IRS accused of granting $500 mln in suspicious contracts

A Virginia IT company inappropriately secured $500 million worth of IRS contracts based on false statements and ties to an agency official, according to a congressional staff report released on Tuesday.

The House Oversight and Government Reform Committee released a report accusing an Internal Revenue Service employee of procuring inappropriate contracts for a small business called Strong Castle, which was founded in 2011 by a man named Braulio Castillo.

In 2012, Castillo received more than $500 million in IRS awards for his technology firm and a mere $465,780 from other federal government agencies. The report accuses IRS deputy director Greg Roseman, a close friend of Castillo’s, of “influencing the selection process” to benefit his friend.

“The IRS – where Strong Castle received well over 99 percent of its 2012 revenues – employs Castillo’s long-time friend, Greg Roseman, who oversaw each and every contract awarded to Strong Castle by the IRS in 2012,” the report’s authors wrote.

The congressional committee also found that before launching the IT company, Castillo filed for “disability rating” with the Veterans Administration, claiming he suffered from a foot injury he obtained at a military prep school in 1984. The rating qualified Strong Castle as a “service-disabled, veteran-owned small business," which gave it preferential treatment in bidding competitions. But Castillo never served on active duty, and played college sports after the alleged injury.

“The case of Strong Castle and its cozy relationship with the IRS is but one example of a deeply flawed procurement process in the federal government,” the report says.

The congressional committee on Wednesday summoned Roseman to interrogate him about the IRS contracts and his relationship with Castillo. 

“Mr. Roseman, when did you first become aware of a company called Strong Castle Inc.?” Chairman Darrell Issa (R-Calif.) asked the IRS employee.

Roseman invoked his Fifth Amendment right to remain silent and refused to answer any questions. He has been removed from his position as IRS deputy director pending the outcome of an inspector general investigation into the contracts.

Strong Castle denies any wrongdoing and claims that it obtained the contracts legally.

"Throughout our work with the IRS, we have never received any improper preferential treatment and have competed fairly for every contract that we have received,” the company told Reuters in a statement.

But the report claims Castillo and Roseman met in 2003, frequently exchanged phone calls and text messages, and formed a long-lasting friendship. Upon the launch of Strong Castle, Roseman sent Castillo a congratulatory text message which stated, “U will be fortune 500 in no time.”

Issa started a probe into the potentially-inappropriate contracting in February, and believes that there is “at least an appearance of impropriety between the two men.”

“The IRS and Strong Castle have made a mockery of fair and open competition for government contracts,” Issa said in a statement.