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IRS suspends two employees for taking conference gifts

By Kim Dixon and Patrick Temple-West

WASHINGTON (Reuters) - The U.S. Internal Revenue Service has suspended two employees - including one working on President Barack Obama's healthcare initiative - for improperly accepting gifts at an agency conference, two congressional staff members briefed on the matter told Reuters on Wednesday.

The tax-collecting agency - already battling a political scandal and accusations of lavish spending - has begun a process to remove the two employees for violating ethics rules pending a review, the IRS said.

"There was clearly inappropriate behavior involved in this situation, and immediate action is needed," acting IRS Commissioner Danny Werfel said in a statement on Wednesday.

The agency did not identify the suspended employees, but congressional aides briefed on the matter said they were Fred Schindler, an IRS official in Washington, and Donald Toda, an IRS employee based in California.

Messages left at their office numbers were not returned.

The aides said that Schindler works for Sarah Ingram, who now leads the IRS's office responsible for enforcing tax laws related to the Affordable Care Act, the Obama administration's makeover of the U.S. healthcare system.

Ingram has been under scrutiny in recent weeks because in 2009 and 2010, she led the IRS office that inappropriately targeted conservative groups for extra scrutiny when they applied for tax-exempt status.

The IRS's acknowledgement last month that the targeting occurred has ignited a political scandal that has led to the departure or suspension of three top IRS officials, including Ingram's successor in the agency's tax-exempt division.

At least three congressional panels are investigating the targeting of conservative groups with names such as "Tea Party," and "Patriots," while the Justice Department has launched a criminal probe.

The suspensions on Wednesday were not related to the targeting scandal, but rather to a Treasury inspector general's report that criticized extravagant spending by the IRS in 2010, a year in which Treasury reported that the tax agency spent $38 million on conferences designed to educate and boost the morale of its employees.

The Treasury report focused on a conference held for the IRS small business division in Anaheim, California, in 2010.

Some of the perks IRS employees enjoyed - potentially in lieu of better room rates - included room upgrades, the report said. The commissioner of the agency's small business and self-employed division stayed five nights in a room that the Treasury report described as having a private bedroom, wet bar and billiard table, the report said.

That official, Faris Fink, will be grilled on Thursday by members of the House Committee on Oversight and Government Reform. Fink will also under the spotlight because he acted as the "Star Trek," television and movie series character Mr. Spock in an employee training video spoof, an expenditure also detailed in the Treasury's report on wasteful spending.

OHIO IRS WORKERS INTERVIEWED

The House Oversight panel is among congressional committees examining the political targeting scandal, which has led Republicans to question whether the Obama administration, in the months before the 2012 election, was involved in trying to stifle conservative groups that generally oppose the president.

The White House has rejected such suggestions. A Treasury inspector general's report that first detailed the targeting scandal did not find any evidence that the administration was involved.

Congressional investigators have been interviewing workers from the IRS's office in Cincinnati, Ohio, headquarters to the agency's tax-exempt division, which carried out the targeting of conservative groups in its role examining groups for tax-exempt status.

Investigators conducted their latest interview with an IRS employee in the Cincinnati office this week, and have another planned in the coming days, according to a congressional aide.

On Thursday, the House Committee on Oversight - led by California Republican Darrell Issa, a vocal critic of the administration - will focus on overspending by the IRS.

Agency rules allow government employees to accept items worth $20 or less, provided the total value of gifts from the same person is not more than $50 in a calendar year, according to the Office of Government Ethics.

The Treasury Inspector General for Tax Administration on Tuesday criticized the IRS for wasteful spending on conferences. It said the tax agency spent about $50 million on more than 220 conferences in recent years, including to pay for luxurious hotel rooms and motivational speakers.

The inspector general said IRS employees at the Anaheim conference failed to negotiate lower hotel rates and instead sought free food and more expensive hotel suites.

In response to widespread criticism of its spending, the IRS has noted that the amount it has spent on conferences has dropped dramatically, from about $38 million in 2010 to less than $5 million in fiscal 2012.

(Reporting by Kim Dixon and Patrick Temple-West; editing by David Lindsey, Sandra Maler and Cynthia Osterman)

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