(Bloomberg) An Internal Revenue Service deputy director whose office awarded more than $500 million in contracts to a friend’s technology company wouldn’t testify before a congressional committee.
Greg Roseman was subpoenaed to appear Wednesday before a U.S. House committee investigating how Strong Castle Inc., a small business formed in late 2011, managed to attract so much contract work in such a short time.
At a House Oversight and Government Reform Committee hearing, he declined to answer questions about his relationship with Braulio Castillo, president of Washington-based Strong Castle.
“Mr. Chairman, on the advice of counsel, I respectfully decline to answer any questions and invoke my Fifth Amendment privilege to remain silent,” Roseman told Representative Darrell Issa, a California Republican and the panel’s chairman.
The committee released a report Tuesday describing the company’s “cozy relationship” with the the IRS, saying Roseman may have “influenced the selection process” to benefit his friend.
When asked at the hearing about his ties to Roseman, Castillo said, “I believe we are friends.”
“I wish he was here to testify,” he told lawmakers.
Castillo said his company didn’t get “inappropriate preferential treatment” from the IRS. While the House staff report determined that Strong Castle had received contracts with a potential value of $500 million, Castillo said in prepared testimony that the company has gotten about $50 million in awards.
Beth Tucker, an IRS deputy commissioner, received a February letter from the committee on the investigation of Strong Castle. She said she immediately referred the matter to a Treasury Department inspector general.
The IRS is in the process of “separating” itself from Strong Castle, Tucker said. She didn’t say whether the company would lose its contracts.
Strong Castle was eligible for contracts that had been set aside for disabled veterans and for small businesses in economically disadvantaged communities.
The company was recently cut from the set-aside program for disadvantaged areas because it provided “inaccurate, unreliable, and misleading information” to the Small Business Administration, according to the report.
Castillo acknowledged submitting false records to the SBA. He also complained about the outcome of his company’s participation in the small-business programs.
“Ultimately, our participation in these small business programs has caused our company and our family to face intense and costly scrutiny from the Government Accountability Office, from Congress, from the press and from the SBA,” he said in prepared testimony.
Representative Elijah Cummings, a Maryland Democrat and the committee’s ranking minority member, rebuked Castillo during the hearing.
“You criticize everyone but yourself,” Cummings said. “Michael Jackson had this song, the ‘Man in the Mirror.’ You need to look in the mirror.”
Castillo had suffered a foot injury in 1984 at the U.S. Military Academy Preparatory School, which he attended for a year, according to the report.
He described his disability in an e-mail to the Veterans Affairs Department when he was applying to its set-aside program, the House report shows. His injuries were “crosses that I bear due to my service to our great country,” he said.
He had no other connection to the military, and his injury didn’t prevent him from playing softball or college football, congressional investigators said.
“I hope you think twice about the example you are setting for your children,” Representative Tammy Duckworth, an Illinois Democrat and Iraq war veteran, said during the hearing. She lost both her legs and injured her arm during her service.
Castillo also rented an office in Washington’s Chinatown neighborhood to qualify for contracts benefiting small businesses in the disadvantaged communities. He and his wife—the firm’s top executives at the time—lived and worked in the “wealthy Virginia suburbs,” according to the report.
He used the head football coach at Catholic University of America, his college roommate, to recruit student employees.
Castillo met Roseman in 2003. The two frequently exchanged phone calls and text messages, some of which contained homophobic slurs.
The IRS’s Tucker called the messages unacceptable, and said she took “immediate steps to have the manager reassigned to a non-supervisory position that does not involve the awarding or administration of contracts.”
—With assistance from Richard Rubin in Washington. Editors: Stephanie Stoughton, Bernard Kohn