Fast-Paced D.C. Tax Scam Probe Aimed 'to Stop the Hemorrhaging'
Sunday, November 11, 2007
They built their case in the middle of the night, being extra careful to put papers back exactly where they found them so that desks looked untouched when city workers returned in the morning.
Federal law enforcement authorities thought that they could not risk tipping off the D.C. Office of Tax and Revenue that it was the target in what is being called the biggest corruption case in the city government's history. So explosive was the probe that no one told even Mayor Adrian M. Fenty (D) until the arrests Wednesday.
The investigation began in late July, when an employee at a SunTrust branch inside a Bowie Safeway supermarket reported suspicions about a customer who tried to move $200,000 to another bank. By Labor Day weekend, the probe centered on the tax office and Harriette Walters, a mid-level employee who was signing off on bogus property tax refunds, authorities said.
Investigators said they found evidence that millions were being lost as Walters and another employee, Diane Gustus, signed off on huge refund checks, using sham paperwork and phony companies, that enriched themselves and others.
Speed became as important as secrecy as authorities combed through records in the North Capitol Street office. Among other items, authorities found evidence of two refund checks improperly issued on a single day -- May 23 -- totaling more than $950,000. They became consumed by the thought that millions more could be lost if they didn't act quickly.
One investigator said the team found it painful to count how much the city had lost. "We had to stop the hemorrhaging," said the investigator, who, like several others on the case, spoke on the condition of anonymity because of the sensitivity of the probe.
There was another fear: that the suspects might flee with the money. So, long before they knew the full extent of the scam or everyone involved, the agents decided to act.
Based on interviews with law enforcement officials and documents filed by prosecutors, a more complete picture is emerging into how the case moved so quickly from the bank employee's tip to Wednesday's pre-dawn arrests of Walters, Gustus and three others accused of wrongdoing. Since those arrests, authorities said they have reviewed additional records and determined that the loss figures "may go substantially higher" than $20 million. Of that, $4 million has been found so far.
Typically, a fraud investigation of this size would take more than a year, as agents surreptitiously developed leads and found cooperators willing to identify suspects and confirm details of the plot. Investigators might start, for example, with lower-level workers and work their way up.
"We got to a point we believed we had reasonably found a good portion of the [stolen] money, and we couldn't wait any longer," said U.S. Attorney Jeffrey A. Taylor in Washington. "There is always a risk that if you wait too long, there will be nothing left."
The SunTrust episode set everything in motion, according to a court affidavit prepared by the FBI. The affidavit describes it like this:
Gustus prepared a $410,000 refund check to a business listed as First American Home, purportedly for an overpayment of taxes on a downtown property. Walters signed off on the refund, and the money was deposited June 18 into a SunTrust account for First American Home, controlled by Walters's niece, Jayrece Turnbull of Bowie.