Kenyan McDuffie flipped on sports betting; what else can D.C. expect from its new finance chair?
By Jeffrey Anderson
His position was clear: Bypassing procurement law to award a no-bid contract to D.C. Lottery vendor Intralot so the District could launch sports betting before Virginia and Maryland was bad public policy.
“I just don’t think the ends justify the means,” Ward 5 Councilmember Kenyan McDuffie told District Dig in a January interview in his office. “A sole source lottery contract in lieu of competitive bidding does not justify being first to market anyway. It’s imprudent, and unwise.”
Chairman Phil Mendelson had introduced the Sports Wagering Procurement Practice Reform Exemption Act of 2019 (“Exemption Act”) at the urging of Chief Financial Officer Jeffrey DeWitt and Ward 2 Councilmember Jack Evans, then-Chairman of the Committee on Finance and Revenue.
Opposition from McDuffie could have doomed the initiative, given the middle ground he often stakes out between older incumbents seen as beholden to business interests and younger members more prone to progressive policies.
“My thought is that we should always be transparent and lean toward competitive practices. The law requires it, and given the history of this contract is extremely controversial, to go forward in the most open way possible is how the public will be best served.”
Something changed along the way, however, as McDuffie’s “No” vote in February in opposition to exempting the lottery contract from procurement practices turned into a “Yes” vote in July in favor of the no-bid contract award to Greek-owned firm Intralot and its local subcontractor Veterans Services Corporation (“VSC”).
McDuffie was not alone in flipping his original position, but he became a singular figure that July day when he emerged from a meeting in Mendelson’s office in possession of finance oversight authority that had been stripped from Evans, a veteran politician engulfed in scandal.
Along with his existing oversight of the District’s minority contracting program, McDuffie suddenly had oversight of the controversial $215 million lottery and sports betting contract, with colleagues lobbing accusations that he and Mendelson had struck a backroom deal.
It was a heady moment for a mercurial incumbent who avoids the limelight, who has stepped into Evans’s shoes and who as Chairman Pro Tem of the Council is now its second most powerful member.
And yet, other developments have even further elevated his profile in a complicated matter that could well land back on his desk in the weeks or months to come. Whether McDuffie will distinguish himself from his predecessor Evans is yet to be seen.
Two D.C. Superior Court judges have imposed a Temporary Restraining Order (“TRO”) on the sports betting contract award in a lawsuit filed by a local businessman who says he was deprived of bidding on the contract, which he says denies taxpayers of the benefits of competitive bidding.
The lawsuit filed by attorney Donald Temple on behalf of tech innovator Dylan Carragher says the Exemption Act is an illegal attempt to circumvent the seminal Home Rule Act, which birthed an era of self-government for the District, created the Office of the Chief Financial Officer (“OCFO”), and required it to comply with competitive bidding laws enacted by the Council, such as the Procurement Practices Reform Act of 2010 (“Procurement Act”).
In December, the Council almost unanimously approved a bill introduced by Evans to legalize sports betting. On January 3, according to the lawsuit, DeWitt wrote to Mendelson and asked him to expedite a waiver of the entire procurement code to allow the D.C. Lottery to develop “the technology platforms, gaming systems, and related services to launch sports betting in the fiscal year 2019.”
On January 8, Mendelson introduced the Exemption Act to give the OCFO “emergency” 90-day authority to award the $215 million contract to Intralot and VSC, owned by Emmanuel Bailey, who has held a 51 percent share in the joint venture known as DC09 LLC for the last 10 years. Approval of the emergency bill would exempt the combined sports wagering and D.C. Lottery contract from the requirements of the Procurement Act.
The Council approved the Exemption Act on February 19. By signing it into law, on February 22, Mayor Muriel Bowser “misconstrued its legal validity and the Council’s authority to effectively circumvent the Home Rule Act’s mandatory requirement that OCFO follow D.C. procurement laws,” the complaint states.
D.C. Attorney General Karl Racine’s office has said to the court that the Council exercised broad authority in amending procurement laws, not authorizing exemptions to them. “That is all that the Council did here,” his office claims. “Because [the Home Rule Act] merely subjects OCFO to the [Procurement Act], the Exemption Act does not in any way run afoul of the Home Rule Act.”
Furthermore, Racine’s office argues, Carragher has not demonstrated an ability to perform on the contract and cannot demonstrate taxpayer damages or a violation of the law. Therefore he lacks standing, the argument goes.
Temple says the District went forward not by amending the Procurement Act but by exempting a no-bid contract award from it. Nowhere in the process did anyone from the District characterize the move as an amendment, he says. An exemption, Temple says, requires an amendment of the Home Rule Act, which requires Council approval and a voter referendum, which did not happen here.
