The $20 million federal investigators say was ripped off from the D.C. Office of Tax and Revenue accounted for more than one refund dollar out of every five distributed between 2003 and 2007, raising questions about how it could possibly have gone undetected.
“Didn’t anybody notice?” asked Mary Levy, a schools and budget expert for the Washington Lawyers Committee. “Obviously, the higher-ups weren’t paying attention.”
On Thursday, tax office employees Harriette Walters and Diane Gustus appeared in federal court to answer to the fraud charges. Prosecutors said in charging documents that the checks they cut for themselves averaged $388,000 each.
The average refund from the tax office — including the apparently bogus six-figure checks — was less than $16,000, documents obtained by The Examiner show.
D.C Council member Mary Cheh, D-Ward 3, said she was concerned that no one questioned that fictitious companies were making claims on six-figure refunds.
The scandal has scarred D.C. Chief Financial Officer Natwar Gandhi. Gandhi, who supervised the office, has said that determined criminals can easily hide from their bosses and auditors.
Levy says she’s not so sure. The two employees are alleged to have marked the checks “hold for pick up.” The checks were often made out to, or put in the care of, prominent real estate figures — like David Fuss, one of D.C.’s top real estate lawyers. Critics ask why no one in the tax office noticed that Fuss and other legitimate agents weren’t actually picking up the checks.
“That’s what internal controls are really for,” Levy said.
The scandal may also singe BDO Seidman, a private audit firm that gave Gandhi its seal of approval earlier this year. Its auditors were paid millions to go over the city’s books and gave Gandhi’s office an unqualified opinion.
Gandhi has used audits from groups like BDO to ward off critics who say he has turned a blind eye to corruption in the city agencies he is supposed to monitor. But earlier this year, schools comptroller Abinet Belachew refused to sign off on BDO’s audit, saying in staff meetings that the auditors were too cozy with Gandhi. BDO spokesman Jerry Walsh declined comment.
On Thursday, U.S. Rep. Tom Davis, R-Va., a key ally of the District, called for a full-scale investigation of the city’s finances.
Davis’ party is in the minority in Congress now, but congressional Republicans have been Gandhi’s biggest fans. Last year, as Adrian Fenty was poised to win election as D.C. mayor, the GOP reached down and extended Gandhi’s term.
Examiner intern Christopher Weaver contributed to this report.
