“What was remarkable about this entire thing was its simplicity,” said William R. McLucas, a partner at WilmerHale, which with PricewaterhouseCoopers LLP conducted an extensive investigation into how Harriette Walters, a District tax office employee, walked off with nearly $50 million of the public’s money.
More than 70 individuals were interviewed. Documentation associated with 26,000 refunds, policies and procedures, and employee records also were reviewed. WilmerHale and PricewaterhouseCoopers LLP performed the work pro bono at the behest of the D.C. Council. Their report of findings is an indictment of the bureaucracy.
Employees and managers were incompetent, or unwillingly to perform their assigned duties, inattentive, walking around with blinders, or muzzled by money.
Neither senior managers at Office of Tax and Revenue, Real Property Administration, nor anyone in the Office of the Chief Financial Officer, nor three independent audit companies, nor the council’s Committee on Finance and Revenue, nor the city auditor, nor the Office of the Inspector General discovered the criminal enterprise, according to the report.
That’s the real scandal.
District taxpayers over the past 20 years paid out millions of dollars to managers, audit companies and council members whose business it was to know what was happening in the bowels of the government. It’s money that was wasted. Thus, much more than $50 million was stripped from District coffers.
“OTR essentially had no formal policies and procedures in place to ensure the integrity of real property tax refunds,” according to the report. One of Walters’ direct supervisors made it clear that “she no longer wished to sign off” on refund vouchers. Audit agencies didn’t conduct “any audits” of real property tax refunds. Chief Financial Officer Natwar Gandhi sent the message to his work force that maintenance of a favorable bond rating, receipt of clean independent audit opinions, and faster processing of refunds were the priorities. Thus, “managers placed a much lower priority on imposing controls or meaningful oversight.”
Gandhi released a statement in response to the McLucas report outlining changes he has made since discovery of the embezzlement. “I am pleased to find that we have already instituted many of the recommended reforms,” he said.
The greatest blame for the theft continues to be placed on lower-level employees.
“Great scandals of our time were not discovered by internal audits. It was discovered by a disgruntled employee,” said Jack Evans, council chairman pro tempore. “In our case that didn’t happen. People in that office knew something wasn’t right and yet no one said anything to anyone.”
It’s true that those who took gifts or suspected wrongdoing remained silent; they were part of the problem. But senior-level officials and even council members can’t escape responsibility. If they had performed their duties, Walters and her gang would have been stopped years ago.
Catching them didn’t require any special skill. They were, as Walters told McLucas, “hiding in plain sight.”
