Gandhi Moving to Oust 14 Who Received Checks

By David Nakamura and Nikita Stewart
Washington Post Staff Writers
Wednesday, October 22, 2008

D.C. Chief Financial Officer Natwar M. Gandhi is seeking the resignations of 14 tax office workers who allegedly accepted checks from Harriette Walters, the mastermind of the $48 million embezzlement scheme within that agency, sources said yesterday.

Gandhi informed the workers Friday that they would be fired if they did not resign, and most have left, one city government source said. The rest have said they will resign by the end of the month, the source said.

The action, first reported yesterday by the Examiner newspaper, comes after the U.S. attorney's office gave Gandhi last week a list of employees whose names appeared on checks written by Walters during the past six years. Walters, a former tax office manager, is one of 11 people convicted in the case but the only city government worker. Charges were dropped against another former employee, Diane Gustus.

Shortly after the case broke in November, Gandhi fired several high-ranking tax office managers, along with Walters and Gustus. He was not privy to the identities of other employees whose names were on the checks until last week, after the U.S. attorney's office closed the case, the city government source said.

Channing Phillips, a spokesman for the U.S. attorney's office, confirmed that Gandhi was seeking to remove 14 employees. However, one of the employees, who was given a very small amount of money, might only receive a reprimand as punishment, said the government source, who spoke on condition of anonymity because of the sensitive nature of the case.

"We're all working from a list of people who received checks from Ms. Walters," Phillips said. "From that list, we highlighted obvious ones who were employees, and [Gandhi's office] cross-referenced their employee records."

Last week, the law firm of WilmerHale, which is investigating the tax office at the request of the D.C. Council, debriefed Walters for six hours. Another debriefing will be held this week, officials said. Walters, who pleaded guilty to wire fraud and other charges last month, remains jailed pending sentencing.

Council Chairman Vincent C. Gray (D) said he has extended WilmerHale's contract, which was supposed to expire at the end of the month, for two weeks. Gray said he was not aware of what the firm has found. He said he supported Gandhi's decision.

"If you got money, you've got to go," Gray said. "I don't see any extenuating circumstances, any mitigating factors."

George Johnson, president of the local chapter of the American Federation of State, County and Municipal Employees, which represents about half of the workers asked to resign, said his office is helping them work out retirement settlements.

Johnson said some of the employees have been working for the city for 15 years.

Although some might not have known of Walters's scam, Johnson said it might be best for the employees to move on. If they fight and are fired, they might not get retirement benefits, he said.

"If there's overwhelming evidence, there can be no ignorance of the law," he said. "They can't go plead, 'I didn't know this woman.' Most would rather say: 'Okay, I got caught up in something. It was poor judgment.' "

David Umansky, a spokesman for Gandhi, declined to provide the names of the employees, citing privacy laws.

Gandhi's office "is continuing its investigation of the tax fraud," Umansky said. "Official action has been and will be taken at the appropriate time."

For nearly two decades, Walters created bogus property tax refund checks and sent them to associates, who cashed them.

Last week, Peter J. Nickles, the city's acting attorney general, said he has drafted a lawsuit against Bank of America to recover $30 million that flowed through accounts controlled by Walters and her associates. Nickles said that the city is negotiating with the bank and that he hopes to reach a financial settlement. He said he has given the bank until Friday to respond. If the two sides cannot reach an agreement, he said, the District would probably pursue the lawsuit.

A spokeswoman for the bank declined to comment.

Walters recruited a Bank of America employee, Walter Jones, to help keep the money flowing. Jones, who has pleaded guilty to conspiracy, handled at least $17 million in fraudulent checks from 2000 to 2006, charging documents state. He was fired in early 2007 after bank officials questioned some transactions.

But federal authorities did not catch on to the scam until several months later, when another bank, SunTrust, raised concerns about a large check handled by Jayrece Turnbull, Walters's niece, who has pleaded guilty in the case.

Staff writer Del Quentin Wilber contributed to this report.

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