D.C. Tax Office Scam Probe Was a Race to Keep Suspects, Cash From Disappearing
Sunday, September 13, 2009
Federal prosecutor Timothy G. Lynch would lie awake at night and fret: Is this the night Harriette Walters flees?
It was 2007, and Lynch and a small team of prosecutors and FBI agents had been toiling in secret for weeks, trying to unwind what would turn out to be a $48.1 million embezzlement, the largest in the D.C. government's history. Investigators were concerned that Walters might hear about the investigation and abscond with millions of dollars.
Authorities were also facing pressure to arrest Walters because she was still stealing. But prosecutors and agents had no idea where all the money had gone, and they desperately wanted to find it. There were also questions about who else might be involved. If they made arrests too early, other conspirators could flee, perhaps with the missing loot.
In the end, authorities say they found the proper balance. They kept working until sweeping across the area early one November morning to make arrests. Eleven people eventually pleaded guilty to federal charges, and all were sentenced to prison terms. Walters, the key player in the scam, was the last to be sentenced. She was given a 17 1/2 -year prison term in late June.
For the first time, federal prosecutors and FBI agents have discussed the investigation in depth, saying it was far more dramatic and tension-filled than court papers indicated. The case started with a lucky tip from a longtime bank security officer and quickly became a frenzied race to gather as much evidence as possible without tipping off suspects.
Investigators visited D.C. government offices late at night to pull files. They strung along a key conspirator to give themselves more time to wrap up the case. Eventually, an FBI agent got Walters to confess in her own handwriting. And another agent befriended the former tax manager, easing her through a series of interviews that proved crucial to understanding the scheme's scope.
"We were on the hunt, but at the same time, you don't want it to end in her evading prosecution," Lynch said, describing the first few months of the case. "It was both an exciting and angst-ridden time."
In the end, Walters admitted that she exploited lax oversight in the city's tax office to issue more than 230 fraudulent property tax refund checks to friends and other conspirators starting in 1989. Between 2000 and 2007, her most prolific period, she issued 152 fraudulent refund checks worth $42 million. Much of the money has not been recovered, having evaporated in gambling trips and purchases of expensive clothes, jewelry, cars and furniture.
The investigation started in July 2007 when FBI agent Matthew Walsh got a call from a longtime security officer at SunTrust Bank. The officer wanted Walsh to know that a woman, Jayrece Turnbull, had deposited a suspicious $410,000 D.C. government check at a branch in a Bowie supermarket. The bank accepted the deposit but froze the account after employees grew concerned about Turnbull's actions and business.
She had been evasive with bank employees, the bank employee told Walsh, and she didn't have any of the proper documents to prove she ran the company that was entitled to the money.
"I just want to let you know this is going on," he told the agent.
A few weeks later, Walsh ran computer checks on Turnbull and found reports from another bank about suspicious checks. The agent then tracked Turnbull's transfers of the funds. The name Harriette Walters popped up. Another quick check showed that Walters was a D.C. government employee.