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.

VARNEY: Joe, Sylvia Burwell, her likely successor, still has to be confirmed in front of Congress.


VARNEY: Now she's got to deal with the potential for more raising of premiums, the possibility that the insurance companies will need some taxpayer money -- I'm not going to call it a bailout, but might need some taxpayer money -- and more cancellations. She has got a tough job, hasn't she?

RAGO: Right. We're clearly not out of the woods yet on ObamaCare implementation. The word out of the White House is everything is fine, let's celebrate. I think this is one of the worst jobs in Washington, not only this year, but just in general, but especially this year. And I think you're getting a White House budget official, White House aide filling that role, because they can't bring in somebody of independent stature. Who would want this job?

VARNEY: She's going to have a tough time in the confirmation, I think. Very tough questions are going to be asked, I suspect.

RAGO: I think so. She was confirmed 96-0 to run the office of Management and Budget. But HHS is a much different agency. This is a -- it has -- it's a department with a $1 trillion budget, 80,000 employees. The Affordable Care Act says "the secretary shall" hundreds of times. So it's a much more important job, I think, than budget director.

VARNEY: Let's move to D.C. And, Kim, for the $64,000 political question --


STRASSEL: Let's not.


VARNEY: -- is this time to save Senate Democrats?

STRASSEL: Well, what is so notable about this, Stuart, is the intensely political nature of the timing of this, when Sebelius is leaving. Look, the time to have left would have been last fall when the one of the biggest failures of government implementation ever happened. They didn't want to do that because they didn't want to acknowledge what a mess it was. So instead, they have now waited. They are doing this at a time when there is a lull in the bad news, as far off from the election as they can. And they're putting forward Sylvia Burwell precisely because she was confirmed before. So this is all being done so that Senate Democrats do not have to face a new nominee and have hard questions asked and potentially have to feel like in order to save themselves they have to vote against a nominee.


HENNINGER: Well, Stuart, let's not lose sight of what her tenure represents, the mess of the implementing of this law, the 38 changes in the law and some of the things along the way. It wasn't ready. But this was the progressives' idea of perfect federal legislation. Kathleen Sebelius, who herself is Catholic, presided over the battle with the Catholic hospitals, who did not want to implement some of the birth control aspects of this, and the fight with the Little Sisters of the Poor. And initially, the message to them was, you've got to do it, you have to comply with this law, which is to say, no matter how much of a mess it was, the idea was we'll just cram it down into the system. And you created this mess. And so they'll -- the idea was, we'll cram it down and clean up the problems later, which is why you had the 38 changes in the law. She presided over that. And we can't just hang it on this woman alone. It's on the idea that the progressives had to put this legislation through.

VARNEY: But may I offer a short word of support for Ms. Sebelius? Number one, she walked into an impossible situation. ObamaCare is the worst-written piece of legislation in a generation. "The Journal" said so. And number two, she had to deal with constant White House interruption and interference.

Anybody want to take that one on? Joe?

RAGO: I'll agree with you, actually. I think, in some ways, she has gotten a bad rep. As you say, all the major decisions were centralized in the White House. Now, Kathleen Sebelius was, by all accounts, a terrible internal manager. But on the other hand, as you say, she's implementing a bad law and she doesn't have complete control over all the decisions.

VARNEY: Kim, I say --

STRASSEL: You know, I'm going to --

VARNEY: Go ahead, Kim.

STRASSEL: No, I would disagree a little bit in that politics is about accountability. You step up for a job like this, you are the one that is responsible. And, in fact, you know, this resignation should have come a lot sooner than it did.


When we come back, former Florida governor, Jeb Bush, making headlines with some controversial comments on immigration. Will they hurt him with conservatives if he decides to run in 2016?


VARNEY: Former Florida governor, Jeb Bush, raising speculation about his plans for 2016, not to mention the anger of some conservatives with these controversial comments about immigration last weekend at the Bush Presidential Library.


JEB BUSH, R-FORMER FLORIDA GOVERNOR: Someone who comes to our country because they couldn't come legally, they come to our country because their families -- you know, a dad who loved their children was worried that their children didn't have food on the table. And they -- you know, wanted to make sure their family was intact.

Yes, they broke the law, but it's not a felony. It's kind of -- it's a -- it's an act of love.


VARNEY: All right. We are back with Dan Henninger and Kim Strassel. Wall Street Journal Political Diary editor, Jason Riley also joins the panel.

Jason, President Bush, former governor of Florida, he seems to be positioning himself within the Republican Party on this issue. What is his position in the party?

JASON RILEY, POLITICAL DIARY EDITOR: Well, I think, like his brother, the former president, Jeb Bush sees immigration as an opportunity, not a problem for the party. And he thinks that immigrants are assets to this country. And he brings a lot to the table here. He's from a very diverse state, a big state. He was a former governor, a very popular two- term governor of that state. And in this case, the Bush name, I think, carries a lot of weight with Hispanics in the country. He did very well with the Hispanic vote. His brother did very well with the Hispanic vote, not only as president, but as governor of Texas. Now, he's got a problem with the base of the party, obviously. But I think these are not insurmountable problems, I think, for Jeb. I think if someone can bring the party together on this issue, it's someone like Jeb Bush.

VARNEY: Well, Kim, how much of a problem does Jeb Bush have with hard-core conservatives who oppose any moderation on the immigration issue?

