By Cheryl W. Thompson
Washington Post Staff Writer
Sunday, September 28, 2008
Samuel E. Pope needed money fast. The landlord raised the rent on his Head to Toe hair salon in Southwest Washington, the bills were piling up, and he was on the verge of closing.
"That's when Harriette came in," Pope recalled. "Basically, she said, 'Well, maybe I can help you.' "
With that simple line, Harriette Walters drew Pope into the biggest embezzlement scandal in the District government's history. In May 1991, he agreed to take fraudulent property tax refund checks, created by Walters at the D.C. tax office where she worked, and to share the money with her. He was among the first to sign onto the scam.
"It was to be a one-shot deal," Pope, 61, said. "I just needed to get caught up on my bills and rent. But it happened again and again. The needs kept coming up."
Pope got hooked on the fast, easy money, like everyone else Walters brought in: the college classmate, the fashion aficionado and her husband, the blackjack dealer, the banker, the relatives and, finally, the personal shopper.
Based on interviews and court documents -- including the first account from an insider -- new details have emerged that show how Walters assembled and deployed her team of thieves, ordinary people from different walks of life. She sized them up over a period of years, proving herself a good judge of people's vulnerabilities. Then, using friendship, family ties and trust, she reeled them in.
Pope had confidence that Walters could pull it off, and for 18 years, she did, raking in more than $48 million. At the same time, Pope said, he knew that if Walters went down, the others could follow. For a while, Pope hoped the statute of limitations might save him. Now he, Walters and eight others have pleaded guilty, and one more person is awaiting trial. Few have publicly expressed remorse.
Walters, 52, surrounded herself with those who shared her interests: fashion, gambling, travel. Joining the scheme didn't require any particular skill, except for the ability to create real and phony companies and deliver, deposit and cash illegal checks. It was all quite informal, and they all didn't even know one another.
Yet, when Walters called to say "the package is ready," they all knew what she meant.Early Accomplices
Walters met Alethia Grooms in 1989 when they took an accounting class at the University of the District of Columbia. Walters, who moved to Washington from the Virgin Islands more than a decade earlier to attend college, went to school while working at the tax office. Grooms worked in the university comptroller's office. She later became a real estate agent.
The two became friends, and Walters told Grooms about her plan to steal from the city using fraudulent refunds. Walters, who was hired at the tax office in 1981, patterned the scam on a rip-off that she came across at work and was preparing to make some money on her own.
"Harriette was looking for someone to cash small checks," said Kevin McCants, Grooms's attorney. Grooms was the first to join in. She got the first check, dated June 27, 1989, for $4,060, and she shared the proceeds with Walters.
Walters turned next to Patricia A. Steven, whom she relied on for fashion advice. Walters was 32 when she started the scam and looked up to Steven, who was more than 20 years older. They met in 1978 when Steven patronized a carryout where Walters was working as a cook. The restaurant was near the apartment on Massachusetts Avenue NW that Steven shared with her husband, Robert, a career Internal Revenue Service employee. Steven's job experience included running a catering business and working as a receptionist at a doctor's office.
Walters dangled this lure: The two could open a plus-size fashion business. Walters was a skilled seamstress who made her own clothes, and a dressmaking business could be profitable. But neither woman had the money to launch the project. Walters said she could get D.C. government checks if Steven would cash them and share the take.
The dressmaking idea never took off, but the company and a corporate bank account were created. Over the years, Walters used Bellarmine Designs as a way to get illegal checks to the Stevens.
A year after recruiting the Stevens, Walters brought in Pope, whose salon was in the neighborhood where she lived. Walters had been going there since the late 1980s, and the two had become good friends, leading to a lunch where he laid out his financial woes.
Walters had needs, too: She wanted someone with a corporate account to handle the checks, figuring that she could issue bigger refunds without attracting attention.
Pope had business accounts for his salon and for a car service that he ran. At Walters's direction, he deposited the government checks, keeping the money in the accounts for a while to avoid suspicion. He withdrew cash for Walters and himself, but he was careful to take out less than $10,000 at a time lest he trigger alarms.
He received his first check in May 1991, for $37,639. By the time the scheme unraveled last November, Pope had received 21 checks totaling $1.1 million, authorities said.
