2 More D.C. Tax Workers Removed
Scam's Total May Pass $20 Million, Authorities Say

By Nikita Stewart and David Nakamura
Washington Post Staff Writers
Saturday, November 10, 2007

D.C. Chief Financial Officer Natwar M. Gandhi removed two more tax office employees, putting them on administrative leave, in response to a tax scam that authorities say has reached $20 million and might go "substantially higher."

It was his second action against staff this week. On Wednesday, Gandhi forced the resignations of the four top managers of the Office of Tax and Revenue.

Mayor Adrian M. Fenty (D) and other city officials have stood by Gandhi, who operates independently and has been credited with helping to rescue the city from past financial crisis. But the fraud case has raised major questions about his judgment and oversight of the office.

The chief officer spoke with Fenty yesterday for the first time since the scandal broke Wednesday. That morning, Fenty appeared with Gandhi at a news conference where the U.S. attorney's office announced the arrests of assessments manager Harriette Walters and co-worker Diane Gustus. Walters, 51, and Gustus, 54, have been charged with 10 felony counts of conspiracy and fraud allegedly involving Walters's relatives and friends, and with fabricating 58 property tax refund checks.

Investigators have said that it appears Walters had figured out that she had the "last eyes" on those checks and operated with little monitoring.

"So far, we know they stole $20 million," a source close to the investigation said. "That number may go substantially higher." The source spoke on condition of anonymity because the investigation is ongoing.

Fenty said of Gandhi yesterday: "This circumstance is one that he has taken responsibility for, which District residents appreciate. I also think he is doing the right thing trying to get out in front of holding people accountable in the agency."

Gandhi refused to identify the two employees placed on leave but said they work in the real property assessment division of the office.

The four managers who resigned are the deputy chief financial officer, Sherryl Hobbs Newman; her deputy director, Matthew Braman; the director of real property tax administration, Martin A. Skolnik; and the chief assessor, Thomas Branham. Gandhi said he held them responsible for failing to catch the fraud.

At an emergency meeting of more than 600 tax and revenue employees Thursday morning, where Gandhi gave an impassioned pep talk, some workers asked whether fault for the staggering theft also rests with him.

"I have been asked two times this past week, why am I not resigning?" Gandhi said in an interview yesterday. "The way I answer is that I take my responsibility very seriously. In this case, the way I take my responsibility seriously is to restore the integrity and reputation of this office that has been damaged and compromised by deplorable acts."

Council members have also been asked by constituents whether Gandhi should resign, but many say his record outweighs this blemish.

"Dr. Gandhi has a reputation that goes way beyond this," said council member Marion Barry (D-Ward 8). "If he had not had that reputation, he would have been out of here. . . . Had this been another CFO, he'd be gone."

Council member Phil Mendelson (D-At Large) agreed. "I don't think you take that all the way to the top" to Gandhi, he said. "My own view is that it is very unfortunate, but people steal."

Council member Yvette M. Alexander (D-Ward 7) said she expected managers under Gandhi to review checks and paperwork. "That's not his function," she said.

Gandhi, who has been chief financial officer since 2000, is credited with improving the city's finances. This year, the council approved increasing his salary to $279,000 from $186,600 to keep him from taking a job at Amtrak.

But even those council members who are supporting Gandhi said they need answers.

"It makes you wonder who's minding the store all the way up to Gandhi," said council member Carol Schwartz (R-At Large).

Authorities say Walters, a mid-level employee who earned $81,000 this year, allegedly wrote checks in the hundreds of thousands with the cooperation of lower-level employees to whom she had given gifts and who signed off on paperwork.

Council Chairman Vincent C. Gray (D) and council member Jack Evans (D-Ward 2), who heads the Committee on Finance and Revenue, will hold a hearing Thursday on the failings of the office.

Rep. Thomas M. Davis III (R-Va.), ranking minority member of the Committee on Oversight and Government Reform, which oversees D.C. affairs, has also called for the Government Accountability Office to conduct an audit of the District's tax department.

"We don't know how bad this is yet," Davis said. "You wonder how someone did not detect it."

Evans took offense at Davis's call for an investigation.

"Congress doesn't really have a role in this," he said. "In the scheme of the world, shouldn't they be investigating the hundreds of billions of dollars lost in Iraq?"

The independent chief financial officer position was created by Congress. Candidates are nominated by the mayor and approved by the council. The mayor may fire Gandhi only for cause.

Evans said the District has changed in the past decade, much to Gandhi's credit, and differs from the financially troubled city that was once under a financial control board appointed by Congress.

As the council member in charge of oversight of Gandhi's office, Evans said he never received any information that would indicate the current alleged wrongdoing.

"This is just another one of those things where people saw an opportunity," he said, "and they certainly went for it."

Staff writer Carol D. Leonnig contributed to this report.