D.C. Tax Workers Charged In Scam
Thursday, November 8, 2007
Two mid-level D.C. government employees used phony paperwork to collect more than $16 million from illegal tax refunds, avoiding detection for at least three years while issuing more than 40 checks cashed by friends and family members in on the scam, prosecutors said yesterday.
By day, Harriette Walters and Diane Gustus worked at the District's Office of Tax and Revenue. In their free time, prosecutors said, they worked with others to raid the city's treasury to stock up on luxury items including fancy cars, homes, furs, precious jewelry, designer handbags and clothing. Walters alone spent more than $1.4 million at Neiman Marcus, according to charging papers.
Authorities called it the largest theft ever uncovered in local government in the Washington area. Four top officials in the tax office resigned yesterday amid criticism that they did not spot what was going on. About $4 million of the money has been found, authorities said.
Walters, a 25-year D.C. employee, was a mid-level manager in charge of property tax refunds, with a salary of $81,000 a year. Gustus, a tax specialist, was paid about $55,000. Both were arrested yesterday and jailed overnight pending appearances today at U.S. District Court in Washington.
A bank employee raised questions this summer, refusing to cash a $410,000 refund check and triggering a federal investigation. Raids yesterday, conducted by at least 100 law enforcement officials, turned up a $160,000 Bentley in the garage of Walters's brother Richard Walters and designer purses and shoes bearing the labels of Chanel, Louis Vuitton and Hermes at Harriette Walters's home, law enforcement officials said. Authorities also found records tying Walters to the purchase of a $26,000 handbag, but the purse itself did not turn up.
Box loads of records also were carted from the D.C. tax office on North Capitol Street NE.
Three people close to Walters are charged with providing phony company accounts where the refund checks could be deposited -- and laundered. They are her niece Jayrece Turnbull; Richard Walters; and Turnbull's friend Connie Alexander, all of Bowie. Richard Walters and Alexander were released on bond, and Turnbull is jailed pending a court hearing.
Authorities say they have evidence of doctored refunds dating to 2004, but some law enforcement sources said yesterday that the total could grow and that the activity might have started as early as 2000.
U.S. Attorneys Jeffrey A. Taylor of the District and Rod J. Rosenstein of Maryland announced the criminal charges and arrests yesterday at a news conference in the District, saying they wanted to stop the harm as soon as they could after gathering sufficient evidence.
"The extent of this scheme is very broad and is still under investigation," Taylor said. "It may date back much further."
The news had immediate repercussions. Chief Financial Officer Natwar M. Gandhi asked for the resignations at the tax office, starting with Sherryl Hobbs Newman, its director since 2005. Her deputy director, Matthew Braman; the director of real property tax administration, Martin A. Skolnik; and chief assessor Thomas Branham also left. None was implicated in the fraud, but officials said they left because of their failure to catch it.
The most frequent question asked in the city, particularly of Gandhi, was how such a large theft could go undetected for years inside the office in charge of safeguarding taxpayers' money. Gandhi has championed multimillion-dollar investments in audits citywide and a computer-tracking system specifically for the Office of Tax and Revenue to spot financial irregularities and fraud.