decline to answer any questions and invoke my fifth inmate privilege to remain silent. >> lastly, mr. roseman, are you prepared to answer any questions here today about your role in the i.r.s. acquisition of technology products and ervices from strong mr. comings do you have any questions before i dismiss the witness? >> i have no questions as we to ect the witness' right remain silent consist president with the fifth amendment, i have no objections with the chairman dismissing this witness. ecpwhrp given that the witness indicated he has no mans to

answer questions. i excuse the witness and take away his name and we'll take a short recess so we can reset the table. mr. roseman, you're excused.

>> i'd like to thank all the witnesses for their forebarnse. the chair would like to make sure we allow sufficient time and even though we are slightly smaller now, there is still a large panel. i'd like you to recognize your entire opening statements be placed in the record and stay within your five minutes or very close to it. >> with that you are recognized five minutes. >> >> thank you i appreciate the opportunity to appear before

u this morning >> the va is committed to making accurate decisions in claims for disability compensation as reflected in our goal by 2015 and monitoring the program. oversight for these programs ensures that qualified veterans receive the benefits and business qualifications they have earned through service to our nation. disability compensation is a monthly benefit payable to veterans with a disability resulting from injury or disease incurred in or aggravated by active military service. such service includes active duty, active duty for training during which they were disabled or side incurred in line of duty. and in that inactive duty the skerned was injured or died in

line of duty. service consisting solely of attendance at any one of the preparatory schools at the service academies may constitute active duty trva purposes depending on the circumstances of the individual's service. va's office of general council held in precedent opinions in 1994 and 19 ate that characterization of an individual's service at a united states academy preparatory school for veteran's benefits depends upon the status which the individual enters the school. entering the school as a result of called to duty for the sole purpose of attending the school or national guard duty to attend the school constitutes active duty tr training. in contrast, persons who enroll directly from active duty from a prior enlistment remain on active duty during their

attendance. those individual selected for enrollment in these preparatory schools are in the military. they wear the uniform, are paid based on their military rank, are subject to the military code of justice and upon release from that period of aining they are issued a dd214 with honorable service or whatever the characterization may be. in november 1995 va amended regulations to reflect our counsel's statutory interpretation concerning this type of service. compensating veterans for disability resulting from service is not limited to providing compensation for disabilities caused by military service. va statutory authority is to compensate veterans for disability incurred in or aggravated by service.

once an individual take it is oath to everybody is and protect the unite, they are on duty 24 hours a day 7 days a week. if he or she is injured or developses a chronic disease whether in combat or during routine activities va claims process that determined entitlement to service connection and the amount of any disability benefits that may be payable. in determining whether a disability is related to military service, there must be evidence of an injury or disease or an exposure in service, medical or in certain circumstances lay evidence of a current disability and evidence a medical or scientific nexexiss or link during the current condition and inservice event. va has statutory duty to assist claim nnts requiring evidence. this includes supporting evidence and ordering an exppings or requesting medical

opinion as necessary. va reviews documents and service treatment records obtained from the particular military service. va also requests evidence identified by the claimant that may be pert nt to the claim and medical records of private providers we are made aware of. va looks at all evidence and if so the elve of sevty of the disability. va standard of proop proof in making these determinations is reasonable doubt. in reviewing records claims process source are provided training which includes identifying any noted alterations or suspected fraudulent records. each regional office has a military record specialist with expertise who everybody ises as a lie ace son with other government agencies.

they are aware upon the determination fraud has occurred a preliminary decision is made with regard to adjusting or terminating the award. the reason for the adjustment, the right to representation and the right to present evidence to rebut the evidence for the proposed adjustment. if no evidence is presented it is adjusted and sent to the inspector general for review. the office of the inspector general coordnates with the united states attorney office. >> could you summarize please? >> yes, sir. that actually summarizes my statement on service connection. >> thank you very much.

>> mr. chod dozen. >> thank you for inviting me to testify in the awarding of certain contracts to stronk castle ink. a firm desert fide as a historically zone entity. before discussing the specifics of the case. i would like to discuss the hub zone program and some of its recent successes. it's aim is to help small communities to federal contract opportunities. they are urban or rural areas with low median household incomes and high unemployment. certified companies to have their office in a hub zone with the intention of spurring economic growth within the community. s of may 31, 2013 there were 5,029 certified hub zone small

businesses. fy 1 over $30 billion was awarded. in the case of these sci the firm applied for hub zone certification and was certified on june 22, 201. sci was awarded a blanket purchase agreement on or about december 7, 201. a hub zone status protest was filed by a competing firm on december 19, 2012. swa could not process the protest. however, sba believed the information contained in the protest called into question sci's eligibility. as a result sba began its investigation into the eligibility in late december 2012. based on the facts and evidence found during this investigation

sba proposed desert fy indication in january 2013. it is important to know the desert fy indication took place before and independent of the investigation sci. after a thorough review of the information provided to sba, sba desert fide sci on may 13, 2013. sba takes seriously it's duty to root out fraud abuse and waste in all of the programs including hub zone. our top priret is to ensure the benefits flow to the intended recipients. our government contracting programs are an effective tool kit for small businesses however we have no tolerance for fraud in those programs. for this reason we have a three prong strategy to identify, prevent and pursue non-compliance or fraud against

all our contracting programs. first is certification processes. clear and comprehensive processes on the front end ensure only qualified firms participate in our programs. second, continued surveillance and monitoring. reviews and on site visits identify potentially fraudulent fimples or those that no longer qualify. and robust timely enforcement. prompt enforcement deters wrongdoing and provides integrity to our contracting programs. we are especially proud of our core partnership with the office of inspector general whose participation is critical to our efforts. through collaboration with the government accountability office, sba intends to protect the federal government commitment to aid and assist small business. the strategy and efforts described in my testimony reflect an integrated approach

that utilize resources across business development, our general counsel's office and 68 district offices and others. as demonstrated by the initiatives and efforts described in this testimony, sba has taken great stride to streppingten the programs and emp meant a robust strategy to combat fraud and abuse. work remains to be done to eliminate fraud and abuse in our programs as bad actors still attempt to take advantage of government benefits. while we've made progress, we look for further opportunities for improlvet and maximize small businesses access to this revenue so they can start, grow and create jobs. thank you for the opportunity to testify before you today and i'm happy to answer any questions you may have. >> thank you. mr. mrs. tucker.

>> chairman ice sa and distinguished members of the committee. >> i appreciate the opportunity to appear before you today. i've been an i.r.s. employee for 24 years. i started as a revenue agent. i am very proud of my government service and it is an honor for me to work alongside the dedicated men and women of the internal revenue service. our agency is vital of the functioning of government in keeping our economy strong. our role as tech administrators we collect 92% of all federal receipts and last year we issued more than $330 billion in refund to individual taxpayers. in my role as deputy commissioner i oversee the support functions of the internal revenue service including technology, human capital, budget, real estate,

physical security and procurement. in february the committee sent the department of treasury a letter raising questions about two contracts that the i.r.s. awarded in december 2012 to strong castle, one of the thousands of vendors that i.r.s. does business with. one of the contracts was for computer equipment. let me be clear, we have made no awards or purchases under that contract. the other involves licensing and product support for ibm software that is in use across the enterprise at i.r.s. upon reit of the committee's letter i immediately referred the letter to the attorney general for tax administration. it's important to note that investigation is still ongoing. in mid may i was informed by tigda about inappropriate and unacceptable personal text messages sent by one of our procurement managers greg

roseman from his personal phone. as soon as i became aware of this situation, i took steps to have mr. roseman reassigned to a non-supervisery position that does not involve the awarding or administration of contracts pending the outcome of the investigation. and then just yesterday the committee released information related to this matter that the internal revenue service had not been previously apriced of. this new information is deeply troubling and it raises additional questions that tigda and the internal revenue service must investigate. let me be clear, these types of communication should not, should not occur between a procurement employee and a contractor. we expect all of our employees to act with profession lism and integrity.

