Advertisement
News by VICE

How Japan May Have Convinced the IRS to Punish American 'Eco-Terrorists'

When Sea Shepherd learned the IRS was investigating it due to a tip from "confidential sources," the anti-whaling group set out to discover whether the Japanese government was responsible.

by Justin Rohrlich
May 21 2015, 5:45pm

Photo via Flickr

In January 2013, members of the Sea Shepherd Conservation Society were informed by the IRS that the organization was being audited. The purpose of the audit, the IRS told them, was to determine whether the anti-whaling group's tax-exempt status, which had been granted in 1981, should be stripped — and as an organization that relies on tax-deductible contributions to fund its operations, Sea Shepherd believed it would almost certainly be forced to shut down without its 501(c)3 classification.

The IRS doesn't typically disclose what triggers an audit — taxpayers can be selected for an audit at random — and the agency would tell Sea Shepherd only that it had received a tip from "confidential sources."

Scott West, Sea Shepherd's director of intelligence and investigations, used to work with the Environmental Protection Agency's Criminal Investigation Division. But neither he nor anyone else in the organization could figure out for certain who went to the IRS.

"I mean, we've pissed off a lot of people over the years," he told VICE News.

The group is known for its controversial tactics — blocking loading platforms, fouling the propellers of whaling ships, destroying nets — and as a result, members of the organization have been branded "eco-terrorists" by several countries. But West and others at Sea Shepherd suspected one in particular.

Related: This May Be the Most Dangerous — and Most Costly — Photo in Japan

It was no secret that Japanese officials had discussed the revocation of Sea Shepherd's tax-exempt status with US officials in the past. Diplomatic cables published by Wikileaks in 2011 showed Japan had been putting pressure on the US to take action against the organization. On several occasions in 2009 and 2010, Japanese fisheries representatives told the National Oceanic and Atmospheric Administration (NOAA) — the US government agency that deals most with whaling issues — and the US State Department that Japan would be more agreeable during whaling negotiations if Sea Shepherd were to lose its tax exemption.

According to a cable dated February 10, 2009, Shuji Yamada, director general of the Japanese Fisheries Agency, told Robert Cekuta, economics minister counselor at the US Embassy in Tokyo, that the government of Japan "finds it inappropriate that the US grants the Sea Shepherd Conservation Society tax exempt status," and asked that the US government "take appropriate legal measures." In another, dated June 9, 2009, Japanese Fisheries Agency deputy director general Jun Yamashita "reiterated" the request to Cekuta, adding that "the problem of the Sea Shepherd must be solved before Japan can make progress in the IWC [International Whaling Commission] negotiations."

But that didn't prove the IRS had acted as a direct result of Japan's diplomatic lobbying.

* * *

On May 13, 2013, Sea Shepherd filed a request under the Freedom of Information Act (FOIA) hoping to find out if Japan's diplomatic requests had played a role in triggering the audit.

Sea Shepherd asked for any and all IRS documents related to the group in files dated from January 1, 2006, to May 13, 2013. Almost a year later, the IRS released the final set of documents to Sea Shepherd. But Christopher Rizek, the attorney handling the case for Sea Shepherd, told VICE News the agency "didn't give up anything of any value." He said the majority of what came back were documents Sea Shepherd had given to the IRS in the first place.

The only difference, according to Rizek, was that the IRS had redacted large portions of them.

Sea Shepherd filed another FOIA request in April 2014. This time, the organization asked for a search of NOAA, and last month, the agency turned over 9 pages of internal documents, which Sea Shepherd shared exclusively with VICE News [pdf below].

There were emails dating back to 2009, in which Roger Eckert, a NOAA attorney-advisor in the Office of the General Counsel, asked the IRS, ostensibly at the behest of the Japanese, how to revoke Sea Shepherd's tax exemption.

A page of handwritten notes taken by an unidentified NOAA employee read: "Japan Embassy in DC approached IRS directly. IRS said the more neg. info abt SSCS [Sea Shepherd Conservation Society], the better to maybe revoke tax exempt status. Japan will cont. to provide info to IRS + ask State and DOC [Department of Commerce] to also do so. Shingo Fukui — he is person in Japan DC Embassy that reached out to IRS."

Fukui was the fisheries attaché at the Japanese Embassy in Washington, DC. On January 10, 2013, less than a week after the IRS informed Sea Shepherd the organization was being audited, Fukui sent an email to Ryan Wulff, a senior policy advisor at NOAA who serves as the US deputy commissioner of the International Whaling Commission, under the heading, "Follow-up of bilateral meeting regarding IRS."

Dear Ryan,

I hope that you and your family had an enjoyable holiday. According to discussion at bilateral meeting in Tokyo last November, I would like to inform you of two IRS officials in charge as attached. I expect your support on this issue. I Iook forward to seeing you here. Please Iet me know if you will be traveling around.

Best regards,

Shingo

Attached were scans of the IRS business cards of Lois G. Lerner, the director of exempt organizations, and Justin J. Lowe, an IRS technical advisor.

