give their stamp of approval to my group. I'm going to start "Steve's Group to Make America Better." I'm going to file an application. Now, that application is going to ask certain things about what? What am I going to have to tell the IRS?

Kim: It's called a form 1024. This application asks you really basic questions. Who are the people behind your group? What is the primary purpose of your group? What do you plan to do? How will you spend your activities? Divide them up into percentages. Maybe 50 percent on education. Maybe you want to improve the environment. Maybe you want to work on how government works. You can have all these different, vague descriptions of what your primary purpose is. Then they'll go along and ask you, "How much will different people make from this particular organization? How are you going to raise money?" They'll also ask you, "Do you plan to spend money to influence or elect certain candidates for office or not?" You have to answer yes or no to that question.

It's a long questionnaire. You would probably have to hire a lawyer, unfortunately Steve, to actually fill it out properly.

Steve: OK, so I do that. Now I've got my Steve's Group application in and you're Kim, investigative reporter and you believe that Steve's Group might not be all it says it or maybe we're going to engage in politics. The IRS is looking at my application. Can you ask for it?

Kim: I can ask for anything I want. They don't have to give it to me, but I can file as many FOIAs as I want to the IRS and ask for certain information. A lot of this is public. As soon as a nonprofit...whether it's a charity or a social welfare nonprofit or a trade association. As soon as they are recognized as tax exempt by the IRS, that document automatically becomes public. In fact, if I go to the actual organization...I show up in person and say, "I want this document," they're supposed to give it to me within 24 hours.

Does that happen? Not necessarily, but the IRS has to release these documents once these groups are recognized as tax exempt. They've got 30 days to do so.

Steve: So this is a pretty important point. When I, Steve's Group, writes my document it's not exactly the deep, dark secrets of Steve's Group because I know it's going to get made public if I'm approved, right? This is everything I know is eventually going to be on the public record.

Kim: Sure, which is why you'll have some sort of vague descriptions. They're very interesting for a reporter to look at and to compare what a group told the IRS in the very beginning with what it actually ended up doing later on.

Steve: You mentioned that you filed these FOIA requests...Freedom of Information Act requests. Now, does the IRS announce to you which groups have been approved?

Kim: No. In fact, they will send back a response to me saying, "We have no record of the tax exempt status of these particular groups," and then will list them. It doesn't tell me whether a group has actually applied. It doesn't tell me whether a group has actually been denied. It just says, "We have no record of the tax exempt status of this particular group." Then it will send me the applications for the groups that have been recognized.

Steve: To do your job then it would be typical of you to maybe find the name of a group in the FEC records, the Federal Election Commission records, and then file a request with the IRS to see if they've been approved. That's how you do your job.

Kim: That's pretty much what I was doing last year. I think the IRS probably got very tired of me sending in one or two requests every month and sometimes two or three a week asking for these particular documents. I must have on my desk...I've got hundreds of these documents there.

Steve: To be clear on this, because this gets into some of the rather interesting, inaccurate statements that have been made about this. We can go through a few of them here. First of all, the request in question which came back to you from the IRS that's now the subject of some coverage and controversy. When did you file that one? When did you ask for the information?

Kim: I sent the letter in. It was dated November 15th of 2012. I asked for the applications for 67 different groups that had spent money on the elections according to FEC records. These were the groups I didn't yet have the applications of because plenty of them, obviously with my previous reporting, I already had. I sent in this very long request for applications for 67 different groups that I didn't already have. Then in return, the IRS sent me back information dated November 28th. That included information for 31 of these groups. I believe it was something like 30 applications and one notice that they could not find the application but that the group had been recognized.

I've got information for 31 groups. The other groups? They had no record of the tax exempt status of those groups. That could mean that those groups have applied. It could also mean they haven't yet applied. It could mean their applications are pending.

We really have no idea about those other groups, but I can say that that request included information for conservative groups, for liberal groups, for middle of the road groups. The only criteria I had for requesting that information was groups that had spent money on the election and did not disclose their donors.

Steve: Just to be clear, in case anyone's forgotten the excitement of last fall, November 15th was after the election, right?

Kim: It is true. That was actually after the election.

Steve: OK, because that's been a little bit of a point of confusion. Now, when this material came back to you, was there anything in the material relating, for example, to the confidential donor information as Senator McConnell has suggested? Was there anything of that nature given to you by the IRS?

Kim: No. I wish. I would love to have confidential donor information. I did not get any of that information. What I got that was confidential were nine applications of groups that had not yet been recognized as tax exempt.

Steve: Now again, to be clear, these are the applications that will be made public if the IRS ultimately approves the requests. These are applications written by the group expecting them to be made public, correct?

Kim: Yeah, but they would not be made public if the group is, for instance, rejected.

Steve: And among them was Crossroads GPS. What was your first thought when you saw a Crossroads GPS document in there?

Kim: "Holy cow! Crossroads GPS was recognized by the IRS and we are the first journalism outlet to get this. We've got to get this up right away." That was my first reaction because everybody wanted this application. Every journalist wanted this application because this was the group...Remember, the biggest social welfare nonprofit spending on the election in 2012. It spent more than $70 million on the election that was reported to the FEC and millions more on these issue ads that mentioned candidates before they had to reported. It spent a lot of money.

Everybody was very interested in what Crossroads told the IRS when it first applied. I really thought that I had that kind of scoop. That the IRS had recognized them and that we were going to be the first ones to report that.

Steve: And then what happened?

Kim: Then I looked for their recognition letter. The recognition letter is typically something that the IRS attaches to the front of these applications. It says, "You are hereby recognized as a social welfare nonprofit," and it is stamped with a date. This application did not have that letter and it did not have that date.

Steve: Which suggested to you, perhaps, that this had been sent to us in error.

Kim: It did, because I had never seen this before. Then I looked through all of the applications and I found a total of 12, in fact, that did not have these recognition letters. Then I went through these particular 12 and I called all the organizations to find out whether they had been recognized or not. Many folks didn't get back to me, but Crossroads confirmed our suspicions, which were that they had not been recognized by the IRS as far as they knew.

Now, in doing all the reporting that I did and in going through the IRS database that they've got. It's very cumbersome to use. It lists the different organizations. I found out that only nine of the applications were supposed to be confidential. Only nine of these groups had not yet been recognized by the IRS.

Steve: Now these groups that we got these applications for that turned out to not be the stuff that was supposed to be given to us in the first place, were they all conservative groups?

Kim: All nine of those groups were conservative groups. We chose to write two stories. The first story was simply about the Crossroads GPS application and what it said, because it said that it was going to have, I believe, limited political activity. We found that that was interesting to compare what it said on its application with the fact that it spent more than $70 million. Again, this was an application that everybody was interested in. We put that out there. We wrote a story about that. We were very transparent about the fact that we weren't supposed to have this and we even wrote about the fact that the IRS had basically told me that if you publish this, publishing this is a felony and you're risking five years in prison and a $5,000 fine.

What we ended up doing after the advice of legal counsel was redacting financial information because that's the one thing that everybody said, "Well, that could be construed as confidential because they have not yet been recognized by the IRS." So we published the application and we wrote a story about it while redacting the financial information.

Then we did a second story. We did not do a story on all of the other groups that had not been recognized by the IRS, just the ones that had told the IRS on their applications that they would not engage in politics but then turned around and did in 2012. We felt like that was also a story.

As part of that story, we also talked about how we got these documents and the fact that we had been told that we could face five years in prison and a $5,000 fine.

Steve: I should just point out to our listeners that we did...ProPublica...seek and receive an outside legal opinion which suggested that the IRS's interpretation of this law was not correct and that we had every right to publish this. So far, we have not been accused of any wrongdoing in this matter. Now, these stories were published in December of last year right after we received this material, correct? We made no secret of this.

Kim: One was published in mid‑December, the one on Crossroads and I'm fairly certain that the other story was published in early January of this year.

Steve: Now, all of this suddenly came right back into the news again with the revelation that several employees of the office in Cincinnati, Ohio of the IRS that handled this had been improperly targeting groups with the name "Tea Party" in their title. At that point, we decided to come out with another story to remind readers of what we had already said in December and January. What was that story about? Why was it newsworthy?

Kim: I felt like when I saw what was coming out about the head of the Exempt Organizations Division last Friday apologizing in advance for what was going to come out in this Inspector General's report this week and basically blaming folks in Cincinnati for improperly targeting the Tea Party. It made me look at where we got the documents in the first place from and where we were requesting them from, which was the same office in Cincinnati. It seemed worth it to point out the same office that was now getting blamed for improperly targeting the Tea Party had also been the one that sent us documents that we weren't supposed to get.

Steve: Did anyone leak to you a document relating to confidential material from the IRS?

Kim: I was sent, in response, to a public records request applications for nine different groups that were still confidential. I don't know why I was sent them, but I had requested them and they were sent as part of a response to a public records request that also included information on 22 other groups that I had requested information on.

Steve: There's no evidence that we are aware of that this operation here at ProPublica and Investigative Newsroom, that these documents were sent to us deliberately or accidentally. We have no...

Kim: We have no idea. I'd love to be able to say I have some Deep Throat source in the IRS that sends me stuff. It just isn't the case. They don't even return my phone calls. Yeah, we have no idea why we got them or how we got them except by the mail.

Steve: Except by the mail. Essentially what happened is material lands in our office in an official envelope responding to an official request and we write about it. In no way are we burning a source here because we have no source. We have no reason to believe that this was given to us as a kind of leak or a revelation. This arrived through the usual means.

Kim: I mean, Steve, all we know is we requested the documents and we got them in the mail. That's all we know.

Steve: Obviously, at this point, from what Attorney General Holder has said, there will be an investigation into, among other things, how those documents ended up in an envelope sent to us and who knows what they'll find.

Kim: Right. I have no idea.

Steve: Kim, one of the things that people have pointed out is that in our writing in general on the subject of 501(c)(4)s, we've written about a fair number of conservative leaning groups and not so many liberal groups. Is there a reason for that?

Kim: Yes, it's because more conservative groups have been using social welfare nonprofits to spend money on politics. In 2012, I believe it was about 84 percent of the money that was spent on the elections by these social welfare nonprofits and anonymous spending groups came from the conservative side. We do write about the liberal groups. What, to me, is interesting about a lot of these liberal groups that have been engaged in this is they don't even bother applying to the IRS. They just go and form a 501(c)(4). They spend money on politics. They file their annual returns that they're supposed to file and they do not apply to the IRS because the IRS does not require these groups to even be approved to operate.

Steve: That is a fact that you reported at some length in your coverage over the last year.

Kim: Yes. It is a fact that I've reported many times.

