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Washington, D.C.—The criminal indictments of six former employees of one of the nation’s major banks sharply underscores the danger to taxpayers in current plans by the Internal Revenue Service to turn over tax debt collection to private contractors, the leader of the union representing tens of thousands of IRS employees said today.

“As this case shows, there is no doubt that privatizing tax collections puts the personal and sensitive information of taxpayers at serious risk,” said President Colleen M. Kelley of the National Treasury Employees Union (NTEU).

She called the case “only one example of the inability of the IRS to provide adequate oversight of its contractors,” and added: “If anything, this agency ought to be fighting for adequate resources to allow its present workforce to do their jobs, and should be sharply cutting back on the number of contractors it uses.”

Kelley has been leading the fight against an IRS plan to hire private sector debt collectors to pursue tax debts in exchange for a bounty of up to 25 percent of the money they collect. Despite the failure of such a program nearly a decade ago, and the rising incidence of identity theft across the country, Congress authorized the tax debt privatization program last year. Implementation is planned for this summer.

The indictments against six former employees of Mellon Bank—based in Pittsburgh, PA, and one of the nation’s largest financial institutions—were handed down late last week. The allegations against the five men and one woman are that they hid, and then destroyed some 80,000 federal tax returns with payments to the government of more than $1 billion. The defendants, who are charged with conspiracy to defraud the United States, theft of government property and theft of mail, face up to 20 years in prison or fines up to $750,000, or both.

Mellon, which was operating under a contract with the IRS to collect and process tax returns, has since paid a fine of $18.1 million for the actions of its now-closed tax processing center. Its IRS contract called for it to send tax returns to an IRS facility for processing while depositing the checks in an agency account at the bank. The missing tax returns and payments were discovered in June 2001, when taxpayers began calling the IRS to find out why their checks had not yet been cashed.

This incident is a further reminder of the folly of contracting out the work of the government to private companies, said President Kelley. At that time, IRS employees at the Andover, Mass., Service Center were called upon to reconstruct the missing work, which they did successfully, Kelley said. Rather than reconsidering the wisdom of outsourcing this work, the IRS turned around and awarded it to another private contractor, she further stated.

NTEU is the largest independent federal union, representing some 150,000 employees in 30 agencies and departments, including some 98,000 in the IRS.