• With: Kim Strassel, Dan Henninger, James Freeman, Joe Rago, Jason Riley

    This is a rush transcript from "Journal Editorial Report," April 12, 2014. This copy may not be in its final form and may be updated.

    STUART VARNEY, HOST: This week on the "Journal Editorial Report," a rough week for Lois Lerner. New evidence emerges in the IRS targeting scandal, and calls come for her criminal prosecution.

    Plus, six months after the disastrous ObamaCare rollout, Kathleen Sebelius calls it quits. But is it too late to save Senate Democrats?

    And former Florida governor, Jeb Bush, under fire from some conservatives for his views on immigration. What it means for his prospects in 2016.

    Welcome to the "Journal Editorial Report." I'm Stuart Varney, in this week for Paul Gigot.

    The congressional investigation into IRS targeting gained steam this week with one House committee voting to refer former treasury official, Lois Lerner, to the Justice Department for possible criminal prosecution. Another voting to hold her in contempt. New evidence emerged, suggesting Lerner used her position to single out conservative groups for scrutiny and personally pushed to deny tax exempt status to at least one of those groups, Crossroads GPS.

    For more, I'm joined by Wall Street Journal columnist and deputy editor, Dan Henninger; assistant editorial page editor, James Freeman; and Washington columnist, Kim Strassel.

    Kim, to you first, if I may. You have, I think, a case study of what exactly Lois Lerner did.

    KIM STRASSEL, WASHINGTON COLUMNIST: Yeah, that's why what happened this week really mattered, especially what came out of the ways and means committee, Stuart. We finally have an idea of the methods that Lois Lerner used to go after some of these groups. We know that in the case of Crossroads, she focused in on them. She exerted pressure on a group to audit them. It appears she exerted pressure on yet another unit to deny them tax exempt status. And it would seem that she also inserted herself, which is a big no-no, in the appeals process, trying to convince the group within the IRS that handles appeals by such organizations to maintain the decisions that these -- that her units had laid out. So we now know how she did that. And that's important, because before it had all been a bit vague.

    VARNEY: So that's direct evidence of what she did personally intervening. It's right there. Got it. Yes?

    STRASSEL: Yes. And I think the other thing that mattered is that the Camp committee also put out a time line, which also maybe provides a little bit of information about motive. What we see is lots of people, and Democratic Senators, aides to the president, outside groups, all focusing on Crossroads GPS, and then surprise, surprise, Lois Lerner focusing on them. So it suggests that the IRS was highly cognizant of the political atmosphere and acting in some way on that.

    VARNEY: Dan, what caught a lot of people's attention was the use of the word "criminal," as in prosecution. That ratchets up the pressure on Ms. Lerner, does it not?

    DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: It does, indeed. This is not merely abuse of power, but if you interfere with the political activities of groups like this, it's potentially a felony. You can go to prison. Or if you lie to the FBI during an investigation like this. So she has some real legal exposure, for sure. And probably others do, as well.

    Now, the thing about the Camp revelations is that their original defense was that all of this originated with low-level bureaucrats enforcing this thing in Cincinnati. That is clearly no longer true. This was done by higher-ups.

    And then if you add into this the fact that the IRS counsel said about 80 times in front of these committees he couldn't recall events about what was going on, you had the Eric Holder Justice Department leaking that they were not going to prosecute because they saw no reason to prosecute anyone. And finally, the president himself saying there isn't a smidgen of evidence that any wrong-doing occurred. All of that now looks to have been an attempt to cover up something very serious that was going on to shut down these groups.

    VARNEY: James, I think you've spoken to Lois Lerner's lawyer.


    VARNEY: What is her defense?

    FREEMAN: Well, it's surprising. Obviously, she hasn't made a public defense, but what he's told us was not that different from the original sort of cover story. It was kind of the rehashed, well, maybe it was all low-level people making honest mistakes. And then he basically questioned whether targeting had really been reported by the inspector general, pointing out that the word wasn't used in his report, even though the inspector general used the word "targeting" when he testified before Congress. So it was a bizarre meeting, to say the least. And I would say nothing new in terms of exculpatory evidence.

    VARNEY: Do you have any idea who pays his fee?

    FREEDMAN: Well, that is a good question. He says she is the only one --


    VARNEY: Inquiring viewers want to know, to be sure.

    FREEMAN: Yes. They do want to know. He is, as you probably know, a frequent donor to Democratic political candidates. He says he's not getting fees from anyone except her for defense. But, of course, he also did say that she is not paying the normal rate that his -- she's not paying his normally high-priced fees. But on the other hand, it's not pro bono, because she's not an indigent. So I think there is a question of her defense and the motivation there.

    VARNEY: Kim, I get the impression that this week the IRS scandal broke open, that it was blown wide open. Am I going too far with that?

    STRASSEL: No. I think you are absolutely right. We now have -- again, we have more information than we have had before, as Dan said, about the level at which this happened, the way in which it happened, the context in which it happened.

    I think another important point, too, Stuart, there has also been some more focus being put on -- and, again, this gets to motive -- the amount of interaction that members of Senate and the House on the Democratic side may have had with the IRS. We, for instance, found out that there was a staffer for Elijah Cummings, in the House, who had had communication with the IRS about one of these groups, and it happened to be a group that Mr. Cummings was targeting and the IRS was targeting. How much more interaction went on? That's an interesting and important question. Because members of Congress, they're allowed to put out letters calling on regulators to do things. Hauling them in front of committees or having ongoing communication with them about ongoing actions is potentially a big no-no.

    VARNEY: Dan, do you think this story, the IRS scandal, does it still have traction with voters, and will it have traction in November?

    HENNINGER: You know, I think it does, Stuart. Because what was going on here was that the government was using the Internal Revenue Service, an agency most people basically are a little bit afraid of. And clearly, they were sent after these Tea Party groups, many of them just citizens organizing out in the country and towns with names no one has ever heard of, to do some politics. Those groups quit under the intimidation. Many of them disbanded. And I think that sort of thing does have resonance with voters. It's going too far using the weapon of government.

    VARNEY: Last word.

    FREEMAN: Really ought to have resonance with Democrats too. We don't want to go down this path where the party in power sticks it to their opponents with the taxing power, with the police power of the government. Obama is not going to be president forever.

    VARNEY: All right.

    Now, when we come back, the face of ObamaCare calls it quits. We'll take a look at Kathleen Sebelius' rocky tenure at HHS and the problems awaiting her successor.


    VARNEY: Six months after the disastrous ObamaCare rollout, Health and Human Services secretary, Kathleen Sebelius, stepped down Friday. And perhaps just in time, calling it quits before premiums rise during the next ObamaCare sign-up period and before the fall elections.

    We're back with Dan Henninger and Kim Strassel. Wall Street Journal editorial board member, Joe Rago, also joins the panel.

    Dan, to you first. Was she pushed, did she jump, and why now?

    HENNINGER: I think what we know is that she actually raised herself the issue of resigning at least a month ago. And there was undoubtedly unhappiness in the White House with the way she was performing. She had become the face of ObamaCare. And I think at this point she was probably happy to jump. She had had enough.

    The question is, who ultimately is going to take political responsibility for the mess of this law? And what we know is that Mrs. Sebelius, by and large, was doing what the White House wanted her to do. I mean, it was not her idea that that law should be implemented at the moment when there was no evidence whatsoever that it was going to work. But she did it, she went forward, and she took the slings and arrows for the White House. And now she has gone over the side.