"If you put me back in there today, I could get each of you a check."

—tax scammer Harriette Walters, June 30

The greatest instance of municipal larceny in District history came to a quiet end this year with the sentencing of Walters, who led a ring that stole nearly $50 million from city tax coffers. Justice came for Walters in Judge Emmet Sullivan's federal courtroom, ending a string of pleas and sentences in the case discovered in 2007. But how much has changed since then? Natwar M. Gandhi, the man who oversaw the city tax office while Walters' scheme was absorbing enormous sums of taxpayer money, remains the District's chief financial officer. And Walters, while expressing deep regret and repentance upon receiving a sentence of 17-and-a-half years in prison, insisted in the above quotation that perhaps not all of the loopholes she opened have been closed.

More from LL's Quotes of 2009

That's what LL heard from a fellow spectator in Courtroom 24 of the E. Barrett Prettyman United States Courthouse this morning, while we waited for the greatest thief of public funds in District government history, Harriette Walters, to enter, along with man who had her future in his hands, Judge Emmet G. Sullivan.

Truth be told, Sullivan's role was not quite that dramatic. Walters and her attorney, Steven C. Tabackman and worked out a plea deal with federal prosecutors, so it was left to Sullivan only to decide whether Walters would get 15 years of incarceration or 18 years. Still, those three years were debated, quite passionately at times, by Tabackman, Assistant U.S. Attorney Timothy Lynch, and by Walters herself.

Walters entered the courtroom dressed in a blue garment, her hair short and braided. She wore glasses that she took off and placed on the table for most of the proceeding. At the beginning of the hearing, Sullivan brought Walters, 52, up to a podium answer a few perfunctory questions; she then sat back down while Tabackman did what he could to spare three years of her life.

What Tabackman had to do was somehow convince Sullivan that a crime of great heinousness deserved something other than the 18-year maximum—a term that seemed already light to many, given that it came a day after Bernard Madoff was handed a 150-year federal sentence for a fraud similar in nature if not scope. Tabackman's strategy was a combination of being perfectly direct ("She took the money of the District of Columbia when it was not hers, and that was a terrible things to do") and attacking prosecutors for their "demagogy" for pointing out, in their sentencing memo, all of the things that the city could have bought for the $50 million Walters and her accomplices stole—AIDS clinics, schools, so on.

After all, Tabackman pointed out, the District did run a sizable surplus many of those years. "They built a stadium!" after all. Surely no particular project went in need thanks to his client's pilferings?

"She has never tried to justify or excuse or mitigate in any way the seriousness of her conduct," Tabackman pointed out, and indeed Walters has taken full responsibility for her thievery. But the whole role of a defense lawyer at a sentencing is to justify in some way—to mitigate.

For instance, defending her record as a public servant: "Fact of the matter is, of all the units over there [at the Office of Tax and Revenue], when she was running it, it worked better than anything." Or her supposed munificence ("She said, giving away money helped me sleep at night"). Or describing how he became friends with his client. Or pointing out her "pretty complex psychological needs." Or laying out her drug abuse; how she once weighed 400 pounds and is "enormously insecure." Or contrasting her with the likes of Enron villain Jeffrey Skilling.

Walters herself, asked to make a statement, also was perfectly direct: "On Nov. 7, 2007, I accepted full responsibility for the part I played in the commitment of this crime....I stand before your honor in full repentance," she said in her soft Caribbean patois. "I made a decision not to lie anymore."

In the end, none of that remorse got Walters much anywhere.

Lynch, for his part, emphasized the scale of the fraud, and Walters' place in it at the "top of the pyramid." How she was "sophisticated"—a word he must have used a dozen or more times. How she "corrupted her friends...corrupted the Office of Tax and Revenue...corrupted a federally chartered bank...corrupted her family." How the investigation into her crimes spent untold manhours and government dollars. That sending Walters to jail for the full 18 years "sends an important message to those 34,000 people" working for the D.C. government.

