Plea Deal Reached In District Tax Scam
Tuesday, September 16, 2008
The central figure in the biggest embezzlement scam in the District government's history has agreed to plead guilty to fraud and other charges in a deal that would have her serve between 15 and 18 years in prison, sources said yesterday.
Harriette M. Walters, 51, was charged yesterday with wire fraud, tax evasion, money laundering and other offenses stemming from a scam that prosecutors say netted $48.1 million. She is to appear today before U.S. District Judge Emmet G. Sullivan, who can accept or reject the agreement.
The charging papers reveal how Walters used her expertise as a mid-level manager at the D.C. tax office to begin stealing in 1989, issuing about $32,000 in illegal property tax refund checks that year to a few friends. They say she added family members and issued larger and larger checks as the rip-off expanded to millions a year -- all the while escaping internal controls.
At the scheme's peak, in 2004, Walters and others embezzled more than $8.6 million, the charging papers state. In the scam's final year, 2007, they netted more than $5.8 million.
The plea hearing scheduled for today is expected to end a major chapter in a scandal that exposed remarkable lapses in how the D.C. government oversaw one of its most basic functions and that led to a purge of tax office officials. Nine other people have pleaded guilty so far, but Walters always has been the prosecution's prime target.
She made overtures about cooperating with investigators soon after her arrest and jailing in November, leading to a series of meetings that began three months later, according to sources who spoke on the condition of anonymity because the probe is continuing.
As part of the plea agreement, prosecutors are asking the judge to order Walters to forfeit a long list of goods and property, including designer handbags, sunglasses, Barbie dolls, faux Faberge eggs and home furnishings. The FBI seized many of the items last fall in a search of her home on Oregon Avenue NW, a short distance from Rock Creek Park.
"This is a major milestone in this difficult and sad experience for the District," Natwar M. Gandhi, the city's longtime chief financial officer, said yesterday. "It is my hope that Ms. Walters, and all of her co-conspirators, will receive the severest penalties available and that those sentences will serve as a warning to anyone who is even contemplating defrauding the city. And, the investigation should not end until that last possible dollar is recovered from the wrongdoers."
As the scandal unfolded, Gandhi fired four top managers in the tax office and accepted the resignation of the chief of investigations. He since has hired several high-ranking deputies and a new investigations chief. New controls requiring higher-level signoffs before property tax refund checks are sent to businesses have been established, officials said.
The charges were filed in what is known as a "criminal information," a document that can be filed only with the consent of the defendant. It includes a reference to the plea agreement, which sources said is contingent upon the judge accepting the sentencing range of 15 to 18 years in prison.
If the judge does not approve that sentence, Walters can decide to go to trial. She also could attempt to strike another plea agreement with terms that would be more palatable to the judge, the sources said.
Walters's attorney, Steven Tabackman, yesterday said that he would "comment after the proceedings in which the plea is entered." He would not elaborate.