A 1996 Internal Revenue Service audit of WorldNetDaily.com’s
non-profit parent company began with an accusatory letter forwarded to
the agency from the Clinton White House, show Treasury Department
documents obtained by the Internet newspaper through the Freedom of
Information Act.

The Western Journalism Center is one of dozens of tax-exempt
organizations targeted for IRS audit after criticizing President
Clinton. Joseph Farah, editor of WorldNetDaily.com and founder of the
center, first exposed what appeared to be a pattern of political audits
three years ago. The revelations were followed quickly by the
resignation of IRS Commissioner Margaret Milner Richardson, a close
personal friend and political confidante of Bill and Hillary Clinton,
and the launching of a congressional probe by Rep. Bill Archer, R-Texas,
chairman of the House Ways and Means Committee and co-chairman of the
Joint Committee on Taxation.

“Back in 1996 I alleged, based on largely circumstantial evidence,
that Clinton was waging a political war on his enemies and employing the
IRS as his private army,” said Farah. “The documents we now have in our
possession, at long last, prove the White House did just that in our
case and that his administration has engaged in a massive cover-up of
the facts behind this abuse of power.”

A heavily redacted 1997 Treasury Department report titled,
“Questionable Exempt Organization Examination Activity,” was released
July 6 to Farah’s news organization following three years of FOIA
filings and appeals for such information. Contradicting IRS officials
and their Justice Department lawyers in two suits pending against the
agency by the center and its legal counsel, the Treasury report states
unequivocally and repeatedly that the audit began with a letter
forwarded from the White House to the IRS.

“The audit originated from a taxpayer who faxed a letter to the White
House expressing his concern over a one-page advertisement paid for by
WCJ (Western Center for Journalism) that asked for contributions to
investigate (White House deputy counsel Vincent) Foster’s death,”
explained the official Treasury Department report. “The fax was
forwarded to the EO (Exempt Organizations) National Office and then to
the respective Key District Office for appropriate actions.”

The taxpayer who wrote the Nov. 9, 1994 letter to Clinton, after
spotting the ad in question in the Los Angeles Times, is Paul Venze of
Beverly Hills. Venze was unavailable for comment to WorldNetDaily but
told Treasury Department investigators the letter to the president was
his own idea.

In a report by special investigator Timothy Herlihy and inspector Rod
Ammari, Venze is recorded as saying he wondered how the Western
Journalism Center “could have been tax exempt because the advertisement
seemed politically motivated and mean.” The advertisements summarized
the key questions and inconsistencies raised through investigative
reporting into the Foster case. Foster was found dead in Fort Marcy Park
July 20, 1993. Despite the fact that no bullet was found in Foster’s
body or in the park or surrounding area and that Foster’s fingerprints
were not found on the gun next to his body, several official government
investigations ruled suicide.

Some of the material released among the 59 pages from the Treasury
Department is less than enlightening. Several pages are so heavily
redacted that they include only three words — “Western Journalism

For three years, the center has been attempting to obtain its own
case file from the IRS without success. FOIA requests have been denied.
The Treasury Department report may shed some light on the reasons for
stonewalling. High-level IRS officials took a special interest in the
center’s case after receiving the letters from the White House.

In a section titled, “Case Origination,” the report explains that
senior auditor Ed Gorman visited the Exempt Organization Technical
Branch II Office of the IRS and obtained documents in “a pink envelope”
relating to the source of the case examination. The documents included a
memo dated Feb. 28, 1995, from the director of the exempt organizations
division to the district director in Los Angeles. The memo explained
that the fax from Venze to the president was being forwarded “for your
information and any action that you deem appropriate.” The memo advises,
according to the Treasury report, that the advertisement in question
might not be in full compliance with IRS regulations and that the
organization may not have filed tax returns. (The center was not
required to file a return until May of that year.) Included with those
advisories and the Venze letter was the cover sheet showing that it was
addressed to President Clinton and received by the White House
Congressional Affairs Unit Legislative Affairs Division.

While the Treasury Department report concludes there is “no
indication as to how the taxpayer’s fax and letter was routed from the
White House to the IRS,” Farah believes that statement is disingenuous
and “a last-ditch, ever-changing cover story typical of this

“That letter was forwarded just the way it was to convey a message to
officials and underlings at the IRS,” he said. “The message was the
White House has a special interest in this case. See what you can do to
help him out. You don’t have to be a genius to figure that out.”

From Los Angeles, the case file subsequently found its way into the
hands of agent Thomas Cederquist in Sacramento, who first raised
suspicions about the fairness of the center’s audit when, according to
the sworn testimony of the center’s accountant, John Roux, he announced
during their first meeting, “Look, this is a political case and the
decision is going to be made at the national level.” At every stage of
the process, the case file included the fax letter to President Clinton,
along with the stamped cover page showing that the letter had been
received and passed on by the White House.

