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Tax scam co-defendant in plea talks with feds
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Diane Gustus is charged with helping her former co-worker Harriette Walters rip off the public through a series of phony tax refunds.
She was given a one-day immunity deal to talk to prosecutors about what she knew, but the meeting was postponed in lieu of today’s hearing, a source familiar with the investigation told The Examiner.
Prosecutors are expected to announce that they will postpone any grand jury indictments for 90 days and will waive a preliminary hearing, the source told The Examiner.
The two sides are discussing a plea agreement.
Federal authorities have charged seven people in the scheme, which they say is the largest public corruption scandal in the District’s history.
They have raided numerous homes and businesses in D.C., Maryland and the Caribbean in the hope of tracking down the money.
The raids recovered luxury goods, from Faberge eggs to Bentley automobiles, in most of the defendants’ homes.
Gustus has been an exception, and court records from a raid of her home revealed a fairly Spartan existence.
Just months from retiring from the city, Gustus was also working a part-time job at Sears. Her lawyer, A. Scott Bolden, has said publicly that the evidence against his client shows, at worse, that she was a dupe of Walters’ and not a co-conspirator.
Bolden couldn’t be reached for comment late Wednesday.
Authorities have said in court papers that Walters was the mastermind of the scheme.
Got a tip on the tax scandal? Call Bill Myers at 202-459-4956 or e-mail bmyers@dcexaminer.com.
Comments from Examiner Readers
2:01 PM MST on Fri., Nov. 21, 2008 re: "Beautician to testify against accused tax scam mastermind"
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6:49 AM MST on Tue., Apr. 8, 2008
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DC_IS_MY_HOME said:
First and foremost, I would like to say that despite what alot of people may think, these still were hard working black americans, how do I know? Because this Samuel Pope is my grandfather, and for the record he wasn't a beautician he OWNED the salon, I am 23 years old and from the time I was born my grandfather was always a hard working man, yes, this was a massive mistake that he made BUT, come on, we all know that the biggest scandals in this country are happening right now and what are we doing?? BAILING THEM OUT AS WE SPEAK! ALTHOUGH, we all are entitled to our own opinions, it is wrong to say that my grandfather and all of the people who were involved in this scandal have to pay the price and the top executive and conglomerate owners who have dug all of us in the dirt lately, can get bailed out when in essence they were doing the same crap, that my grandfather was doing but on a way larger scale.
0 agree | 1 disagree
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Examiner Reader said:
The people involved in the tax scam did not cause ordinary people to lose their pensions, jobs, homes, etc. It is mind boggling to me that they will be given so much time in prison when the CEOs that have bilked millions from their companies and caused shareholders to be wiped out and thousands to lose their jobs, get off scott free. If Richard Fuld, Martin Sullivan, Stan O'Neal, Kerry Killinger, Angelo Mozilo, Daniel Mudd, Richard Syron, James Cayne,Kennedy Thompson and Charles Prince from Lehman Brothers, AIG, Merrill Lynch, WaMU, Countrywide, Fannie Mae, Freddie Mac, Bear Stearns, Wachovia and Citigroup are not collectively prosecuted by the feds for plunging the economy in such disarrary and causing people to lose their savings, jobs and homes, then the people involved in this tax scam which did NOT victimize individual citizens should not be imprisoned either. What's good for the goose is good for the gander.
1 agree | 2 disagree
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Kent said:
Despite what KKK Tina would have us believe, this case has nothing to do with race.
2 agree | 3 disagree
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Mark Winshel said:
I read something a few decades ago that was written by one of the most highly regarded accountants in the entire ecountry, and in fact it was written before anybody had even heard of such operations as Enron and Barry Minkow's ZZZ Best Carpet Cleaning, and let alone Harriette Walters. And that accountant's statement was that in order to detect fraud, it was far more important that an accountant have a sense of curiousity than that he have great skills in accounting. In other words, far too many of our regulators and watchdogs are really nothing more than "highly skilled" robots who refuse to take a deep look.
