“Gandhi’s got to go.” That was the sentiment expressed by several D.C. Council members after learning that Natwar Gandhi, the city’s chief financial officer, may have failed to properly implement the Tax Clarity Act of 2001, denying the District more than $100 million in real estate taxes.
The Tax Clarity Act, among other things, removed an exemption provided for refinanced loans used to purchase commercial real estate. It also altered the method for assessing the tax on such transactions. If, for example, an owner held an original loan for $100 million but refinanced for $110 million, the tax should have applied to the entire $110 million. But Jeffrey Mitchell, with Oldaker Law Group, and James Stanton, a lawyer and former congressman, discovered the CFO taxed only the $10 million debt.
It’s understandable that, speaking in my Louisiana vernacular, legislators would be Cajun mad. The city needed that money.
To deal with the recession, the District has nearly depleted its savings account. Last week, the council voted on the 2012 budget, raising taxes and cutting social services to close a multimillion-dollar revenue shortfall.
Gandhi’s spokesman told The Examiner’s Freeman Klopott that the CFO is reviewing the two lawyers’ claims.
That’s the overture for “CYA Time.”
Councilman Jack Evans, head of the legislature’s Committee on Finance and Revenue, told the Washington Post’s Mike DeBonis that if the CFO was “supposed to be collecting this tax, and they didn’t do that, it’s really a problem.”
But elected officials are equally responsible. Why didn’t Evans know the CFO hadn’t appropriately implemented the 2001 tax reform bill?
It’s deja vu all over again.
Three years ago, the public learned Gandhi’s lax management allowed a midlevel employee in the city’s Office of Tax and Revenue to embezzle $50 million. Ironically, during this same period, the CFO wasn’t collecting taxes as dictated by the law.
So, on the one hand, Gandhi didn’t collect taxes. On the other hand, what he collected, he allowed to be stolen.
Have mercy!
Mitchell and Stanton had offered to audit transactions between 2001 and 2007 to determine the extent of the damage. They planned to cover “100 percent of upfront costs and related expenses” for setting up and operating that investigation. In exchange, they said they wanted a “small percentage” of what was recovered “exclusive of penalties and late fees.” If the city didn’t get anything, neither would they. The CFO’s folks have portrayed the lawyers as hustlers out to score a contract.
Truth be told, an independent audit could expose Gandhi’s incompetence and the city’s losses. Further, his preferred operational style is opaque, often disguised as discretion and diplomacy. Consequently, he and Attorney General Irvin Nathan have said they will conduct the review.
Forget that. It’s time for the feds.
Council Chairman Kwame Brown should ask the Government Accountability Office to audit Gandhi’s entire operation. Then, as some legislators have suggested, the city should look for a CFO more adept at collecting and counting our beans.
Jonetta Rose Barras’ column appears on Monday and Wednesday. She can be reached at [email protected].
