Erica:

How does the Raymond Cohen Tax Court decision in regarding NWC's brief central argument considering the APA noncompliance in 7623(b) claims in Insinga ?

Does the Cohen decision strengthen IRS Chief Counsel's response and weaken the Tax Court's jurisdiction?

Any reason for denial of an award when the IRS has collected proceeds based on the whistleblower’s information would clearly be appealable under both section 7623(b) and the APA. That’s not the Cohen case though. If someone is denied because of their race, political affiliation… and because no proceeds were collected, then the first two grounds don’t really matter. Query whether you need the APA to find out in discovery if proceeds were collected – cases with that issue are in Tax Court right now.

THE PRESUMPTION OF CORRECTNESS NORMALLY ACCORDED AN AGENCY DOES NOT APPLY DUE TO A “QUALITY REVIEW PROCESS (THAT) WAS NOT SUFFICIENT FOR CONTROLLING THE ACCURACY OF CLAIMS.” THIS PREVENTS THE WHISTLEBLOWER’S OFFICE FROM CARRYING OUT THE LEGISLATIVE INTENT AND MANDATE AND PLACES THE BURDEN OF JUSTIFYING ITS DECISION BY CLEAR AND CONVINCING EVIDENCE THAT ITS DECISION WAS NOT ARBITRARY, CAPRICIOUS OR UNREASONABLE.

When the basic information is not accurate, the agency is unable to carry out its Congressional mandate because the agency cannot make the correct decision with the information that it has.

In Frank v. United States of America 864 F.2d 992 at 63 it states the following:

In considering an unlawful delegation claim this intermediate appellate court is bound by decades of Supreme Court precedent upholding the delegation of rulemaking authority. "If Congress shall lay down by legislative act an intelligible principle to which the person or body authorized to [make rules] is directed to conform, such legislative action is not a forbidden delegation of legislative power." Hampton & Co. v. United States, 276 U.S. 394, 409, 48 S.Ct. 348, 352, 72 L.Ed. 624 (1928). Panama Refining Co. v. Ryan, 293 U.S. 388, 55 S.Ct. 241, 79 L.Ed. 446 (1935) and A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 55 S.Ct. 837, 79 L.Ed. 1570 (1935), the sole two instances of the Supreme Court's departure from a generous recognition of congressional power to delegate rulemaking authority, are aberrational. Since 1935, the Court's position has been settled in favor of recognizing expansive congressional authority to delegate rulemaking authority under broad standards. See, e.g., Lichter v. United States, 334 U.S. 742, 785-86, 68 S.Ct. 1294, 1316-17, 92 L.Ed. 1694 (1948) (upholding delegation of authority to determine excessive profits); American Power & Light Co. v. SEC, 329 U.S. 90, 105, 67 S.Ct. 133, 142, 91 L.Ed. 103 (1946) (upholding delegation of authority to SEC to prevent the unfair or inequitable distribution of voting power among security holders)

Implicit in this delegation of Congressional authority is the agency’s use of accurate information to arrive at the right decision. Use of incorrect data violates the “substantial evidence” doctrine of APA Act 5 U.S.C. 556(d) and results in erroneous decisions which are categorized as arbitrary, capricious, and unreasonable.

The use of incorrect and clearly erroneous information in this case (that the information obtained was from a public record when Form 211 clearly states otherwise) is an example of Respondent's continuous and systemic failure "for controlling the accuracy of claims." Respondent acknowledges this failure on page 19 Exhibit A of the Treasury inspector General For Tax Administration Report dated April 30, 2012 by stating "These (improvements) include ...increased focus on monitoring and oversight of the evaluation of whistleblower submissions." Yet Respondent continues to litigate this case and continues to hold the information it presented to the court as accurate when the Inspector General's Report and Director Stephen A. Whitlock calls the information "unreliable."
“Information captured from multiple systems and input into the single inventory control system was potentially inaccurate, and the quality review process was not sufficient for controlling the accuracy of claims." (Exhibit A Page 5)
On page 18 of Exhibit A in the section “Improved Oversight is Needed to Effectively Process Whistleblower Claims," it states that "We were advised by Whistleblower Program officials that we could not have access to the E-TRAK because they had a commitment to protect the identity of whistleblowers and taxpayers (In previous audits, the auditors were given access). In addition, access was on a "need to know" basis, and officials believed the reasons we provided were not sufficient despite that our reasons included the authority granted us in the Inspector General Act of 1978 to access all records, reports, audits, reviews, documents, papers, recommendations, or other material available relevant to a matter within our jurisdiction. Although we encountered this limitation, we believe that the evidence obtained provides a reasonable basis for our findings and conclusions that the data in the E-TRAK are unreliable."
The acknowledgement by the Director that the Whistleblower Office needed "increased focus on monitoring and oversight of the evaluation of whistleblower submissions" and the conclusion that "the data in the E-Trak are unreliable" as well as "the quality review process was not sufficient for controlling the accuracy of claims" resulted in overriding procedural safeguards for arbitrariness (Schechter Poultry Corp. v United States 295 U.S. 495 {1935} and the APA) and overrode the controls of the standards defining when and how the Whistleblower's Office should use the authority that the statute and Congress delegated to it. This resulted in the unfettered discretion
by the Whistleblower Office which constitutes an unconstitutional abuse of the legislative power delegated , and is a case of delegation run amok.