11 agree | 5 disagree
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Tina said:
Black in America --and they wonder why the perception is that they don't like to work. Always looking for a easy way other than actually working for a paycheck. This is a shame and disgraced and the most corrupted city in the US - Washington, DC - I AM DC -were you can get away with any crime/scam/homicide and never be held accountable.
11 agree | 6 disagree
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Examiner Reader said:
the husband and wife tax scam mastermine ,will both ask for reduced jail time because they are black ,bad child hood,by-polar. this opens a new thread,where are the people that is suppose to be watching the store,they are as bad as the crooks themself.
8 agree | 5 disagree
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A concerned citizen in DC... said:
So why haven't the income tax managers in the DC Office of Tax and Revenue been fired as had the managers in the Real Property Office? Why is the Examiner just reporting the news given to them by the DC government and not doing any investigation. Some of the comments to this and other articles on the scandal pointed out some very interesting places to start investigating the inner workings of the Office of Tax and Revenue. There are questions about the incomplete audits by KPMG and BDO Seidman. There are questions about OTR's Office of Revenue Accounting and the Treasurer's Office and their complicity in the embezzlement. But no follow up by Examiner reporters. No one there wants to be Woodward and Bernstein?
17 agree | 9 disagree
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Examiner Reader said:
what goes around comes around
11 agree | 9 disagree
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Brian said:
Giving the government less of our money is the first step of the solution to this problem. If they can't demonstrate the ability to manage money, they should get less. But if DC continues to elect candidates to the council and the mayor who will not CUT TAXES, we deserve exactly what we're getting. DC, YOU have the power to change this. Support candidates who will cut our taxes.
13 agree | 9 disagree
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Examiner Reader said:
If the Mayor would spend less time meddling in the affairs of the well run agency and fire Gandhi who every other day it is determine that under his watch allowed money belonging to the citizens of this city to be used as a bottomless bank account.
10 agree | 9 disagree
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Examiner Reader said:
If the auditors (either internal DC auditors or the OTR Revenue Accounting staff & management, or BDO or KPMG auditors) had taken the additional 1 - 2 week time to review the top 10 or 20 property tax refunds in any of the past 10 years, the embezzlement would have been discovered instantly! The additional work would have been minimal. From all accounts in the press, the refund amounts embezzled were checks of hundreds of thousands dollars each, which was about 10x to 50x the typical refund check average, and the backup/support file material had wrong ownerships, square-lots, and addresses, and were for "pick up only" (not mailed to the real owner). Why wasn't reviewing the tax refund trail already part of the audit process? This is a failure of the fiduciary responsibiliy of the auditors!! Why isn't the Examiner (or Washington Post, for that matter) focusing on reporting about the failed audit mission of internal and external auditors and why they haven't been held accountable?
23 agree | 11 disagree
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Examiner Reader said:
To quote the article: "Bill Eisig, a partner in auditor BDO Seidman’s Washington office, responded that the fraud was ... 'simply not an audit issue.' To detect the theft of a handful of unusually large but fraudulent refund checks would have required a two-year forensic audit that cost '20, 30, 40 times more than the CAFR,' Eisig claimed." Mr. Eisig is absolutely dead wrong and should be challenged by The Examiner reporters!! BDO's annual audit of the District already included a physical review of the paper trail and interviews with employees of the top 10, 20, 50 items in several categories including Homestead benefit recipients, reductions from tax assessment appeals, top tax exemptions, the largest property values. The additional work to BDO for tax refund audit would be 1 or 2 weeks, at best. BDO (and KPMG before them) should be subject to more than a loss in income; they should be subject to civil penalties for missing this key part of an audit of DC taxes.
16 agree | 11 disagree
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A Concerned Citizen in DC said:
Why isn't the CAFR report (and the "yellow book") available online so we can read it for ourselves?
14 agree | 12 disagree
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Examiner Reader said:
This is why they are chasing down landlords. To divert attention from the fact that many of the main players have escaped detection.
