Timothy P. Carney: Revolving door spins at Obama's IRS

By |

Mark Ernst, in December 2007, was chief executive officer of H&R Block, the nation's largest tax-preparation company. Thirteen months later, once President Obama took office, Ernst was named a deputy commissioner at the Internal Revenue Service, where he would spend his first year drafting new regulations for tax preparers -- regulations that H&R Block welcomes and market analysts say will benefit the company.

With Ernst in mind, recall Barack Obama's campaign pledge: "No political appointees in an Obama administration will be permitted to work on regulations or contracts directly and substantially related to their prior employer for two years."

This campaign pledge manifested itself in an executive order requiring "every appointee in every executive agency" to pledge, "I will not for a period of 2 years from the date of my appointment participate in any particular matter involving specific parties that is directly and substantially related to my former employer or former clients, including regulations and contracts."

Ernst obviously didn't follow these rules, but the IRS tells me that Ernst is not covered by these rules. "Mark Ernst is a civil servant at the IRS; he is not a political appointee," according to an e-mail IRS statement by an agency spokesman.

The statement continues: "The Presidential Executive order on Ethics Commitments by Executive Branch Personnel only applies to political appointees. ... [T]he extended two year Revolving Door Ban in the order does not apply [to Ernst]."

By the common understanding of the words, it's hard to swallow that Ernst is a "career" government employee, or a "civil servant" as opposed to an appointee or a political hire. First of all, he is clearly political: He contributed $9,900 to federal candidates in the last election -- with 90 percent going to Democrats, including the maximum contribution to Hillary Clinton.

Also, he is a retired CEO. He is not making a career as an IRS bureaucrat. And unlike most civil servants, Ernst came in with the new president, being named deputy commissioner in the first days of the Obama administration.

But for nearly every executive branch position, it's up to the administration whom to dub an "appointee" and who is a "civil servant." Had Obama hired Ernst as an "appointee" as opposed to a "civil servant," Ernst clearly would have violated Obama's rule prohibiting appointees from writing up regulations affecting recent employees.

Ernst was driven from H&R Block at the end of 2007 after a shareholder revolt spurred by the company's losses in the subprime mortgage industry.

In late January, less than 13 months after his last day at H&R Block, Ernst joined the IRS as deputy commissioner for operations. In that role, according to an IRS spokesman, Ernst acted as a "co-leader" in the process of drafting new regulations for paid tax preparers -- the industry led by H&R Block.

Investment bank UBS issued an analysis concluding: "The new regulations should help Block" by crowding out smaller competitors and granting the company a government stamp of approval.

To recap: A recent H&R Block CEO wrote regulations that help H&R Block, and this doesn't clash with the White House's "unprecedented" ethics rules.

These facts don't prove that Ernst was helping his former employer -- he may not even be in the good graces of H&R Block any more. The facts also don't prove that the regulation is bad.

The story of Ernst, however, does bring to light the worthlessness of Obama's ethics rules. There are other examples, too: Raytheon lobbyist William Lynn received a waiver to become deputy defense secretary. Mark Patterson, a Goldman Sachs lobbyist until April 2008, is the chief of staff at the Treasury Department, and hasn't even been given a waiver from the rules.

There's good reason to hire aides, like Lynn, Patterson, and Ernst, with experience in the industry they'll be regulating or dealing with. But it was Obama who decided to trumpet his restrictions on people entering the administration from the private sector. Now we can see that the ethics rules, like much of Obama's good-government talk, is more style than substance.

Timothy P. Carney is The Washington Examiner's Lobbying Editor. His K Street column appears on Wednesdays.

View article comments Leave a comment