[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]




 
               THE IRS CONTRACTS WITH STRONG CASTLE, INC.

=======================================================================

                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 26, 2013

                               __________

                           Serial No. 113-43

                               __________

Printed for the use of the Committee on Oversight and Government Reform


         Available via the World Wide Web: http://www.fdsys.gov
                      http://www.house.gov/reform



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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida                ELIJAH E. CUMMINGS, Maryland, 
MICHAEL R. TURNER, Ohio                  Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee       CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona               GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania         JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee          MATTHEW A. CARTWRIGHT, 
TREY GOWDY, South Carolina               Pennsylvania
BLAKE FARENTHOLD, Texas              MARK POCAN, Wisconsin
DOC HASTINGS, Washington             TAMMY DUCKWORTH, Illinois
CYNTHIA M. LUMMIS, Wyoming           ROBIN L. KELLY, Illinois
ROB WOODALL, Georgia                 DANNY K. DAVIS, Illinois
THOMAS MASSIE, Kentucky              PETER WELCH, Vermont
DOUG COLLINS, Georgia                TONY CARDENAS, California
MARK MEADOWS, North Carolina         STEVEN A. HORSFORD, Nevada
KERRY L. BENTIVOLIO, Michigan        MICHELLE LUJAN GRISHAM, New Mexico
RON DeSANTIS, Florida

                   Lawrence J. Brady, Staff Director
                John D. Cuaderes, Deputy Staff Director
                    Stephen Castor, General Counsel
                       Linda A. Good, Chief Clerk
                 David Rapallo, Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 26, 2013....................................     1

                               WITNESSES

Mr. Brad Flohr, Senior Advisor for Compensation Service, Veterans 
  Benefits Administration, U.S. Veterans Administration
    Oral Statement...............................................     7
    Written Statement............................................    10
Mr. Michael A. Chodos, Associate Administrator, Office of 
  Entrepreneurial Developmnet, U.S., U.S. Small Business 
  Administration
    Oral Statement...............................................    25
    Written Statement............................................    27
Ms. Beth Tucker, Deputy Commissioner for Operations Support, 
  Internal Revenue Service
    Oral Statement...............................................    32
    Written Statement............................................    34
Mr. William A. Sisk, Acting Deputy Commissioner, Federal 
  Acquisition Service, General Services Administration
    Oral Statement...............................................    39
    Written Statement............................................    41
Mr. Braulio Castillo, President and Chief Executive Officer, 
  Strong Castle, Inc.
    Oral Statement...............................................    44
    Written Statement............................................    46

                                APPENDIX

U.S. Small Business Administration, Notice of final 
  Decertification................................................    96


               THE IRS CONTRACTS WITH STRONG CASTLE, INC.

                              ----------                              


                        Wednesday, June 26, 2013

                  House of Representatives,
              Committee on Oversight and Government Reform,
                                                   Washington, D.C.
    The committee met, pursuant to call, at 9:04 a.m., in Room 
2154, Rayburn House Office Building, Hon. Darrell E. Issa 
[chairman of the committee] presiding.
    Present: Representatives Issa, Mica, Duncan, Jordan, 
Walberg, DesJarlais, Gowdy, Woodall, Meadows, Bentivolio, 
DeSantis, Cummings, Maloney, Norton, Tierney, Connolly, 
Duckworth, Kelly and Davis.
    Staff Present: Alexia Ardolina, Assistant Clerk; Jen 
Barblan, Counsel; Kurt Bardella, Senior Policy Advisor; Richard 
A. Beutel, Senior Counsel; Will L. Boyington, Press Assistant; 
Molly Boyl, Senior Counsel and Parliamentarian; Lawrence J. 
Brady, Staff Director; Ashley H. Callen, Senior Counsel; Steve 
Castor, General Counsel; Drew Colliatie, Professional Staff 
Member; John Cuaderes, Deputy Staff Director; Carlton Davis, 
Senior Counsel; Kate Dunbar, Professional Staff Member; Adam P. 
Fromm, Director of Member Services and Committee Operations; 
Linda Good, Chief Clerk; Tyler Grimm, Senior Professional Staff 
Member; Christopher Hixon, Deputy Chief Counsel, Oversight; 
Justin LoFranco, Digital Director; Mark D. Marin, Director of 
Oversight; Ashok M. Pinto, Chief Counsel, Investigations; Laura 
L. Rush, Deputy Chief Clerk; Jonathan J. Skladany, Deputy Chief 
Counsel, Investigations; Rebecca Watkins, Deputy Director of 
Communications; Meghan Berroya, Minority Counsel; Susanne 
Sachsman Grooms, Minority Chief Counsel; Jennifer Hoffman, 
Minority Press Secretary; Elisa LaNier, Minority Deputy Clerk; 
Dave Rapallo, Minority Staff Director; and Donald Sherman, 
Minority Counsel.
    Chairman Issa. The committee will come to order. The 
Oversight Committee's mission statement is that we exist to 
secure two fundamental principles: First, Americans have a 
right to know that the money Washington takes from them is well 
spent; and second, Americans deserve an efficient, effective 
government that works for them.
    Our duty on the Oversight and Government Reform Committee 
is to protect these rights. Our solemn obligation is to hold 
government accountable to taxpayers, because taxpayers have a 
right to know what they get from their government. It is our 
job to work tirelessly in partnership with citizen watchdogs to 
deliver the facts to the American people and bring genuine 
reform to the Federal bureaucracy.
    A few days ago the acting IRS Commissioner, Danny Werfel, 
issued a 30-day assessment on his plan of action for the future 
of the IRS. The report stated that in many instances across the 
IRS, we had efficient, effective management, or effective 
management that is leading positive organizational performance.
    Unfortunately, we are here today because failures within 
the IRS are not isolated to just Tax-Exempt Division. The 
revelation that a company called Strong Castle was able to 
acquire more than $500 million in potential contracts, or in 
contracts for potential sales, with no previous track record 
completely undermines the IRS narrative that just one branch or 
department within the IRS failed the American people.
    Our report, we believe, shows a cozy relationship between 
Strong Castle's president and the IRS Deputy Director for 
Information Technology Acquisitions, Greg Roseman, and it is 
the heart of this issue. Included in the--included in our 
report are exchanges of text messages that we believe are 
shockingly inappropriate, and in some cases offensive.
    Furthermore, the fact that Mr. Castillo was able to 
successfully manipulate the system--and we are not alleging a 
crime--but successfully manipulate the system to acquire 
contracts exposes staggering vulnerability in the IRS's 
acquisition process and jeopardizes billions of taxpayer 
dollars in this situation.
    Quite frankly, we are not sure that we have criminal 
element here, that we have criminal violations. What we are 
sure of is that the intent of Congress and the stated intent of 
this and each administration before has been thwarted.
    The intention of, without a doubt, that disabled military 
veterans receive preference flies in the face of a small injury 
in 1984 while attending the Military Academy Prep School, one 
so minor that it had no effect on college football 
participation for years to follow, and that took 27 years to 
conveniently ask to have this put in as a disability not 
because of a true disability or inability to perform a job, 
but, in fact, in order to qualify for a preference statement.
    Additionally, the use of HUBZones, and in this case one 
that was a legacy HUBZone that actually the Verizon Center and 
the other parts of Washington, D.C., are moving out of that 
into thriving areas; the use of that in order to gain a 
contract and then creating absolutely no jobs within that 
district that were directly related to or in support of this 
$500 million contract.
    Our investigation is still in its infancy. Today we are 
working with the IG and hope to work with others within the IRS 
to end this problem. As we speak, many of these contracts 
continue to be in force. And perhaps that's the most 
distressing is that the IRS officials immediately--excuse me--
initially denied and then repeated their denial that there was 
a problem. They failed to take action after this was brought to 
their attention, and the IRS is still allowing a $266 million 
contract with Strong Castle to stand.
    The action by the inspector general when he was notified of 
these allegations almost a year ago was a lack of urgency that 
the American taxpayers deserve.
    In our evaluation we find no value added performed by 
Strong Castle. I repeat, no value added performed by Strong 
Castle, although profits flow to that company over and above 
the full payment to the companies who actually provide the IRS 
with those services.
    No hearing related to the IRS would be complete without 
mentioning that under Obamacare, the task of the IRS to 
implement at least 47 new provisions, including 18 new taxes 
expected to raise $1 trillion over the next decade, and the 
hiring of thousands of new employees, the need for computer 
systems to work and work accurately begs the question of can we 
afford to implement Obamacare if we cannot get the systems and 
controls in place for existing requirements.
    Just this year the IRS has requested nearly $500 million, 
the same amount of money the IRS plans to award to Strong 
Castle, to enforce Obamacare, including 2,000 new full-time 
employees.
    We are not trying to say that one is interchangeable with 
the other, but it's very clear this is a lot of money, and it's 
a lot of money that could for a fraction, 2 or 3 or 4 percent 
savings, be passed on to the American people.
    Often on this dais we applaud, appropriately, Federal 
workers. And I want to take a moment to make it clear the vast 
majority of people involved in contracting in the Federal 
workforce take contracting seriously. They scrutinize the 
contracts and most often try to get the best value for the 
taxpayer. Because the best value is not always the lowest 
price, this is a difficult job, and it requires absolute 
integrity. If we do not have full confidence in our procurement 
integrity, then we must choose the lowest price. The lowest 
price is not always the best value for the taxpayer, but the 
analytics of lowest price versus lowest value depends on an 
independent, non cozy relationship between the contracting 
officers and their superiors and the contractor. This committee 
has over the years applauded and will continue to applaud that 
most contracts have that characteristic. They are not always 
awarded the way contractors would like, but they are based on 
best value to the taxpayer.
    In this case, at least for this chair and our draft report, 
we don't believe that occurred, and that is the reason that we 
are continuing our investigation.
    Chairman Issa. I would now like to recognize and thank the 
ranking member for being my full partner in this investigation.
    Mr. Cummings. Thank you very much, Mr. Chairman. And I want 
to, first of all, thank you for calling this hearing. It is 
indeed a very important hearing.
    And it is interesting, this hearing is to examine 
allegations against a company named Strong Castle, Inc., that 
has been awarded $51 million in obligations under information 
technology contracts with the Internal Revenue Service. The 
first allegation made against Strong Castle last December was 
that the company's owner, a local businessman from northern 
Virginia named Braulio Castillo, took improper advantage of the 
Historically Underutilized Business Zone program, the HUBZone, 
while setting up his companies here in Washington, D.C.
    Let me say from the outset that I have a tremendous 
interest in HUBZones. I have lived in what would consider to be 
a HUBZone for 32 years in the same house, where I would imagine 
that black unemployment, male unemployment, is probably 35 
percent unemployment; where businesses struggle trying to 
become a part of this economy and trying to do well. And I have 
lived long enough and seen enough to be able to tell you that I 
have worked with a lot of those small business people who have 
felt quite often that they weren't on the playing field. As a 
matter of fact, they felt that they weren't even in the 
stadium. And they have lived long enough and struggled long 
enough, and now I have seen many of them die chasing a dream, 
trying to get there, looking for a playing field that is simply 
level, but they can't even get on the field.
    And so the purpose of the HUBZone program is to help small 
businesses increase employment, investment in economic 
development in historically underutilized business areas. As 
part of this program, which is overseen by the Small Business 
Administration, companies may receive preferred status when 
bidding on Federal contracts.
    In order to qualify, Mr. Castillo opened one small office 
in a HUBZone near Chinatown, the Chinatown neighborhood of 
Washington, D.C. He then worked with the head football coach at 
Catholic University, his former college roommate, to hire 
college students living in a different HUBZone near that 
school.
    Mr. Castillo's former employer and current competitor, 
Government Acquisitions, Inc., filed protests with SBA and the 
Government Accountability Office. The company accused Mr. 
Castillo of engaging in, ``shell game,'' with multiple 
businesses and employees. It also accused him of, 
``manipulating the facts to gain the preferred status.''
    SBA investigated these allegations and decertified Mr. 
Castillo's company as a HUBZone contractor on May 23rd, 2013. I 
ask unanimous consent that the SBA's decertification letter be 
placed into the hearing record.
    Chairman Issa. Without objection, so ordered.
    Mr. Cummings. Thank you, Mr. Chairman.
    SBA determined that Mr. Castillo's company submitted 
employee records that were, ``false and inaccurate.'' It also 
concluded that the company, ``does not have the adequate 
internal controls to independently verify employee records.''
    Despite these findings, I credit Mr. Castillo for appearing 
before the committee today. He participated in a 9-hour 
interview with committee staff, he provided documents to us and 
to SBA, and he is here to explain his actions. A committee 
staff also conducted extensive interviews with almost all of 
his employees.
    Another major allegation involves Mr. Castillo's personal 
relationship with an IRS employee named Greg Roseman. Mr. 
Roseman did not disclose his relationship to the contracting 
officers who awarded contracts to Strong Castle, to his direct 
supervisor at the IRS, or to the IRS Office of General Legal 
Services. This certainly concerns everybody on this dais.
    Mr. Roseman was not the contracting officer ultimately 
responsible for awarding the contracts to Mr. Castillo's 
company, but he participated in the contracting process as a 
voting member of the Contracting Review Board for two of these 
contracts.
    No IRS officials reported having any knowledge of Mr. 
Castillo's relationship with Mr. Roseman. In addition, no 
contracting officials or other IRS employee interviewed by the 
committee reported any inappropriate influence by Mr. Roseman 
on the contracting process; nevertheless, the evidence obtained 
by the committee indicates at least an appearance of 
impropriety because Mr. Roseman did not disclose this 
relationship or recuse himself from the contracting process.
    Regarding their personal relationship, Mr. Castillo stated 
during his interview with the committee staff, ``Greg Roseman 
and I are friends''
    In addition, on May 15, 2013, the Treasury Inspector 
General for Tax Administration reported that Mr. Castillo and 
Mr. Roseman had exchanged text messages on their personal 
cellphones that, ``contained inappropriate language and lacked 
professional decorum.'' Three hundred of these text messages 
included both work-related and personal communications. They 
also included obviously inappropriate communications with 
juvenile and offensive homosexual slurs and mocking references 
to another IRS employee.
    Mr. Roseman has been reassigned pending the completion of 
the inspector general's review and is no longer overseeing 
procurement matters. Earlier this week his attorney wrote to 
the committee indicating that Mr. Roseman is invoking his Fifth 
Amendment right not to testify today. I am not here to defend 
his actions, but this is his right under the Constitution, and 
as Members of Congress we are bound to respect that right.
    And just one other note. The chairman talked about the 
tremendous responsibility that the IRS will now--has been 
facing with regard to the Affordable Care Act. And I have said 
it from this dais before, but I will say it again: We, all of 
us, everybody up here has fired people, all of us. And bad 
actors does not stop the show. This is the United States of 
America. We have problems in an institution, and if people are 
not doing their jobs, they have to go, but that doesn't mean 
that the law, the law, the Affordable Care Act, should not and 
cannot be administered by that agency.
    We are a can-do Nation. We are a can-do Nation, and it is 
part of our obligation, all of us, to make sure, as the 
chairman has said, that we put right this ship and make sure 
that it sails so that it can accomplish the things that the 
Congress had voted for, and that we have stood up for, and that 
is the law.
    And with that, Mr. Chairman, I look forward to hearing from 
our witnesses, and I yield back.
    Chairman Issa. I thank the gentleman.
    Chairman Issa. All Members will have 7 days to submit 
opening statements for the record.
    Chairman Issa. And we now recognize our panel.
    Mr. Brad Flohr is Senior Advisor for Compensation Service 
for the Veterans Benefits Administration at the U.S. Veterans 
Administration.
    Mr. Michael Chodos----
    Mr. Chodos. Yes.
    Chairman Issa. --is the Associate Administrator of the 
Office of Entrepreneurial Development at the U.S. Small 
Business Administration.
    Ms. Beth Tucker is the Deputy Commissioner for Operations 
Support at the Internal Revenue Service.
    Mr. Gregory Roseman is the Deputy Director for Enterprise 
Networks and Tier Systems Support at the Internal Revenue 
Service. And I believe that is a previous title, but we will 
use it for now.
    Mr. William A. Sisk is the Deputy Commissioner for Federal 
Acquisition Services at the General Services Administration, or 
GSA. Welcome.
    And Mr. Braulio Castillo is the president and chief 
executive officer of Strong Castle.
    Pursuant to the committee regulations, would you please all 
rise, raise your right hands to take the oath.
    Do you solemnly swear or affirm that the testimony you are 
about to give will be the truth, the whole truth and nothing 
but the truth?
    Let the record reflect--please be seated. Let the record 
reflect that all witnesses answered in the affirmative.
    Before I continue, and because this committee is acutely 
aware that one or more on the panel may choose to assert their 
Fifth Amendment rights, and because this chair does not want to 
have anyone waive that right accidentally, involuntarily or in 
any other way, does anyone here at this time intend to evoke 
their Fifth Amendment rights?
    Mr. Roseman?
    Mr. Roseman. Yes, sir. I do intend to waive my Fifth--I 
intend to invoke my Fifth Amendment right to be silent.
    Chairman Issa. Mr. Roseman, you have not provided any 
written testimony today; is that correct?
    Mr. Roseman. Yes, sir.
    Chairman Issa. Okay. I understand from your counsel that 
you may want to assert your constitutional privileges, and 
you've already said that's correct.
    Mr. Roseman, today's hearing will cover topics including 
waste, fraud and abuse of government contracting set-asides. As 
Deputy Director, Enterprise Networks and Tier Systems Support 
at the Internal Revenue Service, you are uniquely qualified to 
provide testimony that will help the committee better 
understand information technology acquisition practices at the 
IRS. To that end, I once again must ask you to consider 
answering questions that will bear on that subject with us.
    Mr. Roseman, what is your title at the IRS?
    Mr. Roseman. Mr. Chairman, my title is what is--was Deputy 
Director of Enterprise Networks and Tier Systems Procurement.
    Chairman Issa. Mr. Roseman, to whom do you report at the 
IRS?
    Mr. Roseman. Mr. Chairman, on the advice of counsel, I 
respectfully decline to answer any questions, and invoke my 
Fifth Amendment privilege to remain silent.
    Chairman Issa. Would you do that once again? I apologize.
    Mr. Roseman. Mr. Chairman, on the advice of counsel, I 
respectfully decline to answer any questions, and invoke my 
Fifth Amendment privilege to remain silent.
    Chairman Issa. Mr. Roseman, when did you first become aware 
of a company known as Strong Castle, Inc.?
    Mr. Roseman. Mr. Chairman, on the advice of counsel, I 
respectfully decline to answer any questions, and invoke my 
Fifth Amendment privilege to remain silent.
    Chairman Issa. Mr. Roseman, are you currently employed by 
the IRS?
    Mr. Roseman. Mr. Chairman, on the advice of counsel, I 
respectfully decline to answer any questions, and invoke my 
Fifth Amendment privilege to remain silent.
    Chairman Issa. Lastly, Mr. Roseman, are you prepared to 
answer any questions here today about your role in the IRS 
acquisitions and information technology products and services 
from Strong Castle, Inc.?
    Mr. Roseman. Mr. Chairman, no.
    Chairman Issa. Mr. Cummings, do you have any--any questions 
before I dismiss the witness?
    Mr. Cummings. No, I have no questions. And I--as we respect 
the witness' right to remain silent, consistent with the Fifth 
Amendment, Mr. Chairman, so I have no objections with the 
chairman dismissing this witness.
    Chairman Issa. Given that the witness has indicated that he 
does not intend to answer any questions, and out of respect for 
his right under the Constitution, I will now ask the committee 
to excuse the witness, take away his name, and we'll take a 
short recess so that we can reset the table.
    Mr. Roseman, you're excused.
    [recess.]
    Chairman Issa. The committee will come to order.
    I'd like to thank all the witnesses for their forbearance. 
The chair would like to make sure we allow sufficient time, and 
even though we're slightly smaller now, there's still a large 
panel, so I'd ask you to recognize that your entire opening 
statements will be placed in the record, and to stay within the 
5 minutes or very close to it.
    And with that, you're recognized, Mr. Flohr, for 5 minutes.

