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IRS nominee enjoys smooth confirmation hearing

October 23, 1997

WASHINGTON (AP) _ President Clinton’s nominee to head the Internal Revenue Service enjoyed a smooth Senate confirmation hearing Thursday, and the Finance Committee’s chairman indicated he expected a favorable vote.

Charles O. Rossotti, a Virginia technology executive, pledged a new policy of openness and said he wants to instill a new taxpayer-friendly culture throughout the IRS.

``Long term, we have to get the entire organization to think of themselves as taxpayer advocates,″ Rossotti told the Senate Finance Committee. ``The IRS must do a far better job of serving taxpayers.″

Rossotti was asked how he would deal with the climate of fear and retribution IRS workers described during Senate investigative hearings.

``The most powerful management tool that I’ve used over the last 28 years is trying to create an atmosphere where people feel they should report good as well as bad news,″ he said.

While Rossotti’s fluent and candid testimony drew bipartisan praise, Sen. Bob Kerrey, D-Neb., harshly described the challenges ahead at the tax collection agency.

``Unless this law is changed, it’s going to be very, very difficult to for you execute whatever plan you have in place,″ said Kerrey, sponsor of a bipartisan bill to restructure the IRS. Kerrey said the commissioner lacks the flexibility to fire managers and otherwise implement reforms.

``I don’t know how you’re going to be able to do it, Mr. Rossotti,″ Kerrey said.

Selection of a technology executive to head the IRS ``breaks the mold of former IRS commissioners″ and promises to deliver long-lasting reform, said Sen. William V. Roth Jr., R-Del., the committee chairman. ``Your background is uniquely suited to the task,″ he told Rossotti.

As Rossotti’s confirmation hearing concluded, Roth signaled he expects the nominee to win confirmation.

``I have said on several occasions, I would only vote to confirm you if I were persuaded you were dedicated and committed to real reform at the agency,″ Roth said. ``And as I listen to you this morning, to sum it up, that is your intent.″

Republicans and Democrats reflected similar sentiments. A committee vote on Rossotti’s nomination could come as early as next week, a committee aide said.

Rossotti is chairman of the Fairfax, Va.-based American Management Systems Inc., which provides consulting and technology services to such major clients as the National Football League, California Franchise Tax Board and Bell Atlantic Corp.

Rossotti entered into a recusal agreement describing how potential conflicts of interest would be handled concerning business with the company he founded nearly 28 years ago.

American Management System has two contracts with the Department of the Treasury and two with the IRS for financial management and procurement software, worth about $10 million. Both agencies purchased the software programs from a list of government-approved programs outlined by the General Services Administration.

The company earned $113 million in 1996 from its federal contracts, about 14 percent of its total revenues of $812.2 million in 1996.

``I have no personal knowledge of the specific terms of these contracts,″ Rossotti said in a written statement.

Under the agreement, Rossotti will retain his 1.39 million shares of American Management Systems, worth about $27.8 million. He has agreed to divest his AMS stock holdings if the company decides to bid for more work from the IRS beyond the existing contract or similar successor contracts.

Roth and the committee’s ranking Democrat, Sen. Daniel Patrick Moynihan, D-N.Y., approved the arrangement.

``I place extremely high importance on compliance with all ethical standards, including avoidance of conflicts of interest,″ Rossotti said.

Rossotti provided new details about his political activities as a business executive. Since 1987, he has contributed about $31,900 to political candidates and causes, including Sen. John Warner, R-Va.; Don Beyer, Democratic candidate for Virginia governor; Rep. Tom Davis, R-Va.; and the late Les Aspin when he was a Democratic congressman from Wisconsin.

Warner and Davis both joined Rossotti to introduce him to the committee.

Rossotti also disclosed that American Management Systems was a member of the Tax Reform Action Coalition, which in 1993 opposed higher corporate tax rates.

Rossotti said he hesitated to accept Clinton’s nomination.

``I did not accept quickly,″ he said. But then he said he saw it would be a public service ``to improve the work of an agency that directly affects a great many people.″

Some senators poked fun at the thankless task ahead for Rossotti, especially in wake of the avalanche of bad press the IRS has faced in recent weeks.

``Anybody who wants this job under these bad circumstances probably ought to have it,″ said Sen. Phil Gramm, R-Texas. ``You are going to get an idea at this hearing what a bad job this really is.″

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