Republicans demand probe of tax scrutiny of conservative groups

By Doug Palmer

WASHINGTON (Reuters) - Republican lawmakers called on Sunday for a broad investigation of the tax agency's acknowledgement that its agents had singled out conservative political groups for more scrutiny, and demanded that President Barack Obama make clear the action was unacceptable.

"This is something we cannot let stand. It needs to have a full investigation," House of Representatives Intelligence Committee Chairman Mike Rogers, a Michigan Republican, said on "Fox News Sunday."

"I don't care if you're a conservative, a liberal a Democrat or a Republican, this should send a chill up your spine," Rogers added.

In a practice that drew complaints during the 2012 general election campaign, non-profit advocacy groups with the words "Tea Party" or "patriot" in their names were flagged for closer review by the Internal Revenue Service when they applied to the agency for tax-exempt status. Such groups may focus on issues, but may not directly support any candidate.

"This is truly outrageous and it contributes to the profound mistrust that the American people have in government," Senator Susan Collins, a Maine Republican, said on CNN's "State of the Union." "The president needs to make crystal clear that this is totally unacceptable in America."

Collins said she also doubted the IRS's claim that the groups were targeted as part of an "inappropriate" organizing technique by a few bureaucrats in the agency's tax-exempt section, rather than for political reasons.

"I just don't buy that this was a couple of rogue IRS employees. After all, groups with "progressive" in their names were not targeted similarly," Collins said.

"If it had been just a small group of employees, then you would think that the high-level IRS supervisors would have rushed to make this public, fire the employees involved and apologized to the American people and informed Congress," she said.

NEW HEADACHE FOR OBAMA

An IRS official has apologized for the practice, which has embarrassed the tax-collecting agency and poses another potential headache for the Obama administration at a time when Republicans continue to raise questions about the administration's actions related to the deadly assault on the U.S. mission in Benghazi, Libya, last September.

Lois Lerner, director of the IRS tax-exempt office, said on Friday that revenue agents in Cincinnati targeted the conservative groups "without talking to managers" and that politics had played no role in the screening.

The Cincinnati staffers were trying to deal with a crush of applications for tax-exempt status by using key words to get through the paper work faster, she said.

About 300 applications initially were flagged for closer scrutiny. Of those, 75 were chosen for that treatment based on the presence of the key words in their names. Lerner said none of the applicants was denied tax-exempt status.

The Treasury Department's inspector general for tax administration is to release a report on its investigation into the issue within a few days.

White House spokesman Jay Carney has called the closer scrutiny of the conservative groups "inappropriate," and has said he expected the inspector general's investigation to be thorough and lead to changes at the IRS.

Rep. Rogers said an outside investigation was needed to get to the root of the matter, referring to IRS statements last year that no groups had been targeted for additional scrutiny.

"I don't know where it stops or who's involved ... (The investigation) has to be external. It's clearly shown that they can't do it themselves. And I think Congress needs to have that oversight," Rogers said.

Representative Darrell Issa, a California Republican, requested the IRS inspector general report last year after accusing the IRS of targeting conservative groups.

He has vowed to investigate, and the House Oversight and Government Reform committee he chairs has the power to issue subpoenas.

At least one other congressional panel intends to hold hearings, giving Republicans multiple opportunities to hammer the agency and the White House over the IRS affair.

(Editing by David Lindsey and David Brunnstrom)

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In Paraguay, a rich conservative must tackle poverty

By Daniela Desantis and Hilary Burke

ASUNCION (Reuters) - For Horacio Cartes, a millionaire cigarette and soft drink magnate who will be Paraguay's next president, the challenge now is to run a country where most people can only dream of having a sliver of the wealth he does.

The 56-year-old, who won election on Sunday with 46 percent of the vote and will take office in August, campaigned as a center-right conservative at a time when most of Latin America is run by leftists.

Indeed, Cartes has touted a pro-business agenda that includes modernizing the bloated state, which employs about 10 percent of all workers in Paraguay. At a news conference on Monday, he said the state's "main responsibility is to create an environment so that the private sector can work with calm."

He also wants to attract up to $2.7 billion in private capital to refurbish Paraguay's airports and build new highways.

"We have to try to make investments in infrastructure without growing our mass of public workers," he said on Monday.

Yet it may not be quite that easy.

Cartes himself has acknowledged that, to be successful, he must also cater to Paraguay's poor masses. Poverty runs near 40 percent and per-capita gross domestic product was just $5,413 in 2011, the second-lowest in South America behind only Bolivia, according to International Monetary Fund data.

The country of 6.6 million has long been one of the region's most politically unstable, with a fragile economy dependent on agriculture. The last elected president, Fernando Lugo, was impeached last year following civil unrest.

A political novice who never voted before 2009, Cartes will have strong support from Congress, but will also have to sustain the support of his center-right Colorado Party, whose 60-year reign was interrupted by Lugo's election in 2008.

On Sunday, the Colorado Party won control of the lower house and 19 of 45 Senate seats, preliminary election results showed. The Liberals had the second-biggest showing and leftist coalitions came in third place, with Lugo elected senator.

Cartes has promised to reform the Colorado Party, infamous for corruption and whose long period in power included General Alfredo Stroessner's 1954-1989 dictatorship. But some in the party will likely push back against change.

"It's very difficult to know what Cartes wants to do," said political analyst Jose Carlos Rodriguez.

"In principle, he has a neo-conservative project that gives a strong impulse to private companies and nothing to the state. But there's a major inconsistency there and he'll also have a powerful party that will demand certain benefits."

NOTORIOUS FOR CONTRABAND

Paraguay relies heavily on soybean and beef exports but it is also notorious for contraband trade and money laundering. Growth is seen at 13 percent this year after a severe drought caused a contraction in 2012, according to the central bank.

