Claude A. Allen, who resigned last month as President Bush's top domestic policy adviser, was arrested this week in a suburb of Washington in connection with swindling Target and Hecht's stores out of more than $5,000 in a refund scheme, police said.

Allen, 45, a former Raleigh resident, has been released on his own recognizance and is awaiting trial on two charges, felony theft scheme and theft over $500, said Lt. Eric Burnett, a police spokesman. Each charge is punishable by up to 15 years in prison.

Allen, a former deputy secretary for the Department of Health and Human Services who in 2003 was nominated for a federal appeals court seat, was appointed the president's top domestic policy adviser last year at the start of Bush's second term. That made him the highest-ranking African-American on the White House staff.

Working out of a small office on the second floor of the West Wing, Allen shaped administration policy on such issues as health care, space exploration, housing and education.

After news of Allen's arrest surfaced Friday, White House officials provided The Associated Press with an account of their knowledge of the events that led up to it.

The night of Jan. 2, after the alleged incident at the Target in Gaithersburg, he called White House chief of staff Andy Card to inform him of what had happened. The next morning, he spoke again, this time in person, with Card and White House counsel Harriet Miers, assuring them it was all a misunderstanding, press secretary Scott McClellan said.

Allen told his bosses there was merely confusion with his credit card because he had moved several times. "He assured them that he had done nothing wrong and the matter would be cleared up," McClellan said.

Allen told White House officials later that he wanted to resign because the job was too stressful on his family. His last day at the White House was Feb. 17, McClellan said.

Upon Allen's resignation, Bush said, "Claude is a good and compassionate man, and he has my deep respect and gratitude."

The president learned of Allen's planned departure and the January incident in early February, but because Allen had passed the usual background checks and had no other prior issues that White House officials were aware of, "He was given the benefit of the doubt," McClellan said.

"If it is true, no one would be more shocked and more outraged than the president," McClellan said. Allen has had no contact with the White House since his arrest.

As Bush's top domestic policy aide, he frequently briefed the president and traveled on Air Force One, and he sat in first lady Laura Bush's box during the State of the Union address Jan. 31. Two days later, he traveled with the president to Minnesota, briefing reporters about Bush's education and alternative energy proposals.

The alleged scheme

Allen first came to the attention of Montgomery County police after a manager at a Gaithersburg Target store called the department Jan. 2. Montgomery detectives were able to document Allen's other alleged crimes from Oct. 29 to Jan. 2, some of which were captured on camera, Burnett said.

Burnett said Montgomery police contacted the White House to verify Allen's identity after the Jan. 2 incident, but that was the extent of their communication with the administration.

This is what police said happened Jan. 2:

Employees at the Target in Gaithersburg spotted Allen putting merchandise in a shopping bag. He then walked to the guest services desk, produced a receipt and received a refund.

After getting the refund, Allen left the store without paying for additional merchandise in his shopping cart.

A store employee stopped him, and police were called to the store. Officers issued a citation charging him with theft under $500 but did not arrest him. Court records show that prosecutors dropped the misdemeanor charge, which is not unusual in cases in which detectives are considering filing more serious charges.

Detectives soon learned that the incident was not an isolated event, Burnett said.

He said investigators were able to document 25 fraudulent refunds for items including a Bose home theater system, clothes, a printer and items worth as little as $2.50.

Allen would purchase an item, take it to his car, return to the store, select the same item, take it to the counter and get a refund based on the receipt for the merchandise in his car, Burnett said. "He would get the money back or the credit" on his credit cards.

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