Guilty: IRS examiner admits exposing whistleblower

by Kurt Schulzke

Today’s object lesson in whistleblower risk and regulatory capture comes to us courtesy of the IRS. As reported in Accounting Today:

Dennis Lerner, 60, a former international examiner in the IRS’s New York office, pleaded guilty Monday in a Manhattan federal court before U.S. District Judge John F. Keenan. He was arrested last September and charged with illegally exposing the identity of a whistleblower who reported tax compliance problems by an international bank to the IRS (see Former IRS Official Charged with Exposing Whistleblower’s Identity).

Lerner worked as an international examiner from June 2010 to August 2011, and for several months leading up to his resignation from the IRS, one of his chief responsibilities involved conducting an audit of the German bank Commerzbank related to approximately $1 billion in allegedly unreported income. Shortly before resigning, Lerner led negotiations on behalf of the IRS that resulted in a proposed $210 million settlement between the bank and the IRS. The settlement was still pending final approval at the time of his departure.

Every whistleblower should expect, eventually, to be outed. In the United States, every government employee potentially has an agenda that includes jumping from the government’s ship to a higher paying, non-government job. This systemic conflict of interest lies at the heart of our regulatory capture problem. There is no easy solution. A longer term fix would involve reducing the size of government and its importance in the market while increasing the compensation paid to government employees.

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