tion as opposed to the evidentiary materials being admissible; and thereby to place the burden on the defendant to rebut that presumption?

Mr. WHITAKER. Yes, sir. Let me also say that we are not in as bad shape as it would appear. We may be able in this kind of case, once we can get the facts, to develop it by discovery and interrogatories and that sort of thing. From the standpoint of efficient administration and efficient prosecution of a civil case, for example, this change in the rules of evidence would be of immense value to us.

Mr. LEVITAS. Let me ask a question about administration now, Mr. Alexander.

In an earlier hearing of this committee, in April of this year, I believe, it was brought to our attention that when information is provided to this country, the IRS, by foreign nations under treaties, for the most part this information comes in in large cartons, is logged in Philadelphia, and sits there. And after a period of time-6 months-it is transferred to the Federal Records Center. And it is not even used.

So what good do more treaties do if you are not going to use the information that is already coming in?

Mr. ALEXANDER. First, an additional treaty would be very helpful in coping with specific cases along the lines we have discussed— very, very helpful.

Second, let's talk about the specific problem you mentioned. I think we have two types of documents. We have those in U.S. currency and written in English. And we have about 51,000 documents, which we discussed last time, which are neither expressed in U.S. currency nor written in English.

At the last hearing we explored the problems in our document matching program, and the fact that while we do our best to match all information submitted to use on a mag tape, we were matching only about 10 percent of those paper documents. And this particular small category, 51,000 out of a universe of more than 400 million documents, is creating real problems for us. These were the ones in currencies other than dollars and in languages other than English.

I will ask Mr. Terry what he is doing now with that 51,000, and Mr. McGowan can supplement.

Mr. TERRY. We looked at those for the 1975 tax year filing. We think we can standardize the format sufficiently so that we can translate those and then perfect them and bring them into the total universe and use them in our matching programs. I think we are going to be able to go ahead and utilize those documents.

Mr. LEVITAS. Would you not agree that it is essential to use those documents as opposed to just having them sit around?

Mr. ALEXANDER. We think it is essential. And we have been pushing for a full document matching program, or to match all of the documents on a 3-year cycle. We would match a third of them 1 year, a third the next year, and a third the following year.

But I am not a very good salesman, Mr. Levitas, and I have been unable to sell OMB on this.

I testified before the Senate Finance Committee recently with respect to this problem, which is a real one in tax administration and enforcement. It is a problem of unreported income. We proposed to

77-169 O - 76 - 11

the Finance Committee that they consider what I brought up at a previous hearing of this committee-that we think that withholding is the answer to this problem.

The Senate voted on withholding yesterday; and, as you know, they voted it down by 55 to 35. But I do not believe that some of them who voted against it fully understood that we are convinced that we can take care of the problem of overwithholding or of withholding from someone who does not have any liability at all—an elderly couple who lives on that $5,000 interest from their lifesavings. Those people are the ones who were used as examples of why Congress should not extend withholding to interest and dividends. But that is the same type of withholding that wage earner's have been subjected to all along.

We think withholding is a necessary ingredient to the tax system and we think that we can easily take care of the problem of excess withholding.

Mr. LEVITAS. I understand that particular aspect of your position. But reverting for the moment, I want to be assured that you recognize as a problem in administration the need to utilize this information which you receive.

I am told that 99 percent of the documents, according to our sampling, were either in English or bilingual. And the question of currency conversion, I am sure, is not a monumental task.

But, in pursuing a program to utilize this information and to make these people who are not reporting income and are therefore forcing the rest of us, who are paying our taxes, to pick up the greater burden-if you are aware of that and are taking those steps necessary to utilize this information, that satisfies me at this point.

Mr. ALEXANDER. We are fully aware of the problem, Mr. Levitas. We had hoped for a legislative solution that would be better and more effective and cheaper, we are convinced, with the solutions that Mr. Terry and I have described. But if we do not have that solution, we will do our best to convince OMB to give us the resources for a full scale document matching program.

And in the meantime, we will make the best utilization we can of our present resources to try to cope, particularly, with this problem of foreign documents.

