D.C. Tax Scam Total Rises to $20 Million, Officials Say

"At some point," one investigator said, "Harriette realized she was the last eyeball on these checks."

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In her D.C. government office, where large corporations often appealed their tax assessments for high-rise buildings, Walters was the go-to person in charge of authorizing tax refunds when property owners persuaded the city to lower their assessments, officials said.

Sometimes those refund checks were for as little as $10,000. But checks for several hundred thousand dollars were not outside the norm for big commercial property owners, according to former tax officials. In unusual cases, in which an assessment was long-debated, the refund could rise as high as $1 million.

Authorities said Walters and her friends began small, preparing and authorizing refund applications for sham companies with bank accounts controlled by Walters's brother Richard Walters; her niece Jayrece Turnbull; her nephew, identified as R.W.; and her friend Connie Alexander. Turnbull, Alexander and Richard Walters were arrested and charged in the fraud Wednesday.

In many applications, the supporting material was identical to documentation provided in previous sham applications, and someone reading carefully would have easily spotted them as likely frauds, investigators said.

Under tax office policy, four people in Walters's unit had to sign off on refund applications before the city would issue a computer-generated check. Investigators say in affidavits that Gustus, along with five tax accounting technicians and clerks who have not been charged, signed off on the paperwork more than four dozen times. In some cases, investigators said, the employees acknowledge that they received gifts and sometimes money from Walters and that they never looked very closely at the applications.

"Incompetence may be a defense for some," a law enforcement source said. "They may not have known what was happening, because they just didn't look."

Walters's attorney, Peter Zeidenberg, declined to comment on the case.

The failure to detect such a large scam has raised numerous questions about the stewardship of Gandhi, often lauded for his careful monitoring of city funds. He addressed more than 600 tax office employees at a meeting yesterday at the Walter E. Washington Convention Center.

"I know you're angry. I'm angry, too," Gandhi said. "Some of us knew this and did not say a word. . . . I call on you this morning: We cannot allow such management failures again."

Gandhi, who learned about the investigation from authorities two months ago, said that ever since, "I've been sick to my stomach."

Mayor Adrian M. Fenty (D) learned of the investigation in a phone call from Gandhi at 6 a.m. Wednesday. Federal authorities said the mayor could not be told of the ongoing investigation because of court rules to protect the secrecy of grand jury investigations.