Steve: That was Kim Barker. To read more of our reporting on this issue, go to ProPublica.org/darkmoney. Thanks for listening. For ProPublica, I'm Steve Engelberg. We'll catch you next time

Congressmen to Hagel: Where Are the Missing War Records?

2013-05-20T12:40:40-05:00

by Peter Sleeth, Special to ProPublica

The top Republican and Democrat on the House Committee on Veterans’ Affairs are demanding more information from defense Secretary Chuck Hagel about lost Army field records from the wars in Afghanistan and Iraq, the subject of a ProPublica investigation last year.

In an unusually detailed letter sent Friday to Hagel, Reps. Jeff Miller, R-Fla., and Michael Michaud, D-Maine, said the Defense Department’s response to an earlier request about why records are missing — and what the military is doing about it — didn’t go far enough.

“Congress must have a clear understanding of the extent of the lost records in order to safeguard the best interests of our service members and veterans,’’ the letter says.

The 12 questions posed to Hagel in the letter focus largely on the Army because it has the largest records deficit. Among other things, the congressmen want to know what happened to operational records for the 1st Armored Division and the 82nd Airborne Division and what is being done to reconstruct them.

In November, ProPublica and the Seattle Times reported that they were among numerous Army units that had lost or failed to keep battlefield records as required, making it harder for some veterans to obtain benefits and for historians to recount what actually happened.

“Operational records can be used to track the history of our nation’s military, plan for future operations and support innovative medical research,’’ Miller and Michaud wrote to Hagel.

In addition to chairing the veterans’ panel, Miller sits on the House Armed Services Committee, which has direct oversight responsibility for the Defense Department and service branches.

The department did not return a phone call seeking comment.

Transcript: What’s Going on at Gitmo?

2013-05-17T17:54:41-05:00

by Christie Thompson

The current hunger strike at Guantanamo has entered its fourth month, with resistance growing to involve 100 detainees. More medics have been flown in to assist with force-feeding 29 inmates, and five are currently hospitalized. The strike began after searches of inmates’ Korans, but has grown into a protest of indefinite detention.

“The situation is desperate now. People are fainting with exhaustion every day,” wrote detainee Samir Naji al Hasan Moqbel in a recent New York Times op-ed.

We’ve covered the details of detainees’ cases, and the Obama administration’s back and forth on closing Guantanamo. Friday, we brought together a group of journalists to answer your questions about the U.S.' most controversial prison.

ProPublica’s Cora Currier (@coracurrier) was joined by Carol Rosenberg of the Miami Herald (@carolrosenberg), Ryan J. Reilly of the Huffington Post (@ryanjreilly), and Charlie Savage of the New York Times (@charlie_savage) to discuss what’s going on at Gitmo. Some key takeaways:

Guantanamo is currently under a media blackout: Four reporters left this morning, and no new journalists will be allowed back until June. The Pentagon is in the process of training new Public Affairs escorts (known as "minders") who take reporters on scripted tours of the prison camps. "They don't like it when you call it a blackout, but that's what it is," Reilly said.

Gitmo guards are trapped in the middle of detainees and D.C.-level decisions: Guards, many of whom are younger then the men they patrol, are in a difficult position. "The detainees are mad because basically no one is allowed to leave anymore - low-level transfers dried up after Jan 2011 - and to them the guards are the face of all that," Savage said.

Officials won't say who is on hunger strike: But lawyers are alerted when their clients are being force-fed. Attorneys for 13 hunger strikers gave their names to the Miami Herald.

Eighty-six detainees have been approved for transfer — but it's not so simple: "The problem is they come from chaotic countries - primarily Yemen - which makes it harder for officials to say it would be safe to send them because it's not clear the central government is capable of keeping an eye on them," Savage said. As Rosenberg pointed out, saying detainees are "cleared" is a misnomer. "They're not cleared to walk out of the prison camps and board a flight to Fort Lauderdale."

See the full transcript of their discussion below:

Tweet #GitmoChat

How the IRS’s Nonprofit Division Got So Dysfunctional

2013-05-17T17:14:12-05:00

by Kim Barker and Justin Elliott

May 18: This post has been corrected.

The IRS division responsible for flagging Tea Party groups has long been an agency afterthought, beset by mismanagement, financial constraints and an unwillingness to spell out just what it expects from social welfare nonprofits, former officials and experts say.

The controversy that erupted in the past week, leading to the ousting of the acting Internal Revenue Service commissioner, an investigation by the FBI, and congressional hearings that kicked off Friday, comes against a backdrop of dysfunction brewing for years.

Moves launched in the 1990s were designed to streamline the tax agency and make it more efficient. But they had unintended consequences for the IRS’s Exempt Organizations division.

Checks and balances once in place were taken away. Guidance frequently published by the IRS and closely read by tax lawyers and nonprofits disappeared. Even as political activity by social welfare nonprofits exploded in recent election cycles, repeated requests for the IRS to clarify exactly what was permitted for the secretly funded groups were met, at least publicly, with silence.

All this combined to create an isolated office in Cincinnati, plagued by what an inspector general this week described as “insufficient oversight,” of fewer than 200 low-level employees responsible for reviewing more than 60,000 nonprofit applications a year.

In the end, this contributed to what everyone from Republican lawmakers to the president says was a major mistake: The decision by the Ohio unit to flag for further review applications from groups with “Tea Party” and similar labels. This started around March 2010, with little pushback from Washington until the end of June 2011.

“It’s really no surprise that a number of these cases blew up on the IRS,” said Marcus Owens, who ran the Exempt Organizations division from 1990 to 2000. “They had eliminated the trip wires of 25 years.”

Of course, any number of structural fixes wouldn’t stop rogue employees with a partisan ax to grind. No one, including the IRS and the inspector general, has presented evidence that political bias was a factor, although congressional and FBI investigators are taking another look.

But what is already clear is that the IRS once had a system in place to review how applications were being handled and to flag potentially problematic ones. The IRS also used to show its hand publicly, by publishing educational articles for agents, issuing many more rulings, and openly flagging which kind of nonprofit applications would get a more thorough review.

All of those checks and balances disappeared in recent years, largely the unforeseen result of an IRS restructuring in 1998, former officials and tax lawyers say.

“Until 2008, we had a dialogue, through various rulings and cases and the participation of various IRS officials at various ABA meetings, as to what is and what is not permissible campaign intervention,” said Gregory Colvin, the co-chair of the American Bar Association subcommittee that dealt with nonprofits, lobbying, and political intervention from 1991 to 2009.

“And there has been absolutely no willingness in the last five years by the IRS to engage in that discussion, at the same time the caseload has exploded at the IRS.”

The IRS did not respond to requests for comment on this story.

Social welfare nonprofits, which operate under the 501(c)(4) section of the tax code, have always been a strange hybrid, a catchall category for nonprofits that don’t fall anywhere else. They can lobby. For decades, they have been allowed to advocate for the election or defeat of candidates, as long as that is not their primary purpose. They also do not have to disclose their donors.

Social welfare nonprofits were only a small part of the exempt division’s work, considered minor when compared with charities. When the groups sought IRS recognition, the agency usually rubber-stamped them. Out of 24,196 applications for social welfare status between 1998 and 2009, the exempt organizations division rejected only 77, according to numbers compiled from annual IRS data books.

Into this loophole came the Supreme Court’s Citizens United decision in January 2010, which changed the campaign-finance game by allowing corporate and union spending on elections.

Sensing an opportunity, some political consultants started creating social welfare nonprofits geared to political purposes. By 2012, more than $320 million in anonymous money poured into federal elections.

A couple of years earlier, beginning in 2010, the Cincinnati workers had flagged applications of tiny Tea Party groups, according to the inspector general, though the groups spent almost no money in federal elections.

The main question raised by the audit is how the Cincinnati office and superiors in Washington could have gotten it so wrong. The audit shows no evidence that these workers even looked at records from the Federal Election Commission to vet much larger groups that spent hundreds of thousands and even millions in anonymous money to run election ads.

The IRS Exempt Organizations division, the watchdog for about 1.5 million nonprofits, has always had to deal with controversial groups. For decades, the division periodically listed red flags that would merit an application being sent to the IRS’s Washington, D.C., headquarters for review, said Owens, the former division head.

In the 1970s, that meant flagging all applications for primary and secondary schools in the south facing desegregation. In the 1980s, during the wave of consolidation in the health-care industry, all applications from health-care nonprofits needed to be sent to headquarters. The division’s different field offices had to send these applications up the chain.

“Back then, many more applications came to Washington to be worked — the idea was to have the most sensitive ones come to Washington,” said Paul Streckfus, a former IRS lawyer who screened applications at headquarters in the 1970s and founded the industry publication EO Tax Journal in 1996.

Because this list was public, lawyers and nonprofits knew which cases would automatically be reviewed.

“We had a core of experts in tax law,” recalled Milton Cerny, who worked for the IRS, mainly in Exempt Organizations, from 1960 to 1987. “We had developed a broad group of tax experts to deal with these issues.”

In the 1980s, the division issued many more “revenue rulings” than issued in recent years, said Cerny, then head of the rulings process. These revenue rulings set precedents for the division. Revenue rulings along with regulations are basically the binding IRS rules for nonprofits.

“We would do a revenue ruling, so the public and agents would know,” Cerny said. “Over the years, it apparently was felt that a revenue ruling should only be published at an extraordinary time. So today you’re lucky if you get one a year. Sometimes it’s less than that. It’s amazing to me.”

Other checks and balances had existed too. Not only were certain kinds of applications publicly flagged, there was another mechanism called “post-review,” Owens said. Headquarters in Washington would pull a random sample every month from the different field offices, to see how applications were being reviewed. There was also a surprise “saturation review,” once a year, for each of the offices, where everything from a certain time period needed to be sent to Washington for another look.

So internally, the division had ways, if imperfect, to flag potential problems. It also had ways of letting the public know what exactly agents were looking at and how the division was approaching controversial topics.

For instance, there was the division’s “Continuing Professional Education,” or CPE, technical instruction program. These articles were supposed to be used for training of line agents, collecting and putting out the agency’s best information on a particular topic — on, say, political activity by social welfare nonprofits in 1995.

“People in a group would write up their thoughts: ‘Here’s the law,’” said Beth Kingsley, a Washington lawyer with Harmon, Curran, Spielberg & Eisenberg who’s worked with nonprofits for almost 20 years. “It wasn’t pushing the envelope. It was, ‘This is how we see this issue.’ It told us what the IRS was thinking.”

The system began to change in the mid-1990s. The IRS was having trouble hiring people for low-level positions in field offices like New York or Atlanta — the kinds of workers that typically reviewed applications by nonprofits, Owens said.

The answer to this was simple: Cincinnati.

The city had a history of being able to hire people at low federal grades, which in 1995 paid between $19,704 and $38,814 a year — almost the same as those federal grades paid in New York City or Chicago. (Adjusted for inflation, that’s between $30,064 and $59,222 now.)

