Analyst's note:  This is a civil case that could well blow the entire IRS scandal wide open!  You will also want to review Rep. Trey Gowdy tells the IRS why destroying evidence is bad.

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In the absence of a special prosecutor, the best opportunity for piercing the veil of secrecy and evasion that surrounds the IRS handling of groups perceived as enemies of the Obama administration lies in civil litigation.  The National Organization for Marriage has just obtained a $50,000 settlement from the IRS for its criminal release of confidential donor information to an opposition group. But so far Eric Holder’s Justice Department is not pursuing inquiries into who feloniously released that information.

The absence of any official judicial inquiry into the inner workings of the IRS processes is why it is so important to note that yesterday saw the beginning of the discovery phase in the lawsuit by Z-Street a pro-Israel organization that was told its application for tax exempt status was being delayed because:

…these cases are being sent to a special unit in the DC office to determine whether the organization’s activities contradict the Administration’s public policies.

Z-Street’s lawsuit alleges unlawful viewpoint discrimination, a First Amendment claim. The IRS tried several arguments to dismiss Z-Street’s lawsuit, all of which were dismissed by Washington, DC federal district court Judge Ketanji Brown Jackson, an Obama appointee. She noted that Z-Street was not suing to gain tax exempt status, but rather over the viewpoint discrimination evidenced by what it was told by IRS agent Diane Gentry about contradicting administration policies – the process by which the IRS made the determination on tax exempt status. In the words of the Jerusalem Post:

The Z Street case may be what forces the IRS to pull aside its carefully constructed curtain and reveal how it made decisions regarding organizations deemed out of step with the current US administration.

Judge Jackson gave the IRS until June 26 to respond to Z-Street. That deadline has now passed, so the case enters discovery. This means that Z-Street can subpoena IRS officials, place them under oath, and ask them questions about how they acted, and cross examine them closely. They can also subpoena documents and require their production. This is much different than a House committee hearing in which members have only a few minutes to ask questions, and when friendly Democrats have their opportunity to apologize for the impertinence of daring to ask questions of our IRS masters. Depositions taken under oath can last many hours and involve detailed questions.

What makes the Z-Street case unique and potentially extremely damaging is that its lawsuit was filed in August 2010. That filing placed the IRS under legal obligation to preserve records. The Wall Street Journal’s Review and Outlook column explains:

Under the Federal Rules of Civil Procedure and legal precedent, once the suit was filed the IRS was required to preserve all evidence relevant to the viewpoint-discrimination charge. That means that no matter what dog ate Lois Lerner's hard drive or what the IRS habit was of recycling the tapes used to back up its email records of taxpayer information, it had a legal duty not to destroy the evidence in ongoing litigation.

In private white-collar cases, companies facing a lawsuit routinely operate under what is known as a "litigation hold," instructing employees to affirmatively retain all documents related to the potential litigation. A failure to do that and any resulting document loss amounts to what is called "willful spoliation," or deliberate destruction of evidence if any of the destroyed documents were potentially relevant to the litigation.

At the IRS, that requirement applied to all correspondence regarding Z Street, as well as to information related to the vetting of conservative groups whose applications for tax-exempt status were delayed during an election season. Instead, and incredibly, the IRS cancelled its contract with email-archiving firm Sonasoft shortly after Ms. Lerner's computer "crash" in June 2011.

In the federal District of Columbia circuit where Z Street's case is now pending, the operating legal obligation is that "negligent or reckless spoliation of evidence is an independent and actionable tort." In a 2011 case a D.C. district court also noted that "Once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a 'litigation hold' to ensure the preservation of relevant documents."

The government's duty is equally pressing. "When the United States comes into court as a party in a civil suit, it is subject to the Federal Rules of Civil Procedure as any other litigant," the Court of Federal Claims ruled in 2007. The responsibility to preserve evidence should have been a topic of conversation between the IRS chief counsel's office and the Justice Department lawyers assigned to handle the Z Street case.

The potential destruction of evidence, by becoming a separate tort, opens the door for judicial inquiry into the IRS destruction of evidence. Armed with subpoenas and able to examine and cross examine people under oath, Z-Street has the potential to bust open what really went on at the IRS.

Strangely enough no major media outlet covered the opening of the discovery phase of this case. Only Gretchen Carlson of Fox News had the wit to notice, and interviewed Lori Lowenthal Marcus, head of Z-Street (and an AT contributor):