Top Firms Volunteer To Inspect Tax Office
Tuesday, December 4, 2007
The D.C. Council and the Office of the Chief Financial Officer have recruited major firms and nationally known lawyers to take a closer look at what went wrong at the Office of Tax and Revenue.
The council is scheduled today to announce the retention of the auditing firm PricewaterhouseCoopers and WilmerHale, a law firm that has conducted inquiries into major corporate scandals, including the Enron case. They have agreed to wade through records, at no charge, to uncover the methods that allegedly allowed employees to pilfer government money.
Meanwhile, Chief Financial Officer Natwar M. Gandhi is expected to announce this week a five-member audit committee that will help his office "in reviewing financial reporting processes, internal control systems and compliance with established policies and procedures," according to a draft document. Sheldon Cohen, a former commissioner of the Internal Revenue Service, will serve as chairman.
The council approved emergency legislation two weeks ago giving members the power to subpoena witnesses and hire legal counsel and consultants in the tax office case. The legislation also set aside $250,000, an amount that the firms have agreed to forgo, said council member Jack Evans (D-Ward 2). Council Chairman Vincent C. Gray (D) said any payment will be nominal, for services such as copying.
"We have an obligation to investigate how these agencies are operating," Gray said. "Eventually, this will lead to a set of recommendations of what needs to be improved."
Gandhi has taken action against 15 employees, forcing the resignation of top managers and dismissing or placing on administrative leave other workers. He also appointed Ben Lorigo to be acting director of the tax office. But Gandhi and Lorigo, who headed the CFO's internal investigative unit, have come under fire for failing to recognize the alleged scheme.
Lorigo has said he wants to resign in the next few weeks, but Gandhi has asked him to stay until a replacement can be found, a source close to the office said yesterday.
Two employees and five others have been charged in the scheme, which allegedly involved doling out fraudulent property tax refunds. Although federal authorities have charged the suspects in connection with $20 million in falsified refunds, a Washington Post analysis found more than $44 million in dubious refunds in the past nine years.
Gandhi has promised a thorough internal investigation. The audit committee will include lawyer James L. Hudson, a confidant of Mayor Adrian M. Fenty (D); John Hill, chief executive of the Federal City Council; Irving Pollack, a former commissioner and director of enforcement and market regulation for the Securities and Exchange Commission; and Donald H. Chapin, a member of the audit and review committee of the Smithsonian Institution.
Like the council's team, the Gandhi audit committee is scheduled to begin work soon. The audit committee will issue quarterly reports, and a final report is due in March 2011. The council investigation has no deadline.
William R. McLucas, a lawyer, will oversee the council inquiry. McLucas, a former enforcement chief at the Securities and Exchange Commission, carved a lucrative and high-profile niche by conducting investigations of numerous corporate scandals, including those involving WorldCom and UnitedHealth Group, in addition to Enron.
McLucas said WilmerHale got involved as a public duty. "The firm's got a fairly rich history of public service and pro bono," McLucas said.
Staff writer Carrie Johnson contributed to this report.