we are taking steps to separate the i.r.s. from any ongoing business relationship with strong castle. subject to our need to safe guard our mission critical resources. under the teaming agreement with ibm that has been talked about in the days since the report was issued, there is a number that is rolling around about strong castle receiving $500 million potentially in award the from that contract. let me be clear, strong castle has not received anywhere near that amount of money. in fact 98% of the value of that contract if it was awarded would go direct to ibm. but as i mentioned, we are taking steps to sever this relationship with strong castle. n response to the fed letter i asked chief counsel tow

the dock nation with regard to these two contracts. in addition, as a result of the issue that is have surfaced from the committee inquiry we're doing a top to bottom review of policies and procedures, everything from internal controls and staffing practices. i've also asked the department of treasury to expand its routine assessment of i.r.s. procurement to include a review of small business programs. based on the troubling information that we have received, we will also further enhance employee training with regard to ethics with a focus gift rules, conflict of interest and appearance of imappropriatety and misuse of position. let me be clear that i have not seen anything within our procurement organization and i think this is also backed up by the extensive interviews the

committee has done with officials inappropriate behavior on the part of any other i.r.s. procurement th are 400 hardworking and mr.hairman as you mentioned our procurement commit community has a strong ethics and wants to support our agency. bottom line, we will continue to work with the committee to provide you with updates on the results of our continuing review and partnership with tigda and we also would implore the committee to please share with us the full set of information that you have obtained in your interviews because i do believe it would greatly assist the internal revenue service as well as the treasury inspector general in bringing this matter to conclusion. with that icon collude my statement and i'm happy to answer any questions. >> thank you. and i'll break with tradition just to note since you made a direct request that it is our

intention to share fully with the ig this information. i must admit it's been a one way street. we're waiting on an awful lot of documents from the i.r.s. that are long overdue. >> mr. sisk. >> good morning. my name is bill sisk. i have spent over 20 years at gsa. i started in atlanta in 1990 and i have served in a number of management positions including assistant regional administrator and regional commissioner. in my capacity as regional commissioner i represented network services and personal property. i have also served as assistant commissioner in the office of general supplies and services within the federal acquisition service and was appointed to the u.s. ability commission

which provides employment opportunities for individuals who are blind or who have other significant disabilities. i appreciate the opportunity to appear here today to discuss gsa 70 program and the process by which gsa reviews schedule 70 applications. it is the most widely used acquisition vehicle in the federal government. it is indefinite multiple award schedule providing access from private sector partners from around the country. businesses 53 under schedule 70. many of these small businesses have sose owe economic designations. 0 are 8 a, 3'1" are sfls disabled veteran owned.

1,027 are women owned. through june 2013 about $11.5 billion of procurement has gone through schedule 70 and 39% went to small business. schedule 70 has helped federal agencies save time and money while ensuring good value in the available goods and services. in addition schedule 70 is one of the two schedules that is available to state and local governments through the cooperative producing program llowing them to leverage the buying power of the federal government at competitive prices. by allowing our partner agencies to purchase from preapproved vendors they can receive goods and services faster. while it's not the only way to do business with the government it allows cut down on administrative cost. cost savings are also generated through prenegotiated price dealings in commercial pricing

and serve as a starting point for additional competition in negotiations. gsa has been established process by which to evaluate applications and make a determination of whether or not to approve businesses to get on schedule. over the past three years, gsa has processed approximately 2800 applications. currently the average processing time is 110 days. contractors can apply through the e system. it's a paperless contracting environment in a step by step process that complies with the federal regulation. after a package is submitted into our system, it is assigned to a contracting office ore or specialist who reviews the package for completeness. after the review the officer sends the offer an administrative letter identifying any areas for which additional information is required.

when a package is complete the officer or specialist conducts a responsibility determination using far part nine together with gsa in-house pricing tool or by submitting a standard form to gsa office of credit and finances for review and approval. in the review the contracting officer or specialist will utilize the system for award management to review offers, representations, certifications, past awards and performance and to assure that all nfpks is accurate and complete. after the responsibility determination is complete, the co or cs prepares a memorandum outlining strategy and any remaining deficient sis. if successful a final revision letter is sent. if the officer accepts the offer. the price negotiation memorandum is finalized. after completed and signed the

co or cs inputs the offer in our system and prepares a package to send to the vendor. it can be an important tool in meeting the needs of federal agencies. and gsa has an established process to review these in a timely fashion. i appreciate the opportunity to be here today and would be happy to answer any questions you have. >> thank you. >> mr. castillo. braulio castillo. i am president and c.e.o. of stronk castle ink. had rchased a company that 15 years of experience as a government contractor. our plan was to transform significance na into a small business net focused on procurement. we came to learn that the i.r.s. desired contract to

mull businesses and decided to pursue hub zone. we ner received any improper pref rerble treatment and computed fairly for every contract we've received. in the short time we've owned the company we've offered the government cost effective solutions to very difficult problems. we've also been instrument until forming teams with hardware suppliers in the i.r.s. in order to improve the company's posture as we began working with the department of veteran affairs and the small business administration to have stronk castle qualified as a service decabed veteran and a hub zone business concern, we understood that these credentials were important because the i.r.s.' increased focus on awarding contracts to small business. the i.r.s. had some

solicitation to qualified hub zone concerns. in order to compete, we approached the va and sba to apply for verification and hub zone certification. we worked closely with the va and sba throughout the application process. we attended multiple hub zone boot camps, presentations which representatives were speakers. we can'ted to communicate frequently and regularly with them often on a daily basis. he sba advised us on all aspects of our quality indication and the hiring of college student employees. because we believed the hub zone status would be significant benefit to the company we consulted on every aspect of our application. we spantspanded to all of the commilt tees question for

documents. we've provided business records, text messages and personal information. the cost of our effort to cooperate with the committee has been tremendous. the mischaracter sigs of the facts has caused strong cast toll lose contracts and good will among our customers. it has hurt our reputation. having responded to request for documentation i believe we've addressed the central issues. first it is not true that strong castle received $500 million in i.r.s. contracts. there were blanket purchase agreements pursuant to which i.r.s. may or may not issue orders. there are valued contracts of approximately $50 for which $49 went to the large business providers. of that amount approximate approximately $1 million to strong castle. last year our company last

approximately $140,000. it is not true the company had no experience in contracts. i personally have worked with the i.r.s. for almost 15 years. my prior experience is relevant to the work we perform at the i.r.s. strong cast sl uniquely qualified to serve based on our years of past performance. strong castle has not received prefer rerble treatment from the i.r.s. to my knowledge strong castle has never received any contract award as a result of pref rerble treatment. fourth, strong castle has been forthcoming with the sba. it was significantly important to the company, we took care to work in consultation with the hub zone office and sought approval and guidance throughout the process. strong castle has not south or

received any unfair advantage. we are a responsible small business. unfortunately other companies are able to use that against us. despite these challenges strong castle remains committed to deliver results as a partner to the united states and i.r.s. as i have done for nearly 15 years. thank you. >> mr. castillo, you talked about the experience of your company in 15 years. how many common employees do you have? how many employees at your firm have been there 15 years? >> no one has been there 15 years. >> ten years? >> none of them have been there ten years? >> five years? >> one year. >> all of them have been there one year or less. >> you made an assertion of prior experience. the fact is the company you bought and the employees of

your current company have nothing in common. i built a company over 20 years. where is that legacy experience that you're claiming your company has? name an employee that when you bought the company that had never done more than $250 in contracting name an employee that is part of that experience that is with you here today? >> of what time line, sir? >> you claim 15 years. you bought the company a year and a half ago. how many employees came when you bought the company? >> two employees and the owner at the time. >> and where are they today? >> the owner left in september of last year and one of the two -- we've got a small company with two employees. one is still there. >> i want the public to stand. you're claiming this experience and legacy and now you're claiming that in reality three employees gross, one the employer, only one with you today so indicate frankly you swore on oath to tell the truth