“That was well below what the prevailing rate was in the New York City area for accountants with training,” Owens said. “We had one accountant who just had gotten out of jail — that’s the sort of people who would show up for jobs. That was really the low point.”

So in 1995, the Exempt Organizations division started to centralize. Instead of field offices evaluating applications for nonprofits in each region, those applications would all be sent to one mailing address, a post-office box in Covington, Ky. Then a central office in Cincinnati would review all the applications.

Almost inadvertently, because people there were willing to work for less than elsewhere, Cincinnati became ground zero for nonprofit applications.

For the time being, the checks remained in place. The criteria for flagged nonprofits were still made public. The Continuing Professional Education text was still made public. Saturation reviews and post reviews were still in place.

But by 1998, after hearings in which Republican Senator Trent Lott accused the IRS of "Gestapo-like" tactics, a new law mandated the agency’s restructuring. In the years that followed, the agency aimed to streamline. For most of the ‘90s, the IRS had more than 100,000 employees. That number would drop every year, to slightly less than 90,000 by 2012.

Change also came to the Exempt Organizations division.

The IRS tried to remove discretion from lower-level employees around the country by creating rules they had to follow. While the reorganization was designed to centralize power in the agency's Washington headquarters, it didn’t work out that way.

“The distance between Cincinnati and Washington was such that soon Cincinnati became a power center,” said Streckfus, the former IRS lawyer.

Following reorganization, many highly trained lawyers in Washington who previously handled the most sensitive nonprofit applications were reassigned to focus on special projects, he said.

Owens, who left the IRS in 2000 but stayed in touch with his old division, said the focus on efficiency meant “eliminating those steps deemed unimportant and anachronistic.”

In 2003, the saturation reviews and post reviews ended, and the public list of criteria that would get an application referred to headquarters disappeared, Owens said. Instead, agents in Cincinnati could ask to have cases reviewed, if they wanted. But they didn’t very often.

“No one really knows what kinds of cases are being sent to Washington, if any,” Owens said. “It’s all opaque now. It’s gone dark.”

By the end of 2004, the Continuing Professional Education articles stopped.

Recommendations from an ABA task force for IRS guidelines on social welfare nonprofits and politics that same year were met with silence.

Even the IRS’s Political Activities Compliance Initiative, which investigated complaints of charities engaged in politics — primarily churches — closed up shop in early 2009 after less than five years, without any explanation.

Both before and after the changes, the Exempt Organizations division has been a small part of the IRS, which is focused on collecting money and chasing delinquent taxpayers.

IRS employee count in 2012

Rulings and Agreements, the division that handles applications of all nonprofits, accounted for less than 0.5 percent of all IRS employees in 2012.

Source: IRS Data Books, IRS Exempt Organizations Annual Report

Of the 90,000 employees at the agency last year, only 876 worked in the Exempt Organizations’ division, or fewer than 1 in 100 employees.

Of those, 335 worked in the office that actually handles applications of nonprofits.

Most of those — about 300 — worked in Cincinnati, Streckfus estimates. The rest were at headquarters, in Washington D.C.

In Cincinnati, the employees’ primary job was sifting through the applications of nonprofits, making determinations as to whether a nonprofit should be recognized as tax-exempt. In a press release Wednesday, the IRS said fewer than 200 employees were responsible for that work.

In 2012, these employees received 60,780 applications. The bulk of those — 51,748 — were from groups that wanted to be recognized as charities.

But the number of social welfare nonprofit applications spiked from 1,777 in 2011 to 2,774 in 2012. It’s impossible to say how many of those groups indicated whether they would engage in politics, or why the number of applications increased. The IRS said Wednesday that it “has seen an increase in the number of tax-exempt organization applications in which the organization is potentially engaged in political activity,” including both charities and social welfare nonprofits, but didn’t specify any numbers.

Total 501(c)(4) Nonprofit Applications from 2002 to 2012

From 2011 to 2012, applications increased by more than 50 percent.

Source: IRS Data Books

On average, one employee in Cincinnati would be responsible for going through roughly one application per day.

Some would be easy — say, a local soup kitchen. But to evaluate whether a social welfare nonprofit has social welfare as its primary purpose, the agent is supposed to use a “facts and circumstances” test. There is no checklist. Reviewing just one social welfare nonprofit could take days or weeks, to look through a group’s website, track down TV ads and so forth.

“You’ve got 60,000 applications coming through, and it’s hard to do that with the number of agents looking at them,” said Philip Hackney, who was in the IRS’s chief counsel office in Washington between 2006 and 2011 but said he wasn’t involved in the Tea Party controversy. “The reality is that they cannot do that, and that’s why you’re seeing them pick stuff out for review. They tried to do that here, and it burned them.”

As we have previously reported, last year the same Cincinnati office sent ProPublica confidential applications from conservative groups. An IRS spokeswoman said the disclosures were inadvertent.

Mark Everson, IRS commissioner for four years during the George W. Bush administration, said he believed the fact that the division is understaffed is relevant, but not an excuse for what happened. “The whole service is under-funded,” he pointed out.

And Dan Backer, a lawyer in Washington who represented six of the groups held up because of the Tea Party criteria, said he doesn’t buy the notion that low-level employees in Cincinnati were alone responsible.

“It doesn’t just strain credulity,” Backer said. “It broke credulity and left it laying on the road about a mile back. Clearly these guys were all on the same marching orders.”

The inspector general’s audit was prompted last year after members of Congress, responding to complaints by Tea Party groups, asked for it.

Like former officials interviewed by ProPublica, the audit suggests that officials at IRS headquarters in Washington were unable to manage their subordinates in Cincinnati. When Lois Lerner, the Exempt Organizations division director in Washington, learned in June 2011 about the improper criteria for screening applications, she instructed that they be “immediately revised.”

But just six months later, Cincinnati employees changed the revised criteria to focus on “organizations involved in limiting/expanding government” or “educating on the Constitution.” They did so “without executive approval.”

“The story people are overlooking is: Congress is complaining about underpaid, overworked employees who are not adequately trained,” said Bryan Camp, a former attorney in the IRS chief counsel’s office.

In the end, after all the millions of anonymous money spent by some groups to elect candidates in 2012, after all the groups that said in their applications that they would not spend money to elect candidates before doing exactly that, after the Cincinnati office flagged conservative groups, the IRS approved almost all the new applications. Only eight applications were denied.

Graphics by Sisi Wei and Lena Groeger

Correction: This post originally said that fewer than 1 in 1,000 IRS employees worked in the Exempt Organizations’ division. In fact, the figure is fewer than 1 in 100.

Your Hospital May Be Hazardous To Your Health

2013-05-17T13:15:55-05:00

As part of our ongoing investigation into patient safety, ProPublica reporters Marshall Allen and Olga Pierce produced this interactive story in collaboration with PBS Frontline and Ocupop during a May 11-16 hackathon.

The Story Behind Our Hospital Interactive

2013-05-17T13:15:30-05:00

by Tom Detzel

Here at ProPublica, we love to find new ways to tell stories. We’ve built data-driven news apps, commissioned our own news songs and crafted narratives with a novelist’s touch, all to enrich our investigative reporting.

“Your Hospital May Be Hazardous To Your Health,” co-published today with PBS Frontline, is our newest try at innovation. And it had an unusual gestation – as part of a five-day hackathon that brought together teams of journalists, filmmakers, developers and designers to produce interactive stories for the Web.

The piece draws from ongoing reporting about patient safety by ProPublica reporters Marshall Allen and Olga Pierce. Our collaborators were documentary filmmakers Tom Jennings and Sabrina Shankman and Director of Development Sam Bailey, all with Frontline, and a team from Ocupop, a web design and development group based in Milwaukee, Wisc.

The hackathon – “Tribeca Hacks: Storytelling Innovation Lab” – is a project of the Tribeca Film Institute and Mozilla that is supported by the Ford Foundation.

Transcript: Installment Loans and the Shifting Debt Industry

2013-05-16T15:41:44-05:00

by Blair Hickman

Monday, we co-published a story with Marketplace on installment loans, a growing industry that offers quick money to low-income borrowers – and is flying under regulators’ radars.

Installment loans are the cousins of payday loans. They exist in at least 19 states, mostly in the South and Midwest, and offer borrowers with poor credit easy access to money. World Finance, a billion-dollar installment loan company, has more than 800,000 customers across the U.S. World and other installment lenders often put their stores near military bases.

Yet as our story explains, installment loans can be “deceptively expensive.” Lenders often persuade borrowers to renew their loans over and over, pushing the effective annual percentage rate sky-high. If state law caps the rate, installment lenders often sell borrowers a slew of unnecessary insurance products. World says it informs borrowers in writing of the terms of its loans, that it renews loans only if its customers want to, and that it provides a valuable financial service to many satisfied customers.

So how could regulation be strengthened? How do installment lenders fit into a shifting debt industry? And what does the everyday borrower need to know if they’re considering taking out an installment loan?

Join us for a live discussion this Thursday, May 16, at 2 PM ET, with Marketplace’s Mitchell Hartman and ProPublica’s Paul Kiel.

We encourage you to leave questions in advance in the comments below. You can also tweet questions with the hashtag #BeyondPayDay.

The Most Important #Muckreads on Rape in the Military

2013-05-16T09:00:54-05:00

by Christie Thompson

May 17: This post has been updated to include the number of men in the military who reported suffering from military sexual trauma.

The Pentagon announced this week that a sergeant working in the military’s sexual assault prevention office had been charged with — you guessed it — sexual assault. This news came just a week after the officer in charge of the Air Force’s rape prevention program was arrested for sexual battery.

An estimated 26,000 service members were sexually assaulted in 2012, according to the latest government report. That’s up from 19,000 in 2010, despite recent claims that the military has been focusing more on prevention efforts.

Amid the growing controversy, Congress is hurrying to draft new legislation and Obama has called for stricter punishment for sexual offenders. All officers in the sexual assault prevention office will be re-screened and re-trained, the Pentagon announced. As lawmakers and military officials debate what to do next, we’ve rounded up some of the best journalism on sexual assault in the military.

Did we miss any? Let us know in the comments below, or tweet them to us with the hashtag #muckreads.

The Invisible War, documentary, June 2012

The academy-award nominated documentary has helped bring the military’s rape crisis to national attention. Filmmakers interviewed victims and military personnel to reveal the overwhelming obstacles to prosecuting military rape, and how inadequate efforts have been so far to curbing sexual assault.

Trauma Sets Female Veterans Adrift Back Home, New York Times, February 2013

According to the Pentagon report, 48,100 women (and 43,700 men) reported military sexual trauma last year, which studies say makes them nine times more likely to suffer from PTSD. This two-part New York Times series documents the struggles facing women veterans who’ve suffered from sexual assault, including homelessness and unemployment.