                       WITNESS STATEMENTS

                    STATEMENT OF BRAD FLOHR

    Mr. Flohr. Thank you, Mr. Chairman, Ranking Member Cummings 
and members of this committee. I appreciate the opportunity to 
appear before you this morning to discuss the Department of 
Veterans Affairs' processes for granting service connection for 
disabled veterans and verifying Service-Disabled Veteran-Owned 
Small Businesses and Veteran-Owned Small Businesses.
    VA is committed to making accurate decisions in claims for 
disability compensation, as reflected in our goal of 98 percent 
accuracy by 2015 and monitoring the VOSB program. Oversight for 
these programs ensures that qualified veterans receive the 
benefits and business qualifications they have earned through 
their service to our Nation.
    Disability compensation is a monthly benefit payable to 
veterans who have a disability or disabilities resulting from 
injury or disease incurred in or aggravated by Active military 
service. Such service includes Active Duty, Active Duty for 
training during which the individual concerned was disabled or 
died from disease or injury incurred or aggravated in the line 
of duty, and in that Inactive Duty for training during which 
the individual concerned was disabled or died from injury 
incurred or aggravated in line of duty.
    Service consisting solely of attendance at any one of the 
preparatory schools of the service academies may constitute 
Active Duty or Active Duty for training for VA purposes, 
depending on the circumstances of the individual service.
    VA's Office of General Counsel held in a precedent opinion 
issued in 1994 and 1995 that characterization of an individual 
service at a United States academy preparatory school for 
purposes of entitlement to veteran's benefits depends upon the 
status in which the individual enters the school. Service by a 
person entering the school as a reservist called to duty for 
the sole purpose of attending the school or by one who is 
enlisted from civilian life or National Guard duty to attend 
the school constitutes Active Duty for training.
    In contrast, persons who enroll directly from Active Duty 
under a prior enlistment remain on Active Duty within the 
meaning of Title 38 during their attendance. Those individuals 
selected for enrollment in these preparatory schools are in the 
military. They wear the uniform, are paid based on their 
military rank, are subject to the Uniform Code of Military 
Justice, and upon release from that period of training, they 
are issued a DD-214 with either honorable service or other than 
honorable, or whatever the characterization may be. In November 
of 1995, the VA amended its regulations to reflect our general 
counsel's statutory interpretation concerning this type of 
service.
    VA's statutory authority to compensate veterans for 
disability resulting from service, stated in 38 United States 
Code section 1110 is not limited to providing compensation for 
disabilities caused by military service. VA's statutory 
authority is to compensate veterans for disability incurred in 
or aggravated by service.
    Once an individual takes the oath to serve and protect the 
United States, they are on duty 24 hours a day 7 days a week. 
If he or she is injured or develops a chronic disease, whether 
in combat or during routine activities, VA claims processors 
prepare a disability rating decision that determines 
entitlement to service connection and the amount of any 
disability benefits that may be payable.
    In determining whether a disability is related to military 
service, there must be evidence of an injury or disease or an 
exposure in service; medical or, in certain circumstances, lay 
evidence of a current disability; and evidence of a medical or 
scientific nexus or link between the current condition and the 
in-service event.
    VA has a statutory duty to assist claimants in gathering 
the required evidence. This includes obtaining certain 
supporting evidence and ordering a VA examination or requesting 
a medical opinion as necessary. VA reviews documents pertaining 
to military service and service treatment records obtained from 
the particular military service. VA also requests evidence 
identified by the claimant that may be pertinent to the claim 
and medical records from any private providers that we are made 
aware of.
    VA carefully evaluates all available evidence to determine 
if entitlement to service connection is established and, if so, 
the level of severity of the disability. VA's standard of proof 
in making these determinations is reasonable doubt.
    In addition to requesting and revealing records from 
military service departments, newly hired claims processors are 
provided training on military records, which includes 
identifying any noted alterations or suspected fraudulent 
records. Each regional office also has a military records 
specialist with expertise in military records who serves as a 
liaison with other government agencies. VA employees are aware 
of their responsibility to ensure that benefits are awarded to 
those who are entitled to them.
    Upon a determination that fraud has occurred, a preliminary 
decision is made with respect to adjusting or terminating an 
award. The beneficiary is provided due process rights, 
including notice of the action to be taken, the reason for the 
adjustment, the right to representation, and the right to 
present evidence to rebut the evidence serving as the basis for 
the proposed adjustment.
    If no evidence is presented, the award is adjusted, and the 
case is referred to the Office of the Inspector General for 
review and any further action that office may deem necessary.
    The Office of the Inspector General coordinates 
investigation with the United States Attorney's Office, State 
and local prosecutors----
    Chairman Issa. Mr. Flohr, could you summarize, please?
    Mr. Flohr. Yes, sir. That actually summarizes my statement 
on service connection.
    Chairman Issa. Thank you very much.
    Mr. Flohr. You're welcome.
    [Prepared statement of Mr. Flohr follows:]

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    Chairman Issa. Mr. Chodos.

                 STATEMENT OF MICHAEL A. CHODOS

    Mr. Chodos. Chairman Issa, Ranking Member Cummings and 
distinguished members of the committee, thank you for inviting 
me to testify about the Small Business Administration's, or 
SBA's, role in the awarding of certain contracts to Signet 
Computers, Inc., and its successor, Strong Castle, Inc., a firm 
recently decertified by SBA as a Historically Underutilized 
Business Zone, or HUBZone entity.
    Before discussing the specifics of the SCI case, I would 
like to briefly describe the HUBZone program and some of its 
recent successes. Its aim to is help small firms in underserved 
communities gain access to Federal contract opportunities. 
Generally HUBZones are urban or rural areas with very low 
median household incomes and/or very high unemployment. The 
program requires certified companies to have their principal 
office in a HUBZone and to employee individuals who reside in 
HUBZones, with the intention of spurring economic growth within 
the community.
    As of May 31, 2013, there were 5,029 certified HUBZone 
small businesses. In fiscal year 2012, over 8 billion--over $8 
billion were awarded to certified firms for work performed in 
all 50 States, including D.C., Puerto Rico, Guam, the Virgin 
Islands, and the Northern Mariana Islands.
    In the case of the SCI, the firm applied for HUBZone 
certification on March 11, 2012, and was certified on June 22, 
2012. SCI was awarded a blanket purchase agreement by the IRS 
on or about December 7th, 2012. A HUBZone status protest was 
filed with SBA by a competing firm on December 19, 2012.
    SBA could not process the protest, based on applicable 
jurisdictional rules; however, SBA believed the information 
contained in the protest called into question SCI's HUBZone 
eligibility. As a result SBA promptly began its investigation 
into the eligibility of SCI for the HUBZone program in late 
December of 2012. Based on the facts and evidence found during 
this investigation, SBA proposed SCI for decertification on 
January 31, 2013.
    It is important to note that this investigation and the 
resulting proposed decertification took place before and 
independent of the committee investigation of SCI.
    After a thorough review of the information provided to SBA 
in response to the proposed decertification, SBA decertified 
SCI on May 23, 2013.
    SBA takes very seriously its duty to root out fraud, waste 
and abuse in all of the Federal small business contracting 
programs, including HUBZone. Our top priority at SBA is to 
ensure that the benefits of our programs flow to the intended 
recipients. Our government contracting programs are a critical 
and effective toolkit for small businesses; however, we have no 
tolerance for fraud, waste and abuse in those programs.
    For this reason we have implemented a comprehensive three-
pronged strategy to identify, prevent and pursue noncompliance 
or fraud across all our government contracting programs. First 
is effective certification processes. Clear and comprehensive 
eligibility screening on the front end ensures that only 
qualified, eligible firms participate in our programs.
    Second, continued surveillance and monitoring. Targeted and 
thorough examinations, reviews and on-site visits identity 
potentially fraudulent firms or those that no longer qualify.
    And three, robust and timely enforcement. Prompt, proactive 
enforcement removes bad actors, deters wrongdoing, and provides 
integrity to our contracting programs.
    We are especially proud of our core partnership with the 
SBA's Office of Inspector General, whose assistance is critical 
to the excess--to the success of our improvement efforts.
    Through ongoing and proactive collaboration with the 
Government Accountability Office and our stakeholders, SBA 
intends to protect the Federal Government commitment to aid and 
assist small business.
    The strategy and efforts described in my testimony reflect 
an integrated approach that utilizes resources across our 
Office of Government Contracting and Business Development, our 
General Counsel's Office and our 68 district offices and 
others.
    As demonstrated by the initiatives and efforts described in 
this testimony, SBA has taken great strides to strengthen the 
small business contracting programs and implement a robust 
strategy to combat fraud, waste and abuse. Work remains to be 
done to completely eliminate fraud, waste and abuse in our 
programs, as bad actors, regretfully, still attempt to take 
wrongful advantage of government benefits.
    While we have made significant progress, we continue to 
look for ways to identify further opportunities for improvement 
and to maximize small businesses' access to this important 
source of revenue so they can do what they do best: start, grow 
and create jobs.
    Thank you for the opportunity to testify before you today, 
and I am happy to answer any questions you may have.
    Chairman Issa. Thank you.
    [Prepared statement of Mr. Chodos follows:]

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    Chairman Issa. Ms. Tucker.

                    STATEMENT OF BETH TUCKER

    Ms. Tucker. Chairman Issa, Ranking Member Cummings and 
distinguished members of the committee, my name is Beth Tucker, 
and I'm the Deputy Commissioner for Operations Support at the 
Internal Revenue Service. I appreciate the opportunity to 
appear before you today.
    I have been an IRS employee for 29 years. I started my IRS 
career in 1984 as a revenue agent. I am very proud of my 
government service, and it is an honor for me to work alongside 
the dedicated men and women of the Internal Revenue Service.
    Our agency is vital to the functioning of government and 
keeping our economy strong. In our role as tax administrators, 
we collect 92 percent of all Federal receipts, and last year we 
issued more than $330 billion in refunds to individual 
taxpayers.
    In my role as Deputy Commissioner, I oversee the support 
functions of the Internal Revenue Service, including 
technology, human capital, budget, real estate, physical 
security and procurement.
    In February, the committee sent the Department of Treasury 
a letter raising questions about two contracts that the IRS 
awarded in December 2012 to Strong Castle, one of the thousands 
of vendors that IRS does business with. One of the contracts 
was for computer equipment. Let me be clear: We have made no 
awards or purchases under that contract. The other involves 
licensing and product support for IBM software that is in use 
across the enterprise at IRS.
    Upon receipt of the committee's letter, I immediately 
referred the matter to the Treasury Inspector General for Tax 
Administration. It's important to note that investigation is 
still ongoing.
    In mid-May, I was informed by TIGTA about inappropriate and 
unacceptable personal text messages sent by one of our 
procurement managers, Greg Roseman, to contractors doing 
business with the IRS from his personal phone. As soon as I 
became aware of this situation, I took steps to have Mr. 
Roseman reassigned to a nonsupervisory position that does not 
involve the awarding or administration of contracts, pending 
the outcome of the TIGTA investigation. And then just yesterday 
the committee released information related to this matter that 
the Internal Revenue Service had not been previously apprised 
of. This new information is deeply troubling, and it raises 
additional questions that TIGTA and the Internal Revenue 
Service must investigate.
    Let me be clear: These types of communications should not, 
should not occur between a procurement employee and a 
contractor. We expect all of our employees to act with 
professionalism and integrity.
    We are taking steps to separate the IRS from any ongoing 
business relationship with Strong Castle, subject to our need 
to safeguard our mission-critical resources.
    Under the teaming agreement with IBM that has been talked 
about in the days since the report was mis---was issued, 
there's a number that--that's rolling around about Strong 
Castle receiving $500 million potentially in award from that 
contract. Let me be clear: Strong Castle has not received 
anywhere near that amount of money from the software teaming 
arrangement. In fact, 98 percent of the value of that contract, 
if--if it was awarded, would go direct to IBM. But as I 
mentioned, we are taking steps to sever this relationship with 
Strong Castle.
    In response to the committee's February letter, I also 
directed officials within our procurement office and Office of 
Chief Counsel to review the documentation and correspondence 
related to these two contracts.
    In addition, as a result of the issues that have surfaced 
from the committee inquiry, we're doing a top-to-bottom review 
of procurement policies and procedures, everything from 
internal controls to business processes and staffing practices. 
I've also asked the Department of Treasury to expand its 
routine assessment of IRS procurement to include a review of 
small business programs.
    Based on the troubling information that we have received, 
we will also further enhance employee training with regard to 
ethics, with a focus on gift rules, conflicts of interest, 
impartiality and the appearance of impropriety, and issues of 
official position.
    Let me be clear that I have not seen anything within our 
procurement organization, and I think this is also backed up by 
the extensive interviews the committees have done with a host 
of IRS procurement officials, inappropriate behavior on the 
part of any other IRS procurement employee. These are 400 
hardworking--and, Mr. Chairman, as you mentioned, our 
procurement community has a strong ethics and wants to support 
our agency.
    Bottom line, we will continue to work with the committee to 
provide you with updates on the results of our continuing 
review in partnership with TIGTA. And we also--we also would 
implore the committee to please share with us the full set of 
information that you have obtained in your interviews, because 
I do believe it would greatly assist the Internal Revenue 
Service as well as the Treasury inspector general in bringing 
this matter to conclusion.
    With that, I conclude my statement, and I'm happy to answer 
any questions.
    Chairman Issa. Thank you.
    [Prepared statement of Ms. Tucker follows:]

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    Chairman Issa. And I will break with tradition just to 
note, since you made a direct request, that it is our intention 
to share fully with the IG this information. I must admit that 
it's been a one-way street. We're still waiting on an awful lot 
of documents from the IRS that are long overdue.
    Mr. Sisk.

                  STATEMENT OF WILLIAM A. SISK

    Mr. Sisk. Good morning, Chairman Issa, Ranking Member 
Cummings and members of the committee. My name is Bill Sisk, 
and I am the Acting Deputy Commissioner of GSA's Federal 
Acquisition Service. I have spent over 20 years at GSA. I 
started at GSA's regional office in Atlanta in 1990, and I have 
served in a number of management positions, including Assistant 
Regional Administrator and Regional Commissioner. In my 
capacity as Regional Commissioner, I represented GSA's Assisted 
Acquisition Services, Network Services and Personal Property. I 
have also served as Assistant Commissioner in the Office of 
General Supplies and Services within the Federal Acquisition 
Service and was appointed to the U.S. AbilityOne Commission, 
which is a unique program that provides employment 
opportunities for individuals who are blind or other--or who 
have other significant disabilities.
    I appreciate the opportunity to appear here today to 
discuss GSA's information technology Schedule 70 program and 
the process by which GSA reviews Schedule 70 applications.
    IT Schedule 70 is the largest, most widely used acquisition 
vehicle in the Federal Government. Schedule 70 is an indefinite 
delivery/indefinite quantity multiple award schedule, providing 
direct access to IT products and services from private-sector 
partners around the country.
    There are currently 4,853 businesses under Schedule 70, and 
4,172 of these, more than 85 percent, are small businesses. 
Many of these small businesses have socioeconomic designations: 
720 are 8(a), 128 are HUBZone, 381 are Service-Disabled 
Veteran-Owned, 333 are Veteran-Owned, and 1,027 are Women-
Owned.
    Through June of fiscal year 2013, about $11.5 billion worth 
of procurement has gone through Schedule 70, and $4.5 billion 
of that, 39 percent, went to small business.
    Schedule 70 has helped Federal agencies save time and money 
while ensuring a good value and the avail--in the available 
goods and services. In addition, Schedule 70 is one of the two 
schedules that is available to State and local governments 
through the cooperative purchasing program, allowing them to 
leverage the buying power of the Federal Government to procure 
IT goods and services at competitive prices.
    By allowing our partner agencies to purchase from 
preapproved vendors, they can receive goods and services 
faster. While having a schedule contract is not the only way to 
do business with the government, having a schedule contract 
allows both vendors and agencies to cut down on administrative 
costs.
    Cost savings are also generated through prenegotiated price 
ceilings, which provide significant discounts from commercial 
pricing and serve as a starting point for additional 
competition and negotiations.
    GSA has an established process by which to evaluate 
applications and make a determination of whether or not to 
approve businesses to get on schedule. Over the past 3 years, 
GSA has processed appropriately 2,800 applications for Schedule 
70. Currently the average application processing time is 
approximately 110 days.
    Contractors can apply through GSA's eOffer system. eOffer 
provides an online, paperless contracting environment and a 
step-by-step process that complies with the Federal acquisition 
regulation. After an offer package is submitted electronically 
in your system, it is then assigned to a contracting officer or 
contract specialist who reviews the package for completeness. 
After the initial review, the contracting officer or contract 
specialist sends the offerer an administrative letter 
identifying any areas for which additional information is 
required.
    When a package is complete, the contracting officer or 
contracts--contracting specialist conducts a responsibility 
determination using FAR Part 9, together with GSA's in-house 
pricing tool, or by submitting a Standard Form 1403 to GSA's 
Office of Credit and Finance for review and approval.
    In the review the contracting officer or contracting 
specialist will also utilize the system for award management to 
review an offerer's representations, certifications, past 
awards and performance, and to ensure that all information is 
correct, accurate and complete.
    After the responsibility determination is complete, the CO 
or CS prepares a prenegotiation memorandum outlining 
negotiation strategy and any remaining deficiencies. If 
negotiations are successful, a final proposal revision letter 
is sent to the offerer.
    If the offerer accepts the FPR, the CO or CS conducts a 
final review of the offer and prepares and finalizes the price 
negotiation memorandum. After all the required forms and 
additional information are completed and signed, the CO or CS 
enters the offer into our system and prepares a package to send 
to the vendor.
    GSA's Schedule 70 can be an important tool in meeting the 
IT needs of Federal agencies, and GSA has an established 
process to thoroughly review these applications in a timely 
fashion.
    I appreciate the opportunity to be here today, and I would 
be happy to answer any questions you have. Thank you.
    Chairman Issa. Thank you.
    [Prepared statement of Mr. Sisk follows:]

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    Chairman Issa. Mr. Castillo.

