NY Times: Big Four lawyers take government gigs to shape favorable tax rules

Tax lawyers from the US accounting and consulting giants do short stints at the Treasury Department to craft favorable tax policy for their former corporate clients, then return to their firms to receive promotions and pay increases, according to a recent report from The New York Times.

This “revolving door” system where professionals cycle between the private and public sector isn’t a new idea. The big accounting firms’ ability to place their lawyers in America’s most important tax policy jobs has, however, largely escaped public scrutiny, the report says.

According to The New York Times, in the last four presidential administrations there were at least 35 instances of round trips from the big accountancies to the Treasury Department’s tax policy office, as well as the IRS and the Congressional Joint Committee on Taxation, and then back to the original firm. In at least 16 of those instances, the professionals were promoted to partner.

According to the NY Times, firms often double the pay of employees after a stint in government, and some partners earn more than $1 million a year.

The report outlines in detail several of the Trojan Horse operations for corporate-friendly tax policy. Mark Weinberger, former CEO of EY, was one of the trendsetters in the area. As a partner at EY during the Clinton administration, he lobbied for a corporate tax break for R&D that critics say was often abused. President George W. Bush in 2001 appointed him to run the Treasury’s Office of Tax Policy, where he helped reverse a rule that made it harder to qualify for that R&D credit. He rejoined EY in 2002 and was later appointed CEO in 2013.

Another example is George Manousos, a PwC manager who joined the tax office in 2002 and helped write a rule that allowed nearly any company to claim a tax credit intended for US manufacturers. He returned to PwC a few years later, where he was promoted to partner and national leader on the tax rules he had written.

A more recent example is that of Ari Berk, a tax lawyer for Deloitte. In 2015, the Treasury Department issued a warning notice intended to shut down tax shelters wherein multinational companies avoided billions in federal income taxes by routing profits through offshore subsidiaries. The tax section of the American Bar Association in May 2016 issued a 42-page rebuke in response to the notice. Among the authors was Berk, a leading designer of the tax shelters.

Berk left Deloitte two weeks after the ABA letter to work for the Treasury, where he oversaw the regulations he had argued should be watered down. In January 2017, his office issued new regulations that made it easier for companies to move profits offshore to avoid US taxes.

In June 2017, Berk rejoined Deloitte and was immediately promoted to partner.

Spokespeople for the Big Four accounting and consulting firms declined to speak to The New York Times.