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Originally published August 1, 2013 at 11:01 AM | Page modified August 1, 2013 at 5:39 PM

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Obama picks restructuring expert to take over IRS

President Barack Obama has chosen a retired corporate and government official with experience managing numerous organizations in crisis to take over an Internal Revenue Service under fire for targeting political groups.

Associated Press

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WASHINGTON —

President Barack Obama has chosen a retired corporate and government official with experience managing numerous organizations in crisis to take over an Internal Revenue Service under fire for targeting political groups.

Obama said his nominee for commissioner of the tax agency, John Koskinen, "is an expert at turning around institutions in need of reform."

"With decades of experience, in both the private and public sectors, John knows how to lead in difficult times, whether that means ensuring new management or implementing new checks and balances," Obama said in a statement. "Every part of our government must operate with absolute integrity and that is especially true for the IRS. I am confident that John will do whatever it takes to restore the public's trust in the agency."

Koskinen came in to overhaul mortgage buyer Freddie Mac after its near collapse in the financial crisis at the end of the George W. Bush administration. The 74-year-old also helped restructure the assets of the largest failed life insurance company in U.S. history, Mutual Benefit Life, and reorganize the Penn Central Transportation Company after it became the largest bankruptcy in U.S. history.

His government experience includes handling preparation for the Year 2000 challenge for President Bill Clinton and helping restore the District of Columbia to financial stability after years of mismanagement as city administrator from 2000-2003.

Koskinen's nomination to a five-year term must be confirmed by the Senate.

If confirmed, Koskinen would take over an agency in crisis, just as it is gearing up to administer large parts of the president's health care law.

The IRS has been under siege since May when agency officials acknowledged that agents working in a Cincinnati office had improperly targeted tea party groups for extra scrutiny when they applied for tax-exempt status. The IRS has since released documents suggesting that progressive groups may have been targeted, too.

Congressional investigations have so far shown that IRS supervisors in Washington - including lawyers in the chief counsel's office - oversaw the processing of tea party applications. But there has been no evidence that anyone outside the IRS directed the targeting or that agents were politically motivated.

Obama ousted acting IRS Commissioner Steven Miller in May when the revelations came to light. The president appointed former White House budget official Danny Werfel as acting commissioner while he searched for a nominee.

Sen. Max Baucus, D-Mont., said Koskinen "has the right background and experience in helping turnaround organizations facing tough challenges." Baucus chairs the Senate Finance Committee, which will hold hearings on Koskinen's nomination.

"I look forward to working with Mr. Koskinen and hope, after a thorough review, the Finance Committee can quickly move his nomination to the full Senate," Baucus said.

Sen. Orrin Hatch of Utah, the top Republican on the Finance Committee, promised a thorough vetting of Koskinen. Hatch, who complained that Obama did not consult him in making the nomination, said Koskinen must promise to cooperate with congressional investigators.

"I will demand significant answers from this nominee to ensure that we not only get to the truth, but that the administration is fully cooperating with our efforts," Hatch said.

With about 90,000 employees, the IRS processes more than 140 million individual income tax returns each year. Starting next year, the IRS will administer much of Obama's new health care law.

The IRS, which is part of the Treasury Department, will be in charge of enforcing the mandate that most individuals have health insurance, collecting fines from people who don't. The IRS will also distribute subsidies to help people buy insurance in new state-based marketplaces known as exchanges.

Obama has asked for a 14 percent increase in the IRS's budget for next year in part to help the agency administer the health care law. House Republicans have responded by proposing to cut the agency's budget by about a fourth.

On Friday, the House is scheduled to vote on a bill that would prohibit the IRS from enforcing any aspect of the health law. It would mark the 40th House vote to repeal some or all of the law. So far, all the bills have died in the Democratic-controlled Senate.

"Because John has a clear understanding of how to make organizations more effective and an unshakeable commitment to public service, he will be an exceptional leader who will strengthen the institution and restore confidence in the IRS," said Treasury Secretary Jack Lew.

An administration official, speaking on condition of anonymity since the search was private, said the president directed his team to above all find someone with extensive experience taking on organizations in crisis and knowledge of best practices to turn them around. Koskinen's corporate restructuring experience includes 21 years at the Palmieri Company consulting firm, where his positions included CEO and chairman, president, and vice president.

Larry Hirsch, who served on the Freddie Mac board while Koskinen was chair, credited him with turning around rock-bottom morale at the company as it relied on a government bailout to survive. Koskinen took over as interim chief after its top executive resigned and a month later the chief financial officer committed suicide.

"Obviously after the financial crisis, the company was in internal and external crisis," said Hirsch, a Republican who now heads the Washington-based Center for European Policy Analysis and is chairman of private equity group Highland Partners. "John walked in and immediately handled what was happening with the company. He had that quiet strength and openness to take a very depressed management team and employee group to give them a confidence they were valued and the company had a future."

Koskinen has been a prolific donor to Democratic political campaigns, giving more than $60,000 since 1999, according to Federal Election Commission records.

However, President George W. Bush tapped Koskinen to be chairman of Freddie Mac in 2008.

Koskinen also has served as president of the United States Soccer Foundation and was deputy director for management at the Office of Management and Budget under Clinton, who later named him chair of the President's Council on Year 2000 Conversion. He serves on the boards of AES Corp. and American Capital, Ltd.

Earlier in his career, he worked for Sen. Abraham Ribicoff, D-Conn., Mayor John Lindsey of New York City and the National Advisory Commission on Civil Disorders. He started his career as a lawyer, and has an undergraduate degree from Duke and law degrees from Yale.

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Follow Nedra Pickler on Twitter at http://twitter.com/nedrapickler

Follow Stephen Ohlemacher on Twitter: http://twitter.com/stephenatap

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