By Carol D. Leonnig and Ruben Castaneda
Washington Post Staff Writers
Tuesday, December 4, 2007
In the widening D.C. government tax refund scandal, a former assistant branch manager at Bank of America in Baltimore was charged yesterday with helping launder stolen money as part of a long-running conspiracy to rob District taxpayers of at least $20 million.
Walter Jones, who was fired in January because of some questionable transactions, was arrested yesterday at his home in Essex, Md., based on the statements other suspects recently gave investigators. Authorities said Jones served as a linchpin in an alleged scheme to get money from illegal D.C. property tax refunds by helping cash the city checks and disburse money to other conspirators.
Federal prosecutors said they have traced $20 million in fraudulent refund checks to former tax manager Harriette Walters and friends starting in 2004, but law enforcement sources said they expect to find many more illegal refunds in what they consider to be the largest public corruption case in local history.
A Washington Post analysis has found $44.3 million in 160 suspicious property tax refund checks issued by the city since 1999. Those checks lacked court orders typically required to authorize refunds and were issued to fictitious companies or companies that didn't own District property.
Jones, 33, is the seventh person charged in the investigation engulfing the D.C. Office of Tax and Revenue since authorities arrested Walters and charged five others Nov. 7. Prosecutors have accused Walters, co-worker Diane Gustus and Walters's niece, brother, nephew and friend of using phony paperwork and sham companies to generate the checks.
Jones's arrest comes after some of his fellow suspects recently told investigators that Jones repeatedly cashed the checks for them, new charging documents show.
The suspects, whose names are redacted in court papers, told investigators that they were "directed by Harriette Walters to take certain fraudulent District of Columbia government checks to a Bank of America branch where JONES worked." A few minutes after taking the checks at the teller window, according to charging papers, Jones would return and provide the fellow conspirator with an envelope containing multiple checks and cash.
Jones instructed at least one of the suspects to endorse the city checks with the abbreviation "Esq." after the signature, as if the person were an attorney, when he or she was not, the new documents say.
Appearing in U.S. District Court in Greenbelt yesterday afternoon, Jones said little other than that he understood the charges against him, had been without a job since January and needed an application for court-appointed counsel. U.S. Magistrate Judge William Connelly released Jones pending trial on the condition that he surrender his passport and reside in his home. The judge also ordered that Jones not engage in any financial transactions larger than $5,000 without court approval or have any contact with other people charged in the conspiracy.
According to an FBI agent's affidavit filed last month, Jones had provided key banking help to Jayrece Turnbull, Walters's niece, who is charged as a leading conspirator in the case. Turnbull, who is being held in jail as a flight risk, kept several accounts at Bank of America for companies that prosecutors say she used as fronts.
Late last year, Bank of America security personnel questioned Jones because he had made several high-dollar transfers of money between Turnbull's multiple accounts, the affidavit shows. Bank policy forbids employees to move funds without a customer's signature. Jones had also issued $50,000 in cashier's checks from Turnbull's commercial accounts to other suspects, including Harriette Walters, her nephew Ricardo Walters, her friend Connie Alexander, Turnbull herself and Turnbull's sister, Jayrelle Israel.
Turnbull told Bank of America security officers that she allowed Jones to make transfers from her accounts, according to the FBI affidavit. She said that she had given gifts to Jones, including a loan of $145,000, and that "Bank of America did not need to know why she had done so."
Jones's own bank accounts raised suspicion, the affidavit shows. In November and December of last year, prosecutors allege, he deposited $91,000 into his accounts. About $60,000 of it was in cash, and Jones failed to report any of the income on his 2006 income tax return.
"Bank of America investigators found these deposits to be highly irregular because the amount exceeded substantially [Walter Jones's] income as an assistant branch manager," an FBI agent wrote in the affidavit.
Sources close to the investigation said several defendants, including Walters, are considering negotiations to reach plea agreements with prosecutors in the face of what they consider overwhelming evidence of theft.
One of those sources, who spoke on condition of anonymity because of the sensitivity of the discussions, said Diane Gustus plans to meet with prosecutors this week to tell them what she knows about the alleged tax scam.
Staff writer Yolanda Woodlee and staff researcher Meg Smith contributed to this report.