Rep. Darrell Issa accuses IRS contractor of making false statements

By Patrick Temple-West

WASHINGTON (Reuters) - A Virginia company inappropriately secured contracts worth hundreds of millions of dollars from the Internal Revenue Service based on false statements and personal ties to an IRS official, the top Republican investigator in the U.S. House of Representatives said on Tuesday.

A report issued by Oversight and Government Reform Committee Chairman Darrell Issa of California said the IRS, which is embroiled in a series of unrelated controversies, awarded the contracts to computer networking and security company Strong Castle Inc.

The report said Strong Castle's president, Braulio Castillo, relied on a friendship with an IRS contracting official, Gregory Roseman, to win business. It said the company made false statements to beat rivals for the work.

The cost of Strong Castle's 2012 contracts to the IRS, including for work in future years, could reach nearly $500 million, the report said.

The IRS's watchdog is investigating the alleged contracting abuse, the agency said in a statement on Tuesday.

"We learned of new information today from the committee that we are currently looking into," the IRS said.

The company denied the allegations. "Throughout our work with the IRS, we have never received any improper preferential treatment, and have competed fairly for every contract that we have received," it said in a statement.

"We are confident that the record will ultimately show that our company has committed no wrongdoing."

Strong Castle changed its name from Signet Computers in October 2012.

The tax-collecting agency has come under fire after a number of different groups, including some allied with the conservative Tea Party movement and some left-leaning groups, were targeted for extra scrutiny when applying for tax-exempt status. It has also been accused of lavish spending on conferences.

Roseman and Castillo are expected to testify at an oversight committee hearing on Wednesday. Roseman might not attend the hearing and is likely to invoke his constitutional right not to answer questions, according to a letter from Issa to Roseman's lawyer sent on Tuesday.

Senior IRS and other government officials are also scheduled to testify.

"The IRS and Strong Castle have made a mockery of fair and open competition for government contracts," Issa said in a statement.

Oversight committee Democrats, in their own report, said Roseman and Castillo did not disclose their friendship and that evidence obtained in the investigation "indicates at least an appearance of impropriety" between the two men.

Issa started the probe in February, and said then that a whistleblower in 2012 contacted the IRS's inspector general with evidence that showed contracts were steered to the company inappropriately.

Castillo was already facing criticism for Strong Castle's contracting business before Issa's report. In May, the federal Small Business Administration revoked certain contracting benefits for the company based on some inaccurate records.

Federal contractors are required to disclose any conflicts of interest they might have with bidding companies.

Issa's investigation reviewed more than 350 text messages between Castillo and Roseman that it said included "grossly inappropriate" remarks and "underscore a problematically close relationship," the report said.

(Reporting By Patrick Temple-West; Editing by Kim Dixon, David Storey and Mohammad Zargham)