Tax scam leader pleads guilty

A former manager in the D.C. tax office pleaded guilty Tuesday to wire fraud, tax evasion and other charges, admitting her role as the central figure in the largest case of tax fraud in city government history.

Harriette Monica Walters, 51, entered her plea before U.S. District Judge Emmet G. Sullivan, who provisionally accepted the agreement. Judge Sullivan has the right to reject the agreement once he reviews a pre-sentence report filed by probation authorities. A status hearing will be held Oct. 27.

Walters revealed little emotion when presenting her plea to the judge, answering firmly to “yes” or “no” questions. When asked why she was accepting the plea agreement, Walters said she was “taking full responsibility for my actions” and that “it is in my best interest to accept this agreement… it will give me the opportunity to get out of prison and be with my family. It will also allow me to repay the city.”

Under the plea deal, Walters will be sentenced 15 to 18 years in prison and a pay $48.1 million in restitution to the District. The amount is equal to the amount she took over 18 years.

She also must pay $13 million to the federal government and $3.3 million to the District for back taxes. Walters is the 10th person to plead guilty in the scam, which began in the late 1989.

The hearing offered new details in the scandal, in which Walters, a mid-level manager and her accomplices - including friends, family members and her banker - stole from the city over two decades. According to the 114-page Statement of Offense document issued to the court, Walters issued at least 236 fraudulent property-tax refund checks through last year, when the scam was uncovered.

Prosecutors also described how systemic corruption within the Office of Tax and Revenue went as far back as the mid-1980s.

Even before Walters initiated her scheme, prosecutors said, she learned how some agency employees would take cash in return for waiving interest and penalties on tax bills.

Walters would prepare fraudulent property-tax vouchers, then use her position of authority to shepherd the refunds through the approval process. She then gave the checks to her co-conspirators to deposit or cash.

The scope of her scheme gradually increased over time. In the beginning, Walters would issue individual fraudulent property vouchers that were in amounts of just more than $4,000. By the end, she had prepared a single fraudulent voucher in excess of $500,000.

The amount she stole each year increased as well. In 1989 she had prepared six fraudulent vouchers totaling just less than $32,000. In 2004 alone, she had prepared 26 checks totaling more than $8.5 million.

The investigation has so far resulted in guilty pleas from nine of Walters’ co-conspirators, including her brother, Richard Walters, 49; her former banker, Walter Jones, 33, and her personal shopper, Marilyn Yoon, 40.

Two others, including former tax office employee Diane Gustus, are awaiting trial.

Judge Sullivan said he was disturbed by how Walters and her accomplices could defraud the city for so long without being detected. He also expressed doubt over whether 15 to 18 years in prison would be sufficient, suggesting he might reject the deal.

The judge said: “$48 million is unheard of, so I have serious concerns about the sentencing range.”

Story Continues →