15 agree | 14 disagree
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A concerned citizen in DC... said:
... and why doesn't the Examiner or the Washington Post report on the auditors, the managers, the employees and the outside consulting firms in the District that have NOT been fired but were in the line of signing authority and review of the embezzlement checks? Why hasn't anyone mentioned the woman who is now Director of Auditing at Office of Tax and Revenue who was Harriette Walters direct supervisor for three years during the height of the embezzlement, but she was promoted and still has her job? Why hasn't the Examiner or Post reported on the Director of Revenue Accounting whose department was responsible for processing Harriette Walter's phony property tax refund claims? The Director of Rev. Accounting was placed by Gandhi as the Controller of DC Public Schools -- why? Has she overlooked any phony checks at DCPS like she overlooked the phony property tax refund checks of Walters? What about the Revenue Accounting staff at OTR? Have they been fired for processing phony che
20 agree | 12 disagree
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A concerned citizen in DC... said:
Why did Gandhi fire four managers who were hired within the past three years and who had nothing to do with the embezzlement but they keep the long-employed internal auditors, the outside auditors (and pay them mucho dinero!), and long-employed OTR's accountants and Treasury officials who all should have caught this scandal years ago? A travesty! The auditors didn't audit. The Revenue Accounting staff and managers overlooked proper procedures. But Gandhi fires the four people who were blameless...
20 agree | 14 disagree
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Examiner Reader - Taxpayer said:
Did they investigate the investigators?
14 agree | 13 disagree
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Examiner Reader said:
Theft, embezzlement, bribery, etc...one employee was fired and discplinary action was the punishment for the rest? Are you kidding? If theft and embezzlement don't lead to indictment and jail, we will see these rip-offs over and over. Why not? Call it unscheduled bonuses for employees.
13 agree | 13 disagree
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Joe said:
And the leadership rides on still collecting their paychecks after all this incompetence. I've got an idea. Since they are handling large sums of money, hook them all up to a polygraph. I bet not many would pass.
12 agree | 12 disagree
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Examiner Reader said:
Why hasn't Gandhi been fired??
17 agree | 15 disagree
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Examiner Reader said:
DC Government employees suspected of wrongdoing? I'm shocked, shocked!!!!
12 agree | 12 disagree
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Examiner Reader said:
There are agencies in the D.C. government where the organizational culture is one of a plantation and where employees are treated like servants and bullied and threatened. Such a culture is a potential breeding ground for unethical or illegal behavior. It should be made perfectly clear that such conduct, by managers especially, is unacceptable and should be followed up by zero-tolerance sanctions. No employee should have to tolerate a manager's bad moods (or illegal behavior covered up by vicous attacks) just because they can. Come on D.C. officials, institute zero tolerance as the norm. You just need a few examples to get the pooint over. Get rid of dysfunctional supervisors/managers ASAP!!!
18 agree | 13 disagree
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Examiner Reader said:
One issue that keeps cropping up is the conspiracy of silence among such a large group of employees to keep questionable behavior inside an office/group. Even the so-called office loans should have been a tip off, and the idea that a truely rich person would have stayed a D.C. worker for over 25-30 years is laughable. Also, it seems kids are not the only ones with ideas against snitching. One could ask whether this is culture based? It's called different things (let's keep this among ourselves or else), but means the same thing: keeping unethical or illegal behavior under wraps for some personal gain using subtle or overt threats. It doesn't have to be at the level like the tax office, but such subtle or overt threats should be stopped as soon as it seen or heard - Period!! D.C. government should have a "zero tolerance" for unethical, criminal, or inappropriate behavior that creates or strong arms an environment of silence or a conspiracy of silence. Solution: immediate dismissal!!
13 agree | 11 disagree
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Fenty - Bad Mayor said:
This is good for the District. The Mayor and Council members have been freely spending DC resident’s hard earned money. Now you will see if the Mayor can sweet talk his way into a balance budget. There has been frivolous spending over the years especially in DCPS (and now Rhee want to privatize public schools). Now its time to get back to basic and funding essential social needs, i.e. garbage pick-up.
49 agree | 58 disagree
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Joe said:
Shows you what a horrible work culture it is where nobody gives a crap about anything.