and whole truth. that's shading the truth pretty close to claim 15 years of experience with essentially no employees for all practical purposes. our committee when we sent the letter to you, ms. tucker, to the acting pressurery secretary and you got involved in it back in february and march, we asked you about this and at the you said there was no there there. do you stand by that today in the case of this investigation? >> no, sir, i don't. >> turn your mic on. >> let me be clear. the information that we've seen about the personal relationship with mr. roseman and mr. castillo is inappropriate. mr. roseman should have recused himself immediately from any involvement whatsoever in any

i.r.s. interactions with strong castle. let me be clear also and i think as your staff members interviewed extenively i.r.s. procurement officials that they allstated on the record that they were unaware of any relationship with mr. roseman. >> i understand. mrs. tucker you can't have it both ways. you can't say you don't know what our people said while your lawyers were in the interviews and then say what people said in our interviews. just this past monday you ipped kated you were not going to cancel it will $26 million contract to strong castle. my understanding a few minutes ago is you are now going to cancel that or put it on hold. it is not so important as to not be reworked is that correct? >> mr. chairman what i told members of your staff on monday was that we were exploring

options. >> let's get to this part about the money. when you provide a contract, when the federal government and your other witnesses hopefully help, when you provide a contract to a disabled veteran like mr. castillo and in a hub zone. the i.r.s. as i understand it took full credit for this hundreds of millions of dollars as though they went to that company, isn't that true. you didn't take credit for 1% going to a veteran in a hub zone. you took credit for $500 million, isn't that correct? >> internal revenue service followed the -- >> you're not a witness i'm thrilled with today. you ignored this until we pressed and pressed and pressed. i'll go to mr. flor and mr. chod dozen. when the i.r.s. awards $500

million they don't do it off the net for no participation in the actual delivery of services, they take the gross amount. this is scored as hundreds of millions of dollars going to a hub zone, isn't that correct? >> mr. chairman, the ultimate credit for the contract is for the dollars incurred and the dollars incurred are gross. >> so for the american people here today, one of the frauds on the american people and for us is we get these report cards talking about billions of dollars going to our disabled veterans, hundreds and millions of dollars going into these zones that we're trying to encourage, i call them enterprise zones. we're scoring $500 million and then somebody comes here, ms. tucker i'm picking on you for a reason. comes here and tries to say

it's my niss cal. this cost more than ifed the been bid to the principles and every scent that mr. castillo got from what we can tell without having a true principle operation, and the witnesses did make it pretty clear. they don't go there. the people who had real money don't go there. a few college students show up and look for potential new contracts. that was scored as hundreds of millions of dollars to help people in blighted areas and help a disabled veteran who played college ball for years and didn't limp or have a problem until le got ready to apply for this special status. i have a scoring problem and my ranking member and everyone on the day i can't say. bear in mind it's not about mr. castillo per southeast. he may not have broken a single

rule. that's for others to determine under the law. but we were shocked to discover that we're scoring as though we're doing a lot of good for decainled veterans, not people who turned their ankle and have no problem for 27 years until it's time to conveniently become a disabled veteran and we're scoring impact to blighted communities when in fact that score is at best fraudulent. we're scoring $1 million but writing it in as ten times or a hundred times that. that's part of this hearing today. that's why the ranking member and i are teammates in this. this is an example of an agency that had a large contract may or may not have gotten the best value for the american taxpayer. but certainly the two gentleman on your left ms. tucker they are in a position where complying with the law they are not seeing you deliver the value appropriately to the american people for these set

aside type events. mr. come mings. >> i wam going to pick up where the chairman left off. help me with this. you apparently had not made a decision on an ibm contract on monday, is that right? >> that's correct. we were exploring options. we were troubled but we had not immediately cancelled the contract because the ibm software is critical to our mainframe operation. >> i understand. so what information came to you between monday and this morning to cause you to say what you said and when that was decision made to sever the relationship? if i'm misstating you, tell me. i think that's what you said. >> so yesterday afternoon when

we received the report from the committee and the procurement executive team and i met and based on the e-mail exchanges that were seen in the report that we had not been made privy to and based on the fact that mr. roseman was repeatedly asked by his supports if he had a personal relationship with mr. castillo and strong castle and he denied it. and i believe the detail that we saw excerpted in the report has raised considerable concern that we are in the process of separating our relationship with strong castle. >> would the gentleman yield for a second? >> mrs. tucker i want to make sure the ranking member understands the e-mails you're so horrified about you gave us.

that was part of discovery. your organization reeds them before they deliver them to us. >> no, sir, that's not correct. that's not the e-mail i'm referring to. we did provide e-mails from the internal revenue service system. >> so the e-mails you provided did not lead you -- were not enough to get you to feel that there should be a severing, is that right? >> correct. >> now some additional e-mails came in. >> it's actually text messages. >> asia said in my opening statement it's text messages from mr. roseman's personal phone to mr. castillo that had not been shared with the internal revenue service and that we were unaware of. >> so that basically was the straw that broke the camel's back, is that correct? >> yes, sir. >> mr. chod dozen tell me

briefly tell me how many desert fy indications you have done over the last four or five years. i'm trying to figure out how unique this is, desert fy indication. >> thank you. i can get you a full spread for the last five years of all the certifications. i believe we've desert fide approximately 1500 or 1600 firms over the course of the last year. some are due to changes in the hub zone track maps. some due to specific issues with particular companies. >> mr. castillo, i reviewed your testimony and i have to admit that i'm troubled because you seem to take no personal responsibility for any of your own actions. in fact you criticize everyone else but yourself. you even blame your current problems on let me quote this the volatile business and

political environment of the day, whatever that means. i would like to read from the letter that sba sent to you on may 23, about one month ago notifying you that your company's hub zone status was revoked. then i'd like to get your response. >> the letter says that you and i quote admitted that records provided were false and inaccurate. i want you to put a pen on that. not ys you quote did provide sba with reliable and accurate payroll records end of quote. it says you do not have quote adequate internal controls end of quat quote. you tried to claim that your program manager is not an employee at all but rather a contracter end of quote. it says you have quote a

pretitious attitude with regard to the accuracy of records end of quote. michael jackson had the song the man in the mirror. you need to look in the mirror. it says your employees quote can record time worked as they please. wouldn't we all like to have that job? so with all of that, mr. castillo, let me now give you a chance to respond. do you admit that you submitted false records to sba? >> sba did desert fy us based on the records and we've put measures in place to address some of those concerns. >> that's not what i asked you. do you admit you submitted false records to sba? >> yes. >> how do you respond to other allegations well the sba letter

states that you only corrected these errors and i quote after being confronted with conflicting evidence by sba. so they weren't problems you identified? >> no, sir, they identified them and we corrected them. cho chod dozen let me dozen let me turn to you. do you stand by your find sngs >> yes the sba stands by its findings. >> going back to you mr. castillo, what do you say about not ba saying that you did have adequate internal controls? what is your response to that? i want to give you an opportunity to respond because there are some problems here. >> yes, sir. they pointed out inaxis and we

put crecks in place from a time recording perspective. >> you admit there were problems with internal controls? >> yes, sir. >> let me get to something that the charmente talked about that is extremely troubling to me. i told you in my opening statement that i live in an are where businesses struggling so i want the programs to run properly as i know the chairman does. the question is can you tell me outside of the catholic university students and faculty, tell me how many other people outside of those that ou employeed from the hub zone . >> of our ten employees not counting the college students,

we have one other hub zone resident. >> so you had ten employees? >> yes, sir. >> you're telling me nine of them were from catholic university? >> no, sir. what i was saying we have approximately ten employees. about five of them per your count are from catholic university. one of them is from -- not counting the catholic students is from a must be zone. >> when did you hire that person? >> may of this year. >> you just hired her? >> yes, sir. we disclosed that to the committee during my transcribed interview, yes, sir. >> i guess if you were in my district the folks i'm talking about wouldn't get a job for you unless they were at the catholic university? hello. >> no, sir, i would not agree with that characterization. >> let me ask one other question. mr. castillo, it seems clear from the evidence you wanted to

