An employee of the District’s Office of Tax and Revenue filed hundreds of fraudulent tax returns and swindled D.C. taxpayers out of more than $300,000 in a multiyear scheme, federal prosecutors said, adding another stain on the record of the city’s tax office.
In a court filing, federal prosecutors said that Kimberle Davis, a "control technician" in the OTR, helped prepare 282 fraudulent D.C. tax returns while she also worked a part-time job at a tax preparation company, 2FT Fast Facts Tax Service. Those filings generated $304,909 in income tax refunds.
Along with the local returns, prosecutors said, Davis and unindicted co-conspirators filed 973 fraudulent federal returns that netted an additional $3.8 million in refunds.
More troubling news for Chief Financial Officer Natwar Gandhi, who oversees the tax office, surfaced hours later when he disclosed that federal regulators have opened an "informal inquiry" into his agency.
In a letter to city leaders, Gandhi said his office would "fully comply" with the request by the Securities and Exchange Commission for copies of audits and other internal reviews conducted during a span of nearly three years.
|Who is Kimberle Davis?|
|Davis joined the District government in 2002. As an employee of the Office of Tax and Revenue, she worked as a "control technician" focused on the homestead exemption and made about $53,000 a year. A city official, who demanded anonymity, said the District was in the process of terminating her employment.|
A spokeswoman for the SEC declined to comment.
But the charges of conspiracy and first-degree theft, first reported by Washington City Paper, were poised to trigger more public scrutiny of an office that has experienced significant turmoil during Gandhi's tenure.
According to authorities, Davis played a simple role in the alleged plot by providing "clients with false charity receipts to be used in the event the clients were audited" and checking District computers to see if those individuals were facing audits.
"Davis knew that the income tax returns being prepared for 2FT clients were fraudulent because she prepared her own false income tax returns while working at 2FT and created her own false supply of documents," prosecutors wrote.
Prosecutors said the conspiracy's aim was to "enrich" the owner of the firm, who has not been charged, by allowing the company to charge more for having secured higher refunds and developing "repeat customers and word-of-mouth referrals."
Prosecutors laid out their case in a court filing that indicates a guilty plea is imminent. A plea hearing on charges of conspiracy and first-degree theft has been scheduled for Oct. 31.
An attorney for Davis, who has been on paid leave since June, could not be reached.
Gandhi spokesman David Umansky said federal authorities began probing Davis' activities after the agency's internal auditors detected trouble.
A spokesman for the U.S. attorney declined to comment on the role of Gandhi's office in the investigation, which Umansky said took more than a year to complete.
Umansky also said it appeared Davis had violated tax office policy by working with the external firm.
"OTR employees may not work for a tax preparer," Umansky said.
At-large D.C. Councilman David Catania, a Gandhi critic who described the episode as "a particularly clever scheme," said he was unsure of what Gandhi could have done to prevent the plot.
"I'm not sure how he can play defense against that. These are people using inside knowledge outside of his office to defraud the city," Catania said. "It does speak to a larger issue in terms of the quality control we have of the hires."