PRESIDENT'S BUDGET CUTS ASSIST ORGANIZED CRIME PROFITEERS Mr. VANIK. Mr. Chairman, you asked a question just before you had to leave, and I just want to say that there was no separate narcotics traffickers tax program for 1976. Worse yet, the President's Budget Act for fiscal 1977 whacked a whole one-third out of the special enforcement program. Not only has the President failed to seek a budget to fund a narcotics traffickers tax program; but, under his proposed budget, there is provision for the Treasury enforcement of gambling tax laws. Furthermore, the budget cut will result in a continuing decline in tax evasion cases brought against organized crime figures. By cutting one-third out of the budget for a special enforcement program, the President has doomed any program against narcotics traffickers to failure. Recently the Treasury requested a supplemental appropriation of $20 million to fund 982 positions for IRS to work narcotics trafficking and corporate slush fund cases. The request was turned down by the President's own Office of Management and Budget on June 15, 1976. So the President's demand for action is getting no support from the OMB, either. Now, Mr. Chairman, if I can just conclude by going back to my basic statement. I talked about the President's message to the Congress on April 27, 1976. Subsequently, Secretary Simon announced the formation of a Treasury Department Anti-Drug Enforcement Committee. The Committee, formed within 4 weeks after the President's announcement, was to report its findings to Secretary Simon by July 1, 1976. My efforts to communicate with the Treasury Department have been futile. I strongly suggest that an effective program will not be implemented. Since May 27 of this year I have had pending with the Secretary of the Treasury a formal request for documents relating to the rise and fall of the Narcotics Traffickers Tax program, but the Secretary has not yet complied with my request. Not one document has been turned over to me by the Secretary or other officials of his Department. Since the Secretary has stonewalled my request, this statement is necessarily based on evidence from indirect sources. Senator BAYH. Why? Mr. VANIK. I can't tell you. I would hope the chairman might help me get some of this documentation which I think is absolutely essential before decisions are to be made on the programs. Senator BAYH. My chief counsel, Mr. Rector, tells me that we have obtained about half of the requested documents, and they are being turned over to your staff. I'm not certain about the other records. I don't know why I should be more successful than you. It would seem they should cooperate with any Member of Congress, although we had to take extraordinary steps to get the information. I will enter a letter received from the Department of the Treasury as an exhibit now. In accordance with your telephone conversation with General Counsel Albrecht today, I have enclosed a copy of the documents pertaining to the Treasury narcotics traffickers tax enforcement program that have been submitted to Chairman Rosenthal. At the moment, this is the extent to which we are able to comply with Chairman Bayh's request of July 16 inasmuch as we have not, as yet, made any documents available to Chairman Vanik. Sincerely yours, End Rthand) David R. Macdonald Mr. John M. Rector Staff Director and Chief Counsel Subcommittee to Investigate Juvenile Committee on the Judiciary United States Senate Washington, D. C. 20510 Mr. VANIK. We have had problems. Mr. Chairman, it is easy to see why the Treasury hierarchy is trying to dodge this issue. The documents they are trying to hide are an embarrassment in the light of the President's most recent message to the Congress on the scourge of drug abuse. I believe there still is no real program. And from what we see going on, there isn't going to be any effective program. The Treasury committee has held only two meetings; neither has been productive. At the first meeting Treasury presented a proposal that would have created a Narcotics Traffickers Tax program, essentially as it existed before its dissolution by the Internal Revenue Service. But this plan— an excellent one, in my opinion-met with strong resistance from IRS officials that Commissioner Alexander had sent to represent him at the Treasury committee meeting. The IRS position called for no change in its basic approach-that is, giving narcotics traffickers no greater attention than is accorded any ordinary tax evader-and leaving it to district directors and district fraud chiefs to decide how to fit trafficker fraud cases into their general workload. The only difference would be that under an interagency agreement, then being negotiated, the Drug Enforcement Administration would provide IRS with the names of suspected major narcotics traffickers. At any rate, the first