45 agree | 56 disagree
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Brian said:
This is what happens when a government anoints itself with the power to tax as heavily as DC's government does. It's not the first time in history history of our city's government either. While I'm appalled and angered, I can't say that I'm surprised. There's only one way to keep a pig from eating more than his fair share: DON'T OVERFEED THE PIG. It's the people's revenue, not the governments, and it's time to rally behind candidates for mayor and the council who will CUT TAXES.
64 agree | 53 disagree
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Examiner Reader said:
Jack Evans, chair of Council's Finance committee is acting as though this is no big deal...where is his part in this?
144 agree | 371 disagree
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Examiner Reader said:
just enough to cover the corruption loss?
146 agree | 138 disagree
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Anne said:
So it looks like the $50 million extra revenue might just cover the money stolen and the cost of the investigations. And an $80 million surplus? Nothing to brag about. A surplus means that taxpayers have been CHARGED TOO MUCH. How about a rebate?
108 agree | 133 disagree
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Examiner Reader said:
I understand from reading some of the articles that the particpants avoided detection by avoiding the electronic system that would have detected irregular transactions. A few simple rules requiring all transactions to be loaded would have caught this a long time ago. When I was in the Air Force and we awarded a contract manually it was required that the contract be loaded eventually with no exceptions!
146 agree | 111 disagree
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Foster said:
Wait a minute. They sold 600 million in bonds and are claiming a 50 million surplus? Or is the surplus before the sale of bonds? Or did someone simply move the funds back into the District's control from their bank accounts? These people could be dismissed as troubling scum. Unfortunately they are in charge.
123 agree | 110 disagree
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Complaino said:
Just think. Without the thefts they would have had a 100 million surplus. He's just making this announcement to make it look like he knows what he's doing. He doesn't.
362 agree | 118 disagree
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Examiner Reader said:
The people in charge are not very intelligent. There are suppose to be safe guards to detect if there is an increase in tax refunds. I think that all the staff should be replace with new people so that things like this will never occur again.
120 agree | 119 disagree
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DISGUSTED ON THE WATERFRONT IN SW said:
How stupid can one be NOT to detect this corruption!!! Clearly, management of Walters WAS involved in this scheme. It is obvious to anyone with common sense that the reason this department was in such shambles and was never audited was because management did not want THEIR thefts noticed. I'll bet, when it is all said & done, it will be revealed that previous managers had done the same thing as Walters on a smaller scale. They turned heads on what she was doing to keep her from exposing them. You don't need a PHD to see that! In fact, Gandhi, Lorigo, Newman and the rest of Walters' superiors probably received lavish gifts also. An audit of THEIR bank accounts will probably yield quite a few "questionable" deposits. Further, this IS the DC Tax Office, RIGHT? How did they find properties in NJ and OVERLOOK the condo on 4th St. SW owned by Walters? I quess this, too, was covered up to make sure she has a place to live. I say - GET RID OF ALL OF THESE CROOKS...starting with GANDHI!!!!
138 agree | 123 disagree
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Examiner Reader said:
If the scam had been discovered internally by OTR management or auditors, Harriette Walters would have seen that the scam was about to be discovered and she would probably have skipped the country. If the audit reports had been made available to OTR management, they would logically asked Walters, "Could you review these audit reports and get back to us with the documentation on these unusually high refund checks?" She would've left town the next day, I bet. The only reason she is in jail now and not skipped the country was because the alleged scheme was found by outside bankers who went to the FBI and US Attorney quietly. Internally, OTR employees and management did not know this investigation was going on -- so she had no reason to think that she was about to be arrested. If OTR had discovered the irregularities in the refund process, she would've been alerted and fled. So -- is it better that OTR didn't know but she is in jail, or what if OTR did know and she fled the US?
126 agree | 145 disagree
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Just another DC DAY said:
Every day that goes by more facts are revealed about how many characters were involved in this theft. How much of this is going on in the D.C. government in other branches? Probably 9 cents out of every dollar paid by taxpayers are stolen, and probably 21 cents of every dollar are wasted by lazy bureaucrats who don't do their jobs correctly and I would imaagine that and additional 42 cents out of every dollar is simply squandered by employees playing on the internet every day. Mayor Fenty needs to clean house and show the DC employees that this type of conduct is unacceptable.