"l'm sorry, but as a man with a background in musical theater, the attachment made me laugh (Iook at the last names)," Wulff wrote to Eckert, two other NOAA employees, and Lisa Phelps, a State Department employee with the Office of Oceans, International Environmental, and Scientific Affairs. "For those not so Broadway inclined, consider it an FYI." (Lerner and Loewe were a team who wrote several extremely successful musicals.)

"I'd like to add some context to all of this, since that email can seem a bit misleading on its own," Wulff recently told VICE News. "We don't engage on 501(c)3 issues, as it is outside our authority. Our role is to discuss whaling and whale conservation. When Japan raises this issue, we always refer them to the Treasury Department. This email exchange was them letting us know who they met with at the IRS. I had no further exchange or discussion on the matter, nor did I subsequently talk with anyone at Treasury."

Reached at his office at the Ministry of Foreign Affairs in Tokyo, Fukui was less forthcoming.

"I don't remember anything about it," he told VICE News with a laugh. "Sea Shepherd tax exemption? No, no, I don't know anything."

Reached at home, Lerner said, "I don't speak to reporters," and hung up. Lowe did not reply to multiple emails requesting comment.

It's perfectly legal to file a complaint with the IRS about another taxpayer, Rizek points out, provided the basis of the complaint is factual.

"That presumably includes a foreign government," he said. "What's pretty astonishing is that other agencies in government — NOAA, State — would facilitate that for non-tax-related diplomatic reasons, and that the IRS, knowing that, would nevertheless follow up."

* * *

On October 29, 2014, nearly two years after it began, the IRS completed its audit. Sea Shepherd was cleared of any wrongdoing, and its nonprofit status was left untouched.

"Dear Sea Shepherd Conservation Society," began the letter from the IRS's Tax Exempt and Government Entities Division. "Our examination of the information return(s) indicated above disclosed that your organization continues to qualify for exemption from Federal income tax. Accordingly, we accept the return(s) as filed."

West said the audit cost Sea Shepherd several hundred thousand dollars in legal fees. The organization had exhausted all of its options under FOIA to find out what prompted to audit, and the IRS continued to refuse to say anything.

"They told us, 'Well, sue us if you want,'" West said. "Our tax attorneys said nobody ever really pushes the IRS too hard, because they're afraid of getting bullied. But I told them go ahead and do it."

'The government of Japan believes it is necessary to do everything possible to contain activities by [Sea Shepherd]. Part of that effort is an appeal from our government to the IRS.'

In September 2013, Sea Shepherd filed a lawsuit in US District Court over the IRS's failure to comply with FOIA.

"There is a strong public interest in confirming the sequence of these events with the information that the IRS has withheld, which more than outweighs the IRS's desire to continue concealing the improper origins and purpose of this audit," Sea Shepherd contended in court documents. It was important to know "whether the Internal Revenue Service administers US tax laws to benefit political or policy interests other than tax administration."

On March 31 of this year, Judge Amy Berman Jackson's decision gave Sea Shepherd a partial victory. The IRS "entirely failed" to prove that its source (or sources) received explicit promises of confidentiality, Berman wrote. The IRS also failed to convince the court of anything that would "support the inference of confidentiality."

"Defendant merely states that 'the confidential sources requested anonymity,' without anything more," Berman continued. "Indeed, the IRS does not even claim that these sources received an assurance of confidentiality at all, only that they 'requested' it. Under these circumstances, the Court cannot find that the IRS has carried its burden to establish that any of 'the particular source[s] spoke with an understanding that the communication would remain confidential.'"

Jackson instructed the IRS to go back into its files and "conduct a further search for responsive records." She also demanded they provide "a more detailed justification for the adequacy of its search" than they did previously.

Related: Japan Is Going to Kill Thousands of Whales No Matter What Other Nations Say

In April, Sea Shepherd told the IRS it would drop its FOIA suit in exchange for written confirmation that the government of Japan was not the informant behind the audit. On May 20, the IRS rejected the deal, refusing to confirm or deny Japanese involvement. Japan, however, appears slightly more forthcoming.

"The Sea Shepherd's past unlawful violence against Japan's survey whaling ships has been extremely deplorable behavior that has both threatened the lives of the crew and undermined maritime safety," said a May 20 statement from Tokyo, which was emailed to VICE News by Takeshi Miwa, first secretary of the Embassy of Japan in Washington, DC. "The government of Japan believes it is necessary to do everything possible to contain these kinds of activities by [Sea Shepherd]. Part of that effort is an appeal from our government to the IRS, but we believe it would be inappropriate to comment on the details of the discussion between the two governments."

Follow Justin Rohrlich on Twitter: @justinrohrlich

Photo via Flickr

Tagged:
japan
VICE News
americas
united states
National Oceanic and Atmospheric Administration
NOAA
IRS
whaling
Internal Revenue Service
freedom of information act
FOIA
Sea Shepherd Conservation Society
sea shepherd
audits