Byline: Deborah Simmons, THE WASHINGTON TIMES
The federal evidence is shocking: Several named and unnamed co-conspirators committed mail fraud, bank fraud, money laundering, interstate transportation of stolen property and other crimes to defraud American taxpayers in general and D.C. taxpayers in particular of tens of millions of dollars over several years. The news is barely a week old; the investigation, of course, is ongoing.
The grand total of the property-tax scheme rises regularly. Initial reports estimated $14 million. Yesterday, that figure hit $30 million - but nobody's stopped counting.
Any public scandal spells bad news (even when sex isn't involved). One of this magnitude has the potential to stink up the East Coast - from City Hall to Capitol Hill to Wall Street.
D.C. Mayor Adrian Fenty said yesterday that the bleeding has "stopped." Fortunately for all of us the mayor isn't heading up any probe. While we can all appreciate the fact that some of the key people involved in the scam are now behind bars and several city employees who should have noticed the red flags have been fired, the bottom line is that this criminal enterprise was carried out right under the noses of the mayor and the D.C. Council.
Thing is, the thieves weren't all that clever. The affidavit (which made me angrier and angrier as I read it) lays out a fairly sophomoric inside job. Employees who worked in the D.C. Office of Tax and Revenue used bogus documents to bilk taxpayers. The co-conspirators set up bank accounts and fake companies, and approved six-figure property-tax refund checks to those companies. They then doled out the money to each other and used it to to buy real estate, automobiles (including a Bentley) and foolishness. One of the suspected thieves had an annual D.C. government salary of $81,000 but had spent more than $1.4 million in Neiman Marcus since the fall of 2000.
As the affidavit says on page 7, the scheme was effective because "on first glance, [it] had the veneer of legitimacy."
There were warning signs that said officials should have given the scheme second and third glances. For one, property-tax refunds spiked considerably between fiscal 2001, when D.C. had begun a financial recovery, and fiscal 2007, when the city won its best-ever bond ratings. During that period, refunds for property taxes rose from $10.5 million in 2001 to $26.4 million in 2004 to $20.7 million in the fiscal year that just ended on Sept. 30. In fact, 2004 was the year when the most important red flag was raised: That summer, D.C. Auditor Deborah Nichols urged city officials to take a closer look at the refunds because they had jumped an astounding 105.7 percent over projections.
Now, those numbers have the attention of everyone in City Hall. While the FBI, IRS and federal …