Investigation collapsed into bitter acrimony

Testimony reveals that the Hunter Biden investigation collapsed into bitter acrimony

Two whistleblowers argue the DOJ went soft on Hunter Biden. Here’s what they told Congress.

By Andrew Prokop

Hunter Biden struck a deal with federal prosecutors last week, agreeing to plead guilty to two tax charges and likely avoiding jail time, but the drama over his investigation is just beginning.

At the end of last week, House Republicans unsealed testimony from two IRS officials who came forward as whistleblowers expressing concerns about how the investigation was handled by the Justice Department.

The testimony reveals that the investigation collapsed into bitter acrimony and finger-pointing, with these IRS officials repeatedly pressing for more aggressive action, while the DOJ prosecutors they worked with during both the Trump and Biden administrations counseled caution. The IRS team was sidelined and eventually removed from the case. The whistleblowers claim this was political retaliation, but there are also signs it was connected to concern over leaks to the Washington Post in October 2022.

Conflicts between agents and prosecutors over just how aggressive an investigation should be are not rare, though they became particularly charged in this case. And these IRS officials wanted to be very aggressive indeed, even pushing to interview President Biden’s grandchildren to quiz them about money Hunter had spent on them.

But the testimony also calls into question whether the investigation was truly independent. The probe was headed by the US attorney for Delaware, David Weiss, a Trump appointee who had been kept in place by Biden. Biden officials like Attorney General Merrick Garland touted Weiss’s independence to give the investigation credibility. Yet, in the IRS whistleblowers’ telling, US attorneys in California and the District of Columbia blocked Weiss from bringing charges in their districts, effectively hamstringing the investigation.

Garland denied these claims at a press conference Friday, saying Weiss had the authority “to prosecute any way in which he wanted to and in any district in which he wanted to.” House Republicans aren’t buying it, and Speaker Kevin McCarthy has floated opening an impeachment inquiry into Garland.

Keeping in mind that it’s only one side of the story, the IRS whistleblowers’ testimony is a fascinatingly detailed chronicle of what was happening behind the scenes in the Hunter Biden investigation. It’s a tangled tale, so let’s dive into it.

What the whistleblowers said about the investigation

Two whistleblowers have come forward to Congress. The first, Gary Shapley, who was the IRS supervisor for the Hunter Biden investigation, has come forward publicly. The second, who hasn’t revealed his name publicly, was the lead IRS agent who worked the case — I’ll call him “the IRS agent.”

The story starts in 2018, when the IRS agent was reading bank reports on another case, one about a social media company that served as a porn and prostitution platform. Per the agent’s testimony, the reports “identified Hunter Biden as paying prostitutes related to a potential prostitution ring,” and contained evidence he was “living lavishly through his corporate bank account.” After reviewing media articles about Hunter’s messy divorce, which contained allegations of his big spending habits, the agent asked to open a case on Hunter.

The IRS agent says he was warned by colleagues in a friendly way that “big cases” could lead to “big problems,” but he pushed forward anyway, making several attempts to get IRS higher-ups to approve the case and send it to the Justice Department. Eventually, he succeeded. But when he did, he learned that DOJ had already opened its own investigation of Hunter’s spending, based out of the US Attorney’s Office for Delaware. DOJ higher-ups decided the two cases should be merged, so in early 2019, they were, and Weiss, the US attorney for Delaware, was put in charge. (This will be important later.)

The investigation, code-named Sportsman, proceeded, and in January 2020, Shapley came aboard as its IRS supervisor. But a divide soon arose. Shapley and the IRS agent, in their telling, repeatedly pushed for speedier and more aggressive action in the investigation, while DOJ prosecutors, both in Delaware and in the department’s Tax Division, were constantly telling them no or slowing things down. The whistleblowers say this prosecutorial hesitance went beyond any other investigation they’d been involved in (though they don’t seem to have been involved in such a politically high-profile probe before).

One sticking point was the DOJ’s desire to avoid taking actions that could leak in the sensitive period before an election. The whistleblowers express outrage that, in the weeks before the 2020 election, DOJ didn’t want to send out a bunch of subpoenas with Hunter’s name on them, and wouldn’t let them send an agent to do a “walk-by” surveillance of Hunter’s house. Sensitivity to the election cycle has long been DOJ practice (though not always adhered to), but the whistleblowers argued that Hunter’s case technically didn’t qualify under it since he was not a candidate for office. At points in their testimony, the whistleblowers sound either clueless about or downright scornful of these leak concerns. (This will also be important later.)

Why the whistleblowers say they had a strong case against Hunter Biden

In their testimony, investigators explained their theory of the Hunter Biden case, which goes as follows:

Hunter Biden had long been bad at paying his taxes, failing to withhold properly and paying big tax bills late several times while working as a lawyer and lobbyist in the early 2000s. Around 2006, he enlisted Eric Schwerin as a sort of financial chaperone to help him withhold the proper amount of income, which stabilized things for several years.

