A city lawmaker and frequent critic of D.C. Chief Financial Officer Natwar M. Gandhi is calling for a closer look at how the District evaluates people who are hired to work at the Office of Tax and Revenue amid allegations an employee bilked the city for $300,000 in fraudulent tax returns.
Charging papers filed against city tax-office employee Kimberle Y. Davis say she participated in a scheme during the 2008 and 2009 tax seasons to inflate tax refunds and obtain larger fees for a private tax preparation firm.
"It's symptomatic of an issue that been with us for a while," D.C. Council member David A. Catania told reporters early Tuesday, after the Washington City Paper first reported the charges filed in U.S. District Court. "This is a particularly clever scheme, I have to tell you."
Mr. Catania, at-large independent, said the grand sum of theft in recent years from the city's tax office has been "mind-boggling" — most notably, former employee Harriette Walters stole almost $50 million from 1989 until before her arrest in 2007.
Court papers say Ms. Davis, while working at the D.C. OTR during a period from January 2009 to April 2010, also answered phones and entered personal data at a tax return preparation business known as 2FT Fast Facts Tax Service owned by a co-conspirator. Her dual employment violated city policy, Mr. Gandhi's spokesman, David Umanksy, said Tuesday.
The U.S. Attorney's Office accused Mr. Davis of leveraging data on the audit status of 2FT clients through her city job as a control technician who dealt with the District's homestead deduction, a tax benefit in regards to residential property ownership. In summary, prosecutors say Ms. Davis provided 2FT clients with false charity receipts in case they were audited by tax authorities while she claimed deductions that certain 2FT clients were not entitled to.
The business secured inflated refunds and, in turn, obtained larger fees for the tax prep company, according to court papers. During the 2008 and 2009 tax seasons, prosecutors say Ms. Davis and her co-conspirators filed 973 fraudulent federal income tax returns totaling about $3.7 million and 282 fraudulent returns to the District totaling $304,909.
The scheme grew the business by generating repeat customers and "word-of-mouth referrals," according to court papers.
Court papers say Ms. Davis "knew that the income tax returns being prepared for 2FT clients were fraudulent, because she prepared her own false income tax returns while working at 2FT and created her own false supply of documents to substantiate losses she claimed on her tax returns."
Ms. Davis is charged with first-degree theft and aiding and abetting a conspiracy against the government. The charges were filed as a criminal information, which is entered with the defendant's consent and typically signals a plea deal is imminent.
Mr. Umansky said Tuesday the office placed Ms. Davis on administrative leave after the U.S. Attorney's Office informed them of her alleged involvement in February. He said the office has been cooperating with the federal prosecutors.
Mr. Catania said it appeared, to be fair, that it would be hard for Mr. Gandhi to "play defense" against fraud that was hatched by a company outside of the city government.
But the charges "speak to a larger issue" of how employees at the city's tax office are vetted, he said. Mr. Catania suggested the city look at well-crafted "personnel tests" that various states administer to their employees, before they are hired, to examine their integrity and ethical compass.
Mr. Gandhi's office has been the target of a series of critical reports in The Washington Post on commercial property appraisals out of his office and the timely release of internal audits. The developments prompted city lawmakers to call for more timely audit reports from the office.
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