Official declines to testify in contracting probe

Wednesday, June 26th, 2013 | Finance News

WASHINGTON (AP) — An Internal Revenue Service official refused to testify Wednesday before a House committee examining his relationship with the CEO of computer services company that has as much as $500 million in contracts with the tax agency.

Gregory Roseman said he was advised by his lawyer to invoke his constitutional right against self-incrimination. The House Oversight and Government Reform Committee is investigating government contracts secured by Strong Castle Inc., and whether a friendship between Roseman and Strong Castle's CEO, Braulio Castillo, was a factor in the company's ability to win such large contracts with the IRS.

Beth Tucker, the agency's deputy commissioner for operations support, told lawmakers that the IRS was working to sever its ties with Strong Castle and recently referred its contracts with the company to the Treasury's inspector general for tax administration for further investigation.

Tucker said Roseman, who worked in the IRS's procurement office but has since been transferred to a different department, should not have had any contacts with Strong Castle and Castillo.

She said she also was troubled by other aspects of Strong Castle's work with the IRS, including allegations that Castillo took advantage of programs in the Small Business Administration and the Department of Veterans Affairs to move to the front of the line for IRS contracts.

"Let me be clear, the information that we've seen about the personal relationship with Mr. Roseman and Mr. Castillo is inappropriate," Tucker said. "Mr. Roseman should have recused himself immediately."

The committee, which has been investigating ties between the IRS and Strong Castle since February, released a report Tuesday that detailed Castillo's relationship with Roseman. Strong Castle, which was founded just two years ago, scooped up more than a dozen contracts with the IRS in 2012 for computer services potentially worth hundreds of millions of dollars.

Castillo testified Wednesday that his company's dealings with the IRS were lawful and contributed "to the IRS' mission."

He said he didn't know why Roseman invoked his 5th amendment right and that he wished Roseman had testified. Castillo acknowledged that he and Roseman were friends, had regularly exchanged text messages over about 10 years and attended a Washington Nationals baseball game together, but said nothing was untoward.

"We are a responsible small business," Castillo said. "Strong Castle remains committed to providing results."

He added, "We have competed fairly for every IRS contract we've received."

But Democrats and Republicans on the committee pounded Castillo and Strong Castle. They said Castillo's company had taken advantage of his relationship with Roseman and manipulated other government agencies to secure contracts.

The committee chairman, Rep. Darrell Issa, R-Calif., and the top Democrat, Rep. Elijah Cummings of Maryland, questioned Castillo about how he obtained a designation known as HubZone status from the SBA. The program, which is designed to promote businesses in inner city areas, gives special status to companies if they work in certain areas of cities and are staffed with employees who live in HubZone areas.

Castillo's company employed a few students from Catholic University, which is in a HubZone area, for some low-level positions and kept a small office in Washington's Chinatown neighborhood. Castillo told the committee that much of his business was actually run from his home in suburban Loudon County, Virginia.

The SBA recently revoked Strong Castle's HubZone status.

"Don't you think you manipulated this process?" Cummings asked.

"No sir, I don't feel I manipulated it," Castillo said.

Issa also accused Castillo of claiming a level of experience that he did not possess.

"You swore an oath to tell the truth the whole truth and that's shading the truth pretty close," Issa told Castillo.

In another tense exchange, Rep. Tammy Duckworth, D-Ill., an Iraq war veteran and who lost both her legs in combat, mocked Castillo's application for veterans benefits which allowed him to promote Strong Castle as a small business operated by a disabled veteran.

Duckworth noted that Castillo sustained a foot injury not in combat but while playing football at a military prep school. Castillo went on to play college football at the University of San Diego, and more than 20 years later, applied for veterans disability payments.

"My feet hurt too," Duckworth said, sarcastically. "In fact, the balls of my feet hurt continuously. So I can understand and ... I'm so sorry that twisting your ankle in high school has now come to hurt you in such a painful way."

Duckworth asked Castillo how severe his injury was rated by the VA. After Castillo said it was rated at 30 percent, Duckworth pointed to her own arm.

"My right arm was essentially blown off and reattached ... and I'm still in danger of losing my arm. I can't feel my arm. My disability rating for that arm is 20 percent," Duckworth said.

"I don't set the ratings," Castillo replied.

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