IRS Contractors Hide Returns

By MIKE CRISSEY, Associated Press Writer

PITTSBURGH (AP) - Employees at an IRS processing center run by Mellon Bank hid thousands of tax returns or put them with papers to be shredded apparently because they couldn't keep up with the workload, Mellon's chairman says.

At least 40,000 federal tax returns and payments totaling $810 million were either lost or destroyed at the Pittsburgh center, which handled documents sent by taxpayers in New England and parts of New York state.

The scope of the problem was disclosed last week by Senate Finance Committee Chairman Max Baucus, D-Mont., who said it could take months to determine all the details. A federal investigation has begun.

Last month, Mellon lost its contract to run the Pittsburgh IRS Processing Unit because of what bank chairman Martin McGuinn called ``gross disregard'' and the failure by employees to follow company policy.

McGuinn said in an e-mail that an internal probe found taxpayer submissions were ``hidden, and in some cases, destroyed.''

On Tuesday, McGuinn said several employees had been fired.

``As best we know, they did this because they felt they were behind in their work in processing IRS returns,'' McGuinn told employees in a memo.

He said the company has found no evidence of check fraud, identity theft or improper use of taxpayer information.

The center, one of seven Mellon operated nationwide, was set up to handle 1.7 million tax returns during the April rush. The loss of the IRS contract resulted in the layoff or transfer of 106 employees.

The federal investigation was started after taxpayers complained to the IRS that their payment checks had failed to clear. Sen. Charles Schumer (news - bio - voting record), D-N.Y., said last week the agency had received 22,000 complaints of uncashed checks.

The IRS set up a special unit to handle the cases and told taxpayers who suspect they may be affected to stop payment on uncashed checks and to send a new return and check to an IRS service center in Andover, Mass.

Mellon began processing tax returns and payments for the IRS in 1993. In his message, McGuinn urged employees to seek out a manager if there were questions about work responsibilities. Mellon spokesman Ron Gruendl declined comment.

In 1985, the IRS discovered tax returns turning up in trash cans and women's restrooms and thousands of mutilated refund checks at the agency's Philadelphia Service Center. Officials blamed the problems on costly computer problems and worker turnover at the center.

-- Anonymous, September 05, 2001