D.C. Tax Scandal Triggers Reviews

Jurisdictions Add Checks on Fraud

In Prince George's County, there's a new policy in place because of the District tax scandal: All property tax refunds of $5,000 or more will get special review by the county's chief of treasury.

Property tax refunds over $25,000 will get an additional look in Montgomery County as well, and the inspector general is preparing an expanded review of the county's accounts payable early next year.

In Arlington, the chairman of the County Board called his top managers immediately after hearing the news that D.C. employees were accused of stealing at least $20 million from the city government by creating false property tax refunds. He asked: What do we have in place to make sure this couldn't happen to us?

Stunned by the allegations that D.C. Office of Tax and Revenue employees approved illegal refunds over several years, officials from Loudoun to Anne Arundel counties have been checking their procedures for vulnerabilities.

The outcome of those internal reviews in Maryland and Virginia have been overwhelmingly reassuring, local and state officials said. With guarded confidence, they said it would be virtually impossible for even one fraudulent tax refund -- let alone the dozens issued to phony companies in the District-- to get through the gantlet of bureaucrats required to review such transactions.

Still, in some cases, local officials are in the process of shoring up procedures, and money handlers across the region have been reviewing safeguards to ease the fears of skittish elected leaders.

"It was a wake-up call for everybody," said Stanley Willis, the Prince George's treasury chief, who decided soon after hearing of the D.C. charges that he would personally review all tax refunds over $10,000. Later, in an abundance of caution and after a talk with his boss, he lowered the amount to $5,000 -- even though issuing a refund had already required approval from at least four separate individuals in different offices.

Virginia Gov. Timothy M. Kaine (D) acknowledged he has been following the scandal. So has John Kenney, director of general accounting in the Maryland comptroller's office.

"Believe me, every local government official in the region took notice of that story," said Paul Ferguson, chairman of the Arlington County Board.

Authorities believe 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.

Federal authorities are still trying to determine the depth of the loss. They have publicly flagged 58 checks, totaling $20 million, as fraudulent and have warned that the totals could mount as the probe continues. An analysis by The Washington Post identified 160 checks totaling more than $44 million that lacked the court orders required for legitimate refunds.

The most common safeguard to prevent fraud is requiring multiple employees from different departments to review tax refund checks. Often, computer systems are set up so they do not allow checks to be cut if the authorizations are not in order.