STRASSEL: Look, it is a split in the party, Stuart. Although it's one, I feel, having been down in Washington for a while, it is not quite as hot as it was years ago. There is still a faction of the party that really dislikes the idea of any kind of immigration reform. They call it amnesty. They call it all kinds of things. But what you have seen down here is a growing sense among many Republicans, a majority of Republicans, that, A, immigration reform is necessary. It actually is need to restore the rule of law. That also this is an important jobs program, which it is. But finally, too, that politically, it's just really crucial that the Republican Party be seen as a party that is open to immigration, open to so many entrepreneurial voters here who have come here as immigrants and are now on the voting rolls.

VARNEY: Well, Dan, what is the future of immigration policy? Do you think the Republicans will take another run at immigration before the election? Is that possible?

HENNINGER: Well, I don't think we explicitly know the answer to that. But my guess, Stuart, is that they will. They will try to pass an immigration reform bill before the election. Because I think the leadership would like to get this issue behind them and get it off the table because they do get hit with it so hard. I mean, look what happened in the last election. Mitt Romney did get 47 percent of the vote. But he lost. And the question is, what does the Republicans have to do to get across that 50 percent line. And I think Republicans like Jeb Bush feel that they cannot simply take this entire issue of Hispanic voters and Asians, who voted 70 percent for Barack Obama, and simply decide we don't need them. Because if they do that, they have to get upwards of 63 percent of the white vote to win. You're threading a very narrow needle. And I think the Republican leadership would like to pass an immigration reform, get it off the table, and run on things like the economy, rather than that.

VARNEY: Jason?

RILEY: The restrictionist wing of the GOP has always been loud but it's also always been rather small. And, you know, you hear it on talk radio, you hear it on cable news, on the blogosphere. But I think Jeb Bush's position is actually more representative of your average Republican voter. The polls continuously show that most Republicans, the majority of Republicans, favor comprehensive reform. So I think he's got a very mainstream view within the Republican Party, despite what you hear coming from the restrictionist wing.

VARNEY: Kim, if you can forget politics for just a second -- I know you're in D.C. --


-- just for one shining moment, forget it -- this is an economic question too, isn't it?


VARNEY: Business wants immigration reform. Republicans surely want growth in the economy.

STRASSEL: Well, this is what they talk about day in and day out. And honestly, there are few pieces of legislation that would do more for it. This is about providing flexibility in labor markets, about giving businesses the resources they need. It's also about, Stuart, inviting some of the brightest people in the world into our country to work in our high- tech industry, our defense industry, other things that are only going to help this country. And the longer we keep our borders closed, make it impossible for people to get in or so complicated that we're constantly fighting a battle about tracking them down rather than integrating into the society, we are missing out on a lot of those jobs prospects.

VARNEY: Kim, does it look to you like he's running, 2016?


STRASSEL: It's a tough call. I think he's certainly laying some markers out there that would serve him well, were he to decide to run.

VARNEY: Come on, Dan. Is he running?

HENNINGER: I think he would like to run. There are probably some personal reasons why -- another Bush -- but ultimately, if he can, I think he will.

VARNEY: Jason, last one.

RILEY: I do. I think he's running.

VARNEY: OK. That wraps it up.

We do have to take one more break. But when we come back, our "Hits and Misses" of the week.


VARNEY: It's that time, for our "Hits and Misses" of the week.

And, Dan, first to you.

HENNINGER: Well, I'm giving a hit to what I'm calling the Cruz- Schumer comet.


In the Senate this week, Senator Ted Cruz, who is probably as far right as any member of the Senate, joined with Senator Chuck Schumer, who is probably the most cynical Democrat in the Senate, to pass legislation that would ban Iran's envoy to the United Nations because he was involved in the 1979 hostage crisis. Passed the Senate unanimously, passed the House unanimously. Now, Haley's Comet comes around every 75 years. I never expect to see the Cruz-Schumer comet ever.


VARNEY: That's very good, Dan.

Jason, it's your turn.

RILEY: This is a mess for Brandeis University and its gutless president, who decided to reverse the decision to give an honorary degree to Ayaan Hirsi Ali, a Somali-born political activist who has made a name for herself being critical of radical Islam's treatment of women. She speaks from experience about genital mutilation, honor killings, forced marriages and so forth. And Muslim apologists here in America objected. The university caved. It's shameless. This woman had made a name for herself criticizing the pope over abortion or Israel over the treatment of the Palestinians. They should probably give her two degrees, Stuart.


VARNEY: I think you're right.


FREEMAN: This is unqualified praise for the Reverend Al Sharpton, Stuart. News came this week that, years ago, he was an FBI informant against the mob. Now, some mob people, especially New York tabloids, have been calling him a rat or saying he just turned when a drug deal and money laundering went bad. But helping put away the mob is, by far, his greatest contribution to civic life. So, way to go, Reverend.

VARNEY: Thumbs up there, James.

FREEMAN: Absolutely.

VARNEY: Right.

And remember, if you have your own "Hit or Miss," please send it to us at jer@FOXnews.com. And be sure to follow us on Twitter, @jeronfnc.

That's it for this week's show. Thanks to my panel and to all of you for watching. I'm Stuart Varney. You can catch me weekdays on "Varney & Co.," 11:00 a.m. eastern sharp, on the Fox Business Network. Paul is back next week. Hope you can join us then.

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