Report: Friendship may have greased wheels for IRS contracts

An IRS official helped funnel work to a friend whose technology company received some $500 million in agency contracts, according to a new congressional investigation.

The House Oversight Committee found that Greg Roseman, the IRS’s deputy director for IT acquisition, “helped steer contracts” to Braulio Castillo, the chief executive of Strong Castle, “through back channels.”

According to the report, Roseman did not tell other IRS officials about his close relationship with Castillo, and didn’t recuse himself from the contract process when Strong Castle made a bid.

Strong Castle grew from a company with about $250,000 in annual revenues to an outfit with potentially a half billion dollars in IRS contracts, in the six months after Castillo purchased the company with his wife in January 2012

House Oversight Chairman Darrell Issa (R-Calif.) and his panel’s report try to directly tie the Strong Castle contracts to the broader controversies that have enveloped the IRS in recent weeks, including the agency’s targeting of conservative groups.

Issa and other lawmakers, from both sides of the aisle, also sharply criticized the IRS for spending millions of dollars on conferences in recent years, and GOP lawmakers have repeatedly raised questions about whether the IRS is capable of implementing the Democratic healthcare law.

“Further scrutiny of waste and abuse at the IRS is needed for the American people to have confidence that the agency charged with collecting their hard-earned tax dollars can responsibly manage a new infusion of staff and funds,” the Oversight report said.

Castillo and Roseman are among the witnesses scheduled to appear at a Wednesday hearing on the report held by House Oversight. The IRS did not respond to a request for comment on Tuesday, while Castillo said in a statement that he had worked closely with the IRS and other agencies as Strong Castle sought contracts. 

“Throughout our work with the IRS, we have never received any improper preferential treatment, and have competed fairly for every contract that we have received. We are confident that the record will ultimately show that our company has committed no wrongdoing," Castillo said.

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Roseman’s attorney has told the committee that his client will invoke his Fifth Amendment, according to a memo circulated by Democrats on the panel. The memo also said that Roseman had been reassigned pending a review of the situation by a Treasury inspector general.

Lois Lerner, an IRS official central to the targeting controversy, also cited the Fifth Amendment in declining to answer questions before Oversight last month. Congress is continuing to investigate the IRS’s treatment of groups seeking-tax exempt status, with a top Democrat stressing Monday that liberal organizations were singled out as well.

The Oversight report found that Castillo and Roseman became friends in 2003, after which they called or texted each other hundreds of times. Many of Roseman’s text messages, the report found, contained raunchy or homophobic language.

Strong Castle, named Signet Computer when purchased by the Castillos, had not won a federal contract before 2012, and has received under a $500,000 in contracts from other agencies since January of that year.

Meanwhile, between August 2012 and December 2012, the IRS sent almost $50 million to Strong Castle, with the potential for much more. The Treasury Department also gave Strong Castle an award for being a top small contractor in 2012.

The Oversight report also criticizes IRS brass for having yet to cancel a contract with Strong Castle. The agency’s Beth Tucker is scheduled to testify on Wednesday as well.

According to the panel, Castillo also took advantage of a provision to help businesses in less prosperous areas, and another for service-disabled veterans.

Oversight says that Strong Castle recently lost its Historically Underutilized Business Zone certification, after hiring full-time students at Catholic University and renting an office in the Gallery Place section of Washington. Castillo and his wife, meanwhile, worked in Virginia.

Castillo got the grant for disabled veterans, the report says, because of a foot injury he suffered in 1984 at the U.S. Military Academy Preparatory School, where he went to play football. The Strong Castle chief executive later played college football at the University of San Diego, and softball as an adult.

"By inappropriately using a personal relationship and abusing a provision designed to help disadvantaged businesses, the IRS and Strong Castle have made a mockery of fair and open competition for government contracts," Issa said in a Tuesday statement.

Castillo said in a statement that he had worked closely with the IRS and other agencies as it sought contracts.

“Throughout our work with the IRS, we have never received any improper preferential treatment, and have competed fairly for every contract that we have received. We are confident that the record will ultimately show that our company has committed no wrongdoing," Castillo said in a statement.