Could the Case No One Is Talking About Be the One That Blows the Lid on the IRS Scandal?

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Because it is apparent that the Obama administration’s Justice Department is not going to even consider the idea of a special prosecutor in the IRS scandal, it leaves one to wonder if we will ever get to the bottom of the scandal?

But, something you won’t hear much about in the news is the lawsuit that was filed by Z-Street, a pro-Isreal organization, who filed for tax exempt status on December 29, 2009, and was told its application for tax exempt status was being delayed because “these cases are being sent to a special unit in the DC office to determine whether the organization’s activities contradict the Administration’s public policies.”

They then filed a lawsuit in August of 2010, alleging unlawful viewpoint discrimination, a First Amendment claim. The IRS tried several arguments to get the claim dismissed, all of which were dismissed by Washington DC federal district court Judge Ketanji Brown Jackson, who was appointed to the bench by President Obama. In her rulings, she noted that Z-Street was not suing to gain tax exempt status, but they were suing over “viewpoint discrimination,” based on what they had been told by IRS agent Diane Gentry about contradicting the Administration’s policies.

Judge Jackson gave the IRS until June 26, 2014 to respond to Z-Street. That deadline has now come and gone, so the case now enters the discovery phase of the process. This means that Z-Street can now subpoena IRS officials, put them under oath and ask them questions, as well as cross examine them closely. They can also subpoena documents and require they be produced.

According the the Jerusalum Post, this may be the case that helps blow the lid on the IRS scandal. The stated, “The Z-Street case may be what forces the IRS to pull aside its carefully contracted curtain and reveal how it made decisions regarding organizations deemed out of step with the current US administration.”

Interestingly enough, the Z-Street case can be very damaging to the IRS, in that its lawsuit was filed in August of 2010, which means the IRS was then under legal obligation to preserve records, which will all now know, from the House hearings, they have not done.

According the the Wall Street Journal’s Review and Outlook column these records must be preserved by law:

Under the Federal Rules of Civil Procedure and legal precedent, once the suit was filed the IRS was required to preserve all evidence relevant to the viewpoint-discrimination charge. That means that no matter what dog ate Lois Lerner’s hard drive or what the IRS habit was of recycling the tapes used to back up its email records of taxpayer information, it had a legal duty not to destroy the evidence in ongoing litigation.

In private white-collar cases, companies facing a lawsuit routinely operate under what is known as a “litigation hold,” instructing employees to affirmatively retain all documents related to the potential litigation. A failure to do that and any resulting document loss amounts to what is called “willful spoliation,” or deliberate destruction of evidence if any of the destroyed documents were potentially relevant to the litigation.

At the IRS, that requirement applied to all correspondence regarding Z Street, as well as to information related to the vetting of conservative groups whose applications for tax-exempt status were delayed during an election season. Instead, and incredibly, the IRS cancelled its contract with email-archiving firm Sonasoft shortly after Ms. Lerner’s computer “crash” in June 2011.

In the federal District of Columbia circuit where Z Street’s case is now pending, the operating legal obligation is that “negligent or reckless spoliation of evidence is an independent and actionable tort.” In a 2011 case a D.C. district court also noted that “Once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a ‘litigation hold’ to ensure the preservation of relevant documents.”

The government’s duty is equally pressing. “When the United States comes into court as a party in a civil suit, it is subject to the Federal Rules of Civil Procedure as any other litigant,” the Court of Federal Claims ruled in 2007. The responsibility to preserve evidence should have been a topic of conversation between the IRS chief counsel’s office and the Justice Department lawyers assigned to handle the Z Street case.

Because we now know that evidence was not persevered, due to the failure to properly recover emails from a computer crash, even when they could have done so from backup tapes, at the time, this could become a separate tort case, and opens up the door for judicial inquiry into the IRS destruction of evidence.

Of course, not surprisingly, this whole lawsuit has gotten very little media coverage, despite the potential major implications of it for the IRS.

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