take full advantage of the hub zone program and not to help d.c. residents but to maximize your own profits. during your trance cribed interview you said this and i quote, i knew that hub zone was important being from the industry and so we went at it that way end of quote. that's what you said, is that right? >> i don't recall saying it but yes i stand by that. >> finally, what does that mean? what did you mean by that? >> we moved our operations from northern virginia to washington, d.c. in a certified hub zone and established our principle office there. that's what i mean by that, sir. >> would the gentleman yield for one moment? mr. castillo, straight yes or no because we have your interviews and your wife's interviews and so on. isn't it true that all the type

a people who potentially sell or work on that contract live and eskively work elsewhere, that the testimony of yours, your wife and other principles that they don't often go to that principle location, in fact it isn't manned full time and when it is it was by college students who were looking for other contract potential and not executed this contract, that your contracting operation and all those key fuppings were never located in that building? >> sir there was a few things in there so i'll try to address them. you're right, the principle workers i think you would say type a workers all work on site at the government site. they don't report to an office like in many other companies. >> maybe i'll cut this down because i'm on borrowed time. you don't work out of that office, your wife doesn't work out of that office, those previous individuals that were from the previous company don't

even live in the area, one lives in boston, one lives in florida, that in fact, when we really look at it, the college for execution of this contract thus far until a few days ago, basically college students showed up there and served a few sites which was not a direct part of any execution of this contract, isn't that true it was in name only, it was not your principle place you did business executing these contracts? >> you mean me? >> i mean you, your wife or anybody other than college students. >> i work out of our leesburg location. my wife works out of our home. > in the richest county? >> yes, sir i read that. >> the college students and any other worker reported to the office reports to the washington, d.c. office which is why it was established as

our principle office. we had an employee from florida, former i.r.s. executive who lives there who retired to that area and the gentleman that you're referring to in boston actually works in a top secret facility on an air force place so that is at the client's site. >> one last question. based on what the chairman just said, i want to remind you you are under oath and i want to ask you this question. don't you think you manipulated this process and frustrated the true purpose of this program? >> no, sir. >> why do you say that? >> i don't feel i manipulated it that's why i said that. >> you admitted you lied with regard to ack si of information. >> to a direct yes no, we provided inaccurate information on our time sheets not on payroll statements which we

corrected since and put processes in place to correct them sir. titesl tucker, your deputy commissioner for operations support. so you oversee the procurement process for i.r.s. and personnel involved in that? >> yes, sir. >> and you gave a statement i guess pretty much waving the flag in support of i.r.s. actions and i'm sure there are thousands of people whoever day get up and do a good job for i.r.s. but representing people in a district in florida and just anywhere i go, i hear more complaints about the i.r.s. i think you've been in sort of a meltdown of scandals, the targeting of certain political organizations. we held a hearing a few weeks

ago on conferences gone wild, i.r.s.g with on wire today there a story about credit card abuses. >> yes that's part of our procurement organization. >> that again is just an embarrassment. this hearing on procurement process that again has gotten out of hand. i think we've lost great confidence and probably for very good reason. it sounds like mr. castillo is sort of gamed the system, would you agree? >> based on my understanding -- >> let me ask you a question -- let's go back to before the committee contacted you about this, had you or any employees of i.r.s. been contacted about

what was going on with mr. castillo and mr. roseman? >> let me -- >> my question was before the committee contacted you on the matter of this relationship, were you or any of the employees you're aware of notified that something was going on? >> no, sir. >> absolutely no? >> no, sir. >> and since then you've been rather reluctant until you've had the awakening just in the last few days that something was going wrong -- had gone wrong here. sound like oes it sba was gamed by this player? >> congressman, it appears from what we know -- >> he just told you he provided you inaccurate information. >> yes it's a pretty

fundamental principle they have to provide accurate nvings. >> you agree he gamed you. mr. castillo, it appears you also gamed the veterans administration. we want our veterans with disabilities to have special preference in standing. the only snens of disability was at prep school, was it? there was anything in active military service where you sustained disability or injury? >> the injury that i sustained was during my time at the prep school. >> that was my question. my question did you sustain an injury again in active military service or were you disabled during that time? >> i'm not sure. >> in active military service, were you in combat and had an injury?

>> no my injury was during my -- >> it sounds like he's gamed the system mr. flor, would you agree? gamed the , has he system? >> based on discussions we had with your staff last week, we are not able to provide specific information regarding this claim. >> it sounds to me like he's gamed the system. that's not what congress intended. i'm sad that va can't make that determination and say so publicly. let me also say mr. castillo, you had a few contacts or a number of contacts by phone, cell phone text or other contacts with mr. roseman. how would you cell phone contacts, were they a few,

many? a s, few, many meetings, few, many? >> i've probably met with him over the last five years about ten times or so. and there were text messages we provided to the committee as part of the investigation. >> mr. chairman he just testified again a few times. between may and october you and mr. roseman exchanged over 100 telephone calls. don't you think that's in excess of what you just testified to? >> i don't believe there were telephone calls. i believe you are refering to text messages? >> again, we have phone calls or through texting over 100 messages. and then in particular, you had a 21 minute telephone conversation between mr.

roseman and yourself on the seventh of june, 2012 to refresh your memory that was the night before mr. roseman sent you the request for a quote for an $80 million laptop desk top acquisition. so one you testified or you just indicated you had very few contacts contrary to over 100 contacts by phone that we have. and secondly and finally did you want to comment on your 21 minute conversation with mr. roseman prior? >> the gentleman's time is expired. would you pleas answer? >> i testified i met with him ten times or so in the last five years. i didn't state to the number of text messages we turned over versus telephone. >> i asked aboutle cell, phone, text and meetings,.

>> dually noted. >> i don't know the number of telephone calls. i know the text messages because i met with counsel last week and we went over the ones that we provided and i don't recall what the conversation was about on june 7. >> as i go to mrs. norton. mr. castillo i know mr. roseman said there wasn't a friendship you have repeatedly said there was. you've been on the opposite side of that. so these text aren't unexpected in that you said you do have a long relationship with mr. roseman? >> i've worked in support of the i.r.s. for 15 years or so. the last ten years -- >> since 2003 he's been what you would characterize as a friend. >> i would say a customer. i met him through my previous employer where they were very good friend and we had a contract there at my previous employer. >> customer not sfrend your testimony today. >> no, sir i did not because i

think i'm on record saying we have a business relationship that we are friendly or friends. i'm not changing my testimony. >> i believe because we do have a witness not here today who has said to the .rs that you are not friends yes or no, are you friends under your definition of friends? >> yes. i think i have stated that. >> i want to make sure. i know the treasury wants to understand the disparity in interpretation of friends between an individual who did not disclose and yourself. i think mr. mica deserves a yes or no on that. >> i am not sure he asked me if we were friends or if i would characterize that on my 10 years of working with him. i would say we have a good

business relationship, and i would consider him a friend under my definition. but to be clear, i wish he was here to testify. i am a small-business owner owner and in here willingly and actively participated. i have attended everything you asked me to attend. we made every employee available to you and turned over an immense amount of documents, including the text messages you referenced. i would say we have fully cooperated. >> this is not my time, so ms. norton if you would be indulge in for one more moment. we have no objection. from the get-go, you have asserted you believe you did nothing wrong. one of the reasons for this hearing today is we believed from a irs execution of contract, it was not appropriate. we intervened when we believed that. obviously we have the sba here today and the veterans here

today because we believe there needs to be a reform in a portion of the process under which you were given that these statuses. those are the three points. i do appreciate and want to know for the record that yes, from , i get-go you have said do not believe i did anything wrong. you have cooperated. question byeface my indicating that when this program was initiated in the late 1990's, it was done without a hearing. a republican senator from missouri inserted it into a fda reauthorization. it seemed like a good idea. it seemed to bring together some of the visions of one of my good friends, the late jack kemp, to

y his notions of market and capitalism with his concerns for the inner-city. when the democrats took control of the congress, its chair, nydia velazquez, was so disgusted with the program because there had been hearings in all the major cities showing abuse by large companies. zone program. we had a new president, give him the chance to clean it up. i do not have any evidence the program was like it was when those hearings were held throughout united's dates showing big companies had wholesale abused -- the united states that big companies had wholesale abused the notion. i do think the program must have improved, or otherwise we would have heard. but i cannot say the same for what i'm hearing today.

