Name that party--DC outrage scam

Colbert King pulls no punches in naming the party or the phony outrage over a $20 million fraud in the District of Columbia Tax Office.

Credit-taking and scapegoating are staples of a D.C. politician's life. But every now and then, our lawmakers outdo themselves.

Witness the D.C. Council's faux outrage over corruption in the Office of Tax and Revenue, from which more than $20 million in fraudulent tax refunds has vanished.

Case in point: Ward 2 Democratic council member Jack Evans, chairman of the Finance and Revenue Committee, which has oversight responsibility for the corrupt office.

After last week's hearing on the tax refund scam, Evans issued a news release with the headline "Evans Expresses Outrage Over OTR's Corruption Scandal." This was followed by a Nov. 21 news release: "Evans Expresses Outrage over Zoning Commission's 'No' Vote on O Street Market."

He does outrage well.

At the hearing, Evans announced a need "to learn what happened and find out what can be done to change the oversight of our financial management to stop the theft." "It is high time," he said, "that we inspect our money management more closely."

His colleagues professed shock that such a scam could have developed and lasted for at least seven years under the nose of Chief Financial Officer Natwar Gandhi.

Some lawmakers really seemed aggrieved to learn through their morning newspaper that D.C. Auditor Deborah K. Nichols had urged city leaders in 2004 to "closely monitor" the flow of real property tax revenue after she noticed a spike in the amount refunded to property owners.

Why, they wanted to know, didn't Gandhi take a closer look at the tax and revenue office after receiving the auditor's reports?

But, wait a sec.

Why should Gandhi be the only high-ranking official on the hot seat? What about the council?

Let's review the D.C. auditor's July 30 and Sept. 7, 2004, reports, which analyzed the city's cash collections against revenue projections.

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Nichols's July 30 report raised a red flag. She wrote that collection of real property tax was lower than the estimate, "in part, because of an increase in real property refunds." It stated: "Through the 2nd quarter, real property tax refunds totaled $11.9 million against an estimate of $7.3 million. Refunds exceeded the estimate by $4.7 million, or 63%. When compared with the same period in fiscal 2003, refunds through the 2nd quarter were up by $116%."

Nichols told council members that "District officials should closely monitor this revenue source in the 3rd and 4th quarter of the fiscal year."

Three months later, she hoisted another red flag.

Her Sept. 7 report to the council said that real property tax refunds through the third quarter totaled $21.3 million. She advised that those refunds were 105.7 percent higher than the estimate. Wrote Nichols: "By comparison, refunds through the 3rd quarter of 2004 were 149.8% higher than refunds through the 3rd quarter of FY 2003. Despite the fact that real property tax collections were above the estimate through the third quarter, officials should monitor this revenue source closely."

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Fiduciaries have a responsibility to look out for public funds the way they would their own funds. That means when you get a bank statement that indicates expenditures are way out of line with expectations, do you just put it in the file and forget it, or do you start digging in and find out what in the heck happened to the money. If they had, they would have found some employees who were converting the public's money to their own.

Corruption like that in DC is theft from everyone in the district. I cannot imagine any of the executives in public companies where I worked as general counsel not going ballistic over an audit report like that done by D.C. Auditor Deborah K. Nichols. I have also worked with numerous political subdivisions in the issuance of bond offerings and it is hard to imagine any of them ignoring such a report. It requires gross incompetence to miss something that big for that long. Officials who are that irresponsible need to be replaced.

Kudos again to Colbert King for excellent reporting on this issue. Will congressional oversight committees be looking into this mess? The NY Times indicates that "Representative Thomas M. Davis III, a Virginia Republican whose House subcommittee is involved with overseeing the District of Columbia, has called for a Congressional inquiry." The story does not say who the Democrat chairman of the committee is or whether he favors such an inquiry. The story indicates that city finances have produced large surpluses in recent years. That may have blinded some to the theft and fraud taking place.