The Rape of Petty Officer Blumer, Rolling Stone, February 2013

The story of one naval officer’s rape details the consequences victims face for coming forward — consequences that keep most victims from reporting sexual attacks. After telling her superiors she had been raped, Rebecca Blumer was accused of lying, sexually harassed, denied promotions and ultimately discharged.

Rape victims say military labels them 'crazy', CNN, April 2012

A CNN investigation found another way the military handles rape accusations: labeling victims as emotionally unstable. After reporting a sexual assault, multiple service members were diagnosed with a personality disorder and discharged. Their abuse allegations were ignored.

The Enemy Within, National Journal, September 2012

What is it about the military that makes sexual assault so pervasive? The National Journal digs into the policies behind the statistics, and the legal loopholes exploited by sexual predators.

Pentagon grapples with sex crimes by military recruiters, Washington Post, May 2013

Active service members aren’t the only ones vulnerable to sexual assault. A recent series of scandals across the country exposed military recruiters accused of sexually abusing young people looking to enlist.

Betrayal in the Ranks, The Denver Post, 2004

The Denver Post spoke with more than 60 victims about their battle for justice, and the psychological trauma that lasted long after their assault. Many felt the military blamed them for their rape, while shielding their attackers from punishment.

On Victory Drive, Soldiers Defeated by Debt

2013-05-15T05:50:48-05:00

by Paul Kiel, ProPublica, and Mitchell Hartman, Marketplace

This story was co-produced with Marketplace. Listen to their coverage.

Seven years after Congress banned payday-loan companies from charging exorbitant interest rates to service members, many of the nation's military bases are surrounded by storefront lenders who charge high annual percentage rates, sometimes exceeding 400 percent.

The Military Lending Act sought to protect service members and their families from predatory loans. But in practice, the law has defined the types of covered loans so narrowly that it's been all too easy for lenders to circumvent it.

"We have to revisit this," said Sen. Dick Durbin, D-Ill., who chairs the defense appropriations subcommittee and is the Senate's second-ranking Democrat. "If we're serious about protecting military families from exploitation, this law has to be a lot tighter."

Members of the military can lose their security clearances for falling into debt. As a result, experts say, service members often avoid taking financial problems to their superior officers and instead resort to high-cost loans they don't fully understand.

The Department of Defense, which defines which loans the Military Lending Act covers, has begun a process to review the law, said Marcus Beauregard, chief of the Pentagon's state liaison office.

The act mainly targets two products: payday loans, usually two-week loans with annual percentage rates often above 400 percent, and auto-title loans, typically one-month loans with rates above 100 percent and secured by the borrower's vehicle. The law caps all covered loans at a 36 percent annual rate.

That limit "did do a great deal of good on the products that it covered," Holly Petraeus, the Consumer Financial Protection Bureau's head of service member affairs, said in an interview. "But there are a lot of products that it doesn't cover."

Representatives from payday and other high-cost lenders said they follow the law. Some defended the proliferation of new products as helpful to consumers.

A 400 Percent Loan

In June 2011, when Levon Tyler, a 37-year-old staff sergeant in the Marines, walked into Smart Choice Title Loans in Columbia, S.C., it was the first time he'd ever gone to such a place, he said. But his bills were mounting. He needed cash right away.

Smart Choice agreed to lend him $1,600. In return, Tyler handed over the title to his 1998 Ford SUV and a copy of his keys. Tyler recalled the saleswoman telling him he'd probably be able to pay off the loan in a year. He said he did not scrutinize the contract he signed that day.

If he had, Tyler would have seen that in exchange for that $1,600, he'd agreed to pay a total of $17,228 over two and a half years. The loan's annual percentage rate, which includes interest and fees, was 400 percent.

Tyler said he provided his military ID when he got the loan. But even with an annual rate as high as a typical payday loan, the Military Lending Act didn't apply. The law limits the interest rate of title loans — but only those that have a term of six months or less.

In South Carolina, almost no loans fit that definition, said Sue Berkowitz, director of the nonprofit South Carolina Appleseed Legal Justice Center. The reason? Ten years ago, the state legislature passed consumer protections for short-term auto-title loans. In response, lenders simply lengthened the duration of their loans.

Today, plenty of payday and auto-title lenders cluster near Fort Jackson, an army base in Columbia, legally peddling high-cost loans to the more than 36,000 soldiers who receive basic training there each year.

Tyler's loan showcases other examples of lenders' ingenuity. Attached to his contract was an addendum that offered a "Summer Fun Program Payoff." While the loan's official term was 32 months, putting it outside both South Carolina's regulations and the Military Lending Act, the "Summer Fun" option allowed Tyler to pay off the loan in a single month. If he did so, he'd pay an annual rate of 110 percent, the addendum said.

Michael Agostinelli, the chief executive of Smart Choice's parent company, American Life Enterprises, told ProPublica he wants his customers to pay off their loans early. "They're meant to be short-term loans," he said. He also said that customers who pay on time get "a big discount." In Tyler's case, he would have paid an annual rate of 192 percent if he had made all his payments on time.

But Tyler fell behind after only a couple of payments. Less than five months after he took out the loan, a repo company came in the middle of the night to take his car. Three weeks later, it was sold at auction.

"This was something new, and I will never do it again," Tyler said. "I don't care what type of spot I get in."

American Life Enterprises companies operate nine title-lending branches in Nevada and South Carolina. Agostinelli said loans to members of the military are rare for his companies but that service members might go to a title lender for the same reason anybody else does: They need money immediately and discreetly.

Loans similar to the one Tyler took out are broadly and legally available from stores and over the Internet. QC Holdings, Advance America, Cash America and Ace Cash Express — all among the country's largest payday lenders — offer loans that fall outside the definitions of the Military Lending Act, which defined a payday loan as lasting three months or less.

The annual rates can be sky high, such as those offered by Ace Cash Express in Texas, where a five-month loan for $400 comes with an annual rate of 585 percent, according to the company's website.

Ace Cash is among a number of payday lenders just outside the gates of Lackland Air Force Base in San Antonio, and it has four stores within three miles of Fort Hood in Texas.

A 2012 report on the Military Lending Act by the Consumer Federation of America found there had been no drop in the number of payday lenders around Fort Hood since the 2006 law went into effect.

Amy Cantu of the Community Financial Services Association of America, which represents the payday industry, said payday lenders are careful to screen out service members for their short-term products. But she acknowledged that payday companies may provide soldiers and their families with other types of loans. "We welcome more products in the market," she said of the trend of payday lenders increasingly offering longer-term loans. "Options are good for consumers."

Earned a Purple Heart, Lost a Car

Some lenders apparently haven't bothered to change their loan products in response to the law.

A 2011 federal class-action suit filed in Georgia's Middle District alleges that one of the largest auto-title lenders in the country, Community Loans of America, has been flouting the law. The suit names among its plaintiffs three soldiers who took out what appeared to be classic title loans. All agreed to pay an annual rate of around 150 percent for a 30-day loan. All had trouble repaying, according to the suit. One, an Army staff sergeant and Purple Heart recipient, lost his car. The other two managed to pay interest but almost none of the principal on their loans for several months.

The company was fully aware that its customers were soldiers, because they presented their military identifications, said Roy Barnes, a former governor of Georgia who is representing the plaintiffs.

Community Loans, which boasts more than 900 locations nationwide, argued in court that the transactions were not covered by the Military Lending Act because they weren't loans but sales. Here's how Community Loans said the transaction worked: The soldiers sold their vehicles to the company while retaining the option to buy back the cars — for a higher price. In early 2012, the judge rejected that argument. The case is ongoing.

Community Loans, which did not respond to numerous calls and emails, has been making loans to service members through businesses with various names.

Leading up to the gates of Fort Benning in Columbus, Ga., Victory Drive is crowded with lenders. Among them is Georgia Auto Pawn, a Community Loans of America storefront where one of the plaintiffs in the class action, an Army master sergeant, took out his loan.

Just another half-mile down the road is a lender advertising "Signature Loans for the Military." The lender goes by the name of Title Credit Finance, but the parent company is Community Finance and Loans, which shares the same corporate address as Community Loans of America.

A billboard for Title Credit Finance promises to rescue borrowers: Showing a picture of a hamster on a wheel, it says, "Avoid the title pawn treadmill," referring to customers who get caught paying only interest month after month.

Title Credit Finance offers installment loans, a product which, as the company advertises, does seem to provide "CASH NOW The Smart Way" — at least when compared to a title loan. Interest rates tend to be lower — though still typically well above 36 percent. And instead of simply paying interest month upon month, the borrower pays down the loan's principal over time.

But the product comes with traps of its own. Installment lenders often load the loans with insurance products that can double the cost, and the companies thrive by persuading borrowers to use the product like a credit card. Customers can refinance the loan after only a few payments and borrow a little more. But those extra dollars typically come at a far higher cost than the annual rate listed on the contract.

At TitleMax, a title-lender with more than 700 stores in 12 states, soldiers who inquire about a title loan are directed to InstaLoan, TitleMax's sister company, which provides installment loans, said Suzanne Donovan of the nonprofit Step Up Savannah. A $2,475 installment loan made to a soldier at Fort Stewart near Savannah, Ga., in 2011 and reviewed by ProPublica, for example, carried a 43 percent annual rate over 14 months — but that rate effectively soared to 80 percent when the insurance products were included. To get the loan, the soldier surrendered the title to his car. TMX Finance, the parent company of both TitleMax and InstaLoan, did not respond to multiple calls and emails seeking comment.

Another lender on Victory Drive is the publicly traded World Finance, one of the country's largest installment lenders, with a market capitalization of about $1 billion and more than 1,000 stores around the country. World was the subject of an investigation by ProPublica and Marketplace earlier this week. Of World's loans, about 5 percent, approximately 40,000 loans, are made to service members or their families, according to the company. Active-duty military personnel and their dependents comprise less than 1 percent of the U.S. population, according to the Defense Department.

Bill Himpler, the executive vice president of the American Financial Services Association, which represents installment lenders, said the industry's products had been rightfully excluded from the Military Lending Act. The Pentagon had done a good job preserving soldiers' access to affordable credit, he said, and only "tweaking the regulations here or there to tighten them up" was necessary.

The Commander and the Collectors

It's not known how many service members have high-priced loans. The Pentagon says it intends to conduct a survey on the matter soon and issue a report by the end of the year.

But some commanders, such as Capt. Brandon Archuleta, say that dealing with soldiers' financial problems is simply part of being an officer. Archuleta, who has commanded soldiers in Iraq and Afghanistan, recalled fielding numerous calls from lenders trying to track down soldiers who were delinquent on debts.