Mr. LEVITAS. On page 21 of your testimony you talk about the North-Atlantic Region Task Force which selected a number of individuals for examination. And you say there was a sample examined in three other regions. You go on to say that the results were nonproductive because only one criminal prosecution recommendation resulted from these examinations and it was rejected by Regional Counsel.

Did these mail monitoring activities result in any recovery of taxes through civil actions or administrative procedures?

Mr. ALEXANDER. I will ask Mr. Wolfe to answer that, but I think they did.

Mr. WOLFE. Yes, Mr. Congressman; they did. We actually got, as best we can estimate, from the bank problem itself, recovery of $275,000 relating solely to that issue.

And we did find other issues unrelated to the foreign bank matter. So the total additional tax we have recommended so far is $897,400.

There are some cases that are still going through the appeals system. And the total thing will approximate about $2 million. That includes the $897,000 I just gave you.

We actually have had no prosecution cases. We did recommend one and that was rejected. So we actually got no prosecutions.

Mr. LEVITAS. Would you not agree that this $2 million, approximately, of potentially recovered taxes is some success from this program and that it perhaps should not have been discontinued?

Mr. WOLFE. You could say, "Yes; it was not a complete failure." But actually the people who conducted the tests themselves are the ones who recommended that it did not meet the objectives we had sought. Actually, if we had invested this same money in other types of cases where we knew there were errors, we would have gotten a larger return than we got.

Mr. GRADISON. Will the gentleman yield on that point?

Mr. LEVITAS. Yes; but on that point, I haven't finished it yet.

Mr. GRADISON. My understanding is that it would not be possible to continue that same program any longer anyway because of the shift of the Swiss banks from using postal meters to using stamps.

Is that true?

Mr. WOLFE. They used postal meters in the years in which we ran this mail check. We were able to identify them by the numbers on the meters. But I am not familiar with that, and it may be true.

Mr. LEVITAS. It seems to me that there would also be another problem in following up some of those cases. That gets back to the Swiss bank tape file which was destroyed.

Wouldn't it be difficult to follow up on those cases and pursue them in light of the destruction of the Swiss bank tape files?

Mr. WOLFE. Mr. Congressman, some of those tape files were destroyed, but there was a printout made. So the information is still available to the Service.

Mr. LEVITAS. That raises another question in my mind. I am looking at the letter from the Assistant Commissioner of Compliance, Mr. Hanlon, to the Director of the Office of Law Enforcement of the Treasury Department, Martin Pollner, in which he said. "We do not believe the Swiss bank tape file falls in the purview of Mr. Ervin's request."

He goes on to say, "We have arranged to destroy the tape file." Why was the Swiss bank tape file destroyed rather than complying with the congressional request?

And if, as you have indicated, that information was available in a printout, then the simple destruction of the tape itself did not make it unavailable for subsequent transmission to the Congress.

Mr. ALEXANDER. Mr. Levitas, I can assure you that I am as concerned about that which was discussed in the staff investigator's report

as you are.

I think the one to answer this question is the author of that memorandum, Mr. Robert Stankey, who I believe is in the room and who was in the room on Monday.

Maybe he can explain what he meant by what he recommended.
Mr. LEVITAS. Is Mr. Stankey in the room?

Mr. STANKEY. Yes; I am. I have not been authorized to testify today.

Mr. ALEXANDER. You were just authorized.

Mr. STANKEY. I do not believe, Mr. Commissioner, that you have that authority.

Mr. ALEXANDER. The committee has it.

Mr. ROSENTHAL. Would you identify yourself for the record?

Mr. STANKEY. Robert Stankey, Office of Law Enforcement at the Treasury Department.

Mr. ROSENTHAL. Are you a lawyer?

Mr. STANKEY. I am not. I am a staff assistant charged with the coordination of the administration of the Bank Secrecy Act in the Treasury Department. I am under Mr. Macdonald's general supervision.

I formerly was a banker and former special agent with the Internal Revenue Service, and a computer systems analyst in the data processing section.