i have to tell you, mr. castillo, this hits a bit close to home. you of course do not live in d.c. that is allowed. you are from a wealthy suburb. that is allowed. in rented a tiny office chinatown, then you recruited students from catholic university to do the work after you received the contract. towards -- to go eight, which is a part of the city where unemployment is high. classically a part of the city where you could have found people to do the work. fully met the notion embodied in the hub zone that

people who live in disadvantaged areas would have some investment in the area and could get employment, whereas they could not before. sevendn't you go to wards and eight instead of going to catholic university? >> i apologize, i am not well -- >> you know it well enough to go to catholic university. state, thestay -- college employees we hired were hired before. we put together two initiatives. >> the purpose of the hub zone is to hire disadvantaged people. were these catholic university students disadvantaged people? >> they were residents of a hub zone that we employed. >> you say in your testimony that all our actions were taken in consultation with the sba and

we never thought to deceive the government. do you believe hiring college students who go to an expensive private university is in keeping this program? of >> yes, ma'am. believehodos, do you that hiring students who go to a private university, an expensive one at that, is in keeping's with the goals of the program? , representative norton. the answer to your question is this. designedone program is to spur investment in an economic development in -- >> to you believe that the hiring of students of a private university meets the goals of the hub zone program? >> we have seen many entities throughout time that higher

and many students take on great debt to better themselves and their families. --hiring no students except he hired no employees except students from this zone. did we learned in may he hire someone who was not a catholic university student. i love catholic university. i am trying to marry what the zone is about with the actions that were taken. i want to know whether you believe and whether sba believes this is in keeping with the goals of the program. >> so long as they are residents of the community -- >> as far as you know, throughout the united states people are finding people who are by definition advantaged because they have gotten into college. they may be hiring college students across the united states rather than bona fide residents. you do not even know these catholic university students were residents of the district

of columbia. they live in the dormitories or the surrounding neighborhood. we are glad to have them. but you do not even know they are residents of the city or that they need the notions of disadvantaged embodied in the hub zone itself. >> what we know is they certify to us, that they are residents and are planning to live in the hub zone. >> i will have to ask whether to ask hube willing , a hub zonents contract recipients, whether they hire college students so we will know how widespread this practice is? >> let me say this. we agree completely. the purpose of the program is not to focus upon college students. it is to focus upon employment in these places.

>> you cannot say today that that is not a practice not only of mr. castillo but many like him across united dates. >> i can say the practice occurs in various places at various times. i do not have the data. i would very much appreciate you seeing if the data is available. a simple questionnaire -- how many of your employees are college students -- would help us. we want toe that have the needed reforms. there may be no sense in till this case came up that that could amount to an abuse. against college students. i am saying, if it is a systematic practice you can see what the effect would be if the purpose was to make sure that disadvantaged people in the neighborhood were employed.

so i ask that you submit within 30 days whatever you can find on that. from me.question mr. castillo, you indicated that -- something about most of the money went to the parent company or to the large company. but you made $1 million, your company made $1 million. what is the value of your company? last year we reported $8 million in sales and we lost 140 thousand dollars based on sales. $49ou just testified million. your company got $1 million of that. >> yes, ma'am. gross profits, not net profits. an $8 million company, $1 million from one contract is

very lucrative. as you said in one of your e- .ails to your wife >> i might note for the record that as a small businessman for many years, if i chose to pay myself no salary i might make $500,000. myselfose to pay $500,000 i might make no money. -- mr. castillo and his wife, i want to be clear the balance sheet and income statement are somewhat not the same as a fortune 500 company's interpretation. clearly, without these contracts it would be less. with that, we go to the gentleman from ohio, mr. jordan. >> you have been at the iris 29 years? your deputy commissioner? how many deputy commissioners are there? >> two. >> is there anyone between the deputy commissioner and the commissioner?

>> no. >> you are right near the top. one month ago, russell george gave the committee information he informed the irs on may 30, 2012, that targeting of conservative political groups was taking place. if we can put that up on the screen. this is from the timeline he gave this committee. he said in the meeting that the terms were used -- there were three people in that committee, in that meeting. mr. shulman, who is no longer with the iressa, who has been fired, and you. he testified a month ago in the committee that that was the first time he knew targeting was taking place. was that the first time you knew ? >> the first time i was aware of the situation, yes. >> mr. miller has also -- we have also been talking with nana marks -- nan marks.

there was an internal investigation in march 2012. did you know about that? >> no, sir. >> mr. miller knew about what was going on in may 2012. did you know the results? >> no, sir. >> the same time mr. shulman testified -- may 30 last year? >> yes, sir. >> you are familiar with the fact mr. shulman testified in front of the ways and means committee in march of last year. -- he was asked, can you give us assurance the iressa is is not targeting clinical groups? he said, we pride ourselves on being nonpolitical and nonpartisan. he gave assurances. usually when you give assurances there is some basis for assurances. were you part of the basis for assurances mr. shulman gave the ways and means committee in march of 2012? >> no, sir. >> you did not have any conversation with mr. shulman before he testified? >> no, sir. >> in the meeting that took place on may 30, the meeting highlighted on the timeline,

when you learn the targeting was taking place, what was the reaction in that meeting? , we have to do something here? we have to correct the met -- record? what was the reaction when the three top people at the irs learned that this was going on? might, the treasury inspector general comes in once a month to meet with -- >> cut to the chase. what was the reaction? you find out there is targeting of political groups six months before a political election? what was the reaction? >> they reported the information they were looking into the audit. then at that point in time the irs waits for them to complete their investigation. >> they told you cheap arty patriot, identifying -- it'll be the tea party, patriot, terms used to identify groups. in some cases they had tried to

get status for three years. yourearn to that -- reaction was, let it keep going and see what they, what? >> no, sir. >> in your testimony you said the chairman, it would be helpful if this committee would share information with us about the issue in front of the committee today. it would have been helpful if once you got the information you would have shared it with that committee. we would have liked it. we were the committee who asked for the audit in the first place. we would have liked to know, six months before an election, the targeting was going on. did you instruct russell george to share that with the house ways and means committee and oversight committee? >> sir -- >> did you tell mr. jordan, this is pretty important information, we learned today that this is going on. did you tell mr. jordan, you might want to share that with the oversight committee since mr. issa is the one who requested the audit? >> that was not my responsibility. i have responsibility at in turn all revenue service operations