meeting of the Treasury committee ended with a pledge from the IRS representatives to provide IRS comment on the proposal for reestablishing the program. Such comment did not materialize. However, when the committee met a second time a few weeks ago, the IRS representatives produced a letter from the Commissioner reportedly citing an IRS/DEA agreement and saying this is the only length to which IRS is willing to go. On July 27, 1976, the IRS and DEA entered into an agreement, thus bypassing the Treasury committee. I was not furnished with a copy of the agreement. However, as you have said, I have been able to use your copy. The agreement is long on generalities and short on specifics. The first question to be asked is, why is such an agreement needed in the first place? Basically, all it provides for is an exchange of information between two Federal agencies. Why haven't the DEA and the IRS exchanged information before? The agreement does not require the IRS to commit itself to work a single case, nor give any priority to narcotics cases, There is no commitment to form specialized groups where the caseload warrants, nor to expedite cases. DEA/IRS AGREEMENT MEANINGLESS The agreement contains an interesting note in the second paragraph which renders the whole agreement meaningless. It provides that: The responsibility of IRS is to conduct appropriate civil examinations and criminal investigations of high-level drug leaders and financiers who IRS determines to have violated the internal revenue laws using its established standards. That's right. That's what it says. Opinions first, facts later. The IRS will make a determination as to whether tax laws have been violated before conducting civil examinations or criminal investigations. That's ludicrous. If the program is going to work, the IRS must commit itself to performing a certain number of examinations of alleged class 1 violators. The agreement places "primary responsibility for gathering information relating to major narcotics leaders" with the DEA. No special enforcement tax program can be a major success unless specially trained tax fraud agents are committed to go out and develop their own tax-related information. The agreement does not encourage this kind of initiative. Furthermore, new IRS regulations in information gathering are so complicated as to make case development nearly unworkable. The agreement makes it plain that the program will have no national punch behind it. The national office acts only as a channel of information for DEA information. District offices will act on the information furnished by DEA as they find time in the workload. IRS official at the district level shall make the final determination as to which cases shall be subject to either an audit examination or a criminal investigation. My recent inquiries at IRS confirm that the IRS/DEA agreement will bring no change in the IRS approach. No special priority is being assigned to tax cases involving suspected narcotics traffickers. No special provisions will be made to handle any increased work load that might be generated by information received from DEA. In my opinion, the agreement is woefully inadequate. 1 I have some figures in my prepared statement which detail the decline of adequate appropriations for the narcotics traffickers tax program which further support my belief that under present policy, talk of a Narcotics Traffickers Tax program is mere rhetoric. Mr. Chairman, I have come to the conclusion finally that the only hope this Nation has for an effective narcotics traffickers tax program is by legislation such as you suggested last Wednesday. Therefore, I would like to join you in introducing legislation to mandate an effective program. Senator BAYH. Thank you very much, Congressman Vanik. We look forward to continuing to work with you. I have a number of additional questions, but I think you and I would answer them in the same way. I see no justifiable reason why we don't have a special program. The responses of Mr. Alexander, as far as politicians go, is the costly expense one pays to get the narcotics pushers; I think that is a very sterile way to approach it. Let's see what we can do. Mr. VANIK. Thank you, Mr. Chairman. I want to commend you for your tremendous drive in this program. I, frankly, believe that your approach is the only way we are going to get to the root of the problem; and I certainly want to do everything I can on the House side to help you in this endeavor. Senator BAYH. We look forward to working with you. Thank you, sir. [EDITOR'S NOTE:-The conclusion of this day's hearing, with testimony from Dr. Robert L. DuPont, Director, National Institute on Drug Abuse; accompanied by Dr. Robert Shellow, visiting scientist; and Robert Dormer, Staff Attorney, NIDA, U.S. Department of 1 See prepared statement of Hon. Vanik, pp. 143–144. |