Monday, March 5, 2012

TIGTA Report on IRS Undercover Operations (3/5/12)

In a report with many redactions, TIGTA has recently reviewed CI's undercover operations and made recommendations.  See TIGTA report titled Criminal Investigation Can Take Steps to Strengthen Oversight of Its Undercover Operations (Ref No. 2012-30-014 2/3/12), here.

Here are some excerpts:
Criminal Investigation’s (CI) primary mission is to serve the American public by investigating potential criminal violations of the Internal Revenue Code (I.R.C.) and related financial crimes in a manner that fosters confidence in the tax system and compliance with the law.  To accomplish its mission, CI uses undercover operations as an essential technique in the detection and investigation of criminal activity involving tax and money laundering offenses.  An undercover operation is a law enforcement technique whereby a special agent, acting under an assumed identity, infiltrates a suspected criminal organization without the knowledge of the perpetrators for the purpose of acquiring evidence of criminal activity.  CI has special agents who are trained in undercover techniques and are commonly referred to as undercover agents.  In addition to the undercover agent(s) assigned to an undercover operation, other CI personnel, i.e., cover agent, case agent, Supervisory Special Agent, and technical special agents, referred to as the undercover team, normally participate in the undercover operation. 
CI’s Office of Special Investigative Techniques has oversight responsibility for the approval and execution of all undercover operations.  This responsibility includes recommending corrective actions to CI officials to address areas for improvement.  Undercover operations are also subject to review during Review and Program Evaluations of each field office. 
During Fiscal Years (FY) 2008 through 2010, CI closed ***2(f)*** undercover operations that expended ***2(f)*** in confidential expenditures.  The majority of these undercover operations were classified as grand jury.  An undercover operation categorized as grand jury has had evidence brought before a Federal grand jury to seek an indictment against the target(s) of the investigation.  According to Rule 6(e) of the Federal Rules of Criminal Procedure, only those persons authorized have the ability to review evidence presented before the grand jury.[2]  The Assistant United States Attorney’s Office makes the final decision regarding individuals who are authorized access to grand jury information.  In addition, authorized persons are prohibited from disclosing, to those that do not have authorized access, any evidence presented to the grand jury.  Figure 1 provides information for the ***2(f)*** undercover operations by classification, i.e., grand jury or non-grand jury, and the amount of confidential expenditures.
[Table Omitted] 
Since Treasury Inspector General for Tax Administration (TIGTA) auditors are not authorized access to grand jury case information, we were limited to reviewing only non-grand jury undercover operations.  In addition, we did not have access to the case files for ***2(f)*** of the ***2(f)*** non‑grand jury undercover operations because the related investigations were ongoing.  Ultimately, of the ***2(f)*** closed undercover operations, ***2(F)*** with confidential expenditures totaling ***2(f)*** were made available for our review.  However, regardless of whether the classification of the undercover operation is grand jury or non‑grand jury, CI procedures for conducting the undercover operation are the same.  Because the procedures are the same, we believe our review of the ***2(f)*** non‑grand jury undercover operations allows us to make an assessment of CI’s undercover operations.  
For the ***2(f)*** non-grand jury undercover operation administrative case files and the ***2(f)*** cover agent case files we reviewed, the names of special agents and undercover agents were redacted.  CI officials advised that agents’ true identity and undercover identity were redacted for safety and security concerns.  The redactions of special agent and undercover agent names limited our ability to evaluate CI’s controls and oversight of undercover operations.  The redactions also made it impossible to conduct our planned review of documentation to determine if special agents received training prior to being assigned to an undercover operation.  Despite the redaction of special agent names, we were able to review information in the undercover operation case files to determine if special agents followed procedures to protect undercover identities.  In addition, we reviewed training agenda and conducted anonymous interviews with undercover agents to discuss the adequacy of their training.
 * * * *

Here is the summary of what TIGTA found and recommended:
TIGTA found that other Federal law enforcement agencies respect CI’s undercover program because of the financial expertise CI special agents bring to a joint investigation.  TIGTA also found that CI’s undercover practices appear to be more thorough in some aspects than other Federal agencies.  
Although CI took steps to strengthen controls over its undercover operations in response to our Fiscal Year 2002 review, TIGTA identified repeat findings and determined that internal control weaknesses continue to exist because corrective actions were not implemented sufficiently.  In addition, some undercover expenditures that could be considered as questionable did not have documentation indicating the expenditures were preapproved.
Although CI’s undercover agents expressed their training was sufficient and safety was emphasized, TIGTA believes that additional steps could be taken to protect the identity of undercover agents.  TIGTA also determined that financial reviews of undercover operations that earned income were not conducted timely. 
TIGTA recommended that the Chief, CI: 1) modify existing guidance to include specific criteria regarding when operational and financial reviews are required, 2) develop a process to alert CI officials that operational and financial reviews are due, 3) strengthen controls to ensure that expenditures are properly and timely approved and documented, 4) strengthen procedures to protect the identity of undercover agents, and 5) ensure that the financial reviews of undercover operations with churning authority are requested within 90 calendar days after the undercover operation portion of the investigation is concluded.

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