-- internal revenue service operations. >> you were in the meeting. are gone.two guys you were the highest ranking official at the iressa. did you not think it was incumbent upon you to set the record straight? your boss had just testified two months earlier and told congress nothing was going on. he finds out two months later it is going on. you are the highest ranking official. you did not it was appropriate to tell congress? nothe organization does purport to -- >> why didn't you correct the record? why didn't you come to mr. issa and say, you know what, did you tell mr. shulman he should correct the record? >> i did not. >> have you been disciplined by them for not correcting the record? >> no, sir. it is not in my purview. >> you are deputy commissioner. you learned about it that day. >> mr. george told us in his

routine monthly meeting that they were doing an investigation . >> we understand that. all i am asking, there has got to be summaries and why you did not feel that any obligation, any reason why you should come forward and set the record straight. the inspector general told the irs what was going on. you did not feel incumbent upon you to tell the committee? >> sir, at the internal revenue service we have two deputy commissioners who have very clear, delineated responsibilities. >> the gentlelady me finish. >> at the internal revenue service we have two deputy commissioners with very clearly delineated responsibilities. i do not have risk on stability for the service and enforcement programs. ?> ms. tucker whwe in the meetings? if it is nothing to do with you, why did mr. george think in

the meeting? >> mr. george and his deputies come into internal revenue service every month and brief on all our investigations. >> the gentleman's time has expired. i am sure we will get back to this. i would ask unanimous consent the man have 30 additional seconds. -- iwant to be able to want her to be able to answer the question. he is like a machine gun, and she cannot even get her answer out. >> in that meeting, did you discuss -- when you are saying is mr. miller had, that was his area of jurisdiction. >> that is correct. >> did you tell mr. miller he should come forward and tell congress what is going on? >> no, sir. >> was that discussed? >> if i could please -- the once a, they come in month to internal revenue

service to brief the commissioner and the two deputies about their audit's, their open not it's -- audits. on any given meeting, there are lots of oversight investigations at internal revenue service. those meetings are typically them coming in and saying, we have opened an investigation on program, on another program. under myan issue jurisdiction, like procurement, like the irs budget, our real estate portfolio, then i am the responsible party. what i'm trying to convey to you is that i do not have oversight responsibilities for the t .e.g.e. programs. >> ms. duckworth, please. >> this is very troubling to me because this case really shows how things can go wrong.

i want to support our small business owners as much as possible. i want them to be successful. appalled byolutely the advantages is taken of the system. r, i know you cannot discuss mr. castello's case -- that is why you could not answer earlier. vba isrstanding is the bound by legislation that says that a certain condition has a certain disability rating. is 40%.ee amputation correct? >> correct. >> it seems like there is an opportunity here for some legislative fixes to the system. anychodos, is it true that rating, even just five percent, would qualify somebody for a service connected disability owned business? >> so long as they qualify under the va rules for service connected disability, that is

adequate for the self certification. >> thank you. esther castillo, -- mr. castillo, how are you? thank you for being here today. >> i am not well, but you are welcome. >> does it hurt, your left foot? >> yes, ma'am. >> my feet hurt too. hurtalls of my feet continuously and it feels like there is a nail hammered into my right heel now. i enter stand pain and suffering and how service connection can cause long-term, unyielding, unstoppable pain. so i'm sorry the twisting your ankle in high school has come back to hurt you in such a painful way. it is also opportunity you to gain status for your business as you are trying to compete for contracts. i also understand why someone can take years to manifest themselves from when you heard them. in fact, i have a dear friend chris brady agent orange in vietnam -- who sprayed agent

orange in vietnam. it took 40 years for the leukemia to manifest itself and he died six months later. i can see how military service, though at the time you seemed for a healthy, could 40 years later result in a devastating injuries. could you tell me if you hurt your left foot again during your football career subsequently to twisting it in high school? --ma'am, i do not understand >> post high school. >> before college. prep school. your left foot again after -- injury your left foot again after prep school? >> i am not sure i understand the question. >> you played football in college, correct? >> yes, ma'am. >> did you injure that same foot again subsequently in the years since you twisted it in prep school? >> not to my recollection. >> ok. tell the va that

-- doctors >> i do not feel it was inaccurate, ma'am. would you like me to address that? >> go ahead. my -- one of my doctors that submitted letters, as part of the injury you have to establish it is chronic and recurring. when i returned home to san diego my doctor from san diego had also said he had treated me for injuries suffered on active duty. when i moved to las vegas a couple years later, that dr. submitted he continued to treat me for that broken foot injury. finally, when i moved to doctor and went to a it continued to hurt. he established that. dr. sam wilson, who ironically was also stationed --

>> i am running out of, i'm sorry. -- dr. wilson himself is a disabled veteran and very familiar. he was the one who talked to me that this may be something that is connected. i believe i told him -- >> i have to cut you off. i am talking. let me ask you this. you feel the 30% rating you have for the pain in your foot is accurate to the sacrifices you have made for this nation? that the va decision is accurate in your case? >> yes, ma'am. >> my right arm was essentially blown off in the attached. i spent a year with a dozen servant -- surgeries over that time. in fact, we thought we would lose my arm. i am still in danger of losing my arm. feelnnot feel it, i cannot three of my fingers.

my disability rating for that arm is 20%. in your letter to a government sva,ial, i think it is the you said, my family and i have made considerable sacrifices for our country. my service-connected disability status should serve as a testimony to that end. i cannot say with my kids because i cannot walk without pain. i take twice daily pain medication so i can a normal day's work. crosses, these are crosses that i bear due to my service to our great country, and i would do it again to protect this great country. i am so glad you would be willing to play football in prep school again to protect this great country. shame on you, mr. castillo. shame on you. e armay not have broken any law not sure yet. you miss for presented to the sva -- misrepresented to the sva. you broke the trustthis great nation.

you broke the trust of veterans. iraq and afghanistan veterans are waiting an average of 237 days for an initial disability rating. it is because people like you who are gaming the system are adding to the backlog so young men and women suffering from post paramedics dress, missing limbs, cannot get the compensation and the health that they need. i am sure you played through the pain of that foot all through college. let me tell you something. i recovered with a young man, a runninge man, who was into an ambush when his marines were hurt and had his leg blown off with an rpg. he put a tourniquet on himself and crawled forward. he played through the pain. you did not. you took advantage of the system and described the status just today -- other companies are using these statuses as competitive weapons against you. you, who never picked up a weapon in defense of this great nation. very cynically took advantage of

the system. you broke the faith with this nation. you broke the faith with the men and women who lie in hospitals right now at walter reed in bethesda, at the army medical center. you broke the faith with them. if this nation stops funding veterans health care and calls into question why veterans deserve benefits, it is because cases like you have poisoned the public's opinion on these programs. that you think twice about the example you are setting for your children. i hope you think twice about what you are doing to the nation and the nation's veterans willing to die to protect this nation. twisting her ankle in prep school is not defending or serving this nation. mr. chairman, i am sorry. you have been very indulgent. i yield back. >> i thank you gentlelady. the time was well spent. i cannot add onto that except to make sure the record is clear, since you are under oath -- you said the word broken in your

testimony just now. but my understanding from staff is that the x-ray taken at the time of your injury did not show a break. additionally, i want to make this clear for the record -- you can clear the record up if we do not under us and it correctly. in your va application and with doctors aboard, you claimed your twisted ankle came from football , as the gentlelady said. however, in your transcribed interview before the committee you said you slipped on a rock in orienteering. which one is the truth? that the dr. submitted that i was hurt playing football. i told him that. so when meeting with the committee i told sam that in preparation -- told them that in preparation i noticed the date of injury noted on patterson whichal was november 19, was after football season. -- wasesponse that is

that that injury could not have happened during football. the letter that was submitted stated he had said i told him, and i think i told mr. davis, that i would check. i went back and asked, what was his recollection of a conversation we had had in 2005 that led him to write the letter in support -- theapplication, which va application, to be written by doctors who treated me. i told him that my best recollection i was her playing football. he submitted that in truth -- the gates did not line up, so i did suffer a subsequent injury. the injury i suffered,, it was probably a relapse or aggravation of the injury. i think that answers one of your questions. do you have others? i apologize. football, orientation,

whether it was a break. you said in your testimony a few minutes ago that it was broken. >> yes. serviced foremost, your to this great country is well known and to let you know, i did not set my 30% disability or your 20% disability. >> but you are taking advantage of it and you went after the disability rating for the benefit of your company because, as you said, other companies were using the statuses as a competitive weapon against you. you said that today. >> ma'am, when i said that i meant they were using the process of the procurement as competitive weapons, not my disability. i apologize if i at all stated that they were using my disability as a competitive weapon. protesting asere competitive weapons. thank you for allowing me to clear that up. i do not set the ratings.

speaking keeping and with the doctor, who was at monmouth hospital in fort he had said i may very well be able to qualify. >> you made the decision to apply for a disability rating for a twisted ankle from football or -- you have not even answer the chairman's question. did you twist your ankle or break it, or twisted playing football? do you not remember? which was it? >> it was not a sprained ankle. it was a broken foot. i believe the x-ray technician wrote that there was -- i'm not a doctor -- but it was in essence they x-rayed it and theed a change in malformation. i forget exactly. you signify that for me? he said, you broke your foot. that is what he told me.