                 STATEMENT OF BRAULIO CASTILLO

    Mr. Castillo. Chairman Issa, Ranking Member Cummings and 
members of the committee, my name is Braulio Castillo. I am 
president and CEO of Strong Castle, Inc.
    In January 2012, my wife and I purchased a small company 
called Signet Computers, Inc. At that time Signet had over 15 
years of experience as a government contractor. Because I have 
significant experiencing serving the IT needs of IRS, our plan 
was to transform Signet into a small business that initially 
focused on IRS IT procurements.
    When we considered how we could best position the company 
to support the agency, we came to learn that the IRS desired to 
award contracts to small businesses, and decided to pursue 
HUBZone and Service-Disabled Veteran-Owned Small Business 
credentials. We have never received any improper preferential 
treatment, and we have competed fairly for every IRS contract 
that we have received.
    In the short time frame that we've owned Strong Castle, our 
company has made meaningful contributions to the IRS mission 
and offered the government cost-effective solutions to very 
difficult problems. We've also been instrumental in forming 
teams with large software and hardware suppliers and the IRS.
    In order to improve the company's competitive posture, in 
early 2012, as we began working with the Department of Veteran 
Affairs and the Small Business Administration to have Strong 
Castle qualified as a Service-Disabled Veteran-Owned Small 
Business Concern and a HUBZone Business Concern. We understood 
that these credentials were important because the IRS's 
increased focus on awarding contracts to small business. In 
order to achieve small business participation goals, the IRS 
drafted some solicitation to give favorable consideration to 
qualified SDVOSB and HUBZone concerns.
    In order to compete, we approached the VA and the SBA to 
apply for SDVOSB verification and HUBZone certification. We 
worked closely with the VA and the SBA throughout the 
application process. For example, we attended multiple HUBZone 
boot camps, presentations at which representatives of the 
HUBZone office were speakers. After meeting them, we continued 
to communicate frequently and regularly with them, often on a 
daily basis. The SBA advised us on all aspects of our HUBZone 
qualification, including the establishment of our principal 
office in a HUBZone and the hiring of college student 
employees. Because we believed the HUBZone status would be a 
significant benefit to the company, we consulted with the SBA 
on every detail of our application and plans.
    We worked diligently, at enormous personal and financial 
expense, to cooperate with the investigation and to respond to 
all of the committee's requests for documents. So far we've 
produced over 20,000 documents, including business records, 
email communications, text messages and personal information.
    The cost of our effort to cooperate with the committee has 
been tremendous. The mischaracterization of the facts have 
caused Strong Castle to lose contracting partners, lines of 
credit, and goodwill among our important customers. It has hurt 
our reputation.
    Having responded to the committee's request for 
documentation, I believe that we've addressed the central 
issues of the interests of the committee. First, it is not true 
that Strong Castle received $500 million in IRS contracts. 
Strong Castle successfully competed for blanket purchase 
agreements, pursuant to which the IRS may or may not issue 
subsequent orders.
    In reality, Strong Castle's received from the IRS valued 
contracts of approximately $50 million, for which, as Ms. 
Tucker previously mentioned, 49 million went to the large 
business providers. Of that amount--and approximately 1 million 
to Strong Castle. Last year, our company lost approximately 
$140,000.
    Second, it is simply not true that Strong Castle had no 
track record of past performance on government contracts. The 
company that we purchased had experienced contracting with the 
government, and I personally had worked with the IRS for almost 
15 years. My prior experience is directly relevant to the work 
that we perform at the IRS. As a company, Strong Castle is 
uniquely qualified to serve the IRS based on our years of past 
performance.
    Third, Strong Castle has not received inappropriate 
preferential treatment from the IRS. We competed fairly for 
each blanket purchase agreement and any contract order that we 
received. To my knowledge, Strong Castle has never received any 
contract award to--as a result of inappropriate preferential 
treatment.
    Fourth, Strong Castle has been entirely open, truthful and 
forthcoming with the SBA. Because obtaining HUBZone status was 
significantly important to the company, we took extreme care to 
work closely in consultation with the HUBZone office and sought 
approval and guidance throughout the certification process.
    Strong Castle has not sought, nor has it received, unfair 
advantage in its pursuit of any government contract. We are a 
responsible small business. Unfortunately, other companies are 
able to use status challenges as competitive weapons against 
us.
    Despite these challenges, Strong Castle remains committed 
to delivering results as a valued small business partner to the 
United States and the IRS, as I have done for nearly 15 years.
    Thank you.
    Chairman Issa. Thank you.
    [Prepared statement of Mr. Castillo follows:]