Mr. LEVITAS. Are you familiar, Mr. Stankey, with this memorandum to which I referred and which disturbs me very much for a number of reasons?

Mr. STANKEY. I am familiar with that memorandum. I forget the date of it.

Mr. LEVITAS. It is July 28, 1972.

Mr. STANKEY. On July 28-or July whatever-of 1972, I was on detail to the Office of the Secretary, in a position comparable to the one I am in now. I was not working on the staff of the Internal Revenue Service.

I am familiar with the memo because I was consulted in various preparations. I did not draft it; I was not on the staff of the Assistant Commissioner of Compliance at the time.

Do you have any other questions?

Mr. LEVITAS. Yes. My question is this-if you are familiar with it. Here is what it says:

We do not believe the Swiss bank tape file falls within the purview of Senator Ervin's request.

Then you say,

In short, it is a working file containing the names of individuals who appear to share one characteristic-the ownership of a Swiss bank account. However, to avoid any possible criticism, we have arranged to destroy the tape file.

Now I would like to know what is meant by saying, ". . . to avoid any possible criticism, we have arranged to destroy the tape file" instead of complying with a request from the congressional committee. What was the reason for destroying it rather than complying with that request?

And third, since it now appears that the information was otherwise available on a printout, why was it not subsequently provided to the committee?

Could you answer all or any of those questions?

Mr. STANKEY. I am sorry; I thought I made myself clear, Mr. Congressman.

I was not the author of the memorandum.

Mr. LEVITAS. I understood that.

Mr. STANKEY. I was consulted with respect to it. And I do not know exactly who authored it. I suspect it was someone on the staff of the

Assistant Commissioner at that time. It could have been any one of two or three people.

They discussed it with me to get my opinion as a layman, and probably as a data processing person. I don't even recall the request from the Congress with respect to this.

But I was really on the periphery of the whole thing. But my opinion was that this was strictly a tape file. And, if I recall correctly, the request did pertain to data processing, dossier-type or data banks.

And not as a principal in the affair, but purely as someone who was interested, on the periphery, my opinion was that it was nothing more than a working file rather than a data bank.

Mr. LEVITAS. Is it your response to me that you do not know, you have no knowledge as to why the tape was destroyed rather than responding to a congressional request; and it was to avoid any possible criticism; and why the printout was not subsequently furnished?

I have a copy of this. I notice at the bottom of the copy it says, "RStankey/BLMeehan:hn." And underneath that, it says "7/28/72." I may be incorrect, but that would indicate to me that R. Stankey and B. L. Meehan were responsible for the dictation of this document to a person whose initials were H. N.

Mr. STANKEY. I undoubtedly spoke with Mr. Meehan. He was one of the first to be intimately involved. I don't recall who else was involved.

Mr. LEVITAS. Is it your statement to me that you do not know why that tape was not delivered in response to a congressional request, or what was meant by the statement, "However, to avoid any possible criticism, we have arranged to destroy the tape file"; or you do not know why the printout information was not subsequently delivered? I just want to know your state of knowledge on those points. Mr. STANKEY. Obviously I did not have this file, or I do not even recall the incoming related to it. It is difficult to associate it.

However, my recollection was that the request pertained to tape files, data banks and such, relating to specific individuals. These tapes did not relate to specific individuals. They were just tapes that were made from the mail watch. And there was no attempt to gather information on Mr. X, Mr. Y, or whomever.

I personally, and apparently Mr. Meehan, and the Assistant Commissioner at that time, felt that this did not fall within the scope of that request

Mr. LEVITAS. I understand that aspect. I think that is what it said in the first part.

Mr. STANKEY. And to avoid controversy, perhaps it would be better to destroy the tape.

Mr. LEVITAS. What concerns me, or what I think you are saying, is that you, or whoever wrote this letter, did not think it was within the purview of Senator Ervin's request.

But then it is followed by a statement which I consider odd. You know, the question of burning tapes has been very much in the news in recent years-or the failure to do so.

" Now

But here it says, ". . . to avoid any possible criticism would this mean criticism of having the tape, or criticism of not delivering the tape?