And Lynch prevailed upon the notion that her years of punishment should equal her years of wrongdoing, dating back to 1989: "Eighteen years is something that has justice to it...There is a sense of justice here that someone who has corrupted out city for 18 years would have to serve 18 years in prison."

While Lynch made his arguments, Walters stared at the wall, then started writing notes to Tabackman.

Powerful arguments, but Tabackman and Walters, actually, did hit upon a mitigation that appealed to Sullivan: Walters' willingness to sit in a conference room for two days and explain to a panel of lawyers, accountants, and other investigators engaged by the D.C. Council, and explain exactly how she has able to perpetrate her fraud, across a span of time that Sullivan described as "shocking."

"Harriette Walters," Tabackman said, "helped them understand as well as anyone could."

Sullivan asked Walters at length about the information she provided and how it helped the city understand how she did what she did. At one point, the judge asked her to describe how investigators reacted to the information she provided. "They kind of sat back in their chairs, and said, 'Well...,'" she said

Walters' hometown cooperation apparently pulled on the civic heartstrings of Sullivan, long a resident of Shepherd Park.

Lynch, in his presentation, argued that the information that Walters provided the District investigators "was not materially different" from what she told the feds—the information that led to the plea deal in the first place. "That would be double-counting," Lynch argued. "It's a good thing; it's a nice thing...but it's not materially different."

Sullivan didn't buy that; he appreciated that his fellow citizen of the District of Columbia—his fellow corrupt, thieving, greedy, "extremely intelligent, extremely sophisticated" citizen—had helped make the city a better in the small way that she could.

For those two days helping District authorities, he knocked six months off that 18-year maximum sentence. And Sullivan, knowing this city's government all too well, acknowledged that it might not do much good.

"The scheming is not going to stop," Sullivan said. "It's going to continue."

Speaking for herself, Walters said, "I stand before your honor in full repentance. I never blamed anyone for my part in what I did." She went on to detail the cooperation she'd given to authorities investigating the scam and insisted that without her assistance, the scam could have been perpetrated all over again.

Once Walters finished up, Sullivan said, "It's a shame you couldn't have used your talent and your brilliance to help the D.C. government."

At that, the hearing recessed. After the break, the prosecution will make its case as to why Walters should serve the max. We'll have another report later.

In April 2007, Gandhi decided not to accept an offer to become Amtrak's CFO, and he told his employees in an e-mail about his decision. Walters replied to that e-mail, writing, "Sir, I would like to say thank you for keeping us inform of a decision that would have impacted the employees within the CFO Cluster. I appreciate that you respected us to provide follow up to the recent news reports that we read and heard over the pat week. Thank You!"

Replied Gandhi, "Thank you. Keep up the good work."

That's among the juicier revelations contained in the 122-page report that caps an yearlong investigation commissioned by the D.C. Council and performed pro bono by law firm WilmerHale and accounting firm PricewaterhouseCoopers. The report details massive failures in oversight and the existence of a "dysfunctional work environment" at the Office of Tax and Revenue.

The text of the report and highlights thereof to come.

UPDATE, 1:44 P.M.: A PDF of the report is available.

Here's what the report has to say about the "dysfunctional work environment" at OTR:

Many offices within the OCFO are beset by what might be described as a "culture of silence." In a nutshell, employees seem to have entered into an implicit compact not to question others' work, lest their own work be scrutinized. This culture of silence created an environment in which Walters could process real property tax refunds with little interference from her coworkers and managers. There were a number of indications suggesting that something was amiss in the Adjustment Unit, not the least of which was Walters' extravagant generosity toward co-workers. But no one spoke up, raised a question, or considered whether such generosity was appropriate. An anecdote perhaps explains the silence: when one senior OCFO manager asked his assistant, after the discovery of the fraud, why no one reported the misconduct of members of the Adjustment Unit, she responded: "snitches get stitches." When asked, during her interview, what she would have done if she had discovered a scheme similar to hers, Walters said she would not report misconduct of another Union employee.