Sunday, March 27, 2011

Dumpster-diving, movie-watching, newspaper-reading, relentless ... IRS agents

Perhaps it is just a coincidence, but on each of the last two days I have read a story about prosecutions that began as vigilante, off-hours, side-projects by an enterprising (some would say over-zealous) IRS agent. The methods used in both cases are so similar, however, that coincidence seems impossible.

The first case is the Barry Bonds prosecution. Bonds is currently on trial for allegedly lying to a grand jury during its investigation of the Bay Area Laboratory Co-Operative, or BALCO, for supplying steroids to athletes such as Marion Jones. According to a recent New Yorker article by Ben McGrath (abstract only), the BALCO investigation started when an IRS agent named Jeff Novitsky "saw an article in a local ewspaper with the headline 'GETTING ATHLETES IN TUNE' and featuring a photograph of four burly men holding a former musician aloft." The former musician was Victor Conte, who had since become the executive director of BALCO.

Apparently Novitsky kept this article in his inner database of suspicious things warranting investigation. Because he supposedly recalled the article in 2000, shortly before the Sydney Olympics, "when a shot putter named C.J. Hunter tested positive, and was defended at a press conference" by Mr. Conte of BALCO.

In response, Agent Novitsky "conceived an after-hours stakeout scheme. Beginning in the summer of 2002, he devoted his Monday nights to combing through the dumpsters in the BALCO parking lot, looking for suspicious trash." He did this for nearly a year, eventually getting enough evidence—"empty syringe wrappers, correspondence from elite track-and-field athletes . . . an issue of the underground magazine Anabolic Insider"—to justify a search warrant.

But a search warrant for what? Remember, Mr. Novitsky was still an IRS agent. So he "was compelled to pursue a financial angle, even though his interest clearly lay in the drugs themselves and in their broader social implications." Thus Mr. Novitsky got a warrant to monitor Conte's email account, supposedly looking for references to Western Union transfers. And he subpoenaed bank records, finding what he thought were "abnormally large cash withdrawals and checks from NFL players deposited to Conte's personal account."

This eventually led to "an extensive raid on BALCO, involving more than twenty agents, some wearing flak jackets and carrying automatic weapons"—after all, who knew what roid-raging super-villains they might find inside the lab?

The direct prosecutorial outcome was miniscule, however: forty of the forty-two charges were dropped, and Conte eventually pleaded guilty to a money-laundering count in the amount of just a few hundred dollars—"a sum rarely, if ever, deemed worthy of federal prosecution," according to the probation office's sentencing recommendation.  Ultimately, Conte spent four months in minimum-security prison.  "It was the wrist slap heard round the world," Conte said.

Of course, the indirect consequences of Novitsky's crusade were much more serious.  Barry Bonds—the greatest hitter, and probably the greatest player, in baseball history by any objective standard—stands accused of a felony for lying during the investigation and finds his reputation destroyed. Marion Jones went to federal prison for lying during the BALCO investigation.  Et cetera. Nice work, Mr. Novitsky.


The second case is the prosecution of Charlie Engle for ... taking out a mortgage. Joe Nocera details the case in today's New York Times—read the article to get your daily dose of anti-government paranoia. Here are the highlights.

In the fall of 2006, Mr. Engle ran across the Sahara Desert in 111 days. The event was chronicled in a film financed and narrated by movie star Matt Damon. Unfortunately, ever-vigilant IRS special agent Robert Norlander happened to see the film, and it set off alarm bells inside his head.  As he told the grand jury, "Being the special agent that I am, I was wondering, how does a guy train for this because most people have to work from nine to five and it’s very difficult to train for this part-time.”

Apparently the IRS has a division of "special agents" that watches movies and wonders about things. But, to be fair, Mr. Norlander's wonderings aren't limited to film—as Nocera reports, "He also told the grand jurors that sometimes, when he sees somebody driving a Ferrari, he’ll check to see if they make enough money to afford it." The message: be careful what you do, be careful what you drive—there are special agents out there watching you … and wondering.

Anyhow, Mr. Norlander didn't just let his cinematic wonderings go to waste. He pulled up Norlander's tax returns. They showed substantial income, but low taxable income due to a large carry-forward tax loss. This is when Norlander took a page out of agent Novitsky's playbook and entered into the dumpster-diving surveillance stage of the vigilante-IRS-agent investigation. According to Nocera, "He mainly discovered that Mr. Engle lived modestly."

But Norlander would not give up so easily. He convinced his superiors "to send an attractive female undercover agent, Ellen Burrows, to meet Mr. Engle and see if she could get him to say something incriminating." Something, anything, incriminating!

At this point, you would be excused for exclaiming "un-fucking-believable!"  Here's the lesson though: if an attractive woman starts flirting with you, she's probably an IRS agent.  (An attractive woman has flirted with me just once in my life, and I married her. Unless this is a very long con, I do not believe she is affiliated with the IRS.)

The "something incriminating" that Mr. Engle blurted out was this: “I had a couple of good liar loans out there, you know, which my mortgage broker didn’t mind writing down, you know, that I was making four hundred thousand grand a year when he knew I wasn’t.”

Down goes Mr. Engle.  He is now in federal prison.


Tax cheats are everywhere. I want them taken down. But somehow the thought of IRS agents going through my trash—in their free time—and sending attractive women out to entrap me—based on nothing—scares the shit out of me.

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