On the back of Form 211, the application is sent to:

Internal Revenue Service
Whistleblower Office
SE:WO .
I 111 Constitution Ave., NW
Washington, DC 20224

where it is initially determined that the claim complies with the minimum standards which would include not obtaining the information from a public source. It is subsequently forwarded onto Ogden Utah as shown in Exhibit H of my Amended Petition. 12 business days later without any change in the information, the Whistleblower Unit decides that the application does not meet the minimum requirements. This fact pattern is a prima facia case for arbitrary, capricious and unreasonable since 2 different offices used the same information to arrive at different answers.

"Normally, an agency rule would be arbitrary and capricious if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise." Motor Vehicle Mfrs. Ass'n of the U.S. Inc. State Farm Mut. Auto Ins. Co., 463 U.S. 43. When one office of an agency finds that a Whistleblower Claim complied with the minimum standard and another office of the same agency determines 12 days later without any change in the
information that it failed to comply, the decision that petitioner failed to comply meets the arbitrary and capricious standards for the following reasons:

1. Respondent apparently failed to consider an important aspect of the problem
because Fact 1 of Respondent's Motion to dismiss dated January 13, 2012 states that Form 211 "contained information based on publically available documents...." without considering the statement that the problem was initially discovered when "JP Morgan refused to reissue uncashed dividend checks unless a copy was presented." It should be noted that if a claimant initially obtained this information from publicly available documents, they would not qualify for a Whistleblower award.

2. Respondent offered an explanation for its decision that runs counter to the
evidence before the agency. In Exhibit D of my initial opposition motion, the Internal Revenue Service in a letter dated October 20, 2011 states that "the information you provided did not result in the collection of any proceeds." A claim was submitted on

Form 211. Both petitioner and respondent agree that no administrative or judicial proceeding occurred and that no taxes were collecting during the 12 business days that the agency considered the claim. Respondent, without violating any confidentiality provisions could have stated a reason but chose to state a conclusion ("the information you provided did not result in the collection of any proceeds") instead. The failure was
further exacerbated by the fact that Respondent did not even follow its own Internal Revenue Manual 25.2.27 which states that "the information provided did not identify a federal tax issue upon which the IRS will take action." (Exhibit G of my Amended Petition) While this statement may not meet the minimum standards of the Administrative Procedures Act, it is not necessary to discuss since the
Internal Revenue Service did not state this.

3. Respondent offered an explanation that is "so implausible that it could not be
ascribed to a difference in view or the product of agency expertise." Besides item 1 and 2 above, the initial application is sent to Washington, DC where it is initially determined that the claim complies with the minimum standards which would include not obtaining the information from a public source. It is subsequently forwarded onto Ogden Utah as shown in Exhibit H of my amended petition. 12 business days later without any change in the information, the Whistleblower Unit decides that the application does not meet the minimum requirements. This fact pattern is a prima facia case for arbitrary, capricious and unreasonable.

In the dissent of Cohen v, United States No. 08-5088, it is written that Code Section 704 provides "Agency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review." According to an article written by Patrick J Smith "The (Administrative Procedure's Act) APA's Reasoned-Explanation Rule and IRS Deficiency Notices" Code Section 706(2) lists 6 different standards for the scope of review by a court of agency action. The article goes on to say on page 339 that "The reviewing court shall hold unlawful and set aside agency action, findings, and conclusions found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law...."

IV

THE “QUALITY REVIEW PROCESS WAS NOT SUFFICIENT FOR CONTROLLING THE ACCURACY OF CLAIMS WAS CAUSED BY THE OVERRIDING OF THE ADMINISTRATIVE PROCEDURE WHICH VIOLATED FEDERAL MANAGERS’ FINANCIAL INTEGRITY ACT (FMFIA) AS CODIFIED AT 31 USC 3512 AND LEAD TO ERRORS AND UNRELIABLE INFORMATION. THIS MADE THE DECISIONS OF THE WHISTLEBLOWER OFFICEAND ARBITARY AND CAPRICIOUS.

