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A MESSAGE FROM REMY WELLING, IRS WHISTLEBLOWER

August 26, 2004

Remy Welling is a 22-year IRS veteran whose story of insider influence on behalf of Micrel, Inc., at the IRS was covered in recent New York Times and Tax Analysts articles. Ms. Welling sent us an email responding to our coverage of the story. We reproduce her message below (all emphasis in original).

   I was reading your online bulletins. I wanted 
   to respond briefly. I was very happy to see 
   you were discussing it and taking an interest 
   in it. Pro or con. 

   Yes, my story is true. It was very well 
   documented. 

   As far as my concerns generally with undue 
   influence: it is true that revenue agents are 
   not easily pushed aside.  But orders typically 
   go from former IRS executives to current 
   IRS executives to current line managers to 
   current line employees. To disobey would 
   be insurbordination. 

   For Micrel, it was not that I was just asked 
   merely to "close an examination". I was 
   actually ordered to sign or authorize a 
   "Closing Agreement" (IRC Sec 7121), of 
   course - a binding contract - or else. This is 
   a document that is seldom if ever used. 
   And we are not even permitted to have a 
   signed Closing Agreement (IRC Sec 7121) 
   in a Joint Committee Case before the Joint 
   Committee reviews it, per the Larry Langdon 
   Memo. These were extraordinary Orders. 

   And there was a SMOKING GUN from the 
   very beginning. Or should I say Smoking 
   Guns. For one thing, in Jan 2002, the 
   taxpayer had re-stated their financial 
   statements lower by $64,000,000 for  Stock 
   Options Expenses due to APB 25. Since it 
   was not meeting APB 25, I knew it was not 
   meeting the definition of ISO - in both cases - 
   the options needed to be greater than or 
   equal to the FMV on the date of grant. 
   I also knew that the Stock Option plans 
   were not fully and materially disclosed to 
   the SEC. There were many problems. Any 
   yet I was supposed to okay this, sight 
   unseen on a binding contract, stating that 
   even if the Stock Option Plan did not meet 
   the requirments of IRC Sec 422(b)(4), the 
   Incentive Stock Option Plan was still valid.  

   This particular case was not an isolated 
   incident either. But I was not going to 
   "break ranks" as they say. But when I was 
   handed so much evidence, what was I to 
   do? It was hard to say or do nothing. It was 
   a dilemma for me. And believe me, I struggled 
   with it for some time. And I still am.

   A lot of what I think is wrong in the IRS 
   began with the Restructuring Act of 1998 
   and Sec 1203(b) The Ten Deadly Sins and 
   the pressure it has put on the agents and 
   the managers of the Internal Revenue 
   Service. 

   Thank you.

   Sincerely

   Remy Welling

Our main post on the case is here. Our discussion of Micrel's response to the New York Times is here.

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