Tax fraud: Money trail goes cold

If cashed, the bogus checks would have cost the District more than $40 million, according to a report published by The Washington Post, and a similar tally was reached by The Examiner.

But investigators cautioned that it is far from certain what amount was ever actually stolen from the city tax coffers. Tax office thieves may have prepared checks that for various reasons were never cashed.

Law enforcement officials have told The Examiner that the case is probably much more complicated than adding up fraudulent-appearing check approvals from city records.

The Washington Post reported Sunday that $44.3 million in false payment approvals could be found in a review of tax record offices dating to June 1999. An analysis by The Examiner has found $41.5 in questionable approvals.

But federal investigators cautioned that it is too early to say exactly what amount was converted to cash and stolen.

The federal court document charging Harriette Walters and others with fraud initially said $16 million in “financial loss” had been suffered by the District, but added, “Less than $2 million in bank accounts have been located thus far.”

Even nearly a month after the case broke, and several months after the probe began, federal agents have publicly conceded to finding only $4.5 million in cash. And the value of goods believed bought by Walters and her confederates brings that number to only about $6 million to $7 million. That includes the Bentley automobile, homes, shoes, jewelry, Faberge eggs and assorted booty.

As reported by The Examiner last month, federal investigators are not sure they have established the beginning of the scam in June 1999. Electronic city records date to May 1999. Investigators are poring over boxes of non-computerized documents looking to see whether the wrongdoing began much earlier.

And federal investigators have said they are open to the possibility that others were running parallel frauds at the same time as Walters’ alleged scam. Also possible, law enforcement officials concede: Many fraudulent check approvals were prepared that thieves never converted to funds.

Prosecutors are worried that the alleged conspirators may have hidden additional millions of dollars in offshore bank accounts in the Caribbean.

Court documents also show that Walters was a frequent visitor to numerous gambling casinos in Las Vegas and New Jersey. She held membership cards to nine casinos. It’s possible that Walters could have cashed six-figure checks at the casinos. But that would raise questions about how she and her associates were able to convert the checks to cash without leaving a financial trail that could be followed by federal authorities.

– Examiner Staff Writer Kashmir Hill contributed to this report.

smccabe@dcexaminer.com

bmyers@dcexaminer.com