According to the November 1999 Standards for Internal Control in the Federal Government, “Federal policymakers and program managers are continually seeking ways to better achieve agencies’ missions and program results, in other words, they are seeking ways to improve accountability. A key factor in helping achieve such outcomes and minimize operational problems is to implement appropriate internal controls”(which can be financial or administrative). (An example of a financial internal accounting control is to have different individuals receive the cash and post the payment to the accounts receivable. If the same person performed both tasks, they could delete or write off an amount owed in the accounts receivable and steal the cash.)
1. The Budget and Accounting Procedures Act of 1950 requires the head of each Federal department and agency to establish and maintain adequate systems of management controls. Further, the Federal Managers' Financial Integrity Act (FMFIA) of 1982, as codified at 31 USC 3512 (hereinafter "FMFIA" ), requires each executive agency to establish internal accounting and administrative controls in accordance with standards prescribed by the Comptroller General. These controls will provide reasonable assurance that:
A. Obligations and costs are in compliance with applicable law.
B. Funds, property, and other assets are safeguarded against waste, loss, unauthorized use, or misappropriation.
C. Revenues and expenditures applicable to agency operations are properly recorded and accounted for to permit the preparation of accounts, reliable financial and statistical reports, and to maintain accountability over assets.
2. The FMFIA also requires that each executive agency:
A. Resolve audit findings promptly.
B. Conduct annual evaluations of its systems of internal accounting and administrative control (emphasis added) using guidelines established by the Director of the Office of Management and Budget (OMB).

C. Submit an annual statement to the President and Congress on the status of the agency's system of internal control.
In the Treasury Inspector General for Tax Administration’s April 30, 2012 Report (Reference Number: 2012-30-045), they stated the following:
We conducted this performance audit in accordance with generally accepted
government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objective. During this review, Whistleblower Program officials declined our request for direct access to their management information system, citing concerns on their commitment to protect the identities of whistleblowers and taxpayers and their view that direct access to the system was not consistent with “need to know” principles. The Inspector General Act of 1978 sets forth the TIGTA’s authority to access all records, reports, audits, reviews, documents, papers, recommendations, or other material available relevant to a matter within our jurisdiction. The IRS’s decision to decline our request for direct and independent access to its tracking and reporting system of whistleblower claims resulted in an inappropriate scope limitation. As a result, the TIGTA was unable to complete planned tests to independently evaluate the overall reliability of the Whistleblower Program’s management information system. However, we believe that the evidence obtained during this review provides a reasonable basis for our findings and conclusions based on our audit objective. Information captured from multiple systems and input into the single inventory control system was potentially inaccurate, and the quality review process was not sufficient for controlling the accuracy of claims.

Stephen A. Whitlock, Director of the Whistleblower Office agreed with this assessment by stating that “We recognize that improvements can be made in collection and use of data in our management information system and that more can be done to oversee evaluation of whistleblower claims.”
Mr. Whitlock acknowledges overriding Congress’ mandate for an audit (The Inspector General Act of 1978) by stating that “this occurred after discussions and agreement between the Whistleblower Office and TIGTA management.” This is just one example of the disregard of the administrative controls. Since Congress instituted these controls, they would be the only ones with authority to override or rescind The Inspector General Act of 1978. Mr. Whitlock has set the tone for the office by disregarding the controls in place.

According to Senator Grasley “I have learned from my almost three decades of experience with whistleblowers that government agencies will often seek to undermine or undercut the whistleblower.” The anti-whistleblower attitude was succinctly expressed by former IRS Chief Counsel Donald Korb shortly after he left the IRS and joined a white collar law firm that defends companies against the IRS. In a 2010 interview with the publication Tax Notes, he said:
The new whistleblower provisions Congress enacted a couple of years ago have the potential to be a real disaster for the tax system. I believe that it is unseemly in this country to encourage people to turn in their neighbors and employers to the IRS as contemplated by this particular program. The IRS didn’t ask for these rules; they were forced on it by the Congress.
Administrative controls were created when the Whistleblower Office is established. The controls represent a system of checks and balances that are established as a cohesive unit. In other words, one control complements another to insure the accurate processing of a claim. These controls are documented in the Internal Revenue Manual.
In the “Fiscal Year 2011 Report to the Congress on the Use of Section 7623,”Item #3 states
A whistleblower can appeal any determination on an award under section 7623(b)(1), (2), or (3) of the Code to the Tax Court (section 7623(b)(4) of the Code).A meaningful right to appeal to Tax Court requires disclosure to the whistleblower of the basis for the award determination which oftentime will include taxpayer information that is protected from disclosure under section 6103. Consistent with section 6103(h), the IRM provides for disclosure of taxpayer information by the IRS to the whistleblower if the whistleblower enters into a confidentiality agreement and agrees not to disclose the information other than as permitted in that agreement.

