D.C. Tax Scandal At $44.3 Million, Analysis Finds
Sunday, December 2, 2007
The D.C. government issued more than $44 million in questionable property tax refunds in the past nine years -- more than double the amount that prosecutors have declared to be missing in a massive theft of city money.
A Washington Post analysis of city records identified 160 checks since June 1999 that lacked the court orders that are required for legitimate refunds. The review provides the clearest picture to date of how the alleged tax scam evolved over the years, apparently circumventing internal controls.
Prosecutors have said that Harriette Walters, a mid-level manager at the D.C. Office of Tax and Revenue, approved illegal refunds and shared the wealth with family members and associates. She and five others face federal charges in the case. Meanwhile, the size and duration of the alleged thievery has Congress, council members and many taxpayers questioning why no city officials caught it.
New information from the city's chief financial officer indicates that at least two and as many as four top leaders of the D.C. tax office, including its director, should have personally reviewed the refunds before they were issued. The payments examined by The Post were to fictitious companies or to firms that did not own the properties listed on refund documents.
Federal authorities are examining the same kinds of records scrutinized by The Post and acknowledge they are still trying to determine the depth of the loss. They have publicly flagged 58 checks as fraudulent, totaling $20 million, and warned that losses could mount as the probe continues.
Officials at the U.S. attorney's office in the District, which is leading the investigation, declined to comment on The Post's analysis. U.S. Attorney Jeffrey A. Taylor said "we're still counting" in explaining the status of the federal probe.
The Post analysis includes the checks identified in the criminal charges and others paid to the same firms described as fronts for the alleged conspiracy. The Post included additional checks that have no required court order and that are tied to false property records. Court orders are required for assessment reduction refunds.
The $44.3 million total is $13 million more than previous Post findings; it covers a longer time frame and includes additional payments.
Most refunds were written to fictitious firms, but some were ostensibly to legitimate companies. The Post has contacted more than 40 representatives of the legitimate companies named on the questionable checks, and they said the firms never got the refunds.
The allegations have threatened the previously sterling reputation of Chief Financial Officer Natwar M. Gandhi, who had boosted the District's image on Wall Street. The tax office was the largest agency directly under his supervision, and he was its director from 1997 to 2000, when authorities believe the theft began. In the wake of the scandal, Gandhi ousted the head of the office and four other top managers. A total of 15 employees have been dismissed or put on administrative leave.
The financial records reviewed by The Post do not say who cashed the questionable checks or who signed off on paperwork. Only one other employee in the tax office has been charged: tax specialist Diane Gustus, who reported to Walters. An FBI affidavit says that five more low-level employees helped process fraudulent refund paperwork before it got to Walters but does not address what, if anything, they knew about the alleged scheme.
According to the tax office's policy, all 160 suspicious checks identified by The Post should have been approved by the deputy chief and chief of the office's assessment services division. The most recent people in those jobs, Terez Badger and Susan Lee, were among those put on administrative leave. Badger has declined comment, and Lee has not returned messages regarding the case.