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    Chairman Issa. Mr. Castillo, you talked about the 
experience of your company in 15 years. How many common 
employees do you have? In other words, how many employees at 
the--at your firm have been there 15 years?
    Mr. Castillo. No one has been there 15 years.
    Chairman Issa. Ten years?
    Mr. Castillo. Of the employees?
    Mr. Issa. Ten years?
    Mr. Castillo. None of them have been there 10 years.
    Mr. Issa. Five years?
    Mr. Castillo. I don't believe anyone--well----
    Chairman Issa. One year?
    Mr. Castillo. One year? All of them have been there 1 year 
or less. We have----
    Chairman Issa. Wait a second.
    Mr. Castillo. --January of----
    Chairman Issa. No, no. You made an assertion of prior 
experience. The fact is, the company you bought and the 
employees of your current company have nothing in common. So 
where--I ran a company. I built a company over 20 years. Where 
is that legacy experience that you are claiming your company 
has?
    Name an employee that, when you bought the company that had 
never done more than $250,000 in contracting, name the employee 
that is part of that experience that is with you here today.
    Mr. Castillo. Of what timeline, sir?
    Chairman Issa. Well, you claimed 15 years. You bought the 
company a year and a half ago. How many employees came when you 
bought the company?
    Mr. Castillo. Two employees and the owner at the time.
    Chairman Issa. And where are they today?
    Mr. Castillo. The owner left in September of last year, and 
one of the two--we bought a small company with two employees. 
One of them is still there. One----
    Chairman Issa. Okay. Well, I just want the public to 
understand. You are claiming this experience and legacy, and 
now you are claiming that, in reality, three employees gross, 
one was the employer, only one of which is with you today. So, 
quite frankly, you swore an oath to tell the truth and the 
whole truth. That is shading the truth pretty close, to claim 
15 years of experience with essentially no employees, for all 
practical purposes.
    Ms. Tucker, our committee, back when we sent the letter to 
you, or to the Acting Treasury Secretary, and you got involved 
in it back in February and March, we asked you about this. And, 
at that time, you said there was no ``there'' there. Do you 
stand by that today, in the case of this investigation?
    Ms. Tucker. No, sir, I don't.
    Chairman Issa. Turn your mic on, please.
    Ms. Tucker. No, sir, I--let me just be clear. The 
information that we have seen about the personal relationship 
with Mr. Roseman and Mr. Castillo is inappropriate. Mr. Roseman 
should have recused himself immediately from any involvement 
whatsoever in any IRS interactions with Strong Castle.
    Let me be clear also, and I think as your staff members 
interviewed extensively IRS procurement officials, that they 
all stated on the record that they were unaware of any 
relationship with Mr. Roseman.
    Chairman Issa. No, I understand. And, you know----
    Ms. Tucker. And----
    Chairman Issa. Ms. Tucker, you can't have it both ways. You 
can't say you don't know what our people said while your 
lawyers were in those interviews and then start saying what 
your people said in our interviews.
    So let me use my time more briefly. Just this past Monday, 
you indicated you were not going to cancel the $266 million 
contract to Strong Castle. My understanding a few minutes ago 
is you now are going to cancel that and put it on hold; it is 
not so important as to not be reworked. Is that correct?
    Ms. Tucker. Mr. Chairman, what I told members of your staff 
on Monday was that we were exploring options.
    Chairman Issa. Okay. Well, now, let's get to this part 
about the money. When you provide a contract, when the Federal 
Government--and your other witnesses hopefully are helpful--you 
provide a contract to a disabled veteran, like Mr. Castillo, 
and in a HUBZone, the IRS, as I understand it, took full credit 
for this hundreds of millions of dollars as though they went to 
that company. Isn't that true? You didn't take credit for 1 
percent of it going to a disabled veteran and a small business 
in a HUBZone; you took credit for $500 million. Isn't that 
correct?
    Ms. Tucker. Mr. Chairman, Internal Revenue Service followed 
the----
    Chairman Issa. Ma'am, you're not a witness that I'm 
terribly thrilled at today because you did ignore this until we 
pressed and pressed and pressed. The fact is--and I will go to 
either of the other two witnesses, Mr. Flohr or Mr. Chodos.
    When the IRS awards $500 million, they don't do it on the 
net that might go, if you will, the skimmed-off-the-top profit, 
for absolutely no participation in the actual delivery of 
services. They take the gross amount, don't they? This is 
scored as hundreds of millions of dollars going to a HUBZone. 
Isn't that correct?
    Mr. Chodos. Mr. Chairman, the ultimate credit for the 
contract is for the dollars incurred. And the dollars incurred 
are gross, so----
    Chairman Issa. Okay. So for the American people here today, 
one of the frauds on the American people and for us on the dais 
is we get these report cards talking about hundreds of millions 
and billions of dollars going to our disabled veterans, 
hundreds of millions and billions of dollars going into these 
blighted zones that we are trying to encourage--I call them 
enterprise zones; HUBZone happens to be one form of it. We are 
scoring $500 million. And then somebody comes here--Ms. Tucker, 
I'm picking on you for a reason--and tries to say, well, it is 
minuscule.
    Our indication is that this contract cost more than it 
would have cost if it had been competitively bid to the 
principals. And, clearly, every cent that Mr. Castillo got, 
from what we can tell, without having a true principal 
operation--and the witnesses did make it pretty clear they 
don't go there. The people who had real money don't go there. A 
few college students show up and surf the Internet looking for 
potential new contracts. That, in fact, was scored as hundreds 
of millions of dollars to help people in blighted areas and to 
help a disabled veteran, who it turns out played college ball 
for years and didn't limp or have a problem until he got ready 
to apply for this special status.
    I have a scoring problem here today, and I think my ranking 
member and everyone on the dais--and, Mr. Flohr, you didn't get 
a chance, and I'm going to go to the ranking member now.
    But bear in mind, it's not about Mr. Castillo per se. He 
may not have broken a single rule. That's for others to 
determine under the law. But we were shocked to discover that 
we are scoring as though we are doing a lot of good for 
disabled veterans, not people who turn their ankle and have no 
problem for 27 years until it's time to conveniently become a 
disabled veteran.
    And we were scoring impact to blighted communities, when, 
in fact, that score is at best fraudulent. We are scoring 
apparently $1 million but writing it in as 10 times or 100 
times that. So that is part of what this hearing is here today. 
That is why the ranking member and I are teammates on this.
    This is an example of an agency that conveniently had a 
large contract, may or may not have gotten the best value for 
the American taxpayer. But, certainly, for the two gentlemen to 
your left, or your right, Ms. Tucker, they're in a position 
where, complying with the law, they're, in fact, not seeing you 
deliver the value appropriately to the American people for 
these set-aside-type events.
    Mr. Cummings?
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Ms. Tucker, I'm going to just pick up where the chairman 
left off. Help me with this.
    You apparently had not made a decision on an IBM contract 
on Monday. Is that right?
    Ms. Tucker. That's correct.
    Mr. Cummings. And----
    Ms. Tucker. We were exploring options. We were troubled, 
but we had not immediately canceled the contract because the 
IBM software is critical to our mainframe operation.
    Mr. Cummings. I understand. So what happened, what 
information came to you between Monday and this morning that 
caused you to say what you said? And when was that decision 
made to sever the relationships? If I'm misstating it, tell me. 
I think that's what you said.
    Ms. Tucker. Yeah. So, yesterday afternoon when we received 
the report from the committee, the procurement executive team 
and I met. And based on the email exchanges that we're seeing 
in the report that we had not been made privy to--and, 
candidly, based on the fact that Mr. Roseman was repeatedly 
asked by his superiors if he had a personal relationship with 
Mr. Castillo and Strong Castle and he denied it. And I believe 
the detail that we saw excerpted in the report has raised 
considerable concern, that we are in the process of separating 
our relationship with Strong Castle.
    Chairman Issa. Would the gentleman yield for a second? I 
will give him additional time.
    Mr. Cummings. Sure.
    Chairman Issa. Ms. Tucker, I only want to make sure that 
the ranking member understands the email you're so horrified 
about you gave us. That was part of the discovery. Your 
organization reads them before they deliver them to us.
    Ms. Tucker. No----
    Chairman Issa. Thank you, Mr.----
    Ms. Tucker. No, sir, that's incorrect. That's not the email 
that I'm referring to. We did provide emails from the Internal 
Revenue Service system. The emails----
    Mr. Cummings. So the emails that you provided did not lead 
you--were not enough to get you to feel that there should be a 
severing. Is that right?
    Ms. Tucker. Correct.
    Mr. Cummings. Now, some additional emails came in.
    Ms. Tucker. It's actually text messages.
    Mr. Cummings. Text messages, right.
    Ms. Tucker. As I said in my opening statement, it's text 
messages from----
    Mr. Cummings. In the report.
    Ms. Tucker. --Mr. Roseman's personal phone to Mr. Castillo 
that had not been shared with the Internal Revenue Service and 
that we were unaware of.
    Mr. Cummings. So that basically was the straw that broke 
the camel's back. Is that correct?
    Ms. Tucker. Yes, sir.
    Mr. Cummings. Mr. Chodos, tell me, just very briefly 
because I've got to talk to Mr. Castillo, tell me how many 
decertifications you have done, you all have done--do you 
know?--over the last 4 or 5 years. Can you give us any idea? 
I'm trying to figure out how unique this is, decertification.
    Mr. Chodos. Thank you, Representative Cummings.
    I can get you a full spread for the last 5 years of all 
decertifications. I believe we decertified approximately 1,500 
or 1,600 firms over the course of the last year. Some of those 
have been due to changes in the HUBZone-qualified census tract 
maps. Some of those have been due to specific issues with 
particular companies.
    Mr. Cummings. Now, Mr. Castillo, I reviewed your testimony, 
and I have to admit that I'm troubled because you seem to take 
no personal responsibility for any of your own actions. In 
fact, you criticized everyone else but yourself. You even blame 
your current problems on--let me quote this--``the volatile 
business and political environment of the day,'' whatever that 
means.
    I would like to read from the letter that SBA sent to you 
on May 23rd, about 1 month ago, formally notifying you that 
your company's HUBZone status was revoked. Then I would like to 
get your response.
    The SBA letter says that you, ``admitted that records 
provided were false and inaccurate.'' I want you to put a pin 
on that. It says you, ``did not provide SBA with reliable and 
accurate payroll records.'' It says you do not have, ``adequate 
internal controls.'' It says that you tried to claim that your 
program manager, ``is not an employee at all but rather a 
contractor.'' It says you have, ``a facetious attitude with 
regard to accuracy of records.''
    You know, Michael Jackson had the song, ``Man in the 
Mirror''? You need to look in the mirror. It says your 
employees, ``can record time worked as they please.'' Wouldn't 
we all like to have that job?
    So with all of that, Mr. Castillo, let me now give you a 
chance to respond. Do you admit that you submitted false 
records to SBA?
    Mr. Castillo. SBA did decertify us based on the records, 
and we have put measures in place to address some of those 
concerns.
    Mr. Cummings. That's not what I asked you. Do you admit 
that you submitted false records to SBA?
    Mr. Castillo. Yes.
    Mr. Cummings. How do you respond to the other allegations? 
The SBA letter states that you only corrected these errors, 
``after being confronted with conflicting evidence presented by 
SBA.'' So they weren't problems you were identifying, were 
they?
    Mr. Castillo. No, sir. They identified them, and we 
corrected them.
    Mr. Cummings. And so, Mr. Chodos, let me turn to you. You 
are here representing SBA, so what is your response to Mr. 
Castillo? Do you stand by your findings?
    Mr. Chodos. Yes, Representative Cummings, the SBA stands by 
its findings that the decertification was justified under these 
facts.
    Mr. Cummings. And so, going back to you, Mr. Castillo, what 
do you say about the SBA saying that you did not have adequate 
internal controls? I mean, what is your response to that? I 
want to give you an opportunity to respond----
    Mr. Castillo. Sure. Yes, sir.
    Mr. Cummings. --because you--there's some problems here.
    Mr. Castillo. Yeah. Yes, sir. So they pointed out some 
inaccuracies, and we've put some corrections in place from a 
time-recording perspective.
    Mr. Cummings. And so you admit that there were some 
problems with internal controls?
    Mr. Castillo. Yes, sir.
    Mr. Cummings. Now, let me get to something that the 
chairman talked about that is extremely troubling to me. You 
know, I told you in my opening statement that I live in an area 
where black male unemployment is probably 25, 30 percent. I 
live in a HUBZone-type area where businesses are struggling. So 
I want the programs to be work properly, as I know the chairman 
does.
    The question is, can you tell me, outside of the Catholic 
University students and faculty, tell me how many other people 
outside of those that you employed from the HUBZone?
    Mr. Castillo. Of our 10 employees, sir, not counting the 
college students, we have 1 other HUBZone residence.
    Mr. Cummings. So you had 10 employees----
    Mr. Castillo. Yes, sir.
    Mr. Cummings. --and are you telling me 9 of them were from 
Catholic University?
    Mr. Castillo. No, sir. What I was saying, we have 
approximately 10 employees. About five of them, per your count, 
are from Catholic University. One of them is from--not counting 
the Catholic students, is from a HUBZone.
    Mr. Cummings. When did you hire that person?
    Mr. Castillo. May of this year.
    Mr. Cummings. Oh, so you--oh, you just hired her?
    Mr. Castillo. Yes, sir. We disclosed that to the committee 
during----
    Mr. Cummings. Okay.
    Mr. Castillo. --my transcribed interview, yes, sir.
    Mr. Cummings. Then I guess if you were in my district, the 
folks that I'm talking about would not--they wouldn't get a job 
from you unless they were at Catholic University, huh? Hello?
    Mr. Castillo. No, sir, I would not agree with that 
characterization.
    Mr. Cummings. All right.
    Let me ask for a moment, just one other question, Mr. 
Chairman.
    Chairman Issa. Of course.
    Mr. Cummings. Mr. Castillo, it seems clear from the 
evidence that you wanted to take full advantage of the HUBZone 
program, and not to help D.C. residents or underutilized 
neighborhoods but to maximize your own profits. During your 
transcribed interview with the committee staff, you said this, 
``I knew that HUBZone was important, being from the industry. 
And so we went at it that way.''
    That's what you said; is that right?
    Mr. Castillo. It's--I don't recall saying it, but, yes, I 
stand by that.
    Mr. Cummings. And now, finally, what does that mean? What 
did you mean by that?
    Mr. Castillo. We moved our operations from northern 
Virginia to Washington, D.C., in a certified HUBZone and 
established our principal office there. That's what I mean by 
that, sir.
    Mr. Cummings. All right.
    Thank you very much, Chairman.
    Chairman Issa. Would the gentleman yield for just one 
moment?
    Mr. Cummings. Of course.
    Chairman Issa. Mr. Castillo, just straight yes or no, 
because we have your interviews, your wife's interview, and so 
on: Isn't it true that all the Type A people who potentially 
sell or work on that contract live and effectively work 
elsewhere, that the testimony of yours, your wife, and other 
principals is that they don't often go to that principal 
location, that in fact it isn't manned full-time and that when 
it is manned it was mostly by college students who were looking 
for other contract potential and not executing in this 
contract, that your accounting operation and all those sort of 
key operations somebody would think as corporate headquarters 
were never located in that building?
    Mr. Castillo. So there was a few things in there, so I will 
try to address them, sir.
    So you're right, the principal workers, I think you'd say 
Type A workers, all work onsite, at the government site. They 
don't report to an office like in many other companies----
    Chairman Issa. Right. So the--maybe I will cut this down 
because I'm really on borrowed time.
    Mr. Castillo. Yes, sir.
    Chairman Issa. You don't work out of that office. Your wife 
doesn't work out of that office. Those previous individuals 
that were from the previous company don't even live in the 
area. One lives in Boston; one lives in Florida. That, in fact, 
when we really look at it, the college--during the execution of 
this contract thus far, until a few day ago, basically, college 
students showed up there and surfed a few sites, which was not 
a direct part of any execution of this contract. Isn't that 
true, that the HUBZone headquarters was in name only, it was 
not your principal place that you did business executing these 
contracts?
    Mr. Castillo. By ``you'' do you mean me, sir?
    Chairman Issa. I mean you, your wife, or anybody other than 
these college students.
    Mr. Castillo. Yeah, I work out of our Leesburg HUBZone 
location, and my wife works out of our home as her----
    Chairman Issa. In the richest county in the country, 
Loudoun, right?
    Mr. Castillo. Yes, sir, I think I read that--tending to our 
five children, four of them which are under the age of 10 or 
under.
    The college students and any other worker that reported to 
an office reports to the Washington, D.C., office, which is why 
SBA established that as our principal office. We did have, as 
you mentioned, an employee from Florida, a former IRS 
executive, who lived there, who retired to that area. And the 
gentleman that you're referring to in Boston actually works on 
a Top Secret facility in Hanscom Air Force Base. So that is 
located in Boston and onsite at the client site.
    Chairman Issa. Yeah.
    Mr. Cummings. Can I ask just one last question----
    Chairman Issa. Of course.
    Mr. Cummings. --Mr. Chairman?
    Just based on what the chairman just said, I want to remind 
you that you're under oath, and I want to ask you this 
question: Don't you think you manipulated this process and 
frustrated the true purpose of this program?
    Mr. Castillo. No, sir.
    Mr. Cummings. And why do you say that?
    Mr. Castillo. I don't feel I manipulated it. That's why I 
said that.
    Mr. Cummings. You just admitted that you lied with regard 
to accuracy of the information.
    Mr. Castillo. Well, to your point, in a direct yes/no, we 
provided inaccurate information on our timesheets, not on our 
payroll statements, which we shared and have corrected since 
and put processes in place to correct them, sir.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Chairman Issa. Thank you.
    Mr. Jordan? Oh, I'm sorry. Mr. Mica is here.
    Mr. Mica. Thank you.
    Ms. Tucker, your title is Deputy Commissioner for 
Operations Support. So you oversee the procurement process for 
IRS and personnel involved in that?
    Ms. Tucker. Yes, sir.
    Mr. Mica. Uh-huh. And you gave a statement I guess pretty 
much waving the flag in support of some of IRS actions. And I'm 
sure there are thousands of people who every day get up and do 
a good job for IRS.
    But representing people in a district in Florida, and just 
anywhere I go, I hear more complaints about the IRS. I think 
you have been in sort of a meltdown of scandals: the targeting 
of certain political organizations. We held a hearing a few 
weeks ago on conferences gone wild, spending with the IRS. I 
think on the wire today there is a story about credit card 
abuses. I don't know if you oversee that. Do you see that too?
    Ms. Tucker. Yes. That's part of our procurement 
organization.
    Mr. Mica. Yeah. Well, that, again, is just an 
embarrassment.
    This hearing on the procurement process that, again, has 
gotten out of hand. I think we have lost great confidence, and 
probably for very good reason.
    It sounds like Mr. Castillo has sort of gamed the system, 
would you agree?
    Ms. Tucker. Based on my understanding----
    Mr. Mica. Well, okay, let me ask you a question. Let's go 
back to--before the committee contacted you about this, had you 
or any employees of IRS, had you all been contacted about what 
was going on with Mr. Castillo and Mr. Roseman?
    Ms. Tucker. Sir, let me--let me----
    Mr. Mica. But wait. My question was, before the committee 
contacted you on the matter of this relationship, were you or 
any of the employees, if are you aware of them, notified that 
something was going on with Mr.----
    Ms. Tucker. No, sir.
    Mr. Mica. Absolutely no?
    Ms. Tucker. No, sir.
    Mr. Mica. Okay. And since then, you have been rather 
reluctant until you've had the awakening just in the last few 
days that something was going wrong, had gone wrong here.
    Mr. Chodos, does it sound like SBA was gamed by this 
player?
    Mr. Chodos. Congressman, it appears, from what we know----
    Mr. Mica. Well, he just told you he provided you inaccurate 
information.
    Mr. Chodos. Yes. And as a----
    Mr. Mica. Thank you.
    Mr. Chodos. --result of learning that the information was, 
in fact, inaccurate, I mean, it's a pretty fundamental----
    Mr. Mica. All right.
    Mr. Chodos. --principle that we have certified----
    Mr. Mica. So you----
    Mr. Chodos. --they have to provide us accurate information.
    Mr. Mica. --you agree, he gamed you.
    Now, Mr. Castillo, it appears you also gamed the Veterans 
Administration. We want our veterans with disabilities to have 
some special preference and standing. The only incident of 
disability was in--was it prep school, was it? Was there 
anything in active military service where you sustained a 
disability or injury?
    Mr. Castillo. The injury that I sustained was during my 
time at the prep school.
    Mr. Mica. But that wasn't my question. My question, did you 
sustain an injury, again, in active military service, or were 
you disabled during that time?
    Mr. Castillo. So I--I'm not sure----
    Mr. Mica. In active military service. Were you in combat 
and had an injury where----
    Mr. Castillo. No, my injury is not combat-related, sir.
    Mr. Mica. Okay.
    Mr. Castillo. It was during my----
    Mr. Mica. Mr.----
    Mr. Castillo. --Active Duty with the----
    Mr. Mica. Mr. Flohr, it sounds like he's gamed the system. 
Would you agree?
    Mr. Flohr. Sir----
    Mr. Mica. Come on, tell--yes or no? Has he gamed the 
system?
    Mr. Flohr. Based on discussions, sir, that we had with your 
staff last week, we are not able to provide specific 
information regarding this claim without the release----
    Mr. Mica. Okay. It sounds to me, Mr. Flohr, like he has 
gamed the system. That's not what we intended--what Congress 
intended. I'm sad that VA can't make that determination and say 
so publicly.
    Let me just also say, Mr. Castillo, you had a few contacts 
or a number of contacts, either by phone, by text, cell phone 
text, or other contacts, with Mr. Roseman. How would you--cell 
phone contacts, were they a few? Many? Texts, a few, many? 
Meetings, a few, many?
    Mr. Castillo. I probably have met with him over the last 5 
years about 10 times or so. And there were--there were text 
messages where we provided to the committee as part of the 
investigation.
    Mr. Mica. Well, Mr. Chairman, he just testified, again, a 
few times--between May and October, you and Mr. Roseman 
exchanged over 100 telephone calls. Don't you think that that 
is in excess of what you just testified to?
    Mr. Castillo. I don't believe they were telephone calls. I 
think you're referring to text messages; is that right?
    Mr. Mica. Well, again, we have phone calls or, through the 
texting, over 100 messages.
    And then, in particular, you had a 21-minute telephone 
conversation between Mr. Roseman and yourself on the 7th of 
June, 2012. And to refresh your memory, that was the night 
before Mr. Roseman sent you the request for a quote for an $80 
million laptop-desktop acquisition.
    So, one, you testified or you just indicated you had very 
few contacts, contrary to over 100 contacts by phone that we 
have. And, secondly, did you want--and, finally, do you want to 
comment on your 21-minute conversation with Mr. Roseman prior--
--
    Chairman Issa. The gentleman's time has expired, but would 
you please answer?
    Mr. Castillo. I believe I testified that I met with him 
about 10 times or so for the last 5 years. I didn't comment on 
the number. I think I stated that I believe you're referring to 
text messages versus--that we turned over versus telephone----
    Mr. Mica. Mr. Chairman, may I----
    Chairman Issa. Briefly.
    Mr. Castillo. --cell or phone, text, and meetings--three 
different.
    Chairman Issa. Duly noted.
    Mr. Castillo. So I don't know the number of telephone 
calls. I believe the text messages I'm very much aware with 
because I met with committee staffers and counsel last week or 
so and we went over them, or the ones that we'd provided. And I 
don't recall what the conversation was about on June 7th, sir.
