Lawmakers want to close ‘revolving door’ between big accounting firms and Treasury, IRS

Sen. Elizabeth Warren, D-Massachusetts, and Rep. Pramila Jayapal, D-Washington, have sent a letter to the Treasury Department’s acting inspector general and the Treasury Inspector General for Tax Administration asking them to open an investigation into what they call a “revolving door” between the five largest accounting firms and the upper echelons of the Treasury Department and Internal Revenue Service.

The letter comes in response to an article last September in The New York Times that described how some attorneys at the higher levels of the IRS and the Treasury Department came from the Big Four accounting firms — PwC, Deloitte, KPMG and EY — as well as RSM US, who helped them draft tax regulations.

“As Acting Treasury Inspector General and Treasury Inspector General for Tax Administration, you each already have the statutory power and responsibility to investigate allegations of misconduct with respect to the administration of programs at the Treasury Department and the IRS, including through access to any relevant records and subpoena power,” Warren and Jayapal wrote in a letter last Friday that was released Tuesday. “The questions raised by giant accounting firms’ use of the revolving door to benefit their clients falls squarely within your missions to ‘promote economy, efficiency and effectiveness’ and ‘prevent and detect fraud and abuse’ in the programs and operations of the Treasury Department and IRS.”

Daniel Acker/Bloomberg

They also released new results from their own investigation into this behavior by the accounting firms, the Treasury Department and the IRS after they sent letters after the article appeared last year. In response to their inquiry, the accounting firms confirmed that since 2001, at least 24 of their employees left to take senior tax-policy positions in the federal government, including at Treasury and IRS, and returned to their firms after government work, often receiving large promotions and raises.

“Collectively, the five firms did tell us that, since January 1, 2001, at least 24 employees left their companies to take tax-policy positions in the federal government and returned to the companies afterward, with many receiving promotions, raises or both upon their return,” they wrote. “These disclosures corroborate the Times’s reporting. The firms indicated that their staff who revolved into the Treasury Department served in high-level positions, including individuals who served as International Tax Counsel, Deputy Assistant Secretary, and Assistant Secretary for Tax Policy. The firms also confirmed that many of the individuals who went through the revolving door and returned to the private sector received significant promotions: for example, one left as a Senior Manager and returned as a Managing Director; another left as a Managing Director and returned as a Principal; and another left as a leader of the firm’s Washington Tax Team and returned as a Partner.”

However, Warren and Jayapal contended that the firms did not provide them with meaningful information about their employees’ responsibilities or clients, and the Treasury Department cited the difficulty of constructing the relevant records. The lawmakers said that made it impossible to understand the full extent of the potential conflicts of interest, ethics violations, and corruption as reported by the Times.

They argue that the firms’ ethics policies failed to provide adequate standards to protect Americans from revolving-door activity in and out of the federal government by accounting firm employees. They called on the inspectors general to open inquiries into these practices and asked them to investigate the extent to which accounting firms and their clients are taking advantage of the “revolving door” and to examine how effective the ethics policies and codes of conduct at the Treasury, the IRS and accounting firms are at preventing potential conflicts of interest.