Questionable Checks Total $2.4 Million
By Carol D. Leonnig and Dan Keating
Washington Post Staff Writers
Tuesday, November 20, 2007
In the last year that Natwar M. Gandhi ran the D.C. Office of Tax and Revenue, the agency issued 15 property tax refund checks worth $2.46 million without required court orders and sometimes to companies that did not exist, a Washington Post analysis has found.
The suspicious checks included a $223,000 refund in mid-2000 to a fictitious business listed as Ninja Jo Associates. Accountants at Nina Jo Associates -- an actual partnership that owns a commercial high-rise on K Street -- said yesterday that they never received such a check. The business's name appears to have been slightly altered in city records to cover up a fabricated tax refund, The Post analysis showed.
Similar alterations were uncovered in five additional checks issued to companies that didn't exist.
The analysis covered refund checks issued from October 1999, the oldest records available, through June 2000, when Gandhi was promoted from director of the tax office to the city's chief financial officer. The amounts of the suspicious checks ranged from $50,000 to more than $350,000.
"It's almost impossible to believe this happened," said Rory Dechowitz, comptroller for Tower Cos., a group that manages the Nina Jo Associates property.
"We didn't get this check," Dechowitz said. "And if we were expecting $200,000, we'd be calling the District every day to get it."
Gandhi immediately demanded the resignations of the tax office's director and three other managers after federal authorities filed charges Nov. 7 in what they described as the biggest corruption scam in the D.C. government's history. He said after the scam was alleged that he had carefully reviewed tax revenue when he directed the Office of Tax and Revenue from 1997 to 2000 and required that he sign off on all tax refunds exceeding $250,000.
Yesterday, after The Post provided a list of the suspicious checks, Gandhi declined to comment. Gandhi, who has issued numerous statements since the scandal became public, cited the federal investigation. All told, he has released 15 employees.
Two tax office employees and four other people have been arrested on charges stemming from the alleged theft of more than $20 million in property tax refunds. The two women -- Harriette Walters, a mid-level manager, and Diane Gustus, a specialist -- worked for the tax office while Gandhi headed it.
Federal authorities have said the scheme, which allegedly relied on a coterie of tax employees using phony paperwork and sham companies, had been going on for as long as seven years. Law enforcement sources say the alleged fraud might wind up costing taxpayers more than $30 million.
The financial records examined by The Post do not say who prepared the refund paperwork or who approved it.
Mayor Adrian M. Fenty (D), who gave Gandhi a vote of confidence at a news conference last week, continued to support him last night after being informed of The Post's findings. Fenty and others have credited Gandhi with restoring the city's financial credibility after a crisis in the 1990s.
"Based on the recent briefings the mayor has received, he believes that Dr. Gandhi's overall record justifies his view that it is in the best interest of the District of Columbia for him to remain as CFO," said Fenty's spokeswoman, Carrie Brooks.
The Post looked for the same warning signs cited by an FBI agent in an affidavit outlining the criminal case. They include the absence of court orders, which the FBI says are typically required for legitimate property tax refunds, and the use of company names that were slight variations of real businesses.
None of the 15 checks in question was authorized by a court order resulting from an assessment appeal.
The largest of the checks was for $363,382 in March 2000 to Quadrangle Development, a large commercial property owner and downtown developer.
Attorneys for Quadrangle said they could not find any records yesterday showing that their client received such a check or even won a tax appeal in that time frame.
For the tax office, Oct. 18, 1999, was an especially busy day. Four refund checks were issued that lacked court authorization: $257,287 to Greyrock Capital Group, $229,721 to 254 Limited Partnership, $57,026 to Avenue Associates and $75,099 to Associates of Cummunity Tse. The latter two were among the companies The Post determined do not exist.
Representatives of four companies with similar names and agents said yesterday that they could find no record of receiving such checks.
The check written to Associates of Cummunity Tse stunned officials at an actual group with a similar name: the Association of Community College Trustees. The lawyer listed in the city tax office as having received the refund said he once worked for the real association, but not since 1998.
The association's current lawyer said the group did appeal its taxes and win a legitimate refund -- three years earlier, in 1996. The president of the organization said his predecessor received a refund check for $75,099 in May 1996, and he said internal records show the organization cashed it days later.
The president, Noah Brown, said he and the association's attorneys were immediately suspicious when told by The Post that the city records showed that the tax office has paid the group the same refund twice.
"I am shocked that somebody would have tried to use our association's name to perpetrate fraud, particularly to perpetrate fraud on the public," Brown said. "In a personal note, I find it disturbing because I was a taxpayer and resident of the District for 16 years. It makes you wonder what else happened in city government that you will still uncover."
On another busy day, Feb. 17, 2000, the tax office approved three refund checks totaling $296,500. None of the checks matched a list of court-ordered payments related to assessment appeals. None of the property listings on those three checks matched properties owned by the payees listed on the checks.
The first check was written to Assoc, General Contractors for $58,014.20. In fact, the Associated General Contractors appealed a property tax assessment, won the appeal and received a refund one year earlier for a slightly larger amount. Officials at the organization said their records did not reflect any payment in 2000, and the subsequent check is a mystery to them.
The second refund check the tax office wrote that day was to 1625 Mass Ave Corporation for $113,412.50, city records show. The company actually owned a commercial building at the location for which it is named, but the refund check listed an unrelated property on Cathedral Avenue.
The third check was to Capital Square Homes for $125,102.24. That appears to be a misspelled version of Capitol Square Homes, a partnership of Eakin/Youngentob Associates that developed townhomes on Capitol Hill. The company's chief financial officer said he checked the company's records and found no tax refund from the city in that amount or in that time frame.
"We sure would hope the systems would be there to stop this kind of thing from happening," said Terry Eakin, one of the group's founding partners.
Staff writers David Nakamura and Nikita Stewart and staff researcher Meg Smith contributed to this report.
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