    Chairman Issa. As I go to Ms. Norton, Mr. Castillo, I know 
Mr. Roseman said there wasn't a friendship. I believe you have 
repeatedly said there was. You haven't been quite as--you've 
been on the opposite side of that. So these texts are not 
unexpected, in that you said you do have a long relationship 
with Mr. Roseman.
    Mr. Castillo. I've worked in support of the IRS for about 
15 years or so. The last 10 years, I mean, since----
    Chairman Issa. But since 2003 he has been what you would 
characterize as a friend?
    Mr. Castillo. I would say a customer. I met him through my 
previous employer, where they were very, very good friends. And 
we held a contract there at my previous employer, which was a 
small business----
    Chairman Issa. Okay, so customer, not friend, is your 
testimony today.
    Mr. Castillo. No, sir, I didn't say that. Because I think 
I'm on record as saying--so we have a business relationship, 
but I believe he is--that we're friendly or friends. So I'm not 
changing my testimony that I believe that----
    Chairman Issa. Well, I think Mr. Mica was trying to get to 
the question based on this communication, because we do have a 
witness, not here today, who has said to the IRS that you were 
not friends.
    Yes or no, are you friends under your definition of 
``friends''?
    Mr. Castillo. Yes, I would think I've been clear--I mean--
or I've stated that several----
    Chairman Issa. Thank you. I just want to make sure because 
I know the Treasury wants to understand the disparity in 
interpretation of friends between an individual who did not 
disclose and yourself. And I'm not trying to put anyone on the 
spot. I just think Mr. Mica deserves a yes or no on that.
    Mr. Castillo. I'm not sure he asked me if we were friends 
or if I characterized it. So based on my 10 years of working 
with him, I would say we have a good business relationship and 
I would consider him a friend under my definition.
    But to be clear, I wish he was here to testify. I'm a 
small-business owner of 10 or so folks, and I'm here willingly, 
and I've actively participated. I've attended everything that 
you've asked me to attend. We've made every employee available 
to you. We've turned over an immense amount of documents, 
including the text messages that you reference. And I would say 
that we fully have cooperated or have tried to do so.
    Chairman Issa. Well--and this is not my time, so, Ms. 
Norton, if you'd be indulgent for one more moment.
    We have no objection to exactly that. From the get-go, you 
have come in and asserted that you believe you did nothing 
wrong. One of the reasons for this hearing today is we 
believed, from an IRS execution of the contract, it was not 
appropriate. And, you know, we intervened when we believe that.
    And, obviously, we have the SBA here today and the Veterans 
here today because we believe that there needs to be a reform 
in a portion of the process under which you were given these 
statuses. And those are the three points here today.
    But I do appreciate and I want to note for the record that, 
yes, from the get-go, you've come in and said, ``I don't 
believe I did anything wrong, I will cooperate,'' and you have.
    Ms. Norton, thank you for your indulgence.
    Ms. Norton. Yes, and thank you, Mr. Chairman.
    Let me preface my question by indicating that when this 
program was initiated in the late '90s, I think 1997, it was 
done without hearings. The Republican Senator from Missouri, 
Chris Bond, inserted it into an SBA reauthorization. And it 
seemed like a good idea. It seemed to bring together really 
some of the visions of one of my good friends, the late Jack 
Kemp, to marry his notions of the market system and capitalism 
with his concern for the inner city.
    By the time the Democrats took control of the Congress, its 
chair, Nydia Velazquez, was so disgusted with the program 
because there had been hearings in all of the major cities 
showing terrible abuse by large companies of the HUBZone 
program. And some of us went to Nydia and said, well, you know, 
it's a new President, give him a chance to clean it up.
    I don't have any evidence that the program is still like it 
was when those hearings were held throughout the United States 
showing that big companies had wholesalely abused the notion, 
but, obviously--and so I do think the program must have 
improved or else we would've heard more about that by this 
time. But I can't say the same for what I'm hearing today.
    I have to tell you, Mr. Castillo, that this hits a bit 
close to home. You, of course, don't live in D.C. That's 
allowed. You're from a wealthy Virginia suburb. That's allowed. 
You rented a tiny office in Chinatown, and then you recruited 
students from Catholic University to do the work after you 
received the contract.
    Why didn't you go to Wards 7 and 8, which, of course, is 
the part of the city--if you were not going to do it in your 
own HUBZone, which is a part of the city where unemployment is 
high, it's classically a part of the city where you could've 
found people to do the work, and fully met the notion embodied 
in the HUBZone, that people who live in disadvantaged areas 
would have some investment in the area and could get employment 
whereas they could not before, why didn't you go to Wards 7 and 
8 instead of going to Catholic University?
    Mr. Castillo. So, ma'am, I don't know the wards very well. 
I apologize. I'm not well----
    Ms. Norton. Well, you know it well enough to go to Catholic 
University.
    Mr. Castillo. Yeah. So--and, ma'am, just to state, the 
college employees that we hired were hired before we--the 
awards. We put together two initiatives. One----
    Ms. Norton. Whether they were hired before or after the 
awards, the purpose of the HUBZone is to hire disadvantaged 
people. Were these Catholic University students disadvantaged 
people?
    Mr. Castillo. They were residents of a HUBZone that we 
employed.
    Ms. Norton. You say in your testimony, all of our actions 
were taken in consultation with the SBA, and we have never 
sought to deceive the government.
    Do you believe that hiring college students who go to an 
expensive private university is in keeping with the goals of 
this program?
    Mr. Castillo. Yes, ma'am.
    Ms. Norton. Mr. Chodos, do you believe that hiring students 
who go to a private university, an expensive one at that, is in 
keeping with the goals of the program?
    Mr. Chodos. Thank you, Representative Norton.
    The answer to your question is this: The HUBZone program, 
as you have said, is designed to spur investment in and 
economic development in place-based----
    Ms. Norton. Do you believe that the hiring of students at a 
private university meets the goals of the HUBZone program?
    Mr. Chodos. We have seen many entities throughout time that 
hire students. Many students, of course, take on great debt in 
order to better themselves and their families----
    Ms. Norton. He had hired no students except, until 
recently--he had hired no employees except students from this 
zone. And then we learned in May that he did, in fact, hire 
someone who was not a Catholic University student.
    Now, I love Catholic University. I'm trying to marry what 
the zone is about with the actions that were taken here. And I 
want to know whether you believe and whether SBA believes this 
is in keeping with the goals of the program.
    Mr. Chodos. So long as they are residents of the community 
and----
    Ms. Norton. So, as far as you know, throughout the United 
States, people are going and finding--people who are, by 
definition, advantaged because they've gotten to college, which 
most Americans do not, and they may be hiring college students 
all over the United States, rather than bona fide residents.
    You don't even know that these Catholic University students 
were residents of the District of Columbia. While they live 
here, they of course are residents. They eat and live in the 
dormitories or in a surrounding neighborhood. We're glad to 
have them. But you don't even know that they are residents of 
the city or that they meet the notions of ``disadvantaged'' 
embodied in the HUBZone itself.
    Mr. Chodos. Well, what we know is what they certify to us, 
which is that they are residents and are planning to live in 
the HUBZone----
    Ms. Norton. Well, I'm going to have to ask whether or not 
you'd be willing to ask HUBZone recipients, HUBZone contract 
recipients, whether they hire college students so that we will 
know how widespread this practice is.
    Mr. Chodos. Well, let me say this: We agree with you 
completely. The purpose of the program is not to focus upon 
college students; it's to focus upon employment in these 
places. And----
    Ms. Norton. But you can't say today that that isn't the 
practice not only of Mr. Castillo but of many like Mr. Castillo 
across the United States.
    Mr. Chodos. I can say that the practice occurs in various 
places at various times. I do not have the data, and I can see 
if the data is available, about exactly how many employees----
    Ms. Norton. I would very much appreciate your seeing if the 
data is available. I think a simple questionnaire, how many of 
your employees are college students, would help us to make sure 
that--the chairman said we wanted to have the needed reforms, 
but there may be no sense until this case came up that that 
could amount to an abuse.
    Look, I'm not against the college students. I'm saying if 
it is a systematic practice, you can see what the effect would 
be if the purpose was to make sure that disadvantaged people in 
the neighborhood were employed.
    So I ask that you submit within 30 days whatever you can 
find on that.
    And one more question, if I may?
    Chairman Issa. Briefly.
    Ms. Norton. Mr. Castillo, you indicated something about 
most of the money went to the parent company or to the large 
company, that you made $1 million, your company made $1 
million. What's the value of your company?
    Mr. Castillo. Last year we reported $8 million in sales, 
and we lost $140,000 based on those sales.
    Ms. Norton. But you just testified that $49 million, but 
your company got $1 million of that.
    Mr. Castillo. Yes, ma'am, in gross profits, not in net 
profits. So----
    Ms. Norton. I would just submit, for an $8 million company, 
$1 million from one contract is very lucrative or, as you said 
in one of your emails to your wife, pay dirt.
    Thank you, Mr. Chairman.
    Chairman Issa. Thank you.
    And I might note for the record that, as a small-business 
man for many years, if I chose to pay myself no salary, I might 
make half a million dollars, and if I chose to pay myself half 
a million dollars, I might make no money. So with Mr. Castillo 
and his wife as principal employees, I wanted to be clear that 
the balance sheet and the income statement are somewhat not the 
same as, let's say, a Fortune 500 company's interpretation of 
its profits.
    Ms. Norton. That's why I wanted to know the worth of the 
company.
    Chairman Issa. Yeah. Well, you know, clearly, without these 
contracts, it will be less.
    With that, we go to the gentleman from Ohio, Mr. Jordan.
    Mr. Jordan. Ms. Tucker, you've been at the IRS 29 years?
    Ms. Tucker. Yes, sir.
    Mr. Jordan. And you're Deputy Commissioner; is that 
correct?
    Ms. Tucker. Deputy Commissioner----
    Mr. Jordan. How many Deputy Commissioners are there?
    Ms. Tucker. Two.
    Mr. Jordan. Is there anyone between the Deputy Commissioner 
and the Commissioner?
    Ms. Tucker. No.
    Mr. Jordan. So you're right near the top?
    Ms. Tucker. Yes, sir.
    Mr. Jordan. One month ago, Inspector General Russell George 
gave the committee information that he informed the IRS on May 
30th, 2012, that targeting of conservative political groups was 
taking place.
    And, in fact, if we can put that up on the screen. This is 
from the TIGTA timeline he gave this committee.
    And he says in that meeting, these terms were used, ``Tea 
Party,'' ``Patriots,'' ``9/12,'' that there were three people 
in that committee, or in that meeting: Mr. Shulman, who is no 
longer with the IRS; Steve Miller, who has been fired; and you.
    Now, Mr. Shulman testified a month ago in this committee 
that that was the first time he knew targeting was taking 
place. Was that the first time you knew about the targeting at 
the IRS?
    Ms. Tucker. That was the first time I was aware of the 
situation, yes.
    Mr. Jordan. Now, Mr. Miller has also--we've also been 
informed, the committee, through talking with Nan Marks, an 
employee at the IRS, that there was an internal investigation 
launched by Mr. Miller in March of 2012. Did you know about 
that internal investigation?
    Ms. Tucker. No, sir.
    Mr. Jordan. And the results of that were Mr. Miller knew 
about what was going on May 3rd of 2012. Did you know the 
results on May 3rd?
    Ms. Tucker. No, sir.
    Mr. Jordan. So the earliest you knew about it was the same 
time Mr. Shulman testified and what you're testifying to today, 
was May 30th of last year.
    Ms. Tucker. Yes, sir.
    Mr. Jordan. And you're familiar with the fact that Mr. 
Shulman testified in front of the Ways and Means Committee in 
March of last year, where he said this. First, Mr. Boustany 
asked him, ``Can you give us assurances that the IRS is not 
targeting political groups?'' Mr. Shulman said, ``Yes, I can 
give you assurances. We pride ourselves on being a 
nonpolitical, nonpartisan organization.'' So just 2 months 
prior to learning that targeting was going on, he gave 
assurances.
    Now, there's usually, when you give assurances, there's 
some basis for assurances. Were you part of the basis for 
assurances that Mr. Shulman gave the Ways and Means Committee 
in March of 2012?
    Ms. Tucker. No, sir.
    Mr. Jordan. You did not have any conversation with Mr. 
Shulman before he went and testified in front of the Ways and 
Means Committee?
    Ms. Tucker. No, sir.
    Mr. Jordan. In the meeting that took place on May 30th, the 
meeting that's highlighted there on the TIGTA timeline, when 
you learned that the targeting was taking place, what was the 
reaction in that meeting?
    Was it, ``Oh, sugar, we've got to do something here?'' Was 
it, ``We've got to correct the record?'' What was the reaction 
when the three top people at the IRS learned that this was 
going on?
    Ms. Tucker. So, if I might, TIGTA, the Treasury Inspector 
General, comes in once a month to meet with----
    Mr. Jordan. Cut to the chase. What was the reaction? You 
find out there's targeting of political groups 6 months before 
a Presidential election. What was the reaction from the top 
three people at the IRS?
    Ms. Tucker. TIGTA reported the information that they were 
looking into the audit. And then, at that point in time, IRS 
waits for TIGTA to complete their investigation.
    Mr. Jordan. That's not what they told you. They told you 
``Tea Party,'' ``Patriot,'' ``9/12'' were identifying terms 
used to put groups on a list who were never given the tax-
exempt status they sought. In some cases, they'd been trying to 
get it for 3 years.
    You learned that May--or, excuse me, May 30th, 2012. And 
your reaction was, oh, we'll just kind of let it keep going and 
see what TIGTA comes up with?
    Ms. Tucker. No, sir.
    Mr. Jordan. I mean, earlier in your testimony, you said to 
the chairman, you know, it would be helpful if this committee 
would share information with us at the IRS about the issue 
that's in front of the committee today.
    Well, it would've been helpful if, once you got that 
information, you'd have shared it with this committee. We 
would've liked to have--and, in fact, we are the committee who 
asked for the audit in the first place. We would've liked to 
have known 6 months before an election, May 30th of last year, 
that targeting was going on.
    Did you instruct Russell George to share this information 
with the House Ways and--Ways and Means Committee and with the 
House Oversight Committee?
    Ms. Tucker. Sir, my----
    Mr. Jordan. Well, that's a question. Did you tell Mr. 
George, ``You know what, this is pretty important information. 
We just now learned today,'' according to your testimony, 
``that this is going on.'' Did you tell Mr. George, you know, 
``You might want to share that with the Oversight Committee,'' 
specifically since Mr. Issa is the one who requested the audit?
    Ms. Tucker. No, sir, that was not my responsibility. I have 
responsibility at Internal Revenue Service for----
    Mr. Jordan. Well, let me ask you this. What----
    Ms. Tucker. --operation.
    Mr. Jordan. But the point is, you were in the meeting. The 
other two guys are gone. Mr. Shulman's gone, Mr. Miller's been 
fired. You're the highest-ranking official at IRS in that 
meeting. You knew about it a year ago. Didn't you think it was 
incumbent upon you to set the record straight?
    Your boss, Mr. Shulman, had just testified 2 months earlier 
and told Congress nothing was going on. He finds out 2 months 
later, in fact, it is going on. You're the highest-ranking 
official still at the IRS. You didn't think it was appropriate 
to come tell Congress what was taking place?
    Ms. Tucker. The TEGE organization does not report to me.
    Mr. Jordan. Why didn't you correct the record? Why didn't 
you just come--why didn't you come to Mr. Issa and say, ``You 
know what? What Mr. Shulman''--did you tell Mr. Shulman he 
should correct the record?
    Ms. Tucker. No, sir, I did not.
    Mr. Jordan. And--well, let me ask you this. Have you been 
disciplined by Mr. Werfel for not correcting the record?
    Ms. Tucker. No, sir. It's not in my purview.
    Mr. Jordan. Well, you're Deputy Commissioner. You're in the 
meeting. You learned about it that day, right?
    Ms. Tucker. Mr. George told us in his routine monthly 
meeting that they were doing an investigation of TEGE.
    Mr. Jordan. We understand that. All I'm asking is, there's 
got to be some reason why--you didn't feel any obligation, any 
reason that you should come forward and set the record 
straight? The Inspector General told the IRS what was going on. 
You didn't feel like he should tell us or you didn't feel 
incumbent--that it was incumbent upon you to tell the 
committee?
    Ms. Tucker. Sir, at the Internal Revenue Service, we have 
two Deputy Commissioners that have very clearly delineated----
    Chairman Issa. The gentleman's time has expired.
    Ms. Tucker. --roles and responsibilities.
    Chairman Issa. The gentlelady may finish.
    Ms. Tucker. At the Internal Revenue Service, we have two 
Deputy Commissioners with very clearly delineated 
responsibilities. I do not have responsibility----
    Mr. Jordan. Mr. Chairman?
    Ms. Tucker. --for the service and enforcement programs, as 
Mr. Miller would not have----
    Mr. Jordan. Well, then, Ms. Tucker, why were you in the 
meeting? If it has nothing to do with you, why did Mr. Russell 
George think it's important to tell us that you were in the 
meeting?
    Ms. Tucker. Mr. George and his deputies come into Internal 
Revenue Service every month and brief on all of their 
investigations, some of which are service and enforcement----
    Chairman Issa. Okay, well, the gentleman's time has 
expired. I'm sure we'll get back to this.
    I would ask unanimous consent the man have 30 additional 
seconds.
    Mr. Cummings. I don't mind the 30 seconds, but I want her 
to be able to answer the question. I mean, he's like a machine 
gun, and she can't even get her answer out.
    Chairman Issa. Okay.
    The gentleman may have 30 additional seconds. The 
gentlelady may then answer.
    Mr. Jordan. In that meeting, did you discuss with Mr.--so 
what you're saying is Mr. Miller had--that was his area of 
jurisdiction.
    Ms. Tucker. That is correct.
    Mr. Jordan. Did you tell Mr. Miller he should come forward 
and tell Congress what was going on?
    Ms. Tucker. No, sir. At this meeting----
    Mr. Jordan. Was that discussed?
    Ms. Tucker. If I could, please.
    The meeting--TIGTA comes in once a month to Internal 
Revenue Service to brief the Commissioner and the two Deputies 
about their audits, their open audits. On any given meeting 
that they come in, they could be talking--I mean, there are 
lots of oversight investigations that happen at Internal 
Revenue Service. Those meetings are typically TIGTA coming in 
and saying, we've opened an investigation on X program; we've 
opened an investigation on another program.
    If it's an issue that is under my jurisdiction, like 
procurement, like the IRS budget, like our real estate 
portfolio, then I am the responsible party. What I'm trying to 
convey to you is I do not have oversight responsibility for the 
TEGE program.
    Chairman Issa. Thank you.
    The gentlelady from Illinois, Ms. Duckworth, please.
    Ms. Duckworth. Thank you, Mr. Chairman.
    You know, this hearing is very troubling to me because this 
case really shows how things can go wrong. I want to support 
our small-business owners as much as possible. I want these 
set-asides to be successful. But I am absolutely appalled by 
the advantages that have been taken of the system.
    Mr. Flohr, I know you cannot discuss Mr. Castillo's case 
because you would need his permission to discuss his particular 
case. That's why you could not answer the question earlier.
    My understanding also is that the VA, or VBA specifically, 
is bound by legislation that says a certain condition has a 
certain disability rating. For example, a below-knee amputation 
is 40 percent. It just is, correct?
    Mr. Flohr. That is correct, ma'am.
    Ms. Duckworth. So it seems like there is an opportunity 
here for some legislative fixes to the system.
    Mr. Chodos, is it true that any rating, even if it's just 5 
percent, would qualify someone for a service-connected 
disability--service-connected disability-owned business?
    Mr. Chodos. So long as they qualify under the VA's rules 
for service-connected disability, that is adequate for the 
self-certification.
    Ms. Duckworth. Thank you.
    Mr. Castillo, how are you? Thank you for being here today.
    Mr. Castillo. I am not well, but you're welcome.
    Ms. Duckworth. All right.
    So does your foot hurt, your left foot?
    Mr. Castillo. Yes, ma'am.
    Ms. Duckworth. It hurts. Yeah, my feet hurt, too. In fact, 
the balls of my feet burn continuously, and I feel like there 
is a nail being hammered into my right heel right now. So I can 
understand pain and suffering and how service connection can 
actually cause long-term, unremitting, unyielding, unstoppable 
pain. So I'm sorry that twisting your ankle in high school has 
now come back to hurt you in such a painful way, if also 
opportune for you to gain the status for your business as you 
are trying to compete for contracts.
    I also understand why--you know, something can take years 
to manifest themselves from when you hurt them. In fact, I have 
a dear, dear friend who sprayed Agent Orange out of his Huey in 
Vietnam who--it took 40 years, 40 years for the leukemia to 
actually manifest itself, and he died 6 months later. So I can 
see how military service, while at the time you seem very 
healthy, could 40 years later result in devastating injury.
    Can you tell me if you hurt your left foot again during 
your football career subsequently to twisting it in high 
school?
    Mr. Castillo. Ma'am, I don't understand the high school 
comment----
    Chairman Issa. Would the gentlelady----
    Ms. Duckworth. Prep school.
    Chairman Issa. Prep school.
    Mr. Castillo. I apologize.
    Chairman Issa. Post-high school.
    Mr. Castillo. I'm not----
    Ms. Duckworth. Post-high school. Okay, post-high school, 
prep school, before college, prep school.
    Did you injure your left foot again after prep school?
    Mr. Castillo. I'm not sure I understand the question, 
ma'am.
    Ms. Duckworth. You played football in college, correct?
    Mr. Castillo. Yes, ma'am.
    Ms. Duckworth. As a quarterback?
    Mr. Castillo. Yes, ma'am, I did.
    Ms. Duckworth. Did you hurt, did you injure that same foot 
again subsequently in the years since you twisted it in prep 
school?
    Mr. Castillo. Not to my recollection, ma'am.
    Ms. Duckworth. Not to your recollection. Okay.
    Why didn't you, Mr. Castillo, tell the VA that your 
doctor's note to them was inaccurate when you knew that it was?
    Mr. Castillo. I don't feel that it's inaccurate, ma'am.
    Ms. Duckworth. Okay.
    Mr. Castillo. Would you like me to address that?
    Ms. Duckworth. Yes. Go ahead.
    Mr. Castillo. Yes, ma'am. So one of my doctors that 
submitted letters--so as part of the injury you have to 
establish that it's chronic and reoccurring. So when I returned 
home to San Diego, my doctor from San Diego had also--had said 
that he treated me for the foot injury that I suffered on 
Active Duty.
    When I moved to Las Vegas a couple of years later, that 
doctor submitted that he continued to treat me for that left 
foot, broken foot injury.
    Finally, when I moved to Virginia, I went to a doctor, and 
it continued to hurt. And he established that--so Dr. Sam 
Wilson, who, ironically, was also stationed at Monmouth----
    Ms. Duckworth. Okay. I have to cut you off because I'm 
running out----
    Mr. Castillo. Okay.
    Ms. Duckworth. --of time. I'm sorry.
    Mr. Castillo. Well, I just want to--so let me finish.
    So in talking to Dr. Wilson, who himself was a disabled 
veteran and very familiar with Fort Monmouth in that his son 
had went there, as well, and played football, he actually was 
the one that talked to me about, hey, this may be something 
that is connected. And I believe I told him----
    Ms. Duckworth. So let me----
    Mr. Castillo. --that I was first----
    Ms. Duckworth. Let me--I have to cut you off. I have to cut 
you off. This is not an argument. I'm talking. I'm up here.
    Mr. Castillo. Yes, ma'am.
    Ms. Duckworth. Let me ask you this. Do you feel that the 30 
percent rating that you have for the scars and the pain in your 
foot is accurate to the sacrifices that you've made for this 
Nation? That the VA's decision is accurate in your case?
    Mr. Castillo. Yes, ma'am, I do.
    Ms. Duckworth. You know, my right arm was essentially blown 
off and reattached. I spent a year in limb salvage, with over a 
