D.C. Hearing On Scandal Has Gandhi In Tight Spot

As early as 2004, Nichols had urged officials to "closely monitor" the flow of real property tax revenue after she noticed a surge in the amount of money refunded to property owners. At the hearing, she went through nine reports, including one that she has not yet released. "We repeatedly noted the anomaly in real property tax refunds," she said.

In the wake of the scandal, Gandhi has said that when he headed the tax office -- from 1997 to June 2000, when he became CFO -- he implemented a strict policy under which he signed off on all refunds of more than $250,000.

However, council member Kwame R. Brown (D-At Large) said the policy before Gandhi took over had been for the tax director to approve all refunds greater than $10,000. Brown concluded that Gandhi had made the system less rigorous. Gandhi responded that the previous system amounted to "micro-managing."

In earlier testimony, Hobbs Newman, who oversaw the 600-person Office of Tax and Revenue, told the council that two lower-level employees accused of bilking the city helped create the real property tax system that they allegedly exploited.

"I know the accused worked on creating the first system used in the real property tax administration," Hobbs Newman said, without using the employees' names. "They worked on the design of the current integrated system.

"It now appears that their involvement was to their benefit, not the city's. . . . Their knowledge of the operational strengths and weaknesses provided these people with the cloak to disguise their dishonest objectives."

Later in an interview, Hobbs Newman said she could not elaborate because the system was established before she arrived in 2005.

Walters, the former manager in charge of property tax refunds, and her co-worker, Diane Gustus, were arrested Nov. 7 and charged with funneling more than $20 million in refunds to sham companies. Five others have been charged in the federal case. A Washington Post analysis of tax records shows that more than $31 million in refunds are questionable dating back seven years.

"She was known to be professional, very direct," Hobbs Newman said of Walters. "She was not one where you questioned her performance. She got things done. Her longevity there is why she was consulted on systems issues and processes."

D.C. Council members opened yesterday's hearing with speeches about damage to the public trust and the city's reputation and about how a broken system in Gandhi's office had allowed the alleged thefts to occur.

The scandal has been a blow to the fiscal chief, who has been largely credited with helping to turn around the city's finances and image over the last decade.

"He has said he is not a policymaker. He is just a bean counter. We've all heard that," said council member Mary M. Cheh (D-Ward 3). "Even if you are a bean counter . . . the beans weren't counted."