D.C. rocked by public corruption scandal
More than 100 federal and local law enforcement agents executed seven search warrants in D.C. and Maryland, arresting five people, including city employees Harriette Walters, 51, manager of the D.C. Real Property Tax Administration Adjustments Unit, and Diane Gustus, 54, an employee in the department. The three others arrested were friends and family members of the arrested city employees.
Fallout from the scandal resulted in the resignation of four top managers in the Office of Tax and Revenue, the agency in charge of collecting and keeping track of the citys money.
The charges rocked the city government Wednesday.
It is disappointing to see such a glaring hole in our accounting system, said City Councilman David Catania. The fault lies with our chief accounting officer.
Chief Financial Officer Natwar Gandhi, whose employees were charged with the theft, took responsibility, while attempting to downplay the overall effect of the revelations. It is important to emphasize that this unfortunate incident does not compromise the financial stability and viability of the district, Gandhi said in a statement late Wednesday.
But the depth of the loss to the city may not yet be fully known.
U.S. Attorney Jeffrey Taylor said he expected investigators to find more fraudulent checks and said more arrests were possible, calling the conspiracy an intricate, massive scheme.
When you have a determined group of people, Taylor said, they can defeat any [audit] system.
During the police sweeps Wednesday, agents recovered more than $4 million in cash, fur coats, jewelry and designer bags worth thousands of dollars, plus several vehicles, including a 2005 Bentley.
Some of the money was used to buy homes and go on spending sprees, with Walters spending more than $1.4 million at Neiman Marcus since 2, charging documents said. Walters was earning $81,000 and Gustus $55,000 from the city government, officials said.
According to court filings, Walters, Gustus and other D.C. government employees made fraudulent property tax refund requests to issue 42 checks averaging $388,000 each over a three-year period. The checks were laundered through bank accounts controlled by Walters relatives and distributed to co-conspirators, family members and other D.C. government employees who have not been charged, documents said.
The investigation was started in July by federal investigators in Maryland after a bank employee noticed financial irregularities with large checks generated by the D.C. government. City employees created fake tax refund requests from actual D.C. property owners, according to federal charging documents. But the refund requests called for large checks to be made out to a co-payee who was one of the conspirators, federal authorities said.
Staff Writers Bill Myers and Michael Neibauer contributed to this story.
smccabe@dcexaminer.comdc examiNation and poll: What do you think about the biggest corruption case to hit D.C.?