"In the last 12 years we've seen military officers as war fighters, we've seen them as diplomats, we've seen them as scholars," Archuleta said. "But what we don't see is the officer as social worker, financial adviser and personal caregiver."

While some soldiers seek help from their superior officers, many don't. That's because debt troubles can result in soldiers losing their security clearance.

"Instead of trying to negotiate this with their command structure, the service member will typically end up refinancing," said Michael Hayden, director of government relations for the Military Officers Association of America and a retired Air Force colonel. "It'll typically start out with some type of small crisis. And then the real crisis is just how you get that loan paid off."

Soldiers who hide their debt often forego the military's special aid options. Army Emergency Relief and the Navy-Marine Corps Relief Society offer zero-interest loans. But in seeking that help, a soldier risks alerting the commanding officer to his or her troubles, particularly if the sum needed is a large one.

Russell Putnam, a legal-assistance attorney at Fort Stewart, says he often finds himself making a simple argument to soldiers: "A zero percent loan sure as heck beats a 36 percent plus or a 25 percent plus loan."

From our partners at Marketplace:

IRS Office That Targeted Tea Party Also Disclosed Confidential Docs From Conservative Groups

2013-05-13T17:40:08-05:00

by Kim Barker and Justin Elliott

May 20: Listen to ProPublica editor-in-chief Steve Engelberg talk to Kim Barker in a podcast about this story.

May 17: This post has been updated.

***

The same IRS office that deliberately targeted conservative groups applying for tax-exempt status in the run-up to the 2012 election released nine pending confidential applications of conservative groups to ProPublica late last year.

The IRS did not respond to requests Monday following up about that release, and whether it had determined how the applications were sent to ProPublica.

In response to a request for the applications for 67 different nonprofits last November, the Cincinnati office of the IRS sent ProPublica applications or documentation for 31 groups. Nine of those applications had not yet been approved—meaning they were not supposed to be made public. (We made six of those public, after redacting their financial information, deeming that they were newsworthy.)

On Friday, Lois Lerner, the head of the division on tax-exempt organizations, apologized to Tea Party and other conservative groups because the IRS’ Cincinnati office had unfairly targeted them. Tea Party groups had complained in early 2012 that they were being sent overly intrusive questionnaires in response to their applications.

That scrutiny appears to have gone beyond Tea Party groups to applicants saying they wanted to educate the public to “make America a better place to live” or that criticized how the country was being run, according to a draft audit cited by many outlets. The full audit, by the Treasury Department’s inspector general for tax administration, will reportedly be released this week. (ProPublica was not contacted by the inspector general’s office.) (UPDATE May 14: The audit has been released.)

Before the 2012 election, ProPublica devoted months to showing how dozens of social-welfare nonprofits had misled the IRS about their political activity on their applications and tax returns. Social-welfare nonprofits are allowed to spend money to influence elections, as long as their primary purpose is improving social welfare. Unlike super PACs and regular political action committees, they do not have to identify their donors.

In 2012, nonprofits that didn’t have to report their donors poured an unprecedented $322 million into the election. Much of that money — 84 percent — came from conservative groups.

As part of its reporting, ProPublica regularly requested applications from the IRS’s Cincinnati office, which is responsible for reviewing applications from nonprofits.

Social welfare nonprofits are not required to apply to the IRS to operate. Many politically active new conservative groups apply anyway. Getting IRS approval can help with donations and help insulate groups from further scrutiny. Many politically active new liberal nonprofits have not applied.

Applications become public only after the IRS approves a group’s tax-exempt status.

On Nov. 15, 2012, ProPublica requested the applications of 67 nonprofits, all of which had spent money on the 2012 elections. (Because no social welfare groups with Tea Party in their names spent money on the election, ProPublica did not at that point request their applications. We had requested the Tea Party applications earlier, after the groups first complained about being singled out by the IRS. In response, the IRS said it could find no record of the tax-exempt status of those groups — typically how it responds to requests for unapproved applications.)

Just 13 days after ProPublica sent in its request, the IRS responded with the documents on 31 social welfare groups.

One of the applications the IRS released to ProPublica was from Crossroads GPS, the largest social-welfare nonprofit involved in the 2012 election. The group, started in part by GOP consultant Karl Rove, promised the IRS that any effort to influence elections would be “limited.” The group spent more than $70 million from anonymous donors in 2012.

Applications were sent to ProPublica from five other social welfare groups that had told the IRS that they wouldn’t spend money to sway elections. The other groups ended up spending more than $5 million related to the election, mainly to support Republican presidential candidate Mitt Romney. Much of that money was spent by the Arizona group Americans for Responsible Leadership. The remaining four groups that told the IRS they wouldn’t engage in political spending were Freedom Path, Rightchange.com II, America Is Not Stupid and A Better America Now.

The IRS also sent ProPublica the applications of three small conservative groups that told the agency that they would spend some money on politics: Citizen Awareness Project, the YG Network and SecureAmericaNow.org. (No unapproved applications from liberal groups were sent to ProPublica.)

The IRS cover letter sent with the documents was from the Cincinnati office, and signed by Cindy Thomas, listed as the manager for Exempt Organizations Determinations, whom a biography for a Cincinnati Bar Association meeting in January says has worked for the IRS for 35 years. (Thomas often signed the cover letters of responses to ProPublica requests.) The cover letter listed an IRS employee named Sophia Brown as the person to contact for more information about the records. We tried to contact both Thomas and Brown today but were unable to reach them.

After receiving the unapproved applications, ProPublica tried to determine why they had been sent. In emails, IRS spokespeople said ProPublica shouldn’t have received them.

“It has come to our attention that you are in receipt of application materials of organizations that have not been recognized by the IRS as tax-exempt,” wrote one spokeswoman, Michelle Eldridge. She cited a law saying that publishing unauthorized returns or return information was a felony punishable by a fine of up to $5,000 and imprisonment of up to five years, or both.

In response, ProPublica’s then-general manager and now president, Richard Tofel, said, "ProPublica believes that the information we are publishing is not barred by the statute cited by the IRS, and it is clear to us that there is a strong First Amendment interest in its publication.”

ProPublica also redacted parts of the application to omit financial information.

Jonathan Collegio, a spokesman for Crossroads GPS, declined to comment today on whether he thought the IRS’s release of the group’s application could have been linked to recent news that the Cincinnati office was targeting conservative groups.

Last December, Collegio wrote in an email: “As far as we know, the Crossroads application is still pending, in which case it seems that either you obtained whatever document you have illegally, or that it has been approved.”

This year, the IRS appears to have changed the office that responds to requests for nonprofits’ applications. Previously, the IRS asked journalists to fax requests to a number with a 513 area code — which includes Cincinnati. ProPublica sent a request by fax on Feb. 5 to the Ohio area code. On March 13, that request was answered by David Fish, a director of Exempt Organizations Guidance, in Washington, D.C.

In early April, a ProPublica reporter’s request to the Ohio fax number bounced back. An IRS spokesman said at the time the number had changed “recently.” The new fax number begins with 202, the area code for Washington, D.C.

Update: Testifying before a House committee Friday, former acting IRS Commissioner Steven Miller said that the disclosure of unapproved applications of conservative nonprofits to ProPublica last year, as well as the separate disclosure of confidential documents of the National Organization for Marriage, was “inadvertent.” Miller also mentioned that there had been discipline in one of the cases because procedures had not been followed.

We followed up on the issue, and the IRS sent this statement:

“When these two issues were previously raised concerning the potential unauthorized disclosures of 501(c)(4) application information, we immediately referred these cases to TIGTA [Treasury Inspector General for Tax Administration] for a comprehensive review. In both instances, TIGTA found these instances to be inadvertent and unintentional disclosures by the employees involved.”

The IRS did not respond to questions on who had been disciplined and how. TIGTA did not respond to requests for comment.

‘Act of Congress’ Stresses Hopeful Creation of Dodd-Frank, Omits Grim Ending

2013-05-10T17:08:09-05:00

by Jesse Eisinger

This was co-published with The Washington Post.

President Obama signed the Dodd-Frank financial reform law in July 2010, hailing it as an overhaul to prevent the kind of crisis that hit the world economy in 2008 and one of the signature achievements of his first term. Almost three years later, much of the big stuff the law calls for is on hold, under legal and legislative assault, or still working its way through the regulatory intestines. According to a law firm that tracks the legislation, only 38 percent of the 398 Dodd-Frank rules have been imposed, while regulators haven't yet publicly put forward versions of almost a third of them.

Is this the face of success? A new book, "Act of Congress," by Robert Kaiser, an associate editor and senior correspondent for The Washington Post, gives that question a qualified yes. "The story of Dodd-Frank does demonstrate that Congress still canwork," he writes, "and it shows how, but only in extreme circumstances."

To a Beltway expert such as Kaiser, that a dysfunctional and hyperpartisan Congress passed such a sweeping bill constitutes a small miracle. He concludes that "the big banks and Wall Street institutions never gave up trying to shape the bill to serve their interests, but that they had little success." As former Massachusetts Congressman Barney Frank, whose name is on the bill, says: "Money is influential [in Congress], but votes will kick money's ass any time they come up against each other. . . . Public opinion drove that bill." At another point, Frank declares, "The big banks got nothing."

Kaiser's account reminds you of those fairy tales that end with the wedding and don't follow up to see how the prince and princess's married life turns out. "Act of Congress" doesn't cover what happened after the law's enactment. In large part because of the ongoing, messy aftermath, many students of finance don't see Dodd-Frank as much of a triumph at all. In the wake of this generation's worst global financial and economic crisis, Congress passed the bare minimum of what was necessary. Dodd-Frank did not restructure the financial industry. It did not remake the financial regulatory architecture. Instead, the law tinkered around the edges, increasing regulation for this, expanding the power for that. Congress left much of the toil to financial regulators with limited resources. Troublingly, this has given the banks another opportunity, out of the public eye, to wrest exemptions that emasculate the rules.

Kaiser's book is roughly divided into two parts. The first covers how the House version of the law, shepherded by Frank, came to be; the second half covers the work of then-Sen. Christopher Dodd of Connecticut in his chamber. The legislation is both men's capstone achievement, and both left Congress after it was passed.

The author has delivered a blow-by-blow account of the tawdry compromises, Republican intractability and factional fighting within the Democratic Party that went into making the law. Congress comes across as the nation's grandfather: antiquated, inconsistent, as slow-moving as it is dull-witted. The book is in part an elegy for the Congress — particularly the Senate — of yore, the Senate of Dodd's father, Thomas J. Dodd.