"She had a knack for finding people in need," said Pope, a father of four who faces up to 63 months in prison after pleading guilty to mail fraud and money laundering conspiracy. "She was a lot smarter than people gave her credit for."
Over the years, Walters gave presents to co-workers at the tax office, including at least $1.2 million in checks, prosecutors said. Although no other city employees are charged, Pope believes that some knew of the fraud.
"There were people in her office who I'm sure had a clue," Pope said. "But money will shut up a lot of people."
For his part, Pope said: "I wasn't nearly as involved as I could have been and not as involved as some of the other folks. Anything I was involved with was out of necessity. I wasn't actually trying to beat anybody. I got caught up."A Pair of Gamblers
Walters had a taste for gambling, especially roulette and blackjack.
That's how she met Connie Alexander, who was working in 1992 as a blackjack dealer at a volunteer fire department casino night in Prince George's County.
The two became close friends, and Walters showered Alexander with luxury handbags and cash, sometimes $5,000 or more. They went on shopping and gambling trips, with Walters offering to put store purchases on her credit card.
Walters initially said her generosity stemmed from a hefty inheritance left to her by her father, who died in 1989. She repeated that lie to others, including people in the tax office. In truth, her father left behind $71,068 in personal property to be divided among relatives and a 1982 Oldsmobile that didn't run, court records in the Virgin Islands show.
"I think Connie was really impressed with her," said Aitan Goelman, Alexander's attorney.
Years after they met, Walters reeled Alexander in, asking her to drop off an envelope at the bank.
"You feel like someone's done you all these favors and they just want you to go to the bank and drop off a package," Goelman said. "It's not like, 'Hey, I'm going to rob a bank, and I want you to drive the getaway car.' "
Walters explained the scheme in 1998, and Alexander wanted in. As time went on, Walters paid for more trips to Atlantic City and Las Vegas, a down payment on a car and shopping trips to Adore, an upscale jewelry store in Annapolis. She also paid for Alexander's wedding to James Bashore, a D.C. fire department captain, at the posh Paris Hotel and Casino in Las Vegas and for some hotel rooms used by the guests.
Alexander, a former technical support specialist with the AFL-CIO, used the money to buy a Cadillac Escalade sport-utility vehicle, a Mercedes-Benz and a Harley-Davidson motorcycle; 62 pieces of jewelry; eight fur coats; three projection TVs; and designer handbags.
"She very much regrets being part of this," Goelman said.A Banker Comes Aboard
Walter Jones Jr. was not long out of high school in 1994 when he was hired at a Southwest Washington branch of NationsBank, which later became Bank of America. Less than a year later, Jones met Walters, a longtime bank customer. Bank employees are not supposed to take gifts, and at first Jones turned down Walters's offer of money for his help with her transactions. But she persisted, and he began taking $100, then $1,000, whenever she stopped by the bank.
Walters gave money to other bank tellers and managers, too, court papers show, but Jones was a special case. She worked on him for years before bringing him into the scheme in 2000, when he was 26. Jones was crucial to the growth of the scam. He would deposit checks even if the payee names bore no relationship to the accounts where the money wound up.
Jones handled his first check, for $158,558, in September 2000. Many more followed, and Jones has admitted accepting more than $366,000 in return for handling almost $18 million in illegal transactions.
He used the money to help buy a $370,000 home in Essex, Md., in 2005, and a 2006 Infiniti M45 and a 2006 Infiniti QX56.Putting Faith in Family
As a teenager in St. Thomas, Richard Walters dreamed of landing a college football scholarship and was crushed when he didn't. Tall and solid with large hands, he was known as a hard hitter on the field but an average student in the classroom. His classmates dubbed him "Helmet" because of his round head, and he used the name for the Prince George's County plumbing business he started in 1997 after moving to the area to be near his sister.
Harriette Walters was particularly close to Richard, the youngest of her seven brothers and sisters. They grew up in St. Thomas, where their father, Juanito, worked for 43 years as a banker, and their mother, Elaine, was a nurse at the local hospital. Harriette's other brothers and sisters later got jobs in teaching, social work, nursing and business. A brother, Juanito Jr., died in 1973 at 19 while serving in the Navy as a supply clerk.
