Marion Barry Is the Focus Of a Federal Tax Probe
Wednesday, October 5, 2005
D.C. Council member and former mayor Marion Barry is under investigation for failing to file federal income tax returns and pay his taxes, according to two sources close to the probe.
The sources said authorities have been in plea negotiations with Barry (D-Ward 8) to settle issues stemming from tax returns dating to 1998. The discussions follow an investigation by the Internal Revenue Service and the U.S. attorney's office in Washington, they said. It was not immediately clear how much money Barry could owe in taxes and potential penalties.
Barry, 69, declined to comment yesterday. A spokesman for the U.S. attorney's office also declined to comment. The sources spoke on the condition of anonymity because of the sensitive stage of the investigation.
No charges have been filed in the case. According to the sources, the negotiations hinge on Barry agreeing to plead guilty to a misdemeanor charge and on prosecutors recommending that he avoid jail time. If the two sides strike a deal, the terms would require the approval of a judge in U.S. District Court. The sources said Barry could appear in court within the next several days.
That would put Barry back in the courthouse where he stood trial in 1990 on drug charges. Barry was serving his third term as mayor when he was arrested that year after being caught on an FBI videotape smoking crack cocaine. He ultimately was convicted of a single misdemeanor drug charge and served a six-month prison term. After his release, he revived his political career and was elected mayor a fourth time in 1994.
Barry's tenure in the mayor's office ended in January 1999. After that, he did consulting work but did not have a steady job with a regular income. He worked as a consultant for a Vienna-based developer, KSI Services; for a minority-owned investment banking firm based in New York, M.R. Beal & Co.; and for National Corrections and Rehabilitation Corp., a company that operated group homes.
The firms sought Barry's help in their efforts to do business with city government and to locate developments in the District, including in Ward 8. According to disclosure forms filed by M.R. Beal, the firm paid Barry about $250,000 in retainer fees, commissions and expense reimbursements from 1999 to 2004 for help in getting bond business from the District and other cities.
Barry was elected to the Ward 8 seat in Southeast Washington last year and took office in January.
Failing to file federal tax returns is a misdemeanor offense. Filing fraudulent returns or engaging in a pattern of concealing income from the IRS is a felony.
Charlotte Brookins-Hudson, general counsel to the D.C. Council, said the D.C. charter permits Barry to keep his seat so long as he is not convicted of a felony.
Prosecutors rarely pursue criminal charges in cases that center on an individual who fails to file tax returns. Generally, local tax lawyers said, the IRS notifies tax filers when they are delinquent, and does not consider launching a criminal investigation until someone has failed to file for three years or more.
"A civil case turns to a criminal case when there are indicia of fraud," said lawyer Christopher Rizek of the firm Caplin & Drysdale. "It can't just be an error or a case of someone being forgetful. It's got to be knowing and willful and intentional evasion of a known legal duty."
Officials at the U.S. attorney's office in Washington acknowledged that prosecutors have not pursued many cases for failing to file returns but said they are dependent on the cases that the IRS refers and on receiving permission from the Justice Department to proceed in any criminal tax prosecution. The IRS refers only a fraction of its criminal cases to federal prosecutors. In 2003, the IRS referred 1,129 defendants in tax enforcement cases to U.S. attorney's offices across the country.
The IRS has been trying to rebuild its investigative power after struggling in recent years with limited resources. A federal official speaking on condition of anonymity said the IRS must focus on the most egregious cases. That includes matters involving people who owe large sums and have flouted the law for numerous years but also public officials sworn to protect public money.
In 1990, Del. Eleanor Holmes Norton (D-D.C.) faced a controversy after revelations that she and her husband, Edward Norton, had failed to file D.C. tax returns for eight years.
Norton's tax problems came to light during her first race for the D.C. delegate's seat. She and her husband paid more than $88,000 in back taxes and penalties, and no charges were filed. At the time, the couple said that Edward Norton handled the family's taxes and that she was unaware of the delinquency; the Nortons later divorced.
Staff writer Lori Montgomery contributed to this report.