Kaiser repeatedly characterizes today's Congress as "dysfunctional." But he doesn't demonstrate that so much as he shows Republican obstructionism. The Democrats — Frank, Dodd and their staffs — repeatedly seek compromise with the other party. Dodd gives significant ground without ever having a true negotiating partner. Instead, he has Sen.Richard Shelby of Alabama, the ranking Republican on the Senate Banking Committee. Kaiser gives us a damning portrait of Shelby's evolution from a reasonable, though conservative, voice for a certain level of banking regulation into a partisan hack and the cat's paw of his extreme staffers. Shelby repeatedly flirts with working on the bill and then capriciously withdraws, unfairly denounces Dodd for not working in bipartisan fashion and assails the bill with inaccurate attacks.

And when the bill emerges from committee, Sen. Mitch McConnell of Kentucky, the Republican leader, moves to filibuster it, giving up only when some Republicans defect.

This isn't dysfunction so much as a demonstration of the Republican leadership's lack of interest in doing anything about a reckless and out-of-control financial system that gave the country such a terrible global crisis. More broadly, Kaiser's account once again shows how unserious the modern Republican Party is about policy, how beholden to special interests it is and how determined to not give any victories to the Democrats and a president it views as illegitimate.

With its focus on Congress, Kaiser's account underplays the work of financial industry lobbyists and the White House. Kaiser does point out that the financial industry employed 2,700 lobbyists (including 1,447 former government employees) to work against reform in 2009 and 2010, spending more than $750 million. By contrast, groups advocating reform to the system spent a paltry $5 million. But the author doesn't show us much actual lobbying. And given the modesty of the eventual law and the myriad delays in implementation, Frank's crowing that the banks got nothing for all of this dough rings false.

Obama White House officials, especially then-Treasury Secretary Timothy Geithner, play only bit parts in Kaiser's book. The White House created the template for the House version of the bill, which was "generally cautious," he writes. But then throughout the many months of negotiations, White House officials made only rare appearances. When the law was finally enacted, Dodd was angry that the Obama administration took so much credit. But since Kaiser hasn't focused much attention on the White House's contribution, it's hard to evaluate who has the better claim. According to other reports, Geithner and his staff played a large role, often working to blunt more radical reforms. In one case, the Treasury secretary personally lobbied against the Brown-Kaufman amendment, a truly transformative and dramatic proposal that would have set high capital requirements on banks and put limits on their size.

Frank is the star of this book. The congressman lives up to his reputation as brilliant and witty. But he is also a flawed boss who leaves to his staff the difficult job of bringing less brilliant colleagues around to his way of thinking. Dodd isn't nearly as interesting a character. If Dodd has a core ideology or set of principles, Kaiser didn't find them. Instead, Dodd wants to get something, anything, done — and it's important for that something to be bipartisan.

Kaiser enjoys pointing out the intellectual limitations of our nation's politicians, and we enjoy reading about them. At one point, Rep. Jeb Hensarling, a Republican from Texas, attacks what he thinks is a taxpayer-funded bank bailout fund. He likens it to his college fund, which he and his wife have "because we intend to send our children to college." The author writes slyly, "This bit of rhetorical wizardry seemed to please Hensarling." Like many Republican charges about Dodd-Frank, Hensarling's comparison was erroneous. The banks, not taxpayers, were going to pay for the fund. But his objection also made no sense. The fund was more like insurance. Buying fire insurance doesn't mean you are counting on your house to burn down.

By contrast, Frank understood the complexities of financial regulation. But perhaps being smart in this context wasn't such a good thing. Smart legislative and regulatory solutions may embrace flexibility and exemptions that banks can later exploit. Regulations that create clear, bright lines may seem simplistic and dumb. But such rules tie regulators' hands, freeing them from banking influence.

Dodd-Frank may have been too smart for its own good.

Nonprofit Explorer

2013-05-09T15:44:21-05:00

by Mike Tigas and Sisi Wei

Use our database to find almost 616,000 tax-exempt organizations and see details like their executive compensation, revenue and expenses, as well as download their tax filings going back as far as 2001.

Is Obama Delivering on His Promise of a “21st Century” Approach to Drugs?

2013-05-08T09:00:45-05:00

by Christie Thompson

When the Obama administration released its 2013 Drug Control Strategy recently, drug czar Gil Kerlikowske called it a “21^st century” approach to drug policy. “It should be a public health issue, not just a criminal justice issue,” he said.

The latest plan builds on Obama’s initial strategy outlined in 2010. Obama said then the U.S. needed “a new direction in drug policy,” and that “a well-crafted strategy is only as successful as its implementation.” Many reform advocates were hopeful the appointment of former Seattle Police Chief Kerlikowske as head of the Office of National Drug Control Policy signaled a shift in the long-lasting “war on drugs.”

But a government report released a day after the latest proposal questioned the office’s impact so far.

“As of March 2013, GAO’s analysis showed that of the five goals for which primary data on results are available, one shows progress and four show no progress,” the report by the Government Accountability Office found. For instance, the GAO noted that there’s actually been an increase in HIV transmissions among drug users and drug-related deaths, as well as no difference in the prevalence of drug use among teens.

Many public health experts say the administration deserves credit for increasing access to drug treatment. But others say despite an increase in funding for rehab, the administration has continued to push programs and policies built to punish drug users.

As the administration lays out its latest plan on a new approach to drugs, here’s look at what’s in it, and what they’ve done so far.

“Break the cycle of drug use, crime, delinquency and incarceration”

“While smart law enforcement efforts will always play a vital role in protecting communities from drug-related crime and violence,” the latest strategy says, “we cannot arrest our way out of the drug problem.”

FBI records indeed show a drop in drug arrests, from 1.8 million in 2007 to 1.5 million in 2011.

But overall, the government spends roughly the same proportion of the drug policy budget on law enforcement now as was spent during Bush’s final years in office. In Obama’s 2014 budget proposal, 38 percent is allocated for domestic drug law enforcement, while another 20 percent would be spent to crack down on drugs along U.S. borders and abroad.

The Obama administration has also renewed funding for controversial programs like the Justice Assistance Grant program, formerly known as Byrne Grants, which had been cut under President Bush. The funding created local drug task forces, which critics say were quota-driven and increased corruption and misconduct. Budget-minded conservatives like the Heritage Foundation also argued the grants hadn’t led to a decrease in crime. States like California and New York have used some funding from the program for treatment instead of enforcement.

The administration has made progress when it comes to overcrowding in prisons: One Department of Justice program gives states money to support research toward policymaking that reduces recidivism. Several state legislatures have independently lessened mandatory minimums, reformed parole policies, and passed other laws aimed at cutting the high cost of incarceration.

Obama also signed the Fair Sentencing Act in 2010, which ended a five-year mandatory minimum sentence for crack possession at the federal level, and lessened the sentencing disparity between crack and cocaine.

According to the Bureau of Justice Statistics, the number of inmates in state prisons dropped roughly two percent from 2010 to 2011. Seventy percent of that is from a decrease in California’s prison population, after the Supreme Court upheld an order for the state to reduce overcrowding.

But as a recent Congressional Research report highlights, the number of inmates in federal prisons continues to rise, increasing over three percent from 2010 to 2011. Over half the current federal prison population is drug offenders.

“Support alternatives to incarceration”

In his latest budget, the president is requesting $85 million to go toward drug courts, which some have pushed as an alternative to criminal trials. Since 1999, the number of drug courts has grown from just under 500 to 2,734 today. Drug courts allow for non-violent offenders to avoid being charged, or to have their convictions expunged and sentences waived after completion of a rehab program and passing regular drug tests. Proponents of the system say it allows non-violent drug offenders to serve their time in treatment, instead of in prison.

A 2011 GAO report found statistics suggest drug courts reduce recidivism, but there’s not enough data to fully assess their effectiveness.

Some critics argue drug courts still fall short, by taking a criminal justice approach to a public health problem.

“Increase addiction treatment services”

Obama has indeed repeatedly increased funding for addiction treatment. He proposed $9 billion in his latest budget, up 18 percent from 2012.

Despite that, only 1 in 10 of the 21.6 million Americans in need of drug or alcohol addiction treatment received it in 2011. The number of people receiving treatment has stayed roughly the same since 2002.

The treatment gap should narrow as Obamacare goes into effect: Roughly five million more Americans currently facing drug addictions will soon have insurance coverage for treatment. “That’s the biggest expansion of treatment in 40 years, and maybe in the history of the U.S., ” said public health professor Keith Humphreys, who has served as a policy advisor to the ONDCP.

But a recent Associated Press analysis said current clinics will be overwhelmed by the new demand for treatment. State-level budget cuts have hit organizations hard, and treatment centers in over two-thirds of states are at or close to 100 percent capacity.

ONDCP spokesperson Rafael Lematire said the administration’s latest plan calls for an increase in the number of health care workers to treat newly insured patients.

“Review laws and regulations that impede recovery from addiction”

The latest drug strategy highlights the need to reduce “collateral consequences” (barriers to public benefits, employment and other opportunities) for those convicted of drug crimes. But Obama has little leverage on those issues, which are mostly decided on the state and local levels. For example, while HUD has encouraged public housing authorities to not disqualify former drug offenders from receiving public housing or Section 8 vouchers, it’s up to each city housing authority to determine their own rules.

“While we encourage housing authorities to give ex-offenders a second chance, the decision to admit or deny to public housing remains with the housing authorities,” said HUD spokeswoman Donna White.

Obama’s administration has not announced any plans to address the 1996 federal ban on food stamps or cash assistance for those convicted of drug felonies. Most states have opted out of or amended the law.

“Reduce drug-induced deaths”

The GAO noted that drug-induced deaths and emergency room visits increased from 2009 to 2010. Much of that is likely due to pharmaceutical abuse, which contributes to more accidental overdose deaths than illegal drugs or alcohol.

In 2011, the government released a plan to crack down on the abuse of prescription drugs. There’s little current data on overdose deaths, but recent studies have indeed noted a drop in prescription drug abuse.

Advocates have praised Obama's decision to endorse increasing access to emergency drug Naloxone, which can reverse opioid overdoses. Some lawmakers have criticized that position, saying it essentially encourages drug abuse.

In 2009, Obama also attempted to end the federal ban on funding for clean needle exchange programs, but Congress reversed the decision.

“Curtail illicit drug consumption in America”

The GAO report notes that the prevalence of drug use among teens and young adults has stayed the same since 2009. “With the exception of marijuana use, illicit drug use is trending down, specially prescription drug abuse and use of cocaine, hallucinogens, inhalants, and methamphetamine,” said ONDCP spokesperson Lemaitre. Research cited in the GAO report suggests the increase in marijuana use is tied to a decreased perception of risk.