In 2000, more than a decade after the thefts began, Harriette Walters brought Richard into the scheme. He had a corporate account for his plumbing business, which could be used to deposit large fraudulent checks. He came on board, as did a nephew, Ricardo Walters, at a time when she was shifting away from outsiders and toward family members.
Walters, who never married and had no children, turned to her relatives when she was growing weary of her friends. She had a falling out with Patricia Steven and thought that Alexander was wasting too much money on Internet gambling. She believed that relatives would be more trustworthy as the scam continued, and she wanted them to share in the wealth.
A year after recruiting her brother, Harriette Walters brought a niece, Jayrece Turnbull, into the plan. Turnbull, who was running a home cleaning service, loved to travel, making trips to Spain, France and the Dominican Republic. But she always returned to the Washington area, where her Aunt Harriette, Uncle Richard and cousin Ricardo lived. They were family. They trusted one another.
Turnbull joined Alexander, Steven and Walters on various trips, but not everyone cared for her. Some thought that she was arrogant and pushy. Pope didn't particularly like Turnbull and didn't want to socialize with her or the others.
Asked why he didn't attend Alexander's 2006 wedding reception, which Turnbull attended, Pope explained, "They were not the type of people I'd hang out with."
Once Turnbull got involved, prosecutors said, the size and frequency of the thefts grew. Turnbull is accused of handling some of the biggest checks in the scam, including eight that were $400,000 or more. She had her biggest year in 2004, amassing more than $7 million. Four times that year, she got two checks on the same day, court records show.
From 2001 through 2007, Turnbull deposited 81 checks worth $24.5 million, mostly with the help of Jones, the banker, records show. But she had run-ins that contributed to Jones's firing and to the collapse of the entire scam.
In February 2007, Bank of America learned that Jones was making large withdrawals from Turnbull's accounts when she wasn't present and without her signature. Under questioning from his bosses, Jones insisted that he had Turnbull's permission but also acknowledged that she had given him $145,000 in gifts.
Bank officials then interviewed Turnbull, who said that it was none of the bank's business why she gave Jones the money, the court records state. Within a day, Jones was fired for violating employee standards by taking gifts from a customer.Days of Reckoning
With Jones out of the picture, Walters tried to keep the thefts going by bringing in more people, including her personal shopper, Marilyn Yoon. Since they met in 2000, Walters had given Yoon more than $250,000 in gifts, and Yoon made commissions from purchases Walters made at Louis Vuitton and Neiman Marcus, where she later was employed.
Yoon agreed to handle a fraudulent $275,000 check.
Everything unraveled in the summer of 2007, when a SunTrust Bank employee balked at handling a $410,000 transaction for Turnbull. Turnbull and Walters tried to get the bank to turn over the money, even recruiting a lawyer to write a nasty letter.
Alethia Grooms, the first recruit in the scam, came back after more than a decade away to help create a phony document in hopes of getting the money.
It didn't work.
The bank went to the FBI.
Since then, 12 people have been charged in the case. Three are locked up: Walters, who is awaiting sentencing and faces 15 to 18 years in prison; Turnbull, who is awaiting trial; and Ricardo Walters, who has been sentenced to a 6 1/2 -year term.
Prosecutors dropped charges this month against Diane Gustus, a D.C. government employee accused of assisting with some of the paperwork, saying that they didn't have enough evidence to tie her to the crimes.
The other defendants -- Grooms, the Stevens, Pope, Alexander, Jones, Yoon and Richard Walters -- remain free pending sentencing; all probably will wind up in federal prisons.
Prosecutors are trying to recover the losses. They've seized about $10 million in money and goods. The haul includes Walters's home near Rock Creek Park in Northwest Washington, land in the Virgin Islands, a Hilton Grand Vacation timeshare and 10 other properties; a Bentley, three Jaguars, a Harley-Davidson motorcycle and 10 other vehicles; $2.4 million in various bank accounts; and furs, designer handbags, crystal and china.
Walters, who has glaucoma, has been jailed since the raids in November. She began offering to cooperate with authorities soon after her arrest and pleaded guilty to fraud, tax evasion and money laundering conspiracy.
"She is obviously very pained by all of this and thinks about her conduct constantly," said her attorney, Steven C. Tabackman.
Staff writer Sylvia Moreno and staff researcher Meg Smith contributed to this report.