dozen surgeries over that time period. And, in fact, we thought 
we would lose my arm. And I'm still in danger of possibly 
losing my arm. I can't feel it. I can't feel my three fingers. 
My disability rating for that arm is 20 percent.
    In your letter to a government official, I think it's the 
SBA, ``Attention: Gina Mou,'' you said, ``My family and I have 
made considerable sacrifices for our country. My service-
connected disability status should serve as a testimony to that 
end. I can't play with my kids because I can't walk without 
pain. I take twice-daily pain medication so I can work a normal 
day's work. These are crosses''--these are crosses--``that I 
bear due to my service to our great country, and I would do it 
again to protect this great country.''
    I'm so glad that you would be willing to play football in 
prep school again to protect this great country. Shame on you, 
Mr. Castillo. Shame on you. You may not have broken any law; 
we're not sure yet. You did misrepresent to the SBA. But you 
certainly broke the trust of this great Nation. You broke the 
trust of veterans.
    Iraq and Afghanistan veterans right now are waiting an 
average of 237 days for an initial disability rating. And it is 
because people like you, who are gaming the system, are adding 
to that backlog so that young men and women who are suffering 
from post-traumatic stress, who are missing limbs, cannot get 
the compensation and the help that they need.
    And I'm sure you played through the pain of that foot all 
through college. Well, let me tell you something. I recovered 
with a young man, a Navy corpsman, who, while he was running 
into an ambush where his Marines were hurt, had his leg knocked 
off with an RPG. He put a tourniquet on himself and crawled 
forward. He is who played through the pain, Mr. Castillo. You 
did not. You took advantage of the system.
    You described these statuses just today, that other 
companies were using these special statuses as competitive 
weapons against you. You, who never picked up a weapon in 
defense of this great Nation, very cynically took advantage of 
the system. You broke the faith with this Nation. You broke the 
faith with the men and women who lie in hospitals right now at 
Walter Reed in Bethesda, at Brooke Army Medical Center, in 
Landstuhl. You broke the faith with them.
    And if this Nation stops funding veterans' health care and 
calls into questions why veterans deserve their benefit, it is 
because cases like you have poisoned the public's opinion on 
these programs.
    I hope that you think twice about the example that you're 
setting for your children. I hope that you think twice about 
what you are doing to this Nation's veterans who are willing to 
die to protect this Nation. Twisting your ankle in prep school 
is not defending or serving this Nation, Mr. Castillo.
    Mr. Chairman, I'm sorry, I've gone--you've been very 
indulgent. I yield back.
    Chairman Issa. I thank the gentlelady. And the time was 
well-spent.
    And I cannot add on to that, except I want to make sure the 
record is clear, since you are under oath, you said the word 
``broken'' in your testimony just now, but my understanding 
from staff is that the X-ray taken at the time of your injury 
did not show a break.
    Additionally, I want to make this clear for the record, and 
you can clear the record up if we don't understand it 
correctly. In your VA application and with a doctor's support, 
you claim that your twisted ankle came from football, as the 
gentlelady just said. However, in your transcribed interview 
before this committee, you said you slipped on a rock while 
orienteering.
    For the record today, which one is the truth?
    Mr. Castillo. So I believe that Dr. Wilson submitted that I 
was hurt playing football, that I told him that. And so, when 
meeting with the committee, I told them--and in preparation for 
meeting with them, I noticed that the date of injury noted on 
the--on my--from Patterson Hospital at Fort Monmouth was 
November 19th, which was after football season. So my response 
was that it could not have happened, that specific injury, 
during football.
    The letter that was submitted stated that he had said that 
I had told him, and I think I told Mr. Davis that I would 
check. I did go back to Colonel Wilson and asked him, you know, 
what was his recollection of a conversation we'd had in 2005 
that led him to write the letter in support of the VA 
application, which was to be submitted by doctors who treated 
me for my injury. And he'd said, to his best recollection, I 
told him I was hurt playing football.
    So I believe that he submitted that in truth. And, in 
preparation, as I mentioned, the dates did not line up. So I 
did suffer a subsequent injury. And so I believe that what he 
had said is that, based on the injury I had suffered, it was 
probably a relapse or it caused an aggravation of the injury.
    So I think that answered one of your questions. I think you 
had three in there. Did you have others? I apologize, I don't 
remember all three of them.
    Chairman Issa. VA, football, orientearing, and whether it 
was a break. You said in your testimony just a few minutes ago 
to the gentlelady that it was broken.
    Mr. Castillo. Yes, and not--so, first and foremost, your 
service to this great country is well-known. And so, just to 
let you know, I didn't set my 30 percent disability or your 20 
percent disability. And I think that----
    Ms. Duckworth. But you're taking advantage of it. And you 
went after that disability rating for the benefit of your 
company because, as you said, other companies were using these 
statuses as a competitive weapon against you. You said that 
today.
    Mr. Castillo. Ma'am, when I said that, I meant that they 
were using the protest process of the procurements as 
competitive weapons, not my disability. So I apologize if I at 
all stated that they were using my disability as a competitive 
weapon. I meant that they were protesting awards as competitive 
weapons against our company. So thank you for allowing me to 
clear that up.
    And, again, I don't set the ratings. And in it was in 
keeping and speaking with Dr. Wilson, Colonel Wilson, retired, 
who was at Monmouth Hospital on Fort Monmouth, that he had said 
that I may be able to qualify. And----
    Ms. Duckworth. You made the decision to apply for a 
disability rating for a twisted ankle from either football or 
orienteering. You can't--you haven't even answered the 
chairman's question. You were there. Did you twist your ankle 
or did you break--or did you twist it playing football? Do you 
not remember? Was it orienteering or was it football? Which was 
it?
    Mr. Castillo. Well, to answer your question, it was not a 
sprained ankle. It was a broken foot. And I believe that the X-
ray technician wrote that there was a much--I don't--I'm not a 
doctor--or that led to it. But it was--in essence, they X-rayed 
it, and they showed a sufficient change in the malformation. I 
forget exactly.
    So, in speaking with the doctor, I said, can you really 
just simplify that for me? He says, ``You broke your foot.'' 
That's what he told me.
    Chairman Issa. I thank the gentlelady.
    And I would trust that the VA can take note of testimony 
here today and reopen the case to at least get to an accurate 
record and then an accurate determination.
    We now go to a medical doctor from Tennessee, Dr. 
DesJarlais.
    Mr. DesJarlais. Thank you, Mr. Chairman.
    And as a former VA physician and someone who had the 
privilege of treating many of our great veterans, both service-
connected and not, I do think that one thing that is very 
important is a good history.
    When did your injury occur?
    Mr. Castillo. Around fall of--the initial injury, fall 
1984. And the second injury, November 19th, 1984.
    Mr. DesJarlais. Okay. So in 1984, how did the first injury 
occur? What were you doing, and what was your title?
    Mr. Castillo. I believe I was an E-2 enlisted soldier, sir, 
and----
    Mr. DesJarlais. Okay, in prep school. And how did the 
injury happen?
    Mr. Castillo. I believe the initial injury happened playing 
football.
    Mr. DesJarlais. Okay. So you were playing football, you 
went and got an X-ray, and that's when they told you it was 
broken?
    Mr. Castillo. No, sir, the initial injury was not X-rayed, 
and that's not when they named it broken foot. I was treated by 
trainers----
    Mr. DesJarlais. Okay. And when was the second injury?
    Mr. Castillo. November 19th, 1984.
    Mr. DesJarlais. How many months apart was that?
    Mr. Castillo. Probably not a month.
    Mr. DesJarlais. A month apart?
    Mr. Castillo. Thereabouts.
    Mr. DesJarlais. Okay, so you had a second injury, and you 
were playing football at that time?
    Mr. Castillo. No, sir, I was hurt in the field during an 
orienteering exercise.
    Mr. DesJarlais. Okay. And you got an X-ray at that time?
    Mr. Castillo. Yes, sir.
    Mr. DesJarlais. Okay. And that's when they thought it was 
broken?
    Mr. Castillo. Yes, sir.
    Mr. DesJarlais. Okay. And so it healed in 6 to 8 weeks. You 
were put in a cast, you were on crutches.
    Mr. Castillo. On crutches and, well, orthotics or wrapped 
up or whatever----
    Mr. DesJarlais. Sure.
    Mr. Castillo. I don't know----
    Mr. DesJarlais. And by 8 weeks you were walking on it 
again. And then when did you play football again, the next 
year?
    Mr. Castillo. Yes, sir.
    Mr. DesJarlais. And how many years did you play football 
after that?
    Mr. Castillo. Four years after----
    Mr. DesJarlais. Four years of football. What about your 
athletic career after that? Did you play golf, any other 
sports, tennis?
    Mr. Castillo. I play golf very poorly----
    Mr. DesJarlais. Okay.
    Mr. Castillo. --but I played some softball.
    Mr. DesJarlais. Okay, softball. Do you still play golf?
    Mr. Castillo. No, sir.
    Mr. DesJarlais. Okay. When's the last time you participated 
in sports?
    Mr. Castillo. A couple weeks ago, I went out with some 
buddies and played some----
    Mr. DesJarlais. Okay, so you can still get around on it 
okay, despite having a 30 percent disability service connect 
for this injury.
    Mr. Castillo. Yes, sir, I have--since you're a doctor, you 
probably--I have a fused, I think, navicular area that was 
fused.
    Mr. DesJarlais. And so, 27 years later, you decided that 
this must've been from the original injury? That's what the 
doctors decided?
    Mr. Castillo. No, sir. After suffering for 20-plus years, I 
went and saw a doctor, and he----
    Mr. DesJarlais. Okay.
    Mr. Castillo. --and he established the broken foot and did 
the fusion--the three-fusion exercises--fusion surgery. Excuse 
me.
    Mr. DeJarlais. I'm sure that doesn't make you feel much 
better, Ms. Duckworth, but thank you for updating us on the 
history.
    Ms. Tucker, at the beginning of the hearing this morning, 
Gregory Roseman invoked his Fifth Amendment right against 
incrimination, did not testify. As the Deputy Commissioner of 
the IRS, is it your expectation that an IRS employee will 
appear before the committee to testify about official action 
taken within the scopes of his duties at the IRS?
    Ms. Tucker. So we expect all IRS employees to cooperate 
with Members of Congress.
    Mr. DeJarlais. But he didn't.
    Ms. Tucker. He did not. And----
    Mr. DeJarlais. Ms. Lerner didn't.
    Ms. Tucker. Each of these individuals, as Mr. Cummings 
said, invoked their constitutional right.
    Mr. DeJarlais. Okay. And this is an agency you've been with 
29 years, and you stated in your testimony you're very proud of 
your service there and very proud of this agency, despite, you 
know, the multiple black eyes they have right now.
    Has the IRS taken any disciplinary action against Mr. 
Roseman as a result of this committee's investigation or 
TIGTA's investigation?
    Ms. Tucker. So when I became aware from the Treasury 
inspector general of investigations in mid-May of hard evidence 
that they had found regarding inappropriate texting by Mr. 
Roseman, I directed the procurement organization, his 
superiors, to reassign him from a management position.
    Mr. DeJarlais. But you agree that he would be uniquely 
qualified to testify about what we are wanting today?
    Ms. Tucker. Yes, sir.
    Mr. DeJarlais. Okay. So the fact that he invoked his Fifth 
Amendment, that's his right, but the fact that Lois Lerner did, 
too, and the American people wanting answers, what's going on 
with the IRS? We've got targeting of conservatives, we've got 
excessive spending, we've got situations like this. And I 
understand you want to be proud of who you work for, and you 
should be, but how are we going to get justice? Do you think 
that the IRS needs to bring people to justice? You were in on 
these meetings. Mr. Jordan asked you why you were in on those 
meetings, and he asked you what was the initial reaction. And 
nobody's given us a reaction, nobody was shocked, but we--you 
agree that targeting conservative groups was wrong?
    Ms. Tucker. So what I was told----
    Mr. DeJarlais. Do you agree that targeting conservative 
groups was wrong? That's a yes or no. Do you agree it was 
wrong? Can someone in the IRS admit that this was wrong?
    Ms. Tucker. I think the information that was released this 
week by our Acting Commissioner shows that BOLO lists were 
inappropriately used across multiple, multiple criteria. So, 
yes, that criteria was incorrect.
    Mr. DeJarlais. So the IRS is screwed up. Somebody needs to 
be held accountable.
    Who--who is in charge of appointing the Commissioner of the 
IRS?
    Ms. Tucker. That's a Presidential appointment.
    Mr. DeJarlais. Okay. All right. Well, somebody needs to be 
held responsible; do you agree?
    Ms. Tucker. All of us at IRS have to be responsible for the 
administration of our agency.
    Mr. DeJarlais. Okay. The American people are going to be 
very relieved when they get this news of who might be held 
accountable. Do you have any idea as to who might be held 
accountable? Do you think you should be?
    Ms. Tucker. I think the investigation that's under way, 
that's exactly what this is intended to do. As our Acting 
Commissioner Danny Werfel has stated numerous times, we all 
want to get to the truth.
    Mr. DeJarlais. Well, the American people want us to get to 
the truth, so thank you for being here today and helping us 
on--in that process.
    I yield back, Mr. Chairman
    Chairman Issa. Ms. Tucker, the gentleman asked you did you 
think it was wrong to target conservative groups, and you said 
it was incorrect. Could you answer the gentleman's question, 
was it wrong?
    Ms. Tucker. So, Chairman Issa, I feel--I feel compelled 
that I need to make sure that everyone understands the meeting 
that I was in when Russell George and his team came in to share 
just their routine, here are the audits we have under way, Mr. 
George at that time basically said, we are initiating an 
audit----
    Chairman Issa. No, no. That's not the question. And I 
apologize. The doctor asked you a fairly straightforward 
question, which is, as one of the highest career professionals 
in the IRS, you are now aware that these BOLOs were used to 
target and delay for up to 3 years a legitimate answer to 
people's applications based on their ideology. Do you think 
that was wrong?
    Ms. Tucker. No, sir. What I'm trying to tell you is that's 
not what I was told in that meeting. In----
    Chairman Issa. I'm not asking about the meeting. I'm asking 
about what is now known.
    Ms. Tucker. So when the--when TIGTA issued their final 
report, what, in April, early May of this year, yes, I think 
all of us at IRS that saw the report are troubled; thus the 
investigation to get to the bottom of exactly what transpired.
    Chairman Issa. Ms. Tucker, I'm just asking about right or 
wrong, and that's what the doctor was asking about, not was it 
incorrect. This is--this is virtually a simple question for 
almost every citizen to answer. Was it right or wrong to do 
what you now know from the IG's report? Was it right or wrong?
    Ms. Tucker. Sir, I--here's--here's what I know based on 
what was told to----
    Chairman Issa. Okay. I'm not going to get an answer, and I 
don't have any time.
    I think, Mr. Davis, you are next up.
    Mr. Davis. I think I am, Mr. Chairman, and I thank you very 
much. And I want to thank all of the witnesses. But I also want 
to thank you and the ranking member for holding this hearing. I 
think we've learned a great deal, or we've had, for some of us, 
reinforcement of thinking and thoughts.
    Especially do I want to relate myself to the question, and 
of the ranking member and that of Delegate Norton, whose 
questioning revealed that so often in communities that are 
designated to benefit from program activity, that there are 
ways to manipulate, to scheme and get around to the point where 
the designation means absolutely nothing to the community or 
neighborhood that is supposed to benefit. And for those who 
have helped create HUBZones, been advocates for them, they look 
for the benefit that's to come. Didn't see much benefit from 
this particular business transaction.
    So, Mr. Chodos, let me ask you about the finding in the SBA 
decertification letter that Mr. Castillo and his company tried 
to pass off employees as contractors to skirt the HUBZone rules 
and collect or earn millions of dollars. On May 23rd, 2013, SBA 
sent a decertification letter to Mr. Castillo, and in that 
letter the director of the HUBZone program found that Mr. 
Castillo erroneously characterized individuals as contractors 
rather than employees in order to maintain the 35 percent 
eligibility requirement for the HUBZone program.
    Mr. Chodos, how would you classify someone as a contractor 
rather than an employee help Mr. Castillo's application?
    Mr. Chodos. If I understand your question, Representative 
Davis, it's when the facts came to our attention that the 
people who were running the company essentially or in 
managerial charge of the company were listed as independent 
contractors rather than as employees, we look to the substance 
rather than the form of whether or not they are actually 
employees of the company, and we were able to determine that 
under a totality test, that, in fact, they were, for all 
meaningful purposes, employees of the company, and thus the 
test was not met.
    Mr. Davis. Well, let me read from the SBA certification 
letter, if I might, and it says this: SCI is telling the 
government two different stories. To the Internal Revenue 
Service, the individual is a valued and key member of Signet's 
management team and its proposed program manager, and to the 
SBA she is merely an independent contractor. In SBA's view, a 
firm's management team and its program manager are not roles 
that are normally subcontracted out to third parties.
    Ms. Tucker, let me ask you, why is it important to 
procurement officials that they know who the proposed program 
manager is for a particular contract?
    Ms. Tucker. So from--from the folks in our procurement 
organization, from--from what they tell me, as we are 
interacting on contracts like the one that we're talking about 
today, the project manager is indispensable in communicating 
with the Internal Revenue Service business owners to make sure 
whatever service or product we are contracting for is--is being 
delivered appropriately. So that--that is very important.
    Mr. Davis. Mr. Castillo, let me--and I agree with you that 
you didn't make the rules, you didn't write the regulations, 
you didn't pass the bills, so you did not create the 
opportunities that existed for you to try and do business under 
these arrangements. But let me ask, how do you explain telling 
the Internal Revenue Service that someone would be the key 
program manager for the contract, and then telling the Small 
Business Administration that that person is an independent 
contractor?
    Mr. Castillo. So the person was--is an independent 
contractor in that she works in support of several companies. I 
think she supported our company and SAIC at that time and was a 
1099 employee.
    A program manager, while I understand that it's important, 
it doesn't necessarily make that person an employee. And I will 
tell you, being in the consulting field, that a program manager 
can be contracted out and is often contracted out. As we serve 
as a contractor on the IBM contract that Ms. Tucker----
    Mr. Davis. But you knew that. But you knew that before it 
was brought to your attention by either the SBA or the Internal 
Revenue Service. I'm saying you knew that as a result of your 
knowledge and experience and the work that you've done, but yet 
you described it two different ways.
    Mr. Castillo. Well, I think they're both consistent. I 
think that they're an important member of the team, and we bid 
them as a program manager on the job, as we bid programmer on 
other jobs through other companies.
    And the distinction we made with the other ones was that 
one was a--the other person actually owned a company, supported 
five other companies, and the other one didn't even work for 
us, she supported us during her maternity leave. She did it as 
a favor to me during her maternity leave.
    Mr. Davis. My time has expired, so thank you very much. But 
nevertheless, you described two different ways when you were 
dealing with the procurement opportunity.
    Thank you, Mr. Chairman. I yield back.
    Mr. Bentivolio. [Presiding.] Thank you.
    The chair now recognizes the gentleman from South Carolina 
Mr. Gowdy.
    Mr. Gowdy. Thank you, Mr. Chairman. I also want to thank my 
friend from North Carolina for yielding me his time.
    Mr. Chairman, I want to thank my colleague from Illinois 
for her service to our country. Her moral standing to discuss 
service and sacrifice is unimpeachable. So I want to publicly 
thank you again for your service to our country.
    Ms. Tucker, more people have invoked their Fifth Amendment 
privilege against self-incrimination in this job than they did 
my former job, and I was a prosecutor, so that's saying a lot. 
And two of them are current government employees. And just so 
there's no misunderstanding, they're invoking their Fifth 
Amendment privilege in connection with their official duties. 
We're not discussing bank robberies or narcotics trafficking; 
we're discussing their official duties, and they feel the need 
to invoke their Fifth Amendment privilege.
    So I want to ask you to do something for me. Okay? Have you 
seen the texts from Mr. Roseman?
    Ms. Tucker. Yesterday when the committee released the 
report----
    Mr. Gowdy. Okay.
    Ms. Tucker. --yes, sir, I have seen the text.
    Mr. Gowdy. So you have seen these despicable homophobic 
slurs.
    Ms. Tucker. Yes, sir. I saw the information in the 
committee report.
    Mr. Gowdy. Well, here's what I'm going to ask you to do for 
me and, frankly, for our fellow citizens: Before the close of 
business today, if you can, issue a statement on behalf of the 
IRS as to why he's still employed and still drawing a paycheck. 
If you've seen the texts that I have seen, I would like an 
explanation as to how you can keep your job if you say things 
he said in your official capacity. Can you do that? Can you 
explain to us how you can keep your job and your paycheck 
despite these homophobic slurs?
    Ms. Tucker. Sir, if I might, as I said in my opening 
statement, based on the information in the committee report 
yesterday, I am--I am sickened----
    Mr. Gowdy. All right.
    Ms. Tucker. --not only as----
    Mr. Gowdy. I appreciate that, Ms. Tucker.
    Ms. Tucker. --not only as an IRS official----
    Mr. Gowdy. I----
    Ms. Tucker. --but also as a citizen.
    Mr. Gowdy. I appreciate that. My question was actually a 
little more specific. Can you issue a statement by 5 o'clock 
today as to how someone who used this language in their 
official capacity as a government employee is still employed 
and drawing a paycheck? Can you explain that to us by close of 
business today?
    Ms. Tucker. Sir, if I might, we are having discussions at 
Internal Revenue Service----
    Mr. Gowdy. And how long do you anticipate those discussions 
are going to last? Because I just read the texts this morning, 
and I have already reached my conclusion. So how long do you 
think it's going to take y'all?
    Ms. Tucker. So we are having discussions with our general 
counsel.
    Mr. Gowdy. How about close of business tomorrow?
    Ms. Tucker. So we're going to do our very best to follow 
due process, but, candidly, to also make sure we do this 
appropriately, because I think the committee's aware of the 
Federal personnel rules, and we want----
    Mr. Gowdy. If this doesn't violate them, Ms. Tucker, then 
we need to change them.
    Ms. Tucker. Yes. So we are doing everything we can to make 
sure----
    Mr. Gowdy. All right. Well, rule----
    Ms. Tucker. --that we follow the proper procedures.
    Mr. Gowdy. I will be anxiously awaiting an explanation as 
to how you can say what this person said in your official 
capacity and keep your job and keep your paycheck. I will 
anxiously await that explanation.
    Ms. Tucker. Yes.
    Mr. Gowdy. Mr. Castillo.
    Mr. Castillo. Yes, sir.
    Mr. Gowdy. Why did Mr. Roseman invoke his Fifth Amendment 
privilege?
    Mr. Castillo. I'm--I have no idea, sir.
    Mr. Gowdy. You don't know? You don't know what conduct he 
could be worried about?
    Mr. Castillo. Well, I think you spoke about one of them, 
but, no, sir, I don't know why he did, and I wish he was here 
to speak about some of these things.
    Mr. Gowdy. Well, we do, too, Mr. Castillo, but he's not, so 
I'll direct my questions to you.
    Mr. Castillo. Okay.
    Mr. Gowdy. Did you discuss his invoking his Fifth Amendment 
privilege with him before today?
    Mr. Castillo. No, sir, I did not.
    Mr. Gowdy. When's the last time you talked to him?
    Mr. Castillo. Before February 20th.
    Mr. Gowdy. Do you know what criminal exposure he's 
concerned about?
    Mr. Castillo. No, sir, I don't.
    Mr. Castillo. You don't have any idea?
    Mr. Castillo. No, sir.
    Mr. Gowdy. Did he ever solicit gifts from you?
    Mr. Castillo. No, sir, he did not.
    Mr. Gowdy. Did you ever offer gifts to him?