Land conflicts have intensified in recent years and the small, violent left-wing Paraguayan People's Army operates in northern regions.

In January, the Liberal government took an unprecedented step to tap global debt markets, selling $500 million in 10-year bonds that were nearly 12 times oversubscribed.

Cartes expressed misgivings on Monday over the bond, saying the issue was a "very positive step" but that the money could not be used on salaries or other fixed costs that would "grow the daddy state."

On Monday, Paraguay's global bond was trading largely steady. A New York-based trader said it was yielding at 4.37 percent, or 26 basis points tighter than when it was first issued at par, but he said the paper was very illiquid.

Latin America's leftist bloc is especially strong in the Mercosur trade group, which includes Brazil, Argentina, Venezuela and Uruguay. Mercosur suspended Paraguay in June when Lugo was ousted, arguing the two-day impeachment trial was tantamount to a coup.

Soon after, Mercosur brought in socialist Venezuela even though its inclusion was never approved by Paraguay's Congress.

Cartes told reporters on Sunday that he had already made contacts with Mercosur officials to ensure Paraguay's full return to the group. The presidents of Argentina and Uruguay welcomed Paraguay back into the fold after Cartes' victory.

Fiona Mackie, Paraguay analyst at The Economist Intelligence Unit research firm, said she did not think Cartes would pursue plans to open airports and state utilities to private investment due to resistance within the Colorado Party.

"That said, a Cartes government would be relatively open to foreign investment in mineral resources," she wrote last week, noting the recent discovery of a major titanium deposit and plans for an aluminum smelter by Rio Tinto Alcan.

(Additional reporting by Mariel Cristaldo and Joan Magee for IFR in New York; Editing by Brian Winter, Eric Walsh and Vicki Allen)

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Conservative Paraguayan businessman leads presidential race

ASUNCION (Reuters) - Conservative Paraguayan businessman and political newcomer Horacio Cartes is the leading candidate ahead of the April 21 presidential election, according to a poll published on Monday.

Cartes vows to bring the once dominant Colorado Party back to power after it lost the presidency in 2008, the party's first defeat since democracy was restored to Paraguay in 1989.

With 37.3 percent support, Cartes was clearly favored over Efrain Alegre of the Liberal Party, who got 30.3 percent.

The survey, conducted from March 9 to 15 by research firm First Analisis and Estudios, was published in local newspaper ABC. It said the poll had a margin of error of plus or minus 3.1 percent.

In third place was journalist and local TV host Mario Ferreiro, a left-leaning candidate who polled at 9.5 percent.

The previous leader of the soy-exporting country, Fernando Lugo, was voted out of power last year by Congress for failing to keep the peace after 17 police and peasants were killed in clashes over a land eviction.

Lugo, a leftist and a former Roman Catholic bishop, was a year from completing a five-year term at the time he was ousted.

Lawyers for Lugo questioned the constitutionality of his lightning-quick impeachment. But the country's top electoral court ratified its legitimacy.

(Reporting By Mariel Cristaldo, writing by Hugh Bronstein; Editing by Mohammad Zargham)

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New Jersey Governor Christie snubbed by conservative conference

NEW YORK (Reuters) - The most popular Republican governor in the United States has not been invited to the country's most important gathering for conservative activists, a source familiar with the situation said on Tuesday.

As things stand, New Jersey Governor Chris Christie, a brash politician who clocked a 74-percent approval rating from state residents in a recent Quinnipiac poll, will not be among dozens of officeholders to address the annual Conservative Political Action Conference in Washington next month, the source said.

The fact that Christie is not expected at the large gathering of conservatives shows how difficult it will be for him to win over an important group of activists should he decide to seek the 2016 Republican presidential nomination.

Other potential 2016 candidates, such as former Florida Governor Jeb Bush, are expected at the CPAC conference.

Christie, who is up for reelection this year in his Democrat-leaning home state, rankled some Republicans during the 2012 presidential campaign.

And some conservatives did not approve when he pushed for a multi-billion-dollar government payout to fund the costs of recovery in New Jersey after Hurricane Sandy. They considered the move not fiscally prudent at a time of $1 trillion budget deficits.

Christie raised eyebrows with his keynote speech at the Republican Party's national convention last year that some Republicans thought focused too heavily on his own accomplishments and too lightly on those of the party's presidential nominee Mitt Romney.

His praise of Democratic President Barack Obama for his handling of Hurricane Sandy as Election Day neared last November also did him no favors with Republicans, who felt he was giving Romney's opponent a boost at the worst possible time.

Conservative press baron Rupert Murdoch said then on Twitter that Christie should "re-declare" his support for Romney "or take blame for next four dire years."

In June, before both incidents, Christie addressed a CPAC conference in Chicago.

The schedule for CPAC, set to begin on March 14, has not been finalized, spokesperson Laura Keehner Rigas said.

CPAC, run by the 49-year-old American Conservative Union, often gives a leading platform for current and future Republican leaders to provide their vision for the party. Christie will be the rare exclusion among Republican officeholders tapped to be potential White House contenders in 2016.

This year, Romney will address the conference, giving his first public speech since his failed presidential bid in November. It was at CPAC last year that Romney, locked in the final months of a primary battle where opponents painted him as too moderate, proclaimed himself to be "severely conservative."

Former vice presidential candidate Sarah Palin, who has faded from the national spotlight with her recent exit from Fox News, will also address the crowd after a gap of a year.

Political observers often look to who has been left out of the conference as a sign of fissures within the conservative movement. This year, leading conservative gay rights groups GOProud and the Log Cabin Republicans will not be participating.

A representative for Christie did not return a request for comment Tuesday.

(Reporting by Samuel P. Jacobs; Additional reporting by Steve Holland; Editing by David Brunnstrom)

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