Obama remains staunchly opposed to legalization, but it’s unclear how hard the administration plans to come down on states loosening marijuana laws. Obama has overseen far more medical marijuana raids than under the Bush administration. For states that have legalized pot, Attorney General Eric Holder said he intends to “enforce federal law”, though Obama said he had “bigger fish to fry.” The Department of Justice said it is still reviewing the latest laws.

Everything We Know About What’s Happened Under Sequestration

2013-05-07T08:45:00-05:00

by Theodoric Meyer

We’ve updated our sequestration explainer to reflect new developments. It was originally published on April 11, 2013.

When the annual White House Easter Egg Hunt faced cancellation this year due to the package of mandatory budget cuts known as sequestration, the National Park Service kicked into high gear. It rescued the event — held since 1878 — with money from “corporate sponsors and the sale of commemorative wooden eggs,” according to the Washington Post.

The nation’s airline passengers also caught a break last month when Congress passed (and President Obama quickly signed) a bill allowing the Federal Aviation Administration to shift some funds and halt the furloughs of air traffic controllers that had been blamed for long flight delays around the country.

But other programs haven’t been so lucky. Children in Indiana have been cut from the federally funded Head Start preschool program, and one Head Start program in Maine is being cut altogether. Furloughs have begun for employees of agencies from the U.S. Park Police to the Environmental Protection Agency. And cuts to Medicare have forced cancer clinics to turn away thousands of patients who are being treated with drugs the clinics can no longer afford.

We’ve taken a look at what’s actually happened in the two months since sequestration took effect.

Remind me, what is sequestration again?

Remember the clash over the debt ceiling back in 2011?

When Republicans and Obama struck a deal to raise it, they created a “super committee” of six Democrats and six Republicans and gave them three and a half months to hash out $1.2 trillion worth of cuts to the federal budget over the next decade. If they failed, a package of automatic cuts designed to slash funding to programs dear to both parties (military spending, in the Republicans’ case, and Medicare and other domestic programs in the Democrats’) would go into effect on Jan. 1, 2013.

Needless to say, the super committee failed, leading to the cuts we’re seeing now.

How does this fit in with the “fiscal cliff”?

Sequestration was one element of the so-called “fiscal cliff,” which also included a number of other spending cuts and tax increases. Congress passed a last-minute deal Jan. 1 to blunt the cliff’s impact, which included pushing back the effective date for sequestration to March 1. While Obama and members of Congress spoke out against sequestration in February — Senate Democrats announced a plan to put it off for another 10 months — those efforts failed to stop the cuts.

So what’s happened since March 1?

The indiscriminate cuts affected a wide range of federal programs and departments, making them difficult to track. (Even the White House struggled to explain exactly which programs they’d hit while it was denouncing them.) Jay Carney, the White House press secretary, told reporters Feb. 28 that sequestration would have “a rolling impact, an effect that will build and build and build.”

Congress passed a bill, signed by Obama on March 26, to spare a few programs from cuts this year, including an infant nutrition program, the nuclear weapons program and funding for security at U.S. embassies abroad — a sensitive area since the attacks in Benghazi, Libya, last September. The bill also gave some agencies, including the Pentagon, more flexibility in carrying out the sequester. And last week, Congress quickly passed (and Obama signed) a bill allowing the F.A.A. to scrap its furloughs of air traffic controllers, which had been blamed for long flight delays. But neither bill reduced the total amount the government is required to cut — $85 billion, or about 2.3 percent of the $3.6 trillion federal budget — by the end of the fiscal year in October.

Gotcha. What has all this done to the economy?

The Congressional Budget Office estimates sequestration will cost around 750,000 jobs in total, and forecasters think it could reduce economic growth by half a percentage point this year. But two months into sequestration, the effects are difficult to see. The economy added a relatively respectable 165,000 jobs in April, the Labor Department reported (though the federal government shed 8,000 jobs during the same period). And defense contractors like Lockheed Martin and Northrop Grumman, which warned that the sequester would lead to layoffs, have seen only a slight decline in their business.

Indeed, there’s at least one slice of the workforce that seems to be benefitting from sequestration: Washington lawyers. Contractors short on cash have hired attorneys to help them restructure loan payments.

Do we know any more about what’s been affected?

Yes. Sequestration is still playing out, but here’s what we know has happened so far:

Congress:

While lawmakers’ salaries are exempt from cuts, sequestration hasn’t spared congressional offices, which have had to slash spending by 8.2 percent. “Magazine subscriptions have been canceled,” the Washington Post reported. “Constituents are getting e-mail instead of snail mail. Invoices are getting a second look.” Sequestration has also cut into funding for the overseas fact-finding trips lawmakers often take, known as “codels.” House Speaker John A. Boehner, a Republican, has banned his caucus from using military aircraft for codels.

The White House:

While the egg hunt was saved, the White House announced in March that it would stop giving tours due to sequestration. (Republicans criticized the decision, with Rep. James Lankford of Oklahoma calling it “a dramatic overreaction.”) The White House has also furloughed 480 Office of Management and Budget staffers, and the president will voluntarily return 5 percent of his salary. Sam Kass, the assistant White House chef, has said he is also being furloughed. But Roll Call reported that the White House — which spent “more than a month of dodging questions” about the effects of sequestration on West Wing staffers —seems to have been spared from deep cuts.

Federal Agencies:

A few agencies, such as Department of Veterans Affairs, are mostly exempt from the sequester.

But the budget cuts have hit most others, sometimes with unpredictable consequences. After sequestration forced Yellowstone National Park to cut $1.75 million from its $35 million budget, the park — run by the National Park Service — trimmed its payroll and decided to cut back on snowplowing, which would delay the park’s opening. Plowing was saved only when the Cody and Jackson Hole, Wyo., chambers of commerce, fearing the economic impact of a late park opening, kicked in $170,000.

In Washington, agency after agency is planning to furlough its employees. “The Department of Housing and Urban Development,” the Washington Post reported, “will shut down for seven days starting in May, after concluding that staggering furloughs for 9,000 employees would create too much paperwork.” The Internal Revenue Service will also shut down almost entirely on furlough days. And Department of Labor employees have already started taking their furlough days, which they can do a half-day at a time.

(The Justice Department and the State Department, however, have managed to avoid furloughs.)

The Department of Labor is also planning to lay off 30 of the 74 lawyers it hired to work through a backlog of mine-safety citations that are under appeal. The department had hired the lawyers after a 2010 explosion at a mine run by a company that had received many such citations but fought them, preventing regulatory action against it. The move will save the Labor Department $2.1 million.

And while air traffic controllers won’t be furloughed, it’s unclear whether the FAA will follow through on its plans to close 149 airport control towers, most of them at rural airports. New Jersey officials, for instance, remain uncertain whether the Trenton, N.J., airport tower will be closed or receive a reprieve.

Meanwhile, IRS furloughs have the potential to be counterproductive. Treasury Secretary Jacob J. Lew told a House Appropriations subcommittee in April that the cuts would lead the IRS to answer fewer calls and take longer to respond to taxpayer questions.

“It will also lead to fewer enforcement actions and reduce revenue collection,” Lew said — which could cost the government money rather than saving it.

The Pentagon:

Despite the bill Obama signed in March giving the Pentagon more flexibility in carrying out the sequester, it still must cut $41 billion from its budget this year, which Gen. Martin E. Dempsey, the chairman of the Joint Chiefs of Staff, described as “the steepest decline in our budget ever.” (The Pentagon has been asked to cut more before, but never halfway through the fiscal year.)

Hundreds of thousands of civilian Defense Department employees will likely have to take 14 furlough days by October, though it’s unclear which branches will face them. Defense Secretary Chuck Hagel has said that everything from salaries and benefits to the number of generals and admirals could be cut.

Medicare:

Cancer clinics in March began turning away thousands of Medicare patients being treated with expensive chemotherapy drugs, which the clinics say they can no longer afford. “Legislators meant to partially shield Medicare from the automatic budget cuts triggered by the sequester, limiting the program to a 2 percent reduction — a fraction of the cuts seen by other federal programs,” the Washington Post’s Sarah Kliff reported. “But oncologists say the cut is unexpectedly damaging for cancer patients because of the way those treatments are covered.” Medicare has said that it doesn’t have the power to restore funding for the drugs. (Rep. Renee Ellmers, a North Carolina Republican, introduced a bill that would reverse the cuts, but the legislation remains in committee.)

Education:

The federally funded Head Start early education program is expected to lose around 70,000 of its roughly 1 million slots due to sequestration. Those cuts have already hit children in Indiana, where Head Start programs in two towns resorted to a lottery system in March to determine which kids could remain. A Head Start program in Birmingham, Ala., will shut down for 10 weeks this summer, and one in Pejebscot, Maine, will close for good. Other Head Start programs — such as one in Passaic County, N.J., that expects to lose about $200,000 of its roughly $4 million in federal funding — won’t have to wrestle with cuts until the fall. A program in Colorado Springs faced with cutting 142 spots this fall had children decorate empty chairs that it has sold for $500 apiece to raise money. It has saved two spots so far.

The Head Start cuts have come even as the president called for a massive expansion of preschool.

Sequestration is also hitting schools on Indian reservations, where federal funds can make up 60 percent of a school’s budget. The Fort Peck Indian reservation in Montana “can’t hire a reading teacher in an elementary school where more than half the students do not read or write at grade level,” according to the Washington Post. Summer school may be cancelled. And the Red Lake reservation in Minnesota — where a shooting at the high school left seven people dead in 2005 — has cut its security staff, as well as course offerings and support staff, in response to sequestration.

Scientific Research:

The sequester has also hacked away at funding for scientific research. The National Science Foundation expects to make 1,000 fewer grants this year. Vanderbilt University in Nashville, Tenn., will admit fewer science and engineering graduate students. And the directors of the Department of Energy’s National Laboratories expect that the “drop in funding will force us to cancel all new programs and research initiatives, probably for at least two years.”

More than 50 Nobel laureates have signed a letter protesting the cuts, which Hunter R. Rawlings III, the president of the Association of American Universities, has also decried. “To put it kindly, this is an irrational approach to deficit reduction,” he told a Senate committee in February. “To put it not so kindly, it is just plain stupid.”

Court System:

Sequestration has cut the federal judiciary’s budget by almost $350 million for the 2013 fiscal year, which is already half over. In Massachusetts, public defenders will have to take 16½ furlough days — which could lead to a backlog in the court system — and funding for drug and mental health services will be cut by 20 percent. In Dallas, the public defender’s office will shut down every Friday for the next six months. In California, the U.S. District Court of the Northern District will shutter its courtrooms in San Francisco, San Jose and Eureka on the first Friday of every month through September. And in Nebraska, U.S. District Court Judge Richard Kopf said he is “seriously considering” dismissing some criminal cases.

The sequester also has the potential to impact terrorism cases.

