Cassandra Claire began posting The Draco Trilogy, a Harry Potter fanfic, on FanFiction.Net in 2000, and became extremely well known in the Harry Potter fan fiction community for her work. Though she was known to have plagiarized from June 2001, the full extent of the plagiarism was not public knowledge until 2006. The debate over whether or not Cassandra Claire was a plagiarist caused a schism in the Harry Potter fandom that lasted several years.
The Full Story
In mid-June 2001, Avocado e-mailed Cairnsy, an administrator at FanFiction.Net, with evidence that Cassandra Claire had inserted, without citation, a significant portion of fantasy writer Pamela Dean's work into the ninth chapter of Draco Sinister, the second installment of The Draco Trilogy:
There was a reference to "Fire Letters" in an early chapter of Draco Sinister
There was a footnote in chapter 9 which said "Credit for the inspiration for this conception of the wizarding afterlife goes to a book called The Secret Country, alas, I no longer recall who wrote it." (My reaction upon seeing the footnote was "Pamela Dean wrote it, and Ted doesn't die until The Hidden Land")
Chapter 11 made use of Nightmare Grass, Dean's version of shapechangers, and two specific lines I recognized (emphasis mine):
She seemed to be involved in a battle with her own hair, shrieking and flailing with her arms at nothing.
"You're all right?" she said, in a quavering voice. "Your bones aren't coming out?"
I recognized both of the bolded lines immediately as originating in the Nightmare Grass scene in The Secret Country. (Page numbers here are from the current edition, and can be verified using Amazon's "Search Inside This Book" feature.)
86: "Laura was engaged in a vicious battle with her own hair."
87: "'It's you?' said Laura. 'Your bones aren't coming out?'"
The use of the specific recognizable lines in chapter 11 bothered me because there was no citation at all referencing Pamela Dean or any of her books in chapter 11. 
Further research proved that the text of Chapter Nine of Draco Sinister showed a great resemblance to that of Chapter 14 of The Hidden Land, and Chapter Eleven of DS also had a great deal of text from both The Secret Country and The Hidden Land. 
The complaint was not an official plagiarism complaint, but rather a question of whether it was and what she should do about it.
Cairnsy recognized that inserting this much uncredited text with only a vague and inaccurate disclaimer ("Credit for the inspiration for this conception of the wizarding afterlife goes to a book called The Secret Country, alas, I no longer recall who wrote it") was not the same thing as using well-known quotes from television series. Cairnsy told the reader that this would be taken care of. (Note, an official report was never filed.)
Cairnsy shared this information with others on FanFiction.Net staffers including Xing Li, Meimi, Stephen Savage and Michelle Savage. Another administrator, Flourish, who was in charge only of maintaining FanFiction.Net's Terms of Service at that time, was not informed. A few other people in the "inner circle" of FanFiction.Net administrators were also informed but were told to keep quiet. Nonetheless, one of them e-mailed Cassandra Claire anyway, informing her that she had been reported to FanFiction.Net for plagiarism and suggested that the story be revised before Cassandra Claire's account was deleted from FanFiction.Net. Claire, who later claimed to be on vacation at that time, did not respond to this or other warnings regarding the disputed passages in her fic. 
Roughly a week after the last e-mail had been sent to Claire, FanFiction.Net removed Cassandra Claire's author account for plagiarism. Officially, this occurred on June 22, 2001. 
See the event's timeline for more chronological information.
Examples of Cassandra Claire's original disclaimers for Draco Sinister
These disclaimers date to June 28, 2001 and links are provided to where they were archived. As of 2005, the disclaimers were not changed to acknowledge the plagiarized material or to credit the original author.
Draco Sinister - Overall - Disclaimer posted by web site archive
"Disclaimer: The plot and what ever things Cassandra Claire invented belong to Cassandra Claire. All characters from the Harry Potter series belong to J.K. Rowling. Anything else belong to who ever owns it. Don't sue me cause all I own is this site. Minzzer"
Draco Sinister - Chapter 9
"Disclaimer: Not mine, JK’s. There are quotes in here from Red Dwarf (back when it was funny), Blackadder, Buffy, and I realized I’d criminally neglected Terry Pratchett so far, so made up for it by nicking several quotes in this chapter at once." 
