Jonetta Rose Barras and Bill Myers, The Examiner
2008-05-05 07:00:00.0
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WASHINGTON -

A scathing audit of the city’s expensive computerized tax system was commissioned by a finance official who was later blamed for not doing enough to stop corruption in the tax office.

Sherryl Hobbs Newman was appointed director of the city tax office in 2005. In late 2006, she asked The Wendell Group and Advanced Concepts & Technologies Inc. to review the $120 million automated system.

“I thought it best to get a clear picture of what was there,” Hobbs Newman told The Examiner.

The system, bought when Chief Financial Officer Natwar Gandhi was in charge of the tax office, was failing 44 percent of the time, auditors found.

There had been other red flags. In 2004, D.C. Auditor Deborah K. Nichols warned the finance office that property tax refunds were surging and that the situation should be “closely monitored.”

As the Wendell-Advanced auditors were wrapping up their work, tax officials Harriette Walters and Diane Gustus were charged with ripping off tens of millions of public dollars through phony tax refunds. The alleged scheme dates back to 1989 and continued through Gandhi’s tenure as tax office chief.

After the arrests, Gandhi’s office sought to bury the Wendell-Advanced audit, sources inside the District government said. A draft was completed in February but has not been circulated outside the finance office.

The day the scandal broke, Gandhi fired Hobbs Newman. He said his office had the right checks in place, but his underlings had failed to use them properly.

Hobbs Newman told The Examiner she felt vindicated by the auditors’ findings.

“Clearly, leadership was not the source or cause of these thefts; they began and continued long before I arrived,” she said.