    Mr. Castillo. I think it's noted in the----
    Mr. Gowdy. Well, humor me and answer it again.
    Mr. Castillo. So we went to a ballgame around the 2005 time 
frame when I worked at Government Acquisitions that he paid 
for. I gave him a receipt. And----
    Mr. Gowdy. Has he discussed employment with you post-IRS?
    Mr. Castillo. No, sir, he has not.
    Mr. Gowdy. Will you describe the nature of your 
relationship with Mr. Roseman to us?
    Mr. Castillo. I would say that it's centered on my doing 
business with the IRS and his--for 10 years or so.
    Mr. Gowdy. Did you discuss contracts that you were 
competing for or interested in with Mr. Roseman prior to the 
issuing of those contracts or the awarding of those contracts?
    Mr. Castillo. Not to my--well, I'm not sure I understand 
the question, sir. Did we discuss contracts beforehand?
    Mr. Gowdy. I'm trying to figure out whether or not you 
violated any of the bidding procedures, whether or not he gave 
you an unfair advantage if you were seeking work that other 
people were also seeking.
    Mr. Castillo. No, sir. I'm not aware that I have an unfair 
advantage in any of them.
    Mr. Gowdy. How about any advantage, unfair or fair? Did his 
relationship with you give you an advantage?
    Mr. Castillo. No, sir.
    Mr. Gowdy. You've never discussed future employment with 
him?
    Mr. Castillo. No, sir.
    Mr. Gowdy. Well, this is my last question, because my time 
has run out. Mr. Castillo, have you read the texts from Mr. 
Roseman?
    Mr. Castillo. I have--I have read them. Sir, I provided 
them to the committee.
    Mr. Gowdy. All right. And you still say he's your friend?
    Mr. Castillo. So to be clear----
    Mr. Gowdy. No. I want you to be clear, because--because I 
just read them, and I--and I want you to be clear. You've read 
them.
    Mr. Castillo. I have----
    Mr. Gowdy. You know what's in them, the homophobic slurs in 
his official capacity. Y'all still friends?
    Mr. Castillo. I'm deeply offended. As you're aware, those 
were targeted toward--towards me----
    Mr. Gowdy. Yeah. I----
    Mr. Castillo. --towards me.
    Mr. Gowdy. Yeah, I am. That's why I'm asking you.
    Mr. Castillo. So I am offended. If you can appreciate that 
he's the customer, and it's not my job to go around correcting 
what the customer does or doesn't say. And I--and so----
    Mr. Gowdy. Do you think it's appropriate for a government 
employee to say those things about--about someone----
    Mr. Castillo. No, sir.
    Mr. Gowdy. --in their official capacity?
    Mr. Castillo. No, sir, it's not.
    Mr. Gowdy. How long would it take you to get rid of an 
employee that said that?
    Mr. Castillo. Well, I think it's well noted of the--some of 
the employees that we've terminated, it would not take me----
    Mr. Gowdy. Yeah, for a lot less.
    Mr. Castillo. It would not take me until 5 o'clock time----
    Mr. Gowdy. You did it a lot quicker for a lot less.
    Mr. Castillo. Yes, sir.
    Ms. Tucker. Mr. Gowdy, if--if I might, my folks that are 
here in the room believe that the specific text message that 
you're referring to we actually have not seen yet at IRS.
    Mr. Gowdy. Would you like me to walk them down to you?
    Ms. Tucker. I would--I would like to at some point receive 
those. But let me just be clear, when I said that I was deeply 
disturbed, that was based even on the mess---the text messages 
that were already in the report.
    Mr. Gowdy. Well, here. Let me make sure that you get them 
before you leave----
    Ms. Tucker. No. I----
    Mr. Gowdy. --because if you had thought you were deeply 
disturbed, you may reach a whole 'nother level of disturbia.
    Ms. Tucker. Thank you, sir. I appreciate that.
    Mr. Bentivolio. Thank you.
    The chair now recognizes the gentlewoman from Illinois Ms. 
Kelly.
    Ms. Kelly. Thank you, Mr. Chair.
    This committee serves two purposes, oversight and reform, 
and I'd like to get to what reform your agencies are looking 
at. We have seen how a contractor has been able to game the 
HUBZone system to get an advantage on his competitors for 
millions in government contracts, and I want to know how we're 
going to prevent this from happening in the future.
    Mr. Chodos, is the SBA taking any remedial steps in light 
of the findings of this case?
    Mr. Chodos. Thank you, Representative Kelly.
    Let me say that the agency did take an immediate step when 
it found out that there was a problem back in December and 
January at the end of last year and the beginning of this year, 
which was to decertify this firm after duly looking into the 
facts and getting the correct facts.
    So in terms of moving forward, the agency is always looking 
for opportunities to make the program more effective and to 
identify ways to work closely with our colleagues at VA and at 
GSA to align and coordinate our different rules about 
procurement so that they all work in the same direction.
    So we have proposed rules under the JOBS Act that are in 
process now as we speak that seek to make issues involving use 
of the HUB--HUBZone program clearer, more straightforward, and 
which will improve our opportunities for straightforward 
oversight.
    Ms. Kelly. Mr. Davis read the decertification letter 
already, but is SBA considering asking applicants to provide 
information identifying not only employees, but all other 
individuals who work on behalf of the company, such as 
contractors?
    Mr. Chodos. Yes. And I believe that change has already been 
instituted.
    Ms. Kelly. Great.
    As committee staff interviewed IRS procurement officials, 
they also identified that those personnel needed additional 
training about procurement ethics generally, as well as 
specific training about the types of relationships that IRS 
procurement officials are prohib---prohibited, excuse me, from 
having with contractors.
    Ms. Tucker, can you please describe the steps the IRS has 
taken to improve its procurement ethics training?
    Ms. Tucker. Yes, ma'am. We have a whole host of actions 
under way, including an annual ethics training that will be 
provided to all of our procurement employees in addition to 
what they already have. It will be delivered by our chief 
counsel organization. And, in fact, we're doing an all-employee 
meeting today with our workforce to reemphasize that the 
positions we hold, ethics is of the utmost importance. And so I 
can assure you and give you personal assurance that our 
training programs will be significantly enhanced in the days 
and weeks ahead.
    Ms. Kelly. Is there any other remedial action that you're 
taking that you would like to share?
    Ms. Tucker. You know, the--the--the findings of--regarding 
the, what I believe, totally inappropriate relationship between 
one of our procurement employees and Mr. Castillo, while I--I 
believe at my core that the men and women of our procurement 
organization are operating with the highest ethics and 
integrity every day, I know that one bad actor can--can cast 
disparity on our organization, and so as a result, we're doing 
a top-to-bottom review of our entire procurement organization, 
just reassuring ourselves that we're following proper policy 
and procedures.
    I've also asked the Treasury Department procurement 
executive--they do routine reviews of IRS--I've asked them to 
come in. I've also launched an independent review.
    And in addition, I think, you know, that the focus that 
we're going to be putting on, you know, more routine briefing--
we do a quarterly performance review of the procurement 
organization--I think all of our existing internal controls we 
just need to double down on to reassure ourselves that this--
this type of behavior is not prevalent. And I have no reason to 
believe, ma'am, that it exists beyond what--the unfortunate 
situation with Mr. Roseman.
    Ms. Kelly. All right. Thank you.
    How about, Mr. Sisk, anything to add?
    Mr. Sisk. We are currently continuing our review of this 
particular case to make sure all proper rules and regulations 
were followed. In addition, we're taking a look at our internal 
management controls to make--see if they need to be 
strengthened in any particular areas in light of some of the 
questions that came out of the committee.
    Ms. Kelly. Okay. Mr. Flohr?
    Mr. Flohr. Thank you, ma'am.
    In my particular area of expertise is veterans benefits, 
and so I don't have a lot of information about the SP--Veteran-
Owned Small Businesses, but I would be glad to take any 
questions for the record and provide them to you.
    Ms. Kelly. Okay. Thank you.
    Ms. Kelly. Thank you. And I hope we continue looking at 
this issue and make improvements to gain the public's trust 
back. Thank you, Mr. Chair.
    Chairman Issa. [Presiding.] Thank you.
    Mr. Meadows.
    Mr. Meadows. Thank you, Mr. Chairman.
    Ms. Tucker, some of the testimony you've given recently is 
very troubling, because it's in direct conflict with testimony 
we've heard in this very room from Mr. George. And so with 
that, to make sure that we have a continuity, I'm going to 
yield some of my time back to Mr. Jordan at this particular 
point. So I yield to the gentleman from Ohio.
    Mr. Jordan. I thank the gentleman.
    Ms. Tucker, so you're number two at the Internal Revenue 
Service. You learn on May 30th from the inspector general that 
political targeting of conservative groups is taking place. You 
know the number one at the IRS 2 months prior to that testified 
in front of Congress to just the opposite. And you told me in 
my first round of questioning that because it didn't fall under 
your jurisdiction, you didn't feel obligated to set the record 
straight?
    Ms. Tucker. Sir----
    Mr. Jordan. I mean, what--how does that encourage 
whistleblowers to come forward when they know something's been 
done wrong, if you're the number two career professional at 
IRS, and you don't come forward and set the record straight?
    Ms. Tucker. Sir, if I might just--and maybe I'm not making 
myself clear. The meeting that I was in, what Mr. George told, 
to the best of my recollection, in the meeting was that his 
team was opening an audit on the TEGE organization, and that 
part of that audit is that they were looking at the--the BOLO 
list.
    Until--to the best of my recollection, sir, until Mr. 
George issued the report in April where he revealed that 
inappropriate targeting had appeared to have taken place based 
on the BOLO list, sir, that was--that was the first time that I 
actually had seen the results of Mr. George's investigation.
    Mr. Jordan. Well, if--if I could, and if the gentleman 
would cut me off when you need to, Congressman--according--this 
is from the hearing. The chairman asked inspector general May 
30th, IG function has briefed the IRS Commissioner Doug 
Shulman, Deputy Commissioners Miller and Tucker specifically 
the criteria targeting Tea Party Patriots, and 9/12 and other 
words were used to--in reviewing applications for tax--you 
briefed, and that was your notes. Mr. George response: Yes, 
that's correct.
    So it was very specific. You were briefed on it that day, 
and yet you didn't feel compelled to do anything.
    Ms. Tucker. Mr. George was briefing on the start, to my 
recollection, of their audit. And obviously, as he talked about 
that they were looking at these words being used, yes----
    Mr. Meadows. Will the gentleman yield?
    Ms. Tucker. --that seems to be inappropriate.
    Mr. Jordan. Be happy to yield back.
    Mr. Meadows. I thank the gentleman.
    Ms. Tucker, that's in direct conflict with what Mr. George 
said sitting on this end right here. What he said, that May 
30th meeting he went over preliminary results of the 
investigation that they've had and let you, Mr. Shulman and Mr. 
Miller know in that meeting. It was not the start of an audit. 
It was the preliminary results where targeting actually 
happened. You don't recall that?
    Ms. Tucker. Sir, I--to go back----
    Mr. Meadows. Because I'm finding that a lot of members of 
the IRS have very great detail on recalling things at certain 
times, and at other they lack the memory. So you don't recall 
that he said that?
    Ms. Tucker. Sir, I recall the meeting, the monthly meetings 
that we have with Mr. George and his team----
    Mr. Meadows. And there was nothing unusual about this May 
30th meeting? There was nothing unusual. This--it was a normal 
routine update that he saw fit to go 4 days later to chief 
counsel and let them know about it? That was Mr.--Mr. George's 
testimony. Your testimony and his are not matching up.
    Ms. Tucker. Sir, I--I'm--I do not recollect. And I have to 
keep going back to this. In our monthly meetings with Mr. 
George and his team, they cover a whole host of IRS audits----
    Mr. Meadows. So there's nothing unusual about this 
particular time? That May 30th meeting, there was nothing 
unusual about that? This was just a normal routine update that 
you get every month?
    Ms. Tucker. Sir, obviously when Mr. George conveyed to the 
Internal Revenue Service that in the course of their 
examination, or their audit, that they were looking into----
    Mr. Meadows. It wasn't--it was preliminary results, Ms. 
Tucker, not looking into. It was preliminary results where 
targeting was identified.
    Ms. Tucker. And, sir, based on the testimony that I've seen 
from Mr. Miller, following that discussion, to the best of my 
recollection, is when he took action to ask for an independent 
review.
    Mr. Meadows. No. That happened actually before. So let me--
because we--you earlier on--if the chair will indulge me for 
just a second. You earlier on said that this committee needs to 
continue to give you information, but yet you're the one that's 
paid for managing this whole organization. You're the one that 
gets paid for it. We have oversight, and yet what we're finding 
is we're having to discover and manage the process of which 
you're getting paid for. And--and here we are, you've said 
eight times, let me be clear. So let me be clear that the 
internal investigation at the IRS happened actually before May 
30th. It was concluded the first part of May. It was started 
the day after Mr. Shulman gave testimony to the Ways and Means 
Committee saying that there was--he could give assurances that 
there was no targeting, and y'all started an internal 
investigation the very next day. So your timelines don't match 
up, Ms. Tucker.
    So how do you--how do we respond to the American people, 
because all they want, the ranking member has said it, they 
want truth so then yet again they can trust. So how do we 
respond to that?
    Ms. Tucker. Sir----
    Chairman Issa. The gentlelady may answer. The time is 
expired.
    Mr. Meadows. I thank the gentleman. I yield back.
    Ms. Tucker. Sir, I am--I am trying to share with you the 
truth from what I know and what programs I have responsibility 
for. IRS is an organization of 100,000 people and multiple 
programs. I am the Deputy Commissioner for Operations Support. 
I do not have responsibility, sir, for oversight and 
administration of the service and enforcement program.
    Chairman Issa. I thank the gentlelady.
    We now go to the gentleman from Virginia Mr. Connolly.
    Mr. Connolly. Thank you, Mr. Chairman.
    I might say to my colleagues, Mr. Meadows, Mr. Jordan, that 
if we're going to cite the testimony of the inspector general, 
I would cite the question-and-answer period between the 
inspector general and myself in which I directly asked the 
inspector general whether, in fact, progressive groups could 
also have been targeted in the unidentified 202 organizations 
that were looked at. And his answer, in light of recent facts, 
is at best elusive. And I certainly think that if we want to 
cite the inspector general, we ought to have him come back here 
under oath, as he was that day we had him, and allow him to 
clarify his answers, because they certainly look strange to 
some of ours.
    Chairman Issa. Would the gentleman yield?
    Mr. Connolly. If the clock will stop.
    Chairman Issa. Just--just if you could answer, what are you 
asking to have the IG come back and answer?
    Mr. Connolly. I--Mr. Chairman, I'd--I'd ask the clock to 
stop.
    Chairman Issa. We'll hold the clock, but I just want to 
know----
    Mr. Connolly. Mr. Chairman----
    Chairman Issa. --if you're making a request what the 
request is.
    Mr. Connolly. Yeah. The request is that there is now 
serious confusion about the answer the inspector general gave 
to my direct questioning whether he knew that, in fact, 
progressive groups, not just conservative groups, were also in 
the filtering of the BOLO. Did he know that when he answered my 
question? Because he inferred from his answer that he did not, 
that the--that they--that those were all unidentified. We now 
know that's not true. Now, did he know that, and did he know it 
when he testified under oath before this committee----
    Chairman Issa. Okay. We'll----
    Mr. Connolly. --because----
    Chairman Issa. We'll--we'll look at how we can do that.
    Mr. Connolly. Thank you.
    Mr. Jordan. Will the gentleman yield?
    Mr. Connolly. I'm afraid my time is running out, so I'm 
going to proceed with questioning, but I thank--thank my 
colleagues.
    During the course of the committee's investigation, it's 
become clear that Strong Castle provided inaccurate information 
to SBA on multiple occasions. Mr. Castillo, according to the 
SBA's letter decertifying Strong Castle, the company provided 
inaccurate payroll records for two employees. SBA's decision 
stated that Strong Castle, ``admitted that the records provided 
were false and inaccurate.'' Is that correct?
    Mr. Castillo. They were inaccurate, yes.
    Mr. Connolly. They were inaccurate?
    Mr. Castillo. Yes, sir.
    Mr. Connolly. And the SBA decision goes on to explain, SCI 
confirmed the one instance identified by SBA and identified 
another. The corrections were only made after being confronted 
with the conflicting evidence presented by SBA. Strong Castle's 
former C--COO, Michelle Castillo--I guess that's your wife----
    Mr. Castillo. Yes, sir.
    Mr. Connolly. --said that when she discovered errors in the 
payroll records, she did not check to see whether there were 
additional errors in other months. When she was asked, how do 
you know there weren't other errors for the previous 6 months, 
she replied, I don't.
    Is that the kind of recordkeeping you kept at your company, 
Mr. Castillo?
    Mr. Castillo. Sir, I don't know of her testimony, but rest 
assured, I am aware of the two that you're talking about where 
a student worked 6 hours in 1 day and 8 hours in the other and 
transcribed those in that week, and that student employee had 
written that he had worked 8 hours on 1 day when he meant that 
he worked the other day. So I'm aware of those.
    And--and so we have put steps in place, including the 
person that you'd mentioned, my wife, resigning from the 
company. I've taken over that. We've put steps in place to 
ensure that we have tighter recordkeeping around that----
    Mr. Connolly. Well----
    Mr. Castillo. --including assigning people on a day-to-day 
basis that log in hours and report and supervise hours.
    Mr. Connolly. Thank you.
    Mr. Chodos, how can SBA base certification decisions on 
payroll records from companies when they can't verify actual 
employment, by their own admission?
    Mr. Chodos. Companies have a duty to provide accurate 
information to the SBA because, of course, the SBA needs 
accurate information on an ongoing basis in order to originally 
certify and then to decide if a company is still in compliance.
    Mr. Connolly. So is there sort of an honor system? We rely 
on them to be--to verify and to tell the truth?
    Mr. Chodos. Well, we always expect folks to act in an 
honorable way, but the regulations require that they provide 
accurate information on an ongoing basis. So this is a 
regulatory requirement, not just a trust system.
    Mr. Connolly. In this case the certification provided 
previously was the difference between, well, qualifying for a 
HUBZone, but also the 35 percent residency requirement. Is that 
right?
    Mr. Chodos. I'm sorry, Representative, I just didn't 
understand the question.
    Mr. Connolly. The information provided by former employee 
Michelle Castillo meant that Strong Castle made the difference 
with the 35 percent residency requirement; is that correct?
    Mr. Chodos. Yes. The--well----
    Mr. Connolly. So this wasn't just an error; this was sort 
of dispositive.
    Mr. Chodos. Well, this went to two issues. It went to 
whether--the status of employees and whether or not employees 
were actually spending their time at the principal location, as 
represented.
    Mr. Connolly. Is SBA looking into the issue in this case of 
fraud?
    Mr. Chodos. The SBA is continuing to receive information, 
and has had a number of communications with the committee, and 
welcomes all information on this topic. And also, as we have 
indicated to the committee, since at least March, the SBA has 
been in regular communication with our inspector general and 
has shared all of the information available to us with our IG. 
So it's an ongoing process of evaluating information as it 
becomes available.
    Mr. Connolly. Thank you. My time has expired.
    Chairman Issa. Thank the gentleman.
    We now recognize the gentleman from Michigan for his round 
of questioning.
    Mr. Bentivolio. Thank you, Mr. Chairman.
    Members of Congress are elected by the American people. We 
are expected to answer to our constituents, and every 2 years 
they have the ability to fire us. The American taxpayers do not 
have the ability to do this with IRS officials, who have 
repeatedly let them down. We saw this with the targeting of 
tax-exempt groups, with the egregious waste of taxpayer dollars 
on conference spending, and now again with the discovery of an 
improper relationship between an IRS procurement official and a 
contractor.
    It is not very common for witnesses to assert their 
privilege not to testify before Congress, but today, again, we 
have an IRS official who has refused to answer questions about 
actions he took in his official capacity. This is the second 
time in the last month that an IRS official has refused to 
answer this committee's questions. How many more IRS officials 
are going to come before this committee and refuse to answer to 
the American people? As it is, we are not learning all of the 
necessary facts because of these refusals to testify.
    This problem is not just about Strong Castle and Mr. 
Roseman's refusal to testify today; this problem is bigger than 
Strong Castle. This problem is about IRS mismanagement, the 
agency's failure to the American people, and the agency's 
refusal to answer for what it has done. And the American people 
deserve better.
    Mr. Chairman, I served in Iraq and Vietnam, and I am 50 
percent disabled for a neck injury I suffered in 2007 in Iraq.
    Mr. Castillo, I think Congresswoman Duckworth said it all 
for me, so I'm just going to ask you one simple question: Mr. 
Castillo, I understand that you have produced text messages 
between yourself and Mr. Roseman that you have access to. There 
are, however, text messages that you have stated were lost in 
the iPhone migration. Will you agree to work with the committee 
and with AT&T in an attempt to recover these messages?
    Mr. Castillo. Yes. And I have.
    Mr. Bentivolio. Thank you.
    Mr. Chairman, I yield back.
    Chairman Issa. Would the gentleman yield?
    Mr. Bentivolio. Yes.
    Chairman Issa. I thank you.
    And thank you for helping us with AT&T, and we'll work on 
that after the--this meeting.
    I want to sort of dwell just a moment on--with Mr. Flohr on 
the veterans' standing. In the transcribed interviews, which 
we'll make available to VA, Mr. Castillo has some--little bit 
of confusion in his statement, but essentially, and I'll 
paraphrase, that he was aware that the doctor's view that this 
was a football injury was inaccurate, but didn't think it was 
material.
    If we provide that transcript to you, does that empower you 
to review and get accurate the original filing so that you can 
make an assessment as to whether or not the sequence of events, 
the injury and the doctor's opinion, would support all the 
elements necessary for a 30 percent disability?
    Mr. Flohr. Thank you for the question, Mr. Chairman.
    We would certainly be willing to look at anything that you 
might want to share with us. I'm not saying it would make a 
difference. And as I said earlier in my testimony and written 
and oral statement, it's--a veteran who suffers an injury in 
service, and regardless of what type of injury or what caused 
it, as long as it wasn't from willful misconduct, and it was in 
line of duty----
    Chairman Issa. No. I understand the line of duty. It's 
really--I think Ms. Duckworth made it very clear that she 
looked at a 30 percent and a $500-a-month or so payment for 
life and questioned whether or not, in light of so many severe 
injuries--and she was incredibly severely injured in--in the 
line of duty--whether or not the assessment was correct. And I 
think her view, and rightfully so, is there's a lot of veterans 
on long waiting lists, and there's a lot of veterans who see a 
30 percent disability for what appears to be a rather--
relatively minor injury a long time ago, and they question 
that.
    That's the only reason that--in light of the testimony and 
the confusion, that we would expect that the VA would reopen, 
reevaluate and then make a second accurate assessment based on, 
if you will, reevaluating the doctor's statement, which 
apparently was inaccurate.
    Having said that, I served for 10 years on Active Duty and 
10 in Reserves. Every one of us got something broken or bent, 
so I'm very aware that, for better or worse, almost all of us 
have a hearing loss or have something. Most people who served 
as veterans are, in fact, to at least some small extent, and 
the gentleman from Michigan is to a fairly large extent from a 
serious accident in Iraq, service-connected disabled. And I 
think that's the point you were making is Congress has left you 
little wiggle room. If you're at the prep school, if something 
occurs, and you were not in a criminal relationship, or you 