>> i think the gentlelady and will trust that the va can take note of testimony here today. we open the case to at least get you an accurate record. an accurate determination. we now go to a medical doctor from tennessee. dr. danger lay. >> thank you. as a former va physician and someone who has the privilege of treating many of our great veterans, i do think that one thing is very important. when did your injury occur? the initial injury was fall of 1984. second injury, november 1984. how did the first injury occur? what were you doing and what was your title? 2 enlisted soldier. >> in prep school. how did it happen?

>> playing football. >> you got an x-ray and they told you it was broken. >> no, sir. -- i wasal injury treated by trainers. injury?was the second >> november 19, 1984. >> how many months apart? >> probably a month. >> you had a second injury and were playing football at that time? >> no, i was hurt in the field during in orienteering exercise. >> you got a x-ray? and that is when they thought it was broken? >> yes. >> and in six to eight weeks you were on crutches. >> on crutches and, well, orthotics. on it again.lking when did you play football again? next year? >> yes. >> and how many years did you play football? >> four years. >> after that, golf, any other sports? >> i play golf very poorly. i played some softball. >> you still play golf?

>> no, sir. >> when is the last time you participated in sports? >> a couple weeks ago. >> so you can still get around ok despite having a 30% disability service connected to the injury. >> since you are a doctor, i d area.fuse >> 27 years later you decided this must have been from the original injury, what the doctors decided? >> no, sir. after suffering for 20 plus years i went and saw a doctor and he established the broken fusiond did the three exercises -- surgeries. excuse me. >> i am sure that does not make you feel much better, ms. duckworth, but thank you for the update on the history. at the beginning of the hearing this morning, ray gray rosen invoke his-- roseman

fifth amendment rights. as deputy commissioner, is it your expectation and irs employee will appear before the committee to testify about official action taken with that -- within the scope of his duty? >> we expect all irs employees to qualify with members of congress. >> but he did not. >> he did not. .> mr. lerner did not >> each of these individuals, as mr. cummings said, invoked a constitutional right. >> this is an agency you have been with 29 years -- you stated you are proud of your service and the agency despite the multiple lock eyes they have right now -- black eyes may have right now. has the irs taken disciplinary action against mr. roseman as a result of the investigation? thehen i became aware of investigation in mid-may, hard evidence they had found regarding inappropriate texting by mr. roseman, i directed the

procurement organization, his superiors, to reassign him from a management position. >> you agree he would be uniquely qualified to testify about what we are wanting today. >> yes. >> so the fact he invoked his fifth amendment, that is his right, but the fact lois lerner did, the american people want answers -- what is going on with the irs? conservatives, excessive spending, situations like this. i understand you want to be proud of who you work for, and you should be. but how are we going to get justice? needs toink the irs bring people to justice? mr. jordan asked you, what would be the initial reaction? nobody has given you a reaction. would you agree targeting conservative groups is wrong? >> sir, i >> that is a yes or no. you agree it was wrong? irs admite in the

this was wrong? >> i think the permission released this week shows that lists were inappropriately used across multiple criteria. so yes, that criteria was incorrect. >> so the irs was screwed up. somebody needs to be held accountable. who is in charge of appointing the commissioner of the irs? >> it is a presidential appointment. >> somebody needs to be held responsible. do you agree? >> all of us have to be responsible for the administration of our agency. >> the american people are going to be very relieved when they get this news of who might be held accountable. do you have any ideas? do you think you should be? >> i think the investigation is underway. that is exactly what this is intended to do. the commissioner has stated numerous times -- we all want to get to the truth. >> the american people want us

to get to the truth. thank you for being here today and helping us in that process. i yield back. >> ms. tucker, the gentleman asked to if you thought it was wrong to target conservative groups. you said it was incorrect. could you answer the gentleman's question -- was it wrong? -- iairman issa, i felt feel compelled i need to make sure everyone understands, the meetings i was in when russell george and his team came in to share their routine, here are the audits we have underway, mr. george said that time basically said, we are initiating an audit -- >> that is not the question. i apologize. the doctor asked you a fairly straightforward question -- as one of the highest career professionals in the irs, you are now aware that these were used to target and delayed for up to three years a legitimate

answer to people's applications based on their ideology. the you believe that was wrong? >> no, sir. i'm trying to tell you, that is not what i was told in that meeting. >> i am not asking about the meeting. i am asking what is now known. >> when they issued their final early may ofil, this year, yes, i think all of us at irs who saw the report are troubled. that's the investigation to get to the bottom of exactly -- >> i am am just asking about right or wrong. that is what the dr. was asking about, not was incorrect. a simpleirtually question for almost every citizen the answer. was it right or wrong to do what you now know from the ig's report. was it right or wrong? >> here is what i know based on what is told. >> i am not going to get an answer and do not have any time. i think mr. davis, you are next.

>> i think i am, mr. chairman. thank you very much. i want to thank all the witnesses. i also want to thank you and the ranking member for holding this hearing. i think we have learned a great , or have had for some of us reinforcement of thinking and thoughts. especially do i want to relate myself to the question of the ranking member and that of questionnorton, whose revealed so often that in communities designated to ,enefit from program activity there are ways to manipulate and scheme and get around to the point where the designation means absolutely nothing to the

community or neighborhood that is supposed to benefit. for those who have helped create hub zones and advocates for them, they look for the benefit that is to come. fromot see much benefit this particular business transaction. about the finding in the certification letter that mr. castillo and his company tried to pass off employees as contractors to skirt the hub zone rules and collect or earn millions of dollars. on may 23, 2013, sba sent a decertification letter to mr. castillo. the director of the hub zone program found mr. castillo erroneously characterized individuals as contractors

rather than employees in order to maintain the 35% eligibility requirement for the hub zone program. mr. chodos, how would you classify someone as a contractor rather than an employee? >> if i understand your question, representative davis, came to ourts attention that the people who were running the company essentially, or in managerial charge of the company, were listed as independent contractors rather than as employees, we look to the substance rather than the form of whether they are actually employees of the company. we were able to determine that under a totality test, in fact

they were for all meaningful purposes in foyers of the company and thus the test was not met. employees of the company and thus the test was not met. >> let me read from the letter -- they are telling the government to different stories. , they are a valued and key member of the management team. merely --ba, she is sba, she is merely an independent contractor. in their view, the management team and the program manager are not roles that are normally subcontracted out to third parties. -- tucker, let me ask you why is it important to procurement officials that they know who the proposed program manager is for a particular

contract? >> so, from the folks in our procurement organization, from what they tell me, we are interacting from -- on contracts like the one we are talking about today. the project manager is indispensable in communicating with the internal revenue service business owners to make sure that whatever service a product we are contracting for is being delivered appropriately. that is very important. >> mr. castillo -- and i agree with you that you did not make the rules, you did not write the regulations, you did not pass the bills, so you did not create the opportunities that existed businesso try and do

under these arrangements. but let me ask -- how do you explain telling the internal revenue service that someone would be the key program manager for a contract and then tell the small business administration that that person is an independent contractor? person is an independent contractor in that she works in support of several companies. at theported our company time and was a 1099 employee. program manager, i understand it is important, but it does not necessarily make that person and employee. being in the consulting field, a program manager can be contracted out and is often contracted out. as we served as a contractor on the ibm contract. >> you knew that before it was brought to your attention by the