140 agree | 377 disagree
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Montgomery Ward said:
Maybe Sears better check their bank accounts too.
124 agree | 114 disagree
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It's unbelievable said:
Just make sure his name was spelled correctly on the checks.
108 agree | 126 disagree
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DC POLITICIAN said:
It's GANDHI not GHANDI. Spell his name right and then maybe you can ask him to leave. Let's see what the results of all of this comes up with -- He's done too much for this City for us to turn our back on him now.
139 agree | 130 disagree
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BostonRay said:
One has to really laugh (LOL) for the obvious sophmoric attempts being made to cover up the involvement of the city council and indeed Fenty himself.
131 agree | 117 disagree
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fedupcitizen said:
Ms Gustus only crime was that she sign those checks. I smell a coverup. If this lady was due to retire why would she jeopardize so much. And if she was in on the money situation why was she still employed at Sears part-time?
150 agree | 121 disagree
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NC transplant in DC said:
Although there seems to be a preponderance of evidence against Diane Gustus as well, I find it interesting that the authorities didn't keep her detained in jail. Why ? Obviously she wasn't viewed as culpable as Harriette Walters. If she were thought to be a flight risk or guilty of having stashed away a vast quantity of money, surely they would have kept her on lockdown. Her testimony will prove to be pivotal and we don't know shiggidy until she comes forth, so much for all of the pontification, especially all of this FOOLISH racial pandering. The premise of trying to link race with criminality in this case is beyond absurd, it's just plain old race baiting. Barry, OJ, Michael Vick, Sharpton, Jackson nor Bo Diddley have one thing to do with the case specifics and only foolish persons would attempt to create establish a common thread. It would make more sense to attempt to convince people that pigs can fly.
115 agree | 117 disagree
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GAB said:
The problem with the District of Columbia Government is the tendency to view every issue from the lens of "I have mine -- I don't care about you." Power is the means to obtain wealth, whether it be a city councilman or a petty bureaucrat in the Tax Office. Worse, the poisonous reaction to race sours nearly every opportunity for the city to work with Congress and the neighboring counties.
121 agree | 110 disagree
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John Tyler said:
She wants to be reinstated to her job? My God, these people have gall. She should be shot for what she did. Instead she wants to go back to work for a few months so she can retire. How disgraceful can this situation get? Don't make any deals and throw them away for 30 years.
123 agree | 131 disagree
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Muckle John said:
My hometown of Chicago has long been synonymous with graft, greed corruption, but Washington makes Chicago look bush league!
133 agree | 134 disagree
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Examiner Reader...from SE said:
Why are people makeing this crime a race issue?? I dont care if she is black, white, hindu, or asia....she stole millions of dollars from hardworking taxpaying residents of DC. Some of you people commenting need to focus on the issue. I dont recall any racists comments about the Enron situation...or I guess that was OK..because the people involved were white. Stealing is wrong no matter what...and Im just so sick and tired of people blaming race for individuals actions. ***And to OJ Dimpton, I would like to know what your race is because if your caucasian, you will be a "minority" very soon. ***And I agree...with all the money she stole, you think that she'd get a better hairdresser....that blond hair is not only ugly, but ugly on her!!!
167 agree | 148 disagree
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Examiner Reader said:
If she didn't spend the money buying designer goods she will probably can not affort even if she retires what else do you expect her to do. Greedy fools
169 agree | 146 disagree
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Potomac Pete said:
The amazing part of this story is why the co-workers of these individuals didn't wonder why these people were living large on civil service wages. Doesn't say much for the IQ of some of our people in government...
152 agree | 143 disagree
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Examiner Reader said:
Question for the Examiner : Did any of reportedly stolen Rolex watches of Marion Barry came from Ms. Walters? Who else in the council could have accepted her good tidings "unknowingly" I might add.
208 agree | 160 disagree
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EWO said:
Ghandi is ultimately responsible for having safe guards in place to prevent this type of fraud. I don't trust him...he should resign. It's that simple.
169 agree | 130 disagree
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