Draco Sinister - Chapter 11
"Disclaimer: Not mine, JKR’s. All of it." 
Draco Sinister - Chapter 15 Cookie
"This cookie contains a line from Buffy. She can stake me personally if it bothers her."
Subject: cassie & Rhyseen DS15 cookie June 27, 2001
stellabymoor at fwgreatesthits  has a Cassandra Claire disclaimer which she claims to date from January 9, 2001 for Draco Sinister 4. The disclaimer says:
Disclaimer: I’ve mentioned all this before, but I suppose it bears repeating: none of the characters are mine, they all belong to JK Rowling (obviously) and Draco’s & others’ lines come from many sources: some are made up, some inspired by many sources, including but not limited to : Buffy the Vampire Slayer, Forever Knight, Due South, the X-Files, Woody Allen, the Handbook for Evil Overlords, obscure British sitcoms, Monty Python, Shakespeare, and I could go on and on, but rest assured that no maliciousness is intended and I am making not one cent (even more obviously!) off writing this, nor would I even want to. If you want to play spot-the-quote, feel free! More fun for everyone.
ignatius at fwgreatesthits  claims to have a Cassandra Claire disclaimer which dates from before the booting off FanFiction.Net for Draco Sinister 9. The disclaimer says:
"Credit for the inspiration for this conception of the wizarding afterlife goes to a book called The Secret Country, alas, I no longer recall who wrote it."
Examples of plagiarism
Cassandra Clare was originally banned from FanFiction.Net for the unattributed Pamela Dean quotations as those quotes alone were enough to convince FanFiction.Net's staff of her guilt. However, much of the plagiarism also consisted of three or four lines in sequence from dialogue from various television shows (most often Buffy, Angel, and Blackadder) or very close similarities to/paraphrasings from other works of fiction:
I would like to specifically mention that, in both scenes, the three women look familiar, making the male viewpoint character uneasy. The women draw closer; they have two lines of dialogue. One licks her lips. The scene is interrupted by the arrival of an angry character who makes "imperious" gestures. The viewpoint character observes that the angry arrival seems like a fantastic creature (Dracula demonic, Fleur like a Fury). The women protest, the angry arrival orders them to go. The specific mentions of the word "imperious" and "fury" in both scenes, the fact that the scenes have the same structure, and additional shared text suggests the scene in Draco Sinister is uncredited paraphrase. 
The lines of dialogue would occasionally be cited, but with only one out of several lines noted, and the exact episode of the show it was taken from is never noted.
Below are some examples that others have pulled from her work of allegedly plagiarized materials:
"It's not in my nature to be self-sacrificing," said Draco matter-of-factly. "I don't know if this is just some lingering vestige of that Polyjuice spell or what. But if it is, and this generous phase that I am in passes, and you are still making Hermione miserable, then I will come back here and I will yank out your ribcage and wear it as a hat. Understood?"
"Understood," said Harry, grinning despite himself. "And a big gold star for imagery."
~”Draco Dormiens” 
Buffy: I have had a *really* bad day, okay? If you have information worth hearing, then I am :::grateful for it. If you're gonna crack jokes, then I'm gonna pull out your ribcage and wear it as a hat.
Whistler: Hello to the imagery! Very nice.
~Buffy:The Vampire Slayer, “Becoming, Part II” 
“They had come to a low bridge over a narrow stream. Draco stopped dead. Harry, who hadn´t been paying attention, was about to step on the bridge when Draco reached out a hand and caught at his sleeve.
"I wouldn't walk on that if I were you, Potter," he drawled.
Harry stepped back quickly and looked at Draco with suspicion. "Why? What'll happen?"
"Standard procedure," said Draco, "is to leap fifty feet into the air and scatter yourself over a wide area while screaming at the top of your lungs."
~”Draco Dormiens” 
“Edmund: Finished? I think the obvious point is this: we'll go straight out to the dugout and do the painting from there. You do the most imaginative, most exciting possible drawing of German defenses from your imagination.
George: Oh I see, now that is a challenge.
Edmund: Quite. Come on, let's get out of here.
George: Oh sir, just one thing. If we should happen to tread on a mine, what do we do?
Edmund: Well, normal procedure, Lieutenant, is to jump 200 feet into the air and scatter yourself over a wide area.”