sba or the internal revenue service. of knew that as a result your knowledge and experience and the work you have done. yet you described its two different ways. >> i think they are both consistent. they are an important member of as a program manager on the job, as a programmer to other jobs and other companies. the distinction we made is one, the person owned a company and supported five other companies. the other one did not even work for us and supported us during her maternity leave. she did it as a favor to me. >> my time has expired. thank you very much. nevertheless, you described two different ways when you were dealing with the procurement

opportunity. thank you, mr. chairman. i yield back. >> the chair recognizes the gentleman from south carolina. >> thank you. i want to thank my friend from north carolina for yielding me. i want to thank my colleague from illinois for her service to our country. her moral standing to discuss service and sacrifices is unimpeachable. i want to publicly thank you again for your service to our country. tucker, more people have invoked their fifth amendment privilege against self- incrimination in this job than they did in my former job. and i was a prosecutor. that is saying a lot. and two of them our current government employees. so there is no misunderstanding, they are invoking their fifth amendment privilege in connection with their official duties. we are not discussing bank robberies or narcotics trafficking. we are discussing their official they feel the need

to invoke their fifth amendment privilege. so i want ask you to to do something for me, ok? have you seen the text from mr. roseman? >> yesterday, when the committee released the report. >> so you have seen these despicable, homophobic, slurs. >> yes, sir. i saw the information. >> here is what i will ask you to do. for me and frankly for our fellow citizens. for the close of of business today, if you can, issue a statement on behalf of the irs as to why he is still employed and still drawing a paycheck. if you have seen the texts i have seen, i would like an explanation as to how you can keep your job if you say things he said in your official capacity. can you do that?

can you explain to us how you can keep your job and your paycheck despite these homophobic slurs? >> if i might, as i have said in my opening statement, based on the information in the committee sick andsterday i am ened, not only as an iris official but as a citizen. >> my question was more specific. can you issue a statement by 5:00 today as to how someone who used to this language in official capacity as a government employee is still employed and drawing a paycheck? can you explain that to us by close of business today? >> if i might, we are having discussions at internal revenue service -- >> how long do you anticipate they will last? i read the text is morning and

ird reached my conclusion. how long do you think it will take you all? >> we are having discussions with our general counsel. >> close of business tomorrow? >> we will do our very best to follow due process, but candidly to also make sure we do this appropriately. i think the committee is aware .f the federal personnel rules >> if this does not violate them, ms. tucker, we need to change them. >> we are doing everything we can to make sure we follow the proper procedures. >> i will be anxiously awaiting a nation as to how you can say yourthis person said in official capacity and keep your job and keep your paycheck. i will anxiously await that explanation. why did mr. -- roseman invoke his fifth amendment privilege? >> i have no idea. >> you do not know what conduct

he could be worried about? >> i think he spoke about one of them, but i have no idea. i wish he was here to speak about -- >> we do too, but he is not. i will direct my questions to you. did you discuss his invoking his fifth amendment privilege with him before today? >> i did not. >> when is the last time you talked to him? >> before february 20. >> do you know what criminal exposure he is concerned about? >> i do not. >> you do not have any idea? >> no. >> and he ever solicit gifts from you? >> no. >> did you offer gifts to him? >> it is noted -- >> humor me and answer again. aroundent to a ballgame he 2005 timeframe when i worked at government acquisitions. that he paid for. agave mercy -- i gave him receipt. >> has he discussed employment with you post-you rest? >> he is not.

>> what you describe the nature of your relationship with -- to us? >> it is centered on my doing business with the iressa and him for -- irs and him for 10 years or so. >> did you discuss contracts you were competing for or interested in with mr. roseman prior to the issuing of those contracts or the awarding of the contract? >> i'm not sure i understand the question, sir. contracts?ussed >> i'm trying to figure out if you violated any bidding procedures. if he gave you an unfair vantage if you are seeking work that other people were also seeking. i am not aware i have an unfair to manage. >> how that any advantage, unfair or fair? did his relationship with you give you an advantage? >> no, sir. >> you never discussed future employment with him? >> no, sir. >> this is my last question because my time is running out.

mr. castillo, had you read the texts from mr. roseman? >> i have. >> you still say he is your friend? clear, -- >> i want you to be clear. i just read them and i want you to be clear. you have read them. you know what is in them. the homophobic slurs in his official capacity. still friends? >> i am deeply a friend it -- deeply offended. you are aware those were targeted toward me. >> i am. >> i am offended if you can appreciate he is a customer -- it is not my job to correct what a customer does or does not say. >> is it appropriate for a government employee to say those things about someone in their official capacity? >> no, sir. >> how long would it take you to get rid of an employee who said that? -- t is well noted

>> for a lot less. >> it would not take me until 5:00. >> a lot quicker for a lot you -- a lot less peer >> yes, sir. >> mr. gaudi, if i might, my folks are here in the room. they believe the specific text message you are referring to -- we actually have not seen yet. at irs. >> would you like me to walk them down to you? >> i would like to at some point receive those. that may be clear, when i said i was deeply disturbed, that was based even on the text messages that were already in the report. >> let me make sure you get them before you leave. if you thought you were deeply disturbed, you may reach a whole other level. >> thank you, sir. i appreciate that. >> the chair now recognizes the gentleman from illinois, mrs. kelly. >> thank you, mr. chair. this committee serves two

purposes. oversight and reform. i would like to get to what reform your agencies are looking at. contractorn how a can gain at the hub zone system to get an advantage in government contracts. i want to know how we will prevent this from happening in the future. takingdos, is the sba remedial steps in light of the dash light of the findings of this case? >> thank you, representative kelly. let me say that the agency took an immediate step when it found out there was a problem back in the number and january, the end of last year and of this year. it was to decertify this firm after duly looking into the facts and getting the correct facts. so in terms of moving forward, the agency is always looking for thertunities to make program more effective and to identify ways to work closely with our colleagues at va and gsa to align and coordinate

different rules about procurement so that they all work in the same direction. under theoposed rules jobs act that are in process now as we speak. they seek to make issues involving the use of the andzone program clearer more straightforward, which would improve our opportunities for straightforward oversight. >> the decertification letter was read already. is sba considering asking applicants to provide information indicating employees and all other workers such as contractors? >> yes. i believe that change has already been instituted. -- irisommittee staff per german individuals identified individuals needed additional training about procurement ethics generally, as well as training about the types of relationships the officials are prohibited from having with contractors. can you please describe the

steps the irs is taking to improve procurement ethics training? >> yes. we have a whole host of actions underway, including an annual ethics training that will be provided to all of our procurement employees in addition to what they already have. that will be delivered by our chief counsel organization. in fact, we are doing in all- employee meeting today with our workforce to re-emphasize that , affixesions we hold of the utmost importance. so i can assure you and give you personal assurance that our training programs will be significantly enhanced in the days and months ahead. >> any other remedial action you are taking that you would like to share? findings regarding what i

believe are totally inappropriate relationships between one of our procurement employees and mr. castillo, core thatlieve at my the men and women of our procurement organization are operating with the highest ethics and integrity everyday, i know one bad actor can cast a disparity on our organization. a topesult, we are doing to bottom review of our entire organization, reassuring ourselves that we are following proper policy and procedures. i have also asked the treasury department, the german executives, they routinely -- they do -- procurement executives, they routinely do reviews of the irs. i have launched an independent review. theddition, i think that

focus we will be putting on more routine briefings -- we do a quarterly performance review at the procurement organization. i think all our existing internal controls, we just need to double down on to reassure ourselves that this kind of behavior is not prevalent. i have no reason to believe, it exists beyond the unfortunate situation with mr. roseman. >> anything to add? continuingurrently our review of this case to make sure all the proper rules and regulations were followed. we are taking a look at our internal controls to see if they need to be strengthened in any particular areas in light of questions that came out of the committee. >> mr. flohr? ? >> my area of expertise is veterans benefits.

i do not have a lot of information about the sba -- but i would be happy to take any questions for consideration. >> thank you. i hope to continue looking at this issue and making improvements to gain the public trust back.