Then, in 2014, Hunter struck his deal with the Ukrainian gas company Burisma, in which he’d sit on the company’s board and be paid $1 million a year. The whistleblowers assert that Hunter basically tried to hide this income from Schwerin so he could evade taxes on it. He routed the cash to a new shell company he’d set up with a friend, and then set up a complicated scheme where some of it would be paid to Hunter as a loan. In doing so, he avoided paying taxes on any Burisma income that year (and still hasn’t paid most of those taxes).

Eventually, Schwerin got wind of this, and got Hunter to at least somewhat clean up his tax filings from 2015 to 2017 (as Hunter made millions more from Romanian and Chinese companies). He also started paying back the taxes he’d owed from 2014. But eventually, Hunter and Schwerin had a falling out as Hunter spiraled further downward into addiction and erratic, self-destructive behavior, during which the repayments stopped.

For tax year 2018, Shapley testified, Hunter made a variety of blatantly false claims of business expenses on his tax forms, including a payment for a sex club membership, flights for prostitutes, and a hotel room for his apparent drug dealer. The IRS agent speculated that Hunter was trying to reduce his income so he’d owe less alimony and child support to his ex-wife. Even skeptical DOJ prosecutors in Delaware, he said, viewed that year as a “slam dunk” case.

Yet not everyone in the IRS or the Justice Department agreed. The IRS Criminal Tax Counsel’s office reviewed the proposed charges and advised against making them. (Shapley asserted that “CT counsel is not a respected organization” within the IRS and that they disagreed with his charging recommendations “90 percent” of the time, but that their opinions are only advisory and can be ignored.) The IRS agent also described a June 2022 meeting where DOJ’s Tax Division argued that the case was weak and shouldn’t be charged.

The whistleblowers wanted to investigate the Joe Biden connection

What about Joe Biden? The whistleblowers said that some messages Hunter sent in July 2017, which hadn’t been public before their testimony was unsealed, struck their interest. Trying to close a deal with a Chinese businessman, Hunter wrote, “I am sitting here with my father and we would like to understand why the commitment made has not been fulfilled.” He continued in a threatening vein: “I will make certain that between the man sitting next to me and every person he knows and my ability to forever hold a grudge that you will regret not following my direction.”

It reads like a shakedown, and indeed, the Chinese company would send over $5 million a few days later. Was Hunter actually speaking on behalf of his father, as he appeared to imply, or simply throwing his name around without his knowledge? The whistleblowers say they wanted to pull Hunter’s location data from that day to see if he was at his father’s house, but prosecutors didn’t permit that.

Of course, that would only have revealed where Hunter was, not whether his father knew what he was texting. Once this testimony became public, Hunter’s attorney Chris Clark said in a statement that “any verifiable words or actions of my client, in the midst of a horrible addiction, are solely his own and have no connection to anyone in his family.”

The whistleblowers were also curious about the infamous 2017 email sent in an earlier stage of this business deal, when one business associate said an equity split could include “10 held by H for the big guy ?” They complain that one DOJ prosecutor instructed them not to ask Hunter’s business associates about whether Joe Biden was involved in his business — because, she said, there was no criminality to that line of questioning. An FBI agent asked one of Hunter’s associates anyway, and he said it might have been “wishful thinking,” adding, “I certainly never was thinking at any time the VP was a part of anything we were doing.”

But Shapley seems to think he was on the trail of a bigger scandal until he was waved off it. The investigation “could have been much more,” Shapley testified. “It could have been much bigger. There could have been income streams, more income streams, to other people associated with it, to include the President.”

The venue and independence questions

Despite the roads not taken, by early 2022, the whistleblowers claim there was a consensus among the DOJ prosecutors in Delaware and the IRS team that Hunter should be charged with a set of felony and misdemeanor tax crimes.

But there was a problem. Back during the Trump administration, DOJ had decided to base the investigation in Delaware. Yet Hunter did not live in the state for any of the years in question so he couldn’t be charged there. In 2014 and 2015, he lived in Washington, DC, and from 2016 to 2019 he lived in Southern California. To charge in either, Weiss would need the relevant US attorney to agree, or would need special authority from Justice Department higher-ups (for instance, by being given special counsel status).

The whistleblowers do not have perfect visibility into what happened next, but they say their understanding is that, in March 2022, the case was presented to the US Attorney’s Office for DC. For months after that, they say, Weiss professed hope to them that he’d be able to charge Hunter there.

But in a meeting with Shapley on October 7, 2022, Weiss “stated that he is not the deciding person on whether charges are filed,” per Shapley’s notes, and revealed that the US Attorney’s Office for DC wouldn’t allow charges. According to Shapley, Weiss further claimed that he asked for special counsel authority to let him file the charges, but DOJ turned him down and told him to follow the regular process.

Since the statute of limitations on those offenses was about to expire (Hunter Biden had previously voluntarily extended while engaged in negotiations with DOJ), that essentially ended hope of charging him for the 2014 and 2015 tax years. This was “earth-shattering” news, Shapley testified. “All of our years of effort getting to the bottom of the massive amounts of foreign money Hunter Biden received from Burisma and others during that period would be for nothing.”