~"Blackadder Goes Forth; “Captain Cook.”" 
Draco Sinister, Chapter 11
It moved towards them swiftly, but before Harry had time to do more than step back, Draco had raised his sword and put the blade through its face. It made a noise like a bucketful of water being poured into a patch of mud, staggered back and collapsed to the ground, blood pouring from its head.
As Draco and Harry gazed in horror, the dead-looking guard on the floor wavered and blurred and became a squat, scaly creature that leaped to its feet and charged at Draco again.
He swung the sword at it and managed to slice open its throat. This did very little good, as it immediately turned into a tall man carrying a longsword, and charged at him. Harry stopped thinking and let the sword in his hand do its work - he had already discovered that if he cleared his mind, it seemed to come to life in his hand, or, more likely, that the undercurrent of knowledge from Draco was able to work its way up and direct his arm. But every time he tried to analyze what he was doing, he lost his footing or missed a stroke, so he stopped trying to plan and let his instincts take over, catching at the unfamiliar names of the motions he was making as they fled under the surface of his mind: bind, double bind, circle parry, riposte.
He quickly slaughtered the longsword man-shape, which turned into a wolf, which turned into a large, fox-like creature, which turned into a petite beautiful woman in a leather breastplate. This last incarnation startled Harry so much that he staggered back and nearly lost his footing. He had barely a chance to blink when something silver whipped over his head and embedded itself in the shape-changer´s chest. It was Fleur´s knife.
Pamela Dean, The Hidden Land
179: "Ted put the sword through the face of the third person who attacked him, and stared horror-struck at the result."
Pamela Dean, The Secret Country
139: The sword rang as Patrick drew it, and the beast made a noise like a bucketful of water thrown into a patch of mud.
Pamela Dean, The Hidden Land
172: "In that time, three squat scaled things came at Ted, who swung at them all and missed, and were dispatched by Matthew."
173: "Once he had cleared his mind, the sword seemed to come to life; or more likely, that undercurrent of knowledge from Edward was able to work its way up and direct his arm. Every time he tried to analyze what he was doing, he missed his aim and had to be rescued by Matthew. After the third rescue, Ted stopped trying to analyze anything."
182: "But as each man went down he blurred and wavered and became a small dark woman in leather armor; and as those were injured they turned into large fox-like creatures; and when they crumpled up bloodily they became inky shadows with red eyes, hugging the ground. Ted's and Randolph's swords went into them and came out smoking, but the shadows seemed none the worse for that."
More examples can be seen, including plagiarism of Roger Zelazny's Nine Princes of Amber and Guns of Avalon, Tanith Lee's A Lynx with Lions, and Gene Wolfe's Shadow of the Torturer, on Bad Penny.
Cassandra Claire on the original Plagiarism accusation
The following are some quotes from Cassandra Claire on the situation:
"All I can say is that beyond never hiding the fact that quotes in the stories are taken from Buffy, Monty Python, Red Dwarf, and so on, I've clearly stated it in my disclaimers for the stories, there have been multiple (and in-depth) discussions on PoU about the quotes with people having fun identifying them, and I even have an unofficial quote-nabbing game with some of my fellow authors."
Subject: [cassie & Rhyseen] *is quietly mystified* June 23, 2001
"As for The Secret Country, I also stated in my disclaimer that Draco's trip to the afterlife was an homage to Pamela Dean, and a friend of hers (Pamela Dean's) wrote me after I posted it nd said she loved the homage, thought it was great. There was some discussion of Dean's books on the PoU list as well afterwards. I was planning to do some crossover stuff with it down the line. "
Subject: [cassie & Rhyseen] *is quietly mystified* June 23, 2001
"I am not planning on changing the style in which I write my stories, or ceasing to include homages and references where I wish to. "Plaigarism" is, by dictionary definition, borrowing work from a source and passing it off as your own. I have borrowed quotes, and quite intentionally paraphrased that scene from Pamela Dean, and was quite clear in stating that I was doing so. I was *not* passing off the Buffy quotes or any other reference as my own work (as anyone on this list clearly and surely knows.) However, as far as ff.net is concerned (from what I can tell) they do not care that I clearly cited the works I borrowed from. "