FBI arrests 5 in $20M D.C. tax scam


By Marisol Bello, USA TODAY


WASHINGTON — Tax officials for the District of Columbia government moved quickly Thursday to put in new accountability controls after two employees were arrested on charges of stealing at least $20 million.
Natwar Gandhi, the city's chief financial officer, asked for the resignation of four top-ranking managers in the district's Office of Tax and Revenue and assigned more auditors full time to oversee operations there.

Federal prosecutors say manager Harriette Walters, 51, and tax specialist Diane Gustus, 54, used friends and relatives to defraud the district of millions of dollars that they used to buy homes, luxury cars, fur coats, jewelry and designer purses and shoes.

FBI agents arrested the pair Wednesday, along with three others, including Walters' brother and niece. All were charged with mail fraud, bank fraud, money laundering and conspiracy.

"When you see frauds like this, usually one of two things have happened — a breakdown in supervision and a lack of documentation," said Sebastian Lorigo, appointed Thursday as the interim deputy chief financial officer for Tax and Revenue. "In this case we had both."

Prosecutors, who say the activity might go back to 2000, say they began the probe after a bank employee raised questions about a transaction by one of Walters' relatives.

A federal affidavit lays out the case: Walters, Gustus and other city employees created or approved phony property tax refund requests that they used to issue more than 40 refund checks, each averaging $388,000.

The checks were deposited into sham corporate accounts controlled by Walters' relatives, who then doled out the money to co-conspirators and family members, the affidavit says. A 26-year district employee, Walters' duties as the manager included authorizing or declining refund requests.

"This would not have happened without her," said Channing Phillips, spokesman for Jeffrey Taylor, the U.S. attorney for the district.

Walters' attorney could not be reached. A. Scott Bolden, Gustus' lawyer, said his client's job was to sign vouchers brought to her by her boss, Walters. "It seems she is being charged for doing her job," he said.

A raid of Walters' home turned up thousands of dollars in designer merchandise, such as Chanel and Hermès, said Debbie Weierman, a spokeswoman for the FBI's D.C. office. Prosecutors say that since 2000, Walters had spent more than $1.4 million at Neiman Marcus.

http://www.usatoday.com/news/nation/200 ... scam_N.htm