Cederquist and other IRS officials are named in a $10 million lawsuit
filed on behalf of the center by Judicial Watch’s Larry Klayman. Klayman
believes criminal contempt citations may be in order after reviewing the
Treasury Department document. Cederquist and his superiors in the
Sacramento office of the IRS have consistently denied — even under oath
— that there were any suggestions from above to investigate the Western
Journalism Center. Furthermore, Justice Department lawyers defending
the government officials have buried potentially explosive evidence from
the case file, says Klayman.

“The Treasury report shows there was a direct chain of events
beginning with that fax in the White House — just as I suspected all
along but could never conclusively prove until now,” said Farah. “This
is why the IRS has steadfastly refused to provide us with our own case
file, as it is required to do under the law. Had officials coughed up
the file, they would have hanged themselves and provided us with a
winning case.”

The IRS has recently maintained that there are no more documents
associated with the case. Yet the Treasury report discusses many in the
actual case file being sought.

“At the time the FOIA report was being prepared, those documents
obviously existed,” said Farah. “If they do not exist now, it seems
appropriate to ask what, precisely, has happened to them?”

Cederquist’s early biases against the center are evident in the
Treasury report. It was his assessment that “investigative journalism is
not educational” and, therefore, not a suitable mission for a 501c(3)
corporation. Before ever contacting Farah or any other representative of
the center, Cederquist had already formally recommended that the group’s
tax-exempt status be revoked. Only a review process required Cederquist
to continue the investigation. As of February 1997, the Treasury report
shows, he was still adamantly holding out for revocation.

He also leveled charges against Farah of using the center for
personal gain, though, during the 1994 and 1995 audit years, Farah took
no salary from the non-profit. IRS officials spoke openly with Treasury
Department investigators about the possibility of auditing Farah’s
personal taxes in an effort to make the case for inurement. One agent,
whose name was redacted from the report, commented on “the nice
neighborhood” in which Farah lived while devoting many hours to the
charity without compensation.

Cederquist was eventually removed from the case by the IRS, a new
agent assigned and the tax-exempt status of the center extended with no
penalties. But the audit’s toll on the center had been heavy. Faced with
rising legal and accounting costs, diverted staff time and falling
donations, the center was forced to fold one of its two publications and
to lay off key personnel including investigative reporters.

Partly as a result of its experience with the nine-month audit ordeal
in 1996, the center’s leadership came face to face with the chilling
reality that it was nearly silenced officially by a government agency
for doing what it perceived to be its First Amendment-protected job.
Rather than live under the shadow of facing the IRS again because of a
run-in with corrupt officials in this administration or another, the
center decided to take its latest project, the highly successful
WorldNetDaily.com, from the non-profit realm to the taxpaying sector.

Just last month, the Charitable Trust Division of the California
Attorney General’s Office issued a ruling permitting the center to spin
off the red-hot Internet newspaper into a private, for-profit company,
which will be able to begin raising private investment capital later
this month to expand WorldNetDaily.com into a full-service, one-stop
shopping place for news. WorldNetDaily.com already has a readership
significantly greater than that of Salon.com, the unabashedly
pro-Clinton Internet magazine that went public in June.

“According to the IRS, WorldNetDaily.com has no First Amendment
rights as a non-profit,” said Wayne Johnson, a WorldNetDaily.com Inc.
board member. “Fine, we’ll pay taxes and be 100 times larger. The White
House may be able to target one little foundation, or one lone
investigative journalist, but it can’t shut down the Internet. The
bureaucratic state is an anachronism that simply no longer possesses the
means to silence its critics, short of unplugging the Internet itself.”

Long before the IRS audit of 1996, the White House had taken critical
notice of the activities of the center. A White House counsel’s memo,
written by Jane Sherburne in December 1994, lists the center as a major
concern with regard to its coverage of the Foster story. In 1995, the
White House counsel’s office, in conjunction with the Democratic
National Committee, produced and distributed at taxpayer expense a
331-page report called “Communication Stream of Conspiracy Commerce,” in
which it was alleged that the center was directing a vast, international
media plot to discredit President Clinton.

This week, with Klayman’s assistance, Farah filed a Privacy Act
request for any and all files the White House maintains on him and his
organization. To a previous FOIA request for such information, the White
House claimed to have no pertinent files and claimed exemption from FOIA
rules of disclosure. Currently, Farah’s news organization is appealing a
Superior Court ruling denying it a public trial on charges the audit was
politically motivated.

“This new evidence, clearly suppressed by the administration until
after a favorable ruling by a Superior Court judge, provides the smoking
gun we were hoping to find in the discovery process,” said Klayman. “I
am confident this new revelation demonstrating the government
systematically concealed the truth will persuade the courts to permit
this case to proceed to trial and give us the opportunity to expose and
punish these abuses of power.”

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