Public defenders representing Sulaiman Abu Ghaith, a former Al Qaeda spokesman and a son-in-law of Osama bin Laden charged with conspiring to kill Americans, have requested that a federal judge push back the trial date because of furloughs in their office. “It’s extremely troublesome to contemplate the possibility of a case of this nature being delayed because of sequestration,” Judge Lewis A. Kaplan said in Federal District Court in Manhattan. “Let me say only that — stunning.”

And the Massachusetts public defender’s office, which is representing Boston Marathon bombing suspect Dzhokhar Tsarnaev, still has to deal with furloughs. "No one knows exactly how it will affect things," a federal court official told ABC News.

Wow. Anything else?

Sequestration has led a number of states to cut their emergency unemployment benefits. Programs designed to help victims of domestic violence have had their funding slashed. And less federal funding has meant to cuts to Meals on Wheels programs in places such as Roanoke, Va, which recently started a waiting list. "We've never had a waiting list," Michele Daley, the director of nutrition services at the Local Office on Aging, which administers Meals on Wheels in four Virginia counties, told the Huffington Post. "This is the first time ever and it's a direct result of sequestration."

Has anybody beside the FAA beaten sequestration?

Yes. Weeks before the sequester hit, Agriculture Secretary Tom Vilsack started describing how his department would have to furlough meat inspectors if the cuts went through, forcing meat-processing plants to shut down on furlough days. His talk convinced the meat inspectors’ union and other industry heavyweights to start lobbying. The National Cattlemen’s Beef Association, the National Chicken Council, the National Turkey Federation went to work, and the Senate ended up moving $55 million from other Agriculture Department programs to the inspectors.

Read David A. Fahrenthold and Lisa Rein’s excellent Washington Post story for more details.

The pet industry also successfully lobbied (yes, the pet industry has a lobbying group) for the U.S. Fish and Wildlife Service to restore overtime and weekend inspections of commercial wildlife imports and exports, including exotic snakes, birds and lizards bound for American homes. But the decision may not be as silly as it sounds — the importers and exporters pay substantial fees for the inspections.

How can I keep up with the sequester?

Here are some great resources for tracking the overall impact:

Mother Jones has examples of how sequestration has played out in each of the 50 states.

The Washington Post is charting the sequester’s projected and actual impact on federal agencies.

Government Executive is tracking furloughs by department and agency.

We’ve compiled some of the best charts and graphics explaining the sequester.

Have you seen any good reporting, graphics or other resources on sequestration’s impact? Tweet us your recommendations with #muckreads.

Intern vs. Mayor: Battle Bares Bloomberg’s Argument for Secrecy

2013-05-06T12:30:13-05:00

by Sergio Hernandez, Special to ProPublica

In November 2010, I was earning $300 a week for The Village Voice, blogging about unemployed actors who moonlit as bed bug exterminators and a city project to make biofuel out of toilet water. One afternoon, then-Schools Chancellor Joel Klein stunned the city by suddenly resigning his post of eight years for a job at Rupert Murdoch's News Corporation.

The bigger shock that day was who New York City Mayor Michael Bloomberg chose as Klein's successor: Cathie Black, the Hearst Magazines chairwoman who, as far as anybody could tell, had never stepped foot in a public school, let alone knew how to run one (or the city's 1,700, for that matter).

The announcement sparked fierce criticism among parents, educators, politicians and the city's press corps.

So I fired off a routine Freedom of Information request to the mayor's office, seeking emails between Black, Bloomberg and their staffs.

When the emails were finally released last week, after a two-year legal battle, they revealed a desperate public relations campaign in which city officials tried to rally support from prominent women — including Oprah Winfrey, Gloria Steinem, Caroline Kennedy, and Bette Midler — to champion Black's appointment. (I'll admit: never in a million years did I expect my work to result in stories containing the sentence, "Ms. Winfrey couldn't be reached for comment.") In the end, the emails were amusing, slightly enlightening, but largely innocuous.

Which is why it's so puzzling that the city fought all the way to the state's highest court to block their release. Cathie Black resigned as schools chancellor after just 95 days on the job. The case to keep her emails secret would last more than six times as long.

If I hadn't had high-powered help, the city would surely have won, and quickly. The city initially denied my request and, after I had exhausted an administrative appeals process, John Cook — now the editor of Gawker — put me in touch with a media law clinic at Yale Law School.

The Bulldogs and Elizabeth Wolstein — a partner at Schlam, Stone & Dolan who once supervised appeals for the U.S. Attorney in the U.S. Court of Appeals for the Second Circuit — agreed to take the case, pro bono, propelling a fresh-out-of-NYU, semi-employed, then-21-year-old journalist into a courtroom battle with New York's billionaire, third-term mayor.

We filed our lawsuit in May 2011 and won a judgment from the state's Supreme Court — New York's trial court — that Thanksgiving. The city appealed, drawing the process out another two years.

Plenty has been written about the actual emails since they were finally released last Thursday. The documents (and the protracted legal dispute surrounding their release) led to two articles in The New York Times, an article and an editorial in the New York Post, and stories in the New York Daily News, the Associated Press, WNYC, the Village Voice, the New York Observer, The Daily Beast, Gawker, Gothamist, Metro, New York magazine, NY1, and The Wall Street Journal.

But less has been written about why the city fought so hard — it spent more than 180 hours, totaling more than $25,000 in staff time — to keep the emails secret. Susan Paulson, a senior attorney for the city's Law Department who handled the appeal, has given some clues.

Last Halloween, Paulson showed up to the courthouse on East 25th Street and Madison Avenue. The five-judge panels in this courthouse hear appeals for civil and criminal cases in Manhattan and the Bronx, and at 3:10 that afternoon, Paulson took to the lectern and presented the city's argument.

While Black was not yet on the government's payroll when the emails in question were written, she was nonetheless acting as a "consultant" to the mayor, Paulson said, because she was acting at his direction to further one of his policy goals. What was that goal? Securing Black's own position on the government's payroll.

In her original order, trial court Judge Alice Schlesinger had minced no words, calling this argument "particularly specious" and "wholly devoid of merit." The five judges on the appellate panel also rejected the city's claim.

But the city persisted and tried to get a hearing in the state's highest court, the Court of Appeals, claiming the case now represented a novel and statewide issue.

I'd often been asked why I thought the city was fighting so doggedly to keep these emails secret. But without having seen them, it was difficult to say whether there was a sinister motive or a more legitimate reason.

While petitioning the Court of Appeals to take the case, the city began to make its policy concerns clearer. Disclosing communications with people who were appointed to, but had not yet taken, office would make it more difficult to lure good talent from the private sector, it argued. Of course, people considering public service know they are stepping under a public microscope.

There is also an interest, the argument goes, in allowing government officials some degree of privacy to do their work, so they can deliberate freely and candidly. That is the reason certain communications within and between government agencies are often exempt from disclosure under public transparency laws. These days, of course, much of that deliberation occurs electronically, creating a permanent record. Ardent transparency advocates often want those records open, too, arguing we shouldn't have any smoke-filled rooms — literal or virtual.

"The City believes that the principles permitting government employees to exchange opinions, advice and criticism freely and frankly, without the chilling prospect of public disclosure, should extend to individuals who have been elected or selected to public office but have not yet assumed office," Paulson wrote me — in an email, of course — answering a question for this article.

The question is where, exactly, to draw the line? Suppose the public backlash had forced Bloomberg to abandon hiring Black as chancellor, or that Black herself had withdrawn from the running. Could the emails have been kept secret merely because she had, at one point, been considered for the job? What, then, would prohibit an agency from withholding records of true public import by simply claiming that the Mayor was thinking about hiring John Doe to be his next Deputy Junior Assistant Something-or-Other someday?

While the city maintains it fought for the principle of free and candid communications, there's another theory as to why the mayor's office resisted disclosing these emails: It feared a precedent that would open the floodgates to release other ones that might be worse than embarrassing.

Public records laws rarely have much bite. And, except when disclosure has been advantageous to its goals, the Bloomberg administration has had a famously poor track record of respecting them. But they are still valuable tools for empowering public oversight. And sometimes, they even let David the lowly intern cut Goliaths like Bloomberg down to size.

Have You Held An Internship Recently? Help Us Investigate

2013-05-06T10:15:47-05:00

by Blair Hickman and Jeremy B. Merrill

May 10, 2013: This post has been corrected.

Since the financial crash, jobs have held a top spot in public discussion. But among all the employment talk, one sector of the workforce has consistently received relatively little attention: interns.

In the past few decades, the number of internships in the United States has ballooned. One recent study found that just over half of graduating college seniors had held some sort of internship. That’s more than double the rate another study found two decades ago.

But legal protection for interns, particularly those who are unpaid, hasn’t kept pace with this rapidly emerging workforce.

That’s why we’re turning our eyes to internships in the U.S.

There are six criteria that must be met for an internship in the for-profit sector to qualify to be unpaid under federal law. One of the key criteria is that the position must be of more benefit to the intern than of benefit to the company. Companies can’t just use interns to replace regular employees.

The Department of Labor may examine internships during investigations of an employer’s compliance with wage standards and record-keeping provisions of the Fair Labor Standards Act, according to a spokesperson.

But Dr. Philip Gardner, director of the Collegiate Employment Research Institute at Michigan State University, says the government’s enforcement efforts have been passive.

“You have to file a complaint for them to act,” he said. “The rules are there. But in the scheme of things, the [Department of Labor] wouldn’t spend a lot of time heading out to employers.”

The agency receives only a handful of complaints per year, said the spokesperson. As the New York Times has reported, a few states have also begun investigations and fined employers.

Ross Perlin, author of Intern Nation, said he’s heard mixed reports about how responsive the Department of Labor is to complaints.

“In fairness to the Department of Labor, they require political will to go after things like this,” he said. “My impression is that there are people there who get it. But they have issues around their budget and what they can do.”

“Do I think they could do more?” said Perlin. “Yes, ideally.”

In the past few years, unpaid interns have filed three class-action lawsuits against companies alleging the companies owe interns back pay, because the interns performed the same duties as employees.

So, how many interns are being employed in violation of federal guidelines? What role do colleges and universities play in placing them? What protections cover interns in cases of discrimination or abuse?

We’re launching an investigation to explore answers to some of these questions. And we want to hear your stories. If you've held an internship in the past three years, help us by filling out the form below.

We're most interested in internships held during 2013, but we welcome stories about internships that began as early as Spring 2010. We will publish these stories along with your employer’s name, but your name will remain confidential.

If you have an upcoming summer internship, sign up for an email alert here and we’ll remind you to submit your story in September. The same email listserv will also alert you to other ways to get involved in this investigation.

Correction: An earlier version of this post said the Department of Labor released a six-point unpaid internship test in April 2010. They actually released a fact sheet highlighting the test, which already existed.