Weiss said that he still hoped the US attorney for the Central District of California would let him charge Hunter for the years he lived in that district — 2016 through 2019. But Shapley says he learned that, a few months later, that office also said no.

By the time Attorney General Garland testified before the Senate Judiciary Committee on March 1 of this year, Sen. Chuck Grassley (R-IA) had evidently heard something, and he quizzed Garland about whether Weiss could bring cases in other jurisdictions. “If he needs to bring a case in another jurisdiction, he will have my full authority to do that,” Garland responded. “He has been advised that he is not to be denied anything he needs.”

Then, on June 7, Weiss wrote a letter to House Republicans saying, “As the Attorney General has stated, I have been granted ultimate authority over this matter, including responsibility for deciding where, when, and whether to file charges.”

So what’s going on here? One possibility is that Weiss did not feel he had ultimate charging authority when he spoke to Shapley last year, but that Garland later stepped in to clarify that he did. But there are conflicting accounts here, and we’re still missing a lot of the story.

The leak problem

In Shapley’s telling, his frustrations with DOJ built up to the dramatic October 7, 2022, meeting described above — which he called his “red line” meeting.

Yet in the notes he memorializes from that meeting, the first item on the agenda is something he doesn’t dwell on: discussion about a leak.

The previous day, the Washington Post had published an article extensively describing the thinking of certain “agents” on the Hunter Biden investigation, saying these agents had concluded there was sufficient evidence to charge him. The article made clear the agents had come to this conclusion months ago, implying the holdup was prosecutors’ fault. There had been minor leaks before, but this one was quite detailed, it came about a month before the 2022 midterms, and it seemed transparently from an internal source and designed to try to force prosecutors’ hand.

The IRS agent testified that DOJ was very concerned about this leak. “I remember hearing from them that that touched super close to the investigation and that they felt that [it] was information that’s coming [from] inside the investigation,” he said. The Treasury Department inspector general’s team got involved, and the agent denied responsibility.

Later in October, DOJ asked Shapley and the IRS agent to provide their internal documents and emails about the case for discovery purposes. Both professed outrage over this, saying such a thing was highly unusual at the supervisor level. “It was at that point that I believe things changed with them, and they saw some information in — or I don’t know what it was,” the IRS agent testified. (Shapley insisted the leak was just used as an excuse to retaliate against him, and professed not even to remember which publication had the story in question.)

Afterward, Shapley and the IRS team were essentially cut out of the loop on the investigation going forward and were eventually officially removed from it. “We were told that the prosecutors had found some emails that concerned them if they could actually charge the case,” the IRS agent testified. Shapley then didn’t get a promotion that he claims he was most qualified for, which he argues, again, is retaliation.

But putting these tidbits together, it appears to me that there are the seeds of another story here — one in which the pre-midterms leak destroyed DOJ’s trust in the IRS team, and in which, after investigating, they found concerning emails of some unspecified nature. DOJ so far has not commented on why the IRS team was removed.

What does it all mean?

At the end of the day, Hunter Biden will be charged. He agreed to a deal with prosecutors in which he’d plead guilty to two misdemeanor tax crimes (apparently agreeing to waive the venue issue), and admit to unlawfully buying a gun in 2018. He was not, in the end, charged with any felony counts, though Weiss said in a statement that the investigation was “ongoing.” Critics on the right have called this a sweetheart deal, and the whistleblowers’ testimony plays into that narrative.

Democrats will naturally suspect that these supposed whistleblowers have secret political motives, but there’s no evidence of that — both were career officials who testified to being disinterested in partisan politics. The main “bias” that shines through in the testimony is that they really, really wanted to make this case.

That does not, of course, mean that their point of view is wholly accurate. They hold themselves up as boldly standing up for a righteous rock-solid case, but from their testimony, it isn’t hard to see how they may have gained a reputation as arrogant, insubordinate, overreaching, and politically clueless. (Their repeated complaints about being asked to avoid taking actions that could leak before elections stand out here, as do Shapley’s complaints about some IRS colleagues as not “respected” and the agent’s description of Delaware prosecutors as “the JV squad.”)

Most of their complaints are just about believing DOJ prosecutors were too cautious and risk-averse in this case. Yet it is simply a reality that, in a high-profile case with the potential for major media attention and scandal that could ruin careers, many officials involved will want to be cautious.

Disagreements over how much caution is too much are also common. During the Trump-Russia investigation, some of special counsel Robert Mueller’s prosecutors wanted him to obtain President Trump’s financial records, but Mueller declined to do so. In 2022, some FBI officials were reluctant to search Mar-a-Lago for classified material, but DOJ prosecutors wanted to charge ahead. The underlying political biases of officials can certainly shape decisions like these, but it’s difficult to prove.

The whistleblowers’ strongest point, to me, appears to be their questioning about whether Weiss was truly empowered to bring charges outside his district. The facts of what happened there need sorting out. Yet I come away from this testimony unpersuaded that “the fix was in.” Rather, this seems like a tale of officials who became entangled in a web of bureaucratic caution, and of frustrations rising so high that trust — on both sides — eventually collapsed.