News & Politics

Former Top McCain Staffer Urged Lois Lerner to Audit Non-Profits 'Until It Becomes Financially Ruinous'

In this April 9, 2013, file photo Sen. Carl Levin, D-Mich., left, talks with Sen. John McCain, R-Ariz., on Capitol Hill in Washington. A Senate investigative panel led by Levin and McCain has been reviewing the use of the social welfare groups for political causes for the past year. The lawmakers had planned a hearing on the subject but postponed it following the Internal Revenue Service disclosure, so it could examine the agency's handling of the tax-exempt reviews. The IRS has endured withering criticism for its scrutiny of conservative political groups during the 2012 elections. (AP Photo/J. Scott Applewhite, File)

Senator John McCain’s former staff director in 2013 urged top IRS officials — including then-director of exempt organizations Lois Lerner — to “audit so many [501 (c)(4) groups] that it becomes financially ruinous,” internal IRS documents obtained by Judicial Watch reveal. Lerner, for her part, said that it was “her job to oversee it all.”

Henry Kerner, who is currently special counsel for the United States Office of Special Counsel (OSC), made the shocking suggestion during an April 30, 2013, meeting between Kerner, Lerner, and other high-ranking IRS officials.

During the “marathon” meeting, Lerner and other IRS officials met with top staffers from the Senate Governmental Affairs Committee to discuss concerns raised by both Sen. Carl Levin (D-Mich.) and Sen. John McCain (R-Ariz.) that the IRS was not doing enough to rein in political advocacy groups in the wake of  the Supreme Court’s Citizens United decision.

McCain, who had been the chief sponsor of the McCain-Feingold Act, reviled the Citizens United decision because it overturned portions of the Act. He called it one of the “worst decisions I have ever seen.”

In addition to Kerner and Lerner, the April 30 meeting included Steve Miller, then chief of staff to IRS commissioner Nikole Flax and other IRS officials.

Judicial Watch has previously reported on the 2013 meeting, although the IRS had previously redacted key portions of the notes of the meeting.

From the now unredacted notes:

Henry Kerner asked how to get to the abuse of organizations claiming section 501 (c)(4) but designed to be primarily political. Lois Lerner said the system works, but not in real time. Henry Kerner noted that these organizations don’t disclose donors. Lois Lerner said that if they don’t meet the requirements, we can come in and revoke, but it doesn’t happen timely. Nan Marks said if the concern is that organizations engaging in this activity don’t disclose donors, then the system doesn’t work. Henry Kerner said that maybe the solution is to audit so many that it is financially ruinous. Nikole noted that we have budget constraints. Elise Bean suggested using the list of organizations that made independent expenditures. Lois Lerner said that it is her job to oversee it all, not just political campaign activity.

Following Judicial Watch’s 2015 report on the 2013 meeting, Senator McCain issued a statement decrying “false reports claiming that his office was somehow involved in IRS targeting of conservative groups.”

On May 10, 2013, ten days after the meeting, Lerner admitted that the IRS had a policy of improperly and deliberately delaying applications for tax-exempt status from conservative non-profit groups. Lerner only made the admission to preempt the Treasury inspector general’s impending report confirming the targeting.

That report revealed: “Early in Calendar Year 2010, the IRS began using inappropriate criteria to identify organizations applying for tax-exempt status” (e.g., lists of past and future donors). The illegal IRS reviews continued “for more than 18 months” and “delayed processing of targeted groups’ applications” in advance of the 2012 presidential election.

Judicial Watch uncovered evidence in April 2014 that Lerner was under intense pressure “from both Democrats in Congress and the Obama DOJ and FBI to prosecute and jail the groups the IRS was already improperly targeting.”

In discussing pressure from Senator Sheldon Whitehouse (Democrat-Rhode Island) to prosecute these “political groups,” Lerner admitted, “it is ALL about 501(c)(4) orgs and political activity.”

President Trump nominated Kerner to become special counsel at the OSC in May 2017. He was confirmed by the United States Senate in October 2017.

The OSC is a permanent independent federal investigative and prosecutorial agency whose primary mission “is the safeguarding of the merit system in federal employment by protecting employees and applicants from prohibited personnel practices (PPPs), especially reprisal for whistleblowing.”

In March of this year, Kerner determined that White House counselor Kellyanne Conway had violated the Hatch Act when she promoted Republican Roy Moore over Democrat Doug Jones in the Alabama special Senate election in two television interviews.

Kerner issued a statement saying: “Kellyanne Conway, one of President Donald Trump’s top advisers, violated federal law in two television interviews last year by using her White House position to weigh in on a political race.”