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Anti-terrorism program mines IRS' records

Privacy advocates are concerned that tax data and other information may be used improperly.

January 15, 2007|Dalia Naamani-Goldman | Special to The Times

WASHINGTON — Federal intelligence and law enforcement agencies increasingly rely on the Internal Revenue Service and other government repositories of personal financial information as an important source for leads in terrorism investigations.

The masses of detailed data give investigators broad power to sift through the finances of people, charities and businesses suspected of illegal activities. But they also worry privacy advocates who fear that tax and other financial records may be used improperly.

In 2002, in the wake of the Sept. 11 terrorist attacks, the IRS and the Social Security Administration made 12,236 emergency disclosures of personal tax information to intelligence and law enforcement agencies, according to a count obtained through a Freedom of Information Act request.

These emergency requests are granted only when investigators cite imminent danger or death -- and after 2002 became much less common. Since then, the IRS has made only 180 emergency disclosures to the Federal Bureau of Investigation and other agencies, but thousands more to intelligence and law enforcement agencies using new powers written into the U.S. Tax Code after 9/11.

Federal investigators, armed with otherwise confidential taxpayer information, have used these records to prosecute some individuals and deport others.

After receiving a tip from a high-level Al Qaeda operative in Pakistan in 2003, the FBI began investigating an alleged plot to poison prepackaged Meals Ready to Eat bound for U.S. troops overseas. McAllen, Texas-based Wornick Co. had a $47.2-million contract with the Department of Defense for packaged meals for troops in Iraq.

Federal investigators screened Wornick employees, relying on confidential taxpayer information, including Social Security numbers. The FBI also reviewed employee records for the temporary employment agency Remedy Intelligent Staffing, which supplied workers to Wornick.

In January 2005, Remedy pleaded guilty to hiring illegal immigrants and falsifying hundreds of employee eligibility verification forms. Twenty-eight illegal immigrants and a Remedy vice president paid fines or served jail time -- although none had any ties to terrorism.

To help the IRS increase its ability to organize and share sensitive financial information, the agency's law enforcement arm began in 2002 building a sophisticated data-mining system it named Reveal. Current and former IRS officials say this system has been invaluable in building cases against suspected terrorists and money launderers.

"What we're finding in our work is the majority of counterterrorism mostly has to do with charitable organizations that have been established in the United States that are sending money back to countries that support terrorism," said IRS spokeswoman Patti Reid.

One of the IRS databases mined by Reveal includes tax returns for nonprofit organizations and charities, according to government documents. Some attachments on these returns include lists of major donors.

Reveal also searches IRS databases of individual and corporate tax returns, and the records of financial institutions, accountants, banks and casinos, all of which are required to file reports with the Treasury Department and the IRS.

The system uses a powerful software program that allows investigators to combine at least 16 Treasury and IRS databases with counterterrorism information, according to public documents. One unpublished government description of Reveal claims it also searches personal information the agency buys from data aggregators ChoicePoint Inc. and LexisNexis.

Using this system, the IRS can search massive amounts of information quickly, sifting through account numbers and balances and analyzing financial transactions over time. It matches these records with individual, corporate and charity tax filings. It also can search for suspicious activities and lead investigators to new suspects.

With so much aggregated data, the IRS can see connections and patterns, something the agency misses when it's focused only on individuals, according to Jesus Mena, a former computer researcher at the IRS who pushed the agency to expand its data-mining operations.

"It refines the way they're able to view and identify people," said Mena, who is now a consultant to the Department of Homeland Security's inspector general. "There [are] red flags that data mining can discover. It's a process that makes you more efficient, more effective."

Using programs called VisuaLinks and the Digital Information Gateway, Reveal can detect and visually depict connections buried in mountains of tax documents, linking employees with employers and charities with donors, by cutting and grouping data using defined models, according to Kevin Hohn, Reveal's founding project manager.

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