System failures blamed for theft

A report commissioned by the D.C. Council says systemic failures, a lack of oversight and a dysfunctional work environment all led to the theft of nearly $50 million from city coffers by a D.C. tax office employee.

Longtime tax-office employee Harriette Walters pleaded guilty in September to stealing the money. She approved fraudulent property tax refunds and funneled the money to family and friends, officials say.

The more-than-120-page report - based on a review by Wilmer Cutler Pickering Hale and Dorr LLP, along with PriceWaterhouseCoopers LLP - says Walters was able to conduct her scheme in part because of a lack of formal policies and procedures in place to ensure the “integrity” of property tax refunds and because of “a culture of apathy and silence” in relevant offices.

The report recommends that the District take measures that include reducing manually processed transactions, adopting formal policies for all positions in the Office of the Chief Financial Officer and creating the position of a Chief Risk Officer to oversee fraud prevention and track audit recommendations.

D.C. Chief Financial Officer Natwar Gandhi said Monday his office has “already instituted many of the recommended reforms” and that he has directed work to begin immediately on creating the risk-officer position.

“The actions we have taken are the beginning of a process that has no end date,” Mr. Gandhi said. “We will constantly review our practices and safeguards, looking for ways to improve them.”

Walters’ plea agreement calls for her to serve 15 to 18 years in prison when she is sentenced in March.

To date, 10 people have pleaded guilty in the scheme, though Walters is the only city employee.

Shortly after Walters was arrested in November 2007, Mr. Gandhi asked several high-ranking managers in the Office of Tax and Revenue to resign for their failure to prevent or detect Walters´ scheme. In all, more than 30 employees, including Walters, lost their jobs as a result of this scandal.