D.C. Council leaders will announce today that they have retained a powerhouse legal and auditing team to investigate staggering failures that allowed the largest theft in District government history to persist for nearly a decade.
Law firm WilmerHale and forensic accounting giant PricewaterhouseCoopers will pilot the council’s inquiry into the massive tax office scam, council sources said Monday. The alleged theft by two employees in the Office of Tax and Revenue officially stands at more than $20 million, though independent reviews put the figure at possibly more than $40 million.
Leading the investigation will be William R. McLucas, a former Securities and Exchange Commission official who investigated the collapse of fraudulent energy giant Enron Corp. He told The Examiner that he and his team will conduct a thorough investigation, but said it was too early to say what areas it will focus on.
“We won’t have any idea what is involved until we get our sea legs,” he said.
Harriette Walters, Diane Gustus and their co-defendants are charged with manipulating the property tax refund process, generating unusually large, phony checks to bogus corporations under the nose of the Office of the Chief Financial Officer without anyone noticing, including D.C.’s outside auditor, BDO Seidman LLP. Fifteen tax office employees have either resigned or been fired.
The council is undertaking its own $250,000 review to hunt down flaws in management and internal controls and recommend improvements. A special committee, led by Council Chairman Vincent Gray and Ward 2 Council Member Jack Evans, will have subpoena powers.
McLucas and Evans have been friends for 25 years and worked together at the SEC, when McLucas was in charge of the enforcement division. PricewaterhouseCoopers is one of the world’s largest auditors, counting among its clients ExxonMobil, Ford Motor Co. and Chevron Corp. Earlier this year, it agreed to pay $225 million to settle claims that its audits of Tyco International Ltd. failed to uncover massive fraud committed by senior executives.
As the council gears up for its review, D.C. CFO Natwar Gandhi continues to hold the cautious support of most city leaders. Mayor Adrian Fenty, who has publicly stood by Gandhi, said Monday his position “has not changed.”
Ward 3 Council Member Mary Cheh said the city should not act “precipitously and rashly” by removing Gandhi as the fiscal 2009 budget period approaches. That said, she added, “nobody’s irreplaceable,” and the government must “get into a post-Gandhi mentality.”
