Tab in Scam At Tax Office In D.C. Nears $50 Million
Wednesday, February 20, 2008
Federal authorities think that nearly $50 million was stolen in an embezzlement scheme run out of the D.C. tax office, more than double the amount they had previously uncovered, four sources close to the investigation said.
The corruption at the D.C. Office of Tax and Revenue went undetected much longer than initially thought, the sources said, extending back almost 20 years. In addition to tracking the missing money, authorities are looking into gifts suspected of being provided to co-workers and others by the woman accused of leading the scam, former tax office manager Harriette Walters.
The scheme is the largest corruption case in the city's history. Witnesses have told investigators that Walters, who is accused of issuing larger and larger bogus tax refund checks over the years, lavishly spread the wealth, the sources said.
Security guards got cash, office mates got free meals and virtually anyone who made a request got something, said the sources, who spoke on condition of anonymity because the investigation is ongoing.
Two of the sources, who are familiar with the accounts of witnesses, said the gifts included $35,000 to a co-worker who wanted to remodel her house, $25,000 in cash and luxury gifts to an assistant whom Walters began mentoring and $15,000 each to help two co-workers' daughters pay for renovations and credit card bills.
Walters repeatedly lent huge chunks of cash to colleagues with no requests for repayment, the two sources quoted witnesses as saying. And, said the sources, citing witnesses, Walters paid for her goddaughter's college tuition and a New Jersey home for $855,000. The goddaughter's attorney declined to comment on the case.
Since Walters was arrested in November, authorities have issued subpoenas for financial records, interviewed dozens of witnesses and built a more complete picture of what happened, the sources said.
Prosecutors told a judge soon after Walters was arrested that they had confirmed she had helped steal $20 million in fraudulent refund checks since 2004. But the estimated losses have been growing as federal investigators have delved further into records at the Office of Tax and Revenue and found dozens more fraudulent checks made out to city employees. Sources said that the total is nearing $50 million.
In early December, a Washington Post analysis found that $44.3 million in suspicious property tax refund checks had been issued by the office from 1999 to 2007, the period for which computerized city records were available. The Post identified 160 checks that lacked court orders required for legitimate large refunds and were made out to companies that were either fictitious or were not due a tax refund .
The higher the official theft total, the greater the potential penalty faced by Walters and the nine other people charged in the case.
Authorities are scrutinizing the activities of at least 40 people who have not been charged and are trying to determine whether they received things of value or were involved in financial transactions with those accused of being conspirators, according to interviews and documents reviewed by The Post. Those people are largely city employees who signed off on refund paperwork and others who received the gifts in question.
Witnesses have told authorities in recent weeks that Walters and a small cadre of friends began issuing bogus refund checks for modest amounts and erasing property tax bills as early as 1989. They told authorities that Walters told them that, by manipulating the manual, paper-based records of the office, they could prevent supervisors and computer tracking systems from checking behind them, the sources said.