The Internal Revenue Service failed to provide the information requested
and the Internal Revenue Service’s own attorney failed to follow the Internal Revenue Service’s own IRM with the result that I was denied a meaningful right to appeal which is a violation of my Constitutional Rights including but not limited to due process. While the IRS did mention in his pleadings that the information was obtained from a public source, the court can interpret this in the most favorable light to me in reviewing any motion for summary judgment. This reason; however, is not complete and based upon the Whistleblower Office inaccurate information, is unreliable.

V
THE IRS FAILED TO “USE FULL NOTICE-AND COMMENT PROCUDURES TO PROMULGATE A RULE” REQUIRED BY THE APA THUS PREVENTING CHEVRON DEFERENCE.
Accordingly, the Supreme Court held that all Treasury regulations, like other administrative agency regulations from other Departments and agencies (Including the Whistleblower Office), are entitled to Chevron deference when “‘an agency rule sets forth important individual rights and duties, where the agency focuses fully and directly upon the issue, where the agency uses full notice-and-comment procedures to promulgate a rule, [and] where the resulting rule falls within the statutory grant of authority.’” 131 S. Ct. at 714 (quoting Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158, 173 (2007).

The initial publication was only a notice without any notice and comments. Therefore, no deference should be placed on these regulation.
VI
THE IRS SHOULD BE ESTOPPED FROM DENYING MY CLAIM DUE TO PLAIN ERROR

According Fredericks v Commissioner, (126 F3d 433) in order to use estoppsel, petitioner must show “affirmative misconduct” in addition to three traditional elements of estoppel. In the current case, the IRS claimed I obtained my information from a public source which was clearly erroneous. This precluded me from being in the Whistleblower program. Factors to consider when estopping the IRS:

(1.) Whether government agents who made the misrepresentation were authorized to act
as they did
(2) Whether the government misconduct involved a question of law or fact
(3) Whether the government benefited from its misrepresentation
(4) The existence of irreversible detrimental reliance by the party claiming estoppel.

In addition, the IRS’s conclusion that I obtained this information from a public source constitutes “plain error,” because if this were the initial source of my information, I am precluded from obtaining an award. "Plain error is highly prejudicial error affecting substantial rights and is found only in exceptional circumstances." United States v. Harris, 738 F.2d 1068, 1072 (9th Cir.1984). …There must be a high probability that the error materially affected the outcome. United States v. Kessi, 868 F.2d 1097, 1103-04 (9th Cir.1989); United States v. Bryan, 868 F.2d 1032, 1039 (9th Cir.), cert. denied, 110 S.Ct. 167 (1989) (as cited in Swayze v United States 940 F.2d 669, an unpublished disposition)
VII
LIMITATIONS ON RELIEF
The question before the court is whether petitioner, in equity, is restricted in obtaining relief not specifically barred by Code Section 7623. Code Section 7623 gives the Secretary the authority to proceed with any administrative or judicial action. Other than this limitation, the "statute doesn't explicitly bar actions seeking injunctive relief" Tri-Dam v. Schediwy,1 o. 1:11-CV-01141 AWi-SMS (E.D. Cal. Dec 21,2011) since the plain language of the statute does not address equitable relief.

VIII
RELIEF SOUGHT

Petitioner is seeking equitable relief which would be, as stated on page 2 of the dissent in Cohen v. United States No. 08-5088, "declaratory and injunctive relief." Petitioner would like a "judicial declaration that the ... scheme is unlawful and an injunction ordering the Government to devise a new ... process so as to correct the alleged flaws."

Petitioner also seeks the reason for issuing a determination of zero including all correspondence and notes that let up to this decision. Included would be the individual who made the determination of zero and sufficient information to determine whether the delegation of the Secretary was proper.

Appoint a Federal Monitor to oversee the Whistleblower Office until the monitor and the Inspector General certify that the Whistleblower Office’s problems have be solved.

Order the Whistleblower Office to accept my claim since the Whistleblower’s Office presumption of corrfectness no longer exists..

Have the Court supervise the Whistleblower Office using the Inspector General as its fact finder.