D.C. Council member Jim Graham sat in his office, an envelope stuffed with $2,600 in his hands. He had just been given the cash by a trusted aide, who said it came from a businessman.

After a minute or so, Graham said, he shut the flap, secured it with tape, and initialed and dated the envelope. As he handed it back on that July afternoon in 2009, Graham (D-Ward 1) told his chief of staff, Ted G. Loza, to return it immediately.

“I think I saw that in a movie someplace, where you have to initial it,” Graham said in an interview Wednesday. Aspects of the encounter first emerged in federal court Tuesday during a sentencing hearing for Loza.

Loza, the former chief of staff who passed Graham the money, has pleaded guilty to corruption charges tied to his acceptance of $1,500 in cash gifts from an FBI informant — the same man who had asked him to give the cash to Graham.

Graham said that he was shocked by the attempted payment and that he did not report the matter to authorities. In retrospect, he said, he should have. But he insists he never suspected that the cash or his aide were connected to illegal activity. “I trusted him,” Graham said of Loza. “I was angry at him, though.”

Jim Graham has not been charged with any crimes related to the probe. (JIM GRAHAM)

What Graham didn’t know as he examined the envelope was that the money was really from the FBI. The attempted payment illustrates how investigators working a long-running, wide-ranging inquiry into the D.C. government’s ties to the taxi industry tested the longtime council member.

Graham has not been charged with any crimes related to the probe, which has resulted in the arrests of more than three dozen people — mostly would-be taxi drivers seeking to illegally buy licenses. Loza, Graham’s longtime confidante, is the highest-ranking D.C. official to be ensnared.

That federal agents had focused on Graham in their inquiry was widely known, but little has emerged about the government’s efforts to investigate him. As recently as this week, federal authorities refused to say whether Graham was, or is, a target of their inquest into the taxi industry, code-named “Cash Cab.”

But Graham said the money wasn’t the FBI’s only attempt to see whether he was corrupt. Agents tapped his phones, he said. And, he says, an undercover agent posing as an investor offered him a lavish trip to Miami to discuss potential projects in the District. “I had no idea why they wanted me to go to Miami to discuss that,” Graham said. “That’s why I said no.”

At his 63rd birthday party in 2008, Graham said, he accepted a colorful portrait of himself as a gift from the Ethiopian community. He said he later learned that the FBI had paid for it. Tempted to report the painting on disclosure statements as an “unsolicited gift” from the FBI, Graham said he thought better of it. “I was advised not to antagonize them further,” said Graham, who keeps the portrait in a closet.

William Miller, a spokesman for the District’s U.S. attorney’s office, declined to comment “on any aspects” of the case. FBI agent Kate Schweit, a spokeswoman for the FBI’s Washington Field Office, also declined to comment.

The disclosure of the cash payment and Loza’s sentencing, which is to continue this month, come at a challenging time for elected officials in the District. Mayor Vincent C. Gray (D) has been dogged by accusations that his 2010 election campaign struck a deal with a fellow candidate and rewarded the man with a job and cash payments. D.C. Council Chairman Kwame R. Brown (D) is under investigation for unreported fundraising from his 2008 campaign, and questions remain about his role in having the city government procure the leases of two expensive sport-utility vehicles. And council member Harry Thomas Jr. (D-Ward 5) has been accused of diverting hundreds of thousands of taxpayer dollars and charity funds for personal use.

Legal experts said Graham did not appear to break the law in failing to alert authorities to the attempted cash payment. In not doing so, however, he opened the door to questions about his conduct. The D.C. Council’s ethics code urges its members to report activity that they know or “should know” might be illegal.

“I can make that argument he was under no obligation to report it because it’s not clear on its face what it is,” said Steven Levin, a former federal prosecutor who focused on public corruption matters. “It’s not clear it’s bribery. It’s not clear it’s a thank-you. It’s not clear it’s a campaign contribution. Out of an abundance of caution, a smart councilman should have reported it, if only to protect himself from later accusations.”

The FBI got close to Graham through an FBI informant named Abdulaziz Kamus, an advocate for Ethiopian taxi drivers and a close associate of powerful figures in the D.C. taxi industry. Kamus, who pleaded guilty to bribery and conspiracy charges for his role in the influence-buying scheme, allowed agents to secretly record him giving cash to Loza while in his car as he sought legislation beneficial to some in the taxi industry.

After accepting a $1,000 “Father’s Day” present from Kamus, Loza asked the man: “What do you want me to do? What do you want me . . . I’ll talk to Graham.”

A month later, again in Kamus’s car, the informant gave Loza $500 after the aide handed him copies of taxi legislation that had just been introduced by his boss.

Kamus then passed Loza an envelope filled with cash. “And this is for council member Graham,” he told Loza, “for introducing, you know, the legislation.”

Kamus told Loza the money was from the businessman — the undercover agent — who got a refund after Graham refused the first-class airline ticket to Miami.

“And if he doesn’t take it?” Loza asked.

On July 23 — nearly two weeks after trying to give Graham the money — Loza returned the cash to Kamus during another videotaped meeting in the informant’s car. After Kamus counted the money, Loza told him that Graham wanted to “thank you for the intention but he can’t take it.”

Loza encouraged Kamus to have his associates donate to Graham’s constituent services fund. Two months later, Loza was arrested.

Staff writer Mike Debonis contributed to this story.