Exclusive-Tax prosecutions plunge as Trump shifts crime-fighting efforts

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By Brad Heath and Sarah N. Lynch

WASHINGTON, Dec 10 (Reuters) – Federal tax prosecutions fell to their lowest level in decades this year, declining more than 27% from the year before as the Trump administration cut the ranks of attorneys and agents who pursue those cases, a Reuters examination has found.

President Donald Trump’s administration has carried out a sweeping overhaul of U.S. law enforcement this year, forcing out scores of attorneys and focusing large sections of the Justice Department on tracking down immigrants. Its retreat from tax enforcement illustrates the toll that shift has taken on other crime-fighting efforts. 

The administration made deep cuts to the Internal Revenue Service’s criminal investigative unit, and some of those who remained were ordered to start working on immigration cases or anti-crime patrols in Washington, according to government records and officials, speaking on the condition of anonymity because they were not allowed to discuss their work publicly. At the same time, the Justice Department closed its Tax Division, and officials said a third or more of the criminal lawyers who worked there quit.

The government estimates that it collects almost $700 billion less in taxes than it is owed each year. Criminal prosecutions seek to recoup only a small fraction of that amount, but the threat of prison or large fines is meant to be one of the government’s key tools for deterring cheating. Experts including former IRS and Justice Department officials worry blunting the tool could embolden more cheating. 

“Decreasing criminal enforcement across all types of taxpayers would signal an indifference to cheating and insults the millions of honest filers who pay the taxes they owe,” said David Hubbert, a senior fellow at the Tax Law Center at New York University’s law school, and a former top official in the Tax Division.

Reuters used federal court dockets to count the number of Justice Department attorneys who appeared on behalf of the government in tax prosecutions between January and the beginning of November. Last year, about 420 did. This year, about 160 have. 

Top Trump administration officials told prosecutors early this year that tax investigations were not a priority, three people familiar with the discussions said, speaking on the condition of anonymity to discuss the department’s internal deliberations. Participants concluded that the department’s new management was “very skeptical about white-collar crime and whether we should be doing those cases,” one person familiar with the discussions recalled. 

Justice Department spokeswoman Natalie Baldassarre said closing the centralized tax-crimes office “will not impact the ability of its civil litigators and criminal prosecutors from advancing its mission to fairly and consistently enforce the nation’s tax laws.” The IRS confirmed that its criminal enforcement staffing had shrunk by 330 employees this year but otherwise declined to comment.

The slowdown in tax prosecutions comes as the administration is scrutinizing past investigations for signs of previous political influence, or what some officials alleged was  “weaponization” when former President Joe Biden was in the White House. They have not provided evidence to support this allegation.

In one such case, cryptocurrency investor Roger Ver, also known as “Bitcoin Jesus,” released a video alleging he was being targeted by a weaponized Justice Department over pending criminal charges alleging he had failed to pay tens of millions of dollars in taxes.

Ver hired defense attorneys with ties to Donald Trump, including Chris Kise, to lobby the Justice Department to drop its case. In October, Kise and a senior Justice Department official who previously represented Ivanka Trump reached a deferred prosecution agreement that allowed Ver to avoid a conviction in exchange for paying nearly $50 million to the government.

DISMANTLING TAX ENFORCEMENT 

The Trump administration this fall dismantled the department’s Tax Division, which has been responsible for supervising tax prosecutions since the 1930s, and moved the lawyers and other staff who worked there to other offices. 

At least a third of the roughly 80 criminal prosecutors who worked in the office at the beginning of the year quit rather than be reassigned, two officials familiar with its staffing said.

Reuters examined the extent of the Justice Department’s declining enforcement of tax cases by gathering the dockets of every publicly available federal criminal case since the 1990s from Westlaw, an online legal research service that, like the news service, is a division of Thomson Reuters.

Reuters compared the number of people charged with crimes between Jan. 1 and Nov. 1 this year with the same period in previous years. In some cases, Reuters used artificial intelligence to help classify the charges people faced. A review of a random set of records showed its assessments to be 98% accurate.

The pace at which the government brings such charges dropped steeply this year. As of Nov. 1, federal prosecutors had charged 251 people with violating tax laws, down 27% from the same period a year before, Reuters found.

U.S. attorneys’ offices that could pick up some of that slack have also lost prosecutors with experience in white collar cases, current and former Justice Department officials said. Department records show more than 1,000 lawyers have left U.S. attorneys’ offices this year, roughly double the number who quit or were pushed out in previous years.

Valerie Makarewicz left the Los Angeles U.S. attorney’s office last month to take a job at a law firm. The office was one of a few known for having specialists in tax cases, but their ranks have dwindled from 10 to “three or four,” and replacing them won’t be easy, she said. 

“It’s a niche field and developing that expertise takes time,” she said.

JOB CUTS AND DIVERTED AGENTS

The slowdown in tax enforcement came in part because the Trump administration made deep cuts to the Internal Revenue Service this year, former officials said. The tax agency’s criminal arm lost more than 10% of its employees between January and June, according to a report by the IRS’ ombudsman, the National Taxpayer Advocate. It said overall staffing at the IRS – a frequent political punching bag for Republicans who now control the government – dropped by more than a quarter. 

The White House referred questions to the Treasury Department, which said in a statement that “the IRS is fully staffed preparing for next tax filing season.” 

The IRS investigators who remain “are being pulled in a lot of directions,” some of which are unrelated to taxes, a former Justice Department official who witnessed the changes said. “The damage being done is significant.”

In Washington, the new responsibilities for IRS investigators have included conducting patrols alongside city police officers as part of a show of force Trump ordered this year to combat what he called a crisis of crime in the capital city.

The IRS’ office in Washington initially sent only a few of its roughly 60 agents to assist with those patrols. But after Trump aide Stephen Miller complained, the office upped that amount to more than 20 agents to patrol the streets, two people familiar with the deployment said.

(Reporting by Brad Health and Sarah LynchEditing by Nick Zieminski)