were in the line of duty, you're not AWOL, that, in fact, that 
is service-connected-disability-eligible.
    We're not asking you to rewrite the law, that's our job, 
but we do think that--that getting it right as to percentages 
are important to so many veterans who essentially say, I can't 
work, but they also often find themselves far below 50 percent.
    Mr. Flohr. As I stated, sir, yeah, we'll be glad to look at 
anything you have that you want us to look at, and we certainly 
will--will make you aware of what we find.
    Chairman Issa. I appreciate that.
    We now go to the other gentleman from Michigan Mr. Walberg.
    Mr. Walberg. I thank the chairman.
    And, you know, I--just responding to one of our colleagues 
who questioned whether we would be getting information from the 
IG on targeting, certainly I think we've come to realize that 
there were targeting BOLOs dealing with conservatives and 
religious groups and also progressives. The difference is 
progressives got their certifications; they were approved. The 
issue with the targeting of the nonprogressive, supposedly, the 
conservative, the religious organizations is they're still 
waiting for approvals, and that's unconscionable.
     Ms. Tucker, does Strong Castle's HUBZone decertification 
affect the IRS contracts currently in place with the 
organization?
    Ms. Tucker. Sir, as I mentioned earlier, IRS is in the--the 
process of separating ourselves from Strong Castle.
    Mr. Walberg. So you plan to end--end the contracts with 
Strong Castle?
    Ms. Tucker. It's our--it's our intention to begin the 
proceedings to separate ourselves from Strong Castle, yes.
    Mr. Walberg. What would keep you from separating with 
Strong Castle?
    Ms. Tucker. I'm--I'm not aware of anything that would 
prohibit us. That's what our folks in our--our counsel 
organization are reviewing today.
    Mr. Walberg. So we can expect that there will be a 
separation?
    Ms. Tucker. That is our intention, to separate ourselves 
from a relationship with Strong Castle.
    Mr. Walberg. So do you plan as well to stop ordering from 
the $266 million IBM contract that was awarded to Strong Castle 
in December of 2012?
    Ms. Tucker. So as I--I mentioned earlier, the--the 
contracts in question, the one with laptops, IRS has never 
placed an order on that one, nor do we have any reason to do 
so. And our team has already begun the process to separate 
ourselves, the relationship with Strong Castle, on the IBM 
contract as well.
    Mr. Walberg. Will any of the dollars obligated to Strong 
Castle count toward the IRS's small business goals?
    Ms. Tucker. So as I believe my--my colleague from SBA 
indicated earlier, the--the only time, and this is to my 
understanding, that those obligations go against the goal is if 
dollars are ultimately awarded to the contract.
    So, no, based on the decertification, I'm looking to my 
colleague from SBA, it's my understanding that, no, based upon 
the fact that Strong Castle has been decertified. And this is 
just my understanding, so I'm--I'm going to need some help from 
SBA----
    Mr. Walberg. Mr. Chodos?
    Ms. Tucker. --that they would not count toward a small 
business award.
    Mr. Chodos. So ordinarily, Congressman, the 
decertifications are prospective. From the date of the 
certification, no further contract actions can occur with the 
entity as though it's certified, but contracts which have 
already been awarded or are being performed beforehand remain 
in effect unless there is an independent reason to terminate 
them. So if an award had been made and was performed, then they 
will--it will be listed as a small business contract if it was 
before the certification.
    That also occurs with suspension and debarment when 
wrongdoing comes to our attention. Ordinarily those actions are 
prospective.
    Mr. Walberg. Ms. Tucker, the Treasury Department recently 
recognized Strong Castle as the 2012 small business prime 
contractor of the year. In light of recent developments, should 
this award be reconsidered?
    Ms. Tucker. So----
    Mr. Walberg. Just for the record.
    Ms. Tucker. So the recognition was given by the Department 
of the Treasury. Strong Castle was not nominated by Internal 
Revenue Service, but I believe--this is my personal opinion, 
because I cannot speak for Treasury--I do think what has been 
revealed does cast doubt in my mind.
    Mr. Walberg. Well, I would hope so.
    And, Mr. Chairman, you know, I would say these hearings 
that continue with the type of egregious culture of moral 
vacuum, I think I'd call it, going on is just another example 
of the--of big government and what we can expect to go amok 
when we see a government so large that it is willing to allow 
these types of things to happen, in fact, foster things like 
this happen, foster things because of friendships or otherwise. 
I mean, we've even seen it in the most recent Supreme Court 
decision where we think more about personal desires than we do 
about the best good for children, or the best good for 
taxpayers, or the best good for our economy. We deal with 
promoting entities like this, and this is a perfect example of 
the worst case that can go on with big government.
    I see my time has expired. I----
    Chairman Issa. I thank the gentleman for his----
    Mr. Walberg. --yield back.
    Chairman Issa. -- his time and his comments.
    We now go to the gentleman from Florida Mr. DeSantis.
    Mr. DeSantis. Thank you, Mr. Chairman.
    I got to tell you, just the upshot of these past couple 
months, the IRS, to me, is an institution that is--that is 
terminally ill. We had admission that the agency abused its 
power by targeting conservative groups, which effectively 
silenced a substantial number of Americans for the 2012 
election. We had the IRS Commissioner at that time come before 
us; when asked if he accepted responsibility for the 
malfeasance said, well, it happened on my watch, but I'm not 
responsible.
    Now, that would not fly in virtually any other aspect of 
American life. I'm a Navy guy. If a Navy ship runs aground, and 
the captain of the ship were to say, well, yeah, we ran it 
aground on my watch, but that's actually some E-5's 
responsibility because he messed up, you'd be gone immediately.
    Lois Lerner came in front of the committee, invoked her 
Fifth Amendment right against self-incrimination rather than 
answering questions for the American people. Now, I think she 
waived her Fifth Amendment right. I think the committee's going 
to have something to say about that this week. But she's been 
placed on leave, but she's still with the agency.
    We had an interesting hearing in which an IRS official was 
crit---questioned about lavish spending at conferences, suites 
$3,500 a night, $50,000-plus for a Star Trek parody video. And 
it's interesting, they didn't know exactly how much the video 
cost because they didn't keep receipts for the expenses, and 
all we got was an apology tendered. If the IRS were 
investigating an American, and the American said they just 
didn't bother to keep receipts or offered an apology, that 
probably would not be the end of it. I think the IRS would hold 
them accountable and demand more, but yet, to my knowledge, we 
haven't gotten any accountability for this lavish spending and 
waste of taxpayer funds. It's, oh, we need more--better 
procedures, more training, this and that.
    And so here we are another day and another invocation of 
the Fifth Amendment. We see, to me, a clear example of cronyism 
and waste of taxpayer money, but again, as my colleague from 
South Carolina Mr. Gowdy pointed out, no accountability.
    Ms. Tucker, I appreciate when you mentioned due process, 
but it seems to me, where's the due process for the American 
taxpayer? You know, why does the taxpayer always have to take 
the back seat? Why is there so little accountability in this 
incredibly powerful bureaucracy? It's almost as if the IRS has 
all this power, but some of their officials are held to a lower 
standard than what we would expect in private business or 
people even in other aspects of the government, such as the 
military. And to me, that is not acceptable. And if that means 
we need to change some of the laws that govern this, then I 
think we absolutely have to do it.
    So I think this is a profound culture of arrogance in the 
IRS, and I think the American people are sick of it.
    And with that, Mr. Chairman, I yield back----
    Mr. Meadows. Will the gentleman yield?
    Mr. DeSantis. --the balance of my time.
    Mr. Meadows. Will the gentleman yield?
    Mr. DeSantis. Yes, I will.
    Mr. Meadows. I think we have a video that I would ask that 
we queue up. It's a follow-up of some of the questioning, line 
of questioning, that we had from Mr. Jordan and myself earlier. 
And if we have that, if we can queue that up. I thank--I thank 
the chair.
    Chairman Issa. I thank the gentleman, and I think the 
gentleman from Florida.
    I would now recognize the ranking member for a closing 
statement.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Chairman Issa. Hold it. Could you pause for a moment? I'm 
being told--oh, I'm sorry. If the gentleman--if the remaining 
time can be given to Mr. Meadows. It's a minute and 40, and go 
ahead and use it as a close.
    [Video shown from previous hearing.]
    Issa: ``Based on the timeline you gave us, on May 29, 2012, 
the audit briefed the IG in advance of the IRS Commissioner's 
meeting. May 30th IG and function heads briefed the IRS 
Commissioner, Doug Shulman, and the Deputy Commissioners, Steve 
Miller and Beth Tucker, on the audit, comma, specifically that 
criteria targeting Tea Party Patriots or 9/12, another keyword, 
and other policies issues were being used to--used to in 
reviewing applications for tax-exempt status.''
    ``You briefed, and that's your notes?''
    George: ``Yes. That's correct, sir.''
    Issa: ``And so what--what you say on May 30th is, yeah, 
they're targeting these groups. That's confirmation you reached 
the conclusion they're targeting using these keywords.''
    George: ``Yes. Now, just to be rec---clear, I didn't take 
these notes, but these are accurate.''
    Issa: ``Right. And I'm just using these because they were 
delivered to us from your staff. So on May 30th, there was a 
``there'' there, and you briefed Mr. Shulman and two others. On 
June 4th, you went up--"
    [conclusion of video.]
    Mr. Meadows. So, Ms. Tucker, your--your testimony does not 
agree with that testimony. So who--who is right?
    Ms. Tucker. Sir, when you asked me the earlier question, 
you asked me was I present at the briefing that Mr. George gave 
the Internal Revenue Service. I recalled being at that 
briefing.
    Mr. Meadows. Your testimony----
    Ms. Tucker. I----
    Mr. Meadows. What your testimony said, Ms. Tucker, was that 
this was a normal briefing talking about an audit. This was 
obviously results of which you said there were--that they were 
just talking about going to conduct an audit.
    Ms. Tucker. Sir, if I could, TIGTA comes in to Internal 
Revenue Service monthly. Mr. George--and we will be glad to try 
and produce this. Mr. George briefs the Internal Revenue 
Service on multiple topics at each one of those meetings. To 
the best of my recollection, his discussion of their 
investigation of TEGE was only one of the topics that I 
recollect from that briefing.
    Let me also be clear. When Mr. George communicated to the 
Internal Revenue Service, to the best of my recollection, about 
concerns with the BOLO list and that--the terms that he was 
talking about, it was then the agency's response, as the 
investigation is under way right now, to say, yes, yes, use of 
those BOLO terms are inappropriate. That's why there's an 
investigation under way, to get to the bottom of what the facts 
are, sir.
    Mr. Meadows. But--but you had already had an internal 
investigation that already indicated that that concluded on 
May--the first part of May, so why would that be a surprise?
    Ms. Tucker. Sir, I was not privy to any of the internal 
investigation.
    Mr. Meadows. But Mr. Miller was.
    Ms. Tucker. Mr. Miller is the Deputy Commissioner--or was 
the Deputy----
    Mr. Meadows. My time's expired. I appreciate the 
indulgence.
    Chairman Issa. Would the gentleman yield for just a second?
    Mr. Meadows. Yes.
    Chairman Issa. Ms. Tucker, hopefully I can bring a common 
answer here. So I'm not trying to put words in your mouth, but 
let me try to paraphrase.
    The IG said there was a ``there'' there in that meeting. 
You saw the video. You were in the meeting, you heard it, but 
your testimony today seems to be primarily that, regardless of 
that, you said to yourself, there's a process, it's going to go 
forward, and it's not my job, because it's not within my lane.
    Is that a fair paraphrasing of the series of answers--
questions and answers?
    Ms. Tucker. Yes, sir, because the Deputy Commissioner 
structure at the Internal Revenue Service, just as if TIGTA was 
there giving feedback on an audit or a report that's about to 
be issued, then the responsibility for the follow-up actions, 
just like the report someone referenced earlier today, the--the 
purchase card audit. TIGTA briefed IRS a couple of months back 
in one of these monthly meetings and said, we have done an 
audit of the purchase cards. Here is what our findings show, 
that 99.75 percent of the purchase cards used at IRS are 
correct, but there are some concerns.
    That is my take-away. I own that in my role at IRS. It is 
my job to then follow up and----
    Chairman Issa. Okay.
    Ms. Tucker. --make sure corrective actions take place.
    Chairman Issa. Go ahead, Mr. Cummings, with----
    Mr. Cummings. Yeah. I just want to--just to clarify, I just 
want to be real clear. First of all, Ms. Tucker, I--I have been 
sitting here watching you, just listening, and I just want you 
to know I believe you. I don't know what that means to you, but 
it means a lot to me. I believe----
    Ms. Tucker. It means a lot to me, sir.
    Mr. Cummings. I believe you. And the reason why I say that 
is, as I understand it, IRS, you got a top person, and then 
you've got two deputies. And I think you tried to explain it to 
us probably 10 times now is that you are on one side dealing 
with IT and all this stuff, and I guess more like the nuts and 
bolts--is that----
    Ms. Tucker. Yes, sir.
    Mr. Cummings. And the other side deals with things like 
what?
    Ms. Tucker. Like the----
    Mr. Cummings. Tax exempt----
    Ms. Tucker. --administration, audits, collections.
    Mr. Cummings. And so I just--just going back to what the 
chairman was just asking you, so when you hear--even when you 
hear this stuff that's regarding tax-exempt and stuff like 
that, I'm just--I'm just guessing, I guess you're sitting there 
saying, okay, you know, that is not good, but let me--I'm 
zeroing in on what I'm supposed to do. How many employees come 
under you?
    Ms. Tucker. Roughly 11,000.
    Mr. Cummings. Eleven thousand, your 11,000 employees and 
all your responsibility. So I just--so it's not that you didn't 
care; is that right?
    Ms. Tucker. No, sir. And I--I'm troubled if that is the 
impression that some on the committee are taking away from 
this.
    To the best of my recollection--and, again, IRS is a very 
large organization. TIGTA and GAO do multiple oversight audits 
for Internal Revenue Service. They are in briefings, the 
Commissioner and the two Deputies, monthly, if not more often. 
In light of recent events, Mr. George and his team are now 
coming in weekly to brief on issues.
    Based on my recollection of what was shared at that 
meeting, Mr. George was talking about an audit of TEGE. He also 
was talking about concerns. It was my takeaway based on that 
meeting that IRS would then be taking appropriate action to 
deal with that, not that it was something that was in my 
responsibility to leave the room and begin working with folks 
in TEGE or elsewhere to take any action.
    And I don't--I implore you, that is not me trying to shirk 
responsibilities. That is me focusing on what my 
responsibilities are at Internal Revenue Service.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Chairman Issa. Thank you.
    Mr. Jordan, does that answer your question, or do you have 
further follow-up?
    Mr. Jordan. If I could, Mr. Chairman, I'd appreciate----
    Chairman Issa. The gentleman is recognized for a last 
round.
    Mr. Jordan. I thank the chairman for his indulgence.
    I appreciate what the ranking member said, but the gravity 
of what took place here, it seemed to me everyone in a position 
of influence would want to come forward and set the record 
straight.
    If I could quickly, Mr. Chairman, I just want to put up one 
email that--this is an email from March 9th, 2012, Mr. Floyd 
Williams, in response to an inquiry from Senator Hatch about 
the 501(c)(4) situation. And the FYI--it's copied to all these 
folks, but it says, ``Latest volley in the 501(c)(4) battle.'' 
And I think it's important to note who was copied on this 
email. Ms. Tucker was copied, Sarah Ingram, Nancy Marks, Lois 
Lerner, Steve Miller.
    Ms. Tucker said she had no--this is not her area. She had 
nothing to do with it. And yet, 2 months prior, she is getting 
the latest in the battle about the 501(c)(4) scandal that's 
going on. And yet today she continues to say it had nothing to 
do with her.
    If it had nothing to do with her, why is she copied in on 
an email that focuses in on this very issue 2 months prior to 
when she said she first heard about it?
    And, with that, I'd yield back, Mr. Chairman.
    Chairman Issa. Well, the gentlelady may answer. I think 
there was a question there.
    Ms. Tucker. Yes, sir.
    So our legislative affairs function routinely copies the 
Commissioners and Deputy Commissioners on correspondence that 
is under way between Congress. That is not an unusual 
situation.
    Mr. Jordan. Why is the term ``battle'' used?
    Ms. Tucker. I have no idea, sir.
    Mr. Jordan. Okay. Thank you.
    Chairman Issa. I thank the gentleman.
    Mr. Cummings?
    Mr. Cummings. Thank you very much, Mr. Chairman.
    I want to thank all of our witnesses for being here today.
    Mr. Castillo, I must tell you that your testimony is 
alarming, and it concerns me greatly, and I'm sure as it does 
other members of this committee.
    While I said it in a kind of joking way when I referred to 
Michael Jackson's song, ``Man in the Mirror,'' I really--and 
when I read your testimony and then I listened to what you 
said, I've got to tell you, you've got to look closer in the 
mirror. And, you know, I tell my kids, I tell them, whenever 
you're constantly complaining that people are doing you wrong, 
I said, sometimes you need to look at yourself if you 
consistently find yourself in that position.
    And so I--but the main thing is that I think we need to try 
to straighten this mess out. And I'm glad, Ms. Tucker, that you 
all are taking the steps that you all are taking.
    Our country is--I think we deserve a strong program. I was 
just telling the chairman about how much I admired his ability 
to do business and come from a small company and to make it 
successful. And I want everybody to have those kinds of 
opportunities to open the door, but they will never get there 
if we abuse programs that are to help them get there.
    And so I just hope that when you go back, Ms. Tucker, you 
will reiterate that to your people looking at all of these 
procurements, so that we can have that balance, so that we can 
actually help people achieve their great dreams and not be like 
the people that I talked about in my opening statement who 
worked so hard for so long, pushing, knocking at doors, trying 
to get to opportunity, and then they die before they get there, 
and so their dreams are locked up in the casket with them.
    And so, with that, I want to thank you, Mr. Chairman. 
Again, I think it was a good hearing.
    Chairman Issa. I thank you, Mr. Cummings.
    In closing, often a hearing is about a specific action. 
And, Ms. Tucker, it appears as though a great deal will come as 
a result of the preparation for this hearing and the report we 
put out. I'm going to work with the ranking member to turn it 
into a full committee report. It's essentially a staff draft at 
this point. And we will follow on with some of what we learned 
here today.
    But I'm going to include, in all likelihood, in that report 
or an additional series of letters a number of things that I 
could not help but recognize today.
    Ms. Tucker, I think to say that the IRS is an organization 
currently in crisis is a given. I have some confidence and a 
lot of hope that the new Commissioner, Acting Commissioner, 
will, in fact, be able to bring that about. And for the 100,000 
or so career professionals that work at the IRS, I wish you 
well in doing that. It's important to the American people.
    Mr. Castillo, this is not about you, but, in fact, this 
hearing, I believe, was illustrative of some problems that our 
government has.
    Mr. Flohr, I believe that our committee is going to be 
sending a number of things, and Ms. Duckworth will undoubtedly 
be working on it with us. And that is that, in a time of 
limited resources, we do need to define service-connected 
disabled in a way that doesn't automatically trigger virtually 
every American who served, myself included, from qualifying.
    We also need to be better and more consistent on whether or 
not--and we can legally empower you to be more accurate. Ms. 
Duckworth was correct that a strain, a crack, a twisted ankle 
27 years later that clearly didn't impair the performance of 
somebody going through their life--if we were dealing with 
workers' comp, we would not be as generous as to turn that into 
$6,000 a year for the rest of their life and other benefits. 
There's no question this is far greater in the current dollars 
than I think the taxpayers believe for what the record appears 
to show.
    That's not to take away from the legitimacy of an 
application, but Congress has an obligation to work with the 
Veterans Administration to get these numbers better. At the 
same time, I know you're acutely aware that we are dismayed at 
how long our Iraq veterans and Afghanistan veterans are waiting 
to get a determination.
    Mr. Chodos, the fact is you got a little bit of a pass here 
today, but I must tell you that I'm disturbed that the process 
and the numbers are such that, without either regulation 
changing or coming to Congress with a series of changes that 
you need, we are not accurately reflecting HUBZones, we're not 
accurately reflecting the real benefit that is going to the 
people that Mr. Cummings and I want to see get it.
    Now, much of it may be legislative, but I would charge you 
to go back to your Cabinet Secretaries and say, you know, we 
owe Congress some proposed changes. Whether it's cost savings 
or it's benefit being more targeted, you know, I believe that 
this is part of what this hearing is showing.
    There may have been--there clearly were some violations of 
the rules, some incorrect statements made. But I think even if 
none of those were made, we still would probably, from this 
side of the dais on a unanimous basis, have seen a travesty of 
what was intended versus what was allowed, what was achieved 
versus what was scored.
    So I would hope that as you go back today, recognize that 
we will send, at a minimum, letters asking you to be part of 
the process of getting the reform.
    I thank Mr. Sisk. The GAO is our partner in our branch, and 
it's critical that we have your support. You're constantly 
bringing us some of these items and high risk. Perhaps you will 
be and your organization, on behalf of those of us in Congress, 
will be a hub for a lot of this.
    But it's the intention of this chairman to bring to the 
committees of jurisdiction specific recommendations for change 
that could narrow or prevent this from happening in the future.
    I want to thank you all for your testimony today.
    Ms. Tucker, I'll close only with one thing: a message, I 
think for the IRS, and it's a message for the IRS, for the 
State Department, and for every part of government. This 
committee, over my short tenure as chairman, has a consistent 
frustration, and that is: Messages are received that should 
alert people. Often it's not within their lane, it's not their 
job, but it still bothers us that every single American worker 
in the Federal Government doesn't say, ``Well, but we've got to 
get the truth out there.''
    The world is seeing this NSA crisis right now with a vague 
suggestion that somehow it's because nobody was listening. This 
committee is listening. We want to hear. Every Federal employee 
owes it to Congress and to the American taxpayer to be a 
whistleblower if they see something wrong, even if it's as 
benign as an Acting Commissioner saying we're not targeting, 
and then they become aware in some way that there's a 
likelihood that they are targeting and that Congress is not 
aware that they've been misled.
    That was true for 10 months with Fast and Furious. It was 
true for a similar period of time here with the IRS and the 
targeting. And I believe that we're still dealing with trying 
to get to the whole truth with Benghazi.
    So those are outside of today's hearing, but I think you 
get the point, that I'm calling on every Federal worker to 
recognize that this Congress passed a major new whistleblower 
legislation so that we could invite people to call your 
Congressman, write your Congressman, or come to the committees 
and tell us if you have some doubt. It's okay to be wrong as a 
whistleblower; it's really wrong to keep a secret you think is 
wrongdoing.
    Lastly, I would be remiss if I didn't mention that every 
part of government has an Inspector General. And the IGs are 
the first and most logical report to by Federal workers, and I 
hope they will always do that.
    And, with that, I thank Mr. Cummings, and we stand 
adjourned.
    [Whereupon, at 12:11 p.m., the committee was adjourned.]


                                APPENDIX

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               Material Submitted for the Hearing Record

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