Racine’s office declined to comment for this story, but Temple had this to say: “In the first instance, the Council neither in its consideration of the Exemption law nor in the language of the law at any point described this Exemption law as an ‘amendment.’ Moreso, the Exemption law doesn’t change a single word of the procurement act. It is temporary and peculiar to a single transaction, the award of the lottery contract strategically and deliberately to Intralot.”
In an email to The Dig Temple elaborated, “Instead of following its own laws, the politics of the transaction are forcing them to justify with strained reasoning an illegal transaction.”
Progressives on the Council such as David Grosso and Elissa Silverman have opposed the no-bid initiative from from the start, while more moderate members such as Charles Allen and Mary Cheh approved the Exemption Act on first vote but then thought better of it.
“I’m delighted that the Superior Court Judge has issued a TRO,” said Cheh. “Maybe we’ve finally found a way to uncover the shoddy and unscrupulous circumstances that lead to this contract, and perhaps we’ll be able to start over in an honest way.”
While the TRO delivered a blow to the District’s pledge to launch sports betting in early 2020, it was just the latest piece of bad news for Mendelson, Evans, DeWitt and Bowser—and now McDuffie—key figures who are united on a matter that, if struck down by the court, could be a political disaster.
A pair of recent news stories raised concerns about the business capabilities of VSC. In August, The Dig reported on findings by the Maryland Lottery and Gaming Control Agency that VSC, which partnered with Intralot in a losing bid in 2016 to run their state lottery, lacked “fiscal integrity and resources,” brought “no business value,” and presented “unwarranted downside risk” to the venture, known as Gaming Innovations. (Bailey did not respond to requests for comment on that story.)
A few weeks later, The Washington Post, relying on Intralot’s financial statements, public records and interviews, reported that Intralot funded the creation of the DC09, provides staffing and operating expenses, has paid Bailey’s six-figure salary for the past five years and does all the work. (Bailey told the Post that VSC has played a central role in the joint venture. An official for the agency that monitors small business participation also told the Post that Bailey and VSC meet their contractual requirements and that the joint venture is in good standing.)
Silverman and At-Large Member Robert White, who like McDuffie first opposed the sports betting bill then later voted to approve the no-bid contract, reacted with concerns, and have asked Racine and the OCFO to undertake various types of reviews of the matter. McDuffie has laid low. He did not respond to questions for this story and his office declined to comment.
The timeline of events from approval of the Exemption Act in February to approval of the lottery and sports betting contract award in July offers clues to why he changed his position.
After voicing his opposition to the bill in early February in a losing 7-6 vote, McDuffie was conspicuously absent on the bill’s second reading a couple weeks later when it passed by a vote of 8-4. Over the next several months, the rationale for the no-bid contract started to look hollow, and the push for sports betting started to look desperate.
In March, Maryland Senate President Thomas V. Mike Miller Jr. declared sports betting dead until 2020, after which it would require a voter referendum, making 2021 the earliest possible launch date. Then Bowser indicated she intended to shift $20 million in prospective sports betting revenue away from dedicated funds for early childhood services and an anti-violence initiative—which McDuffie had fought for—and move them into the general fund.
Meanwhile, Evans, whose friend and business associate N. William Jarvis lobbied him on behalf of DC09, continued to face troubling revelations in an expanding corruption probe.
In June, federal agents raided Evans’s Georgetown home after a legal memo by a private law firm in a Washington Metropolitan Area Transit Authority investigation surfaced and alleged that Evans used his position as Chairman of the Board to benefit his personal clients. Evans made matters worse when he denied that the findings prompted him to resign as chair, and was forced to resign entirely.
All eyes were on Evans in early July as he attempted to salvage his position as Chairman of the Committee on Finance and Revenue by asking for an opportunity to speak directly to his colleagues. As a co-architect of the sports betting initiative—along with DeWitt—his fate as finance chair was becoming inseparable from a looming vote to approve a lottery contract award to Intralot.
Reporters packed into a conference room in the John A. Wilson Building as Evans’s white-collar criminal defense attorney Abbe Lowell hovered in the doorway, and members peppered Evans with questions. Absent—again—was McDuffie, who, when cornered afterward, told reporters he did not want to question Evans if Evans was not under oath.
McDuffie’s aloofness started to make sense during the last day of the legislative session as he sided with Evans, Mendelson, Ward 7 Member Vince Gray, Ward 4 Member Brandon Todd, and At-Large Member Anita Bonds in declining to strip Evans of all his committee assignments, and voted (along with Robert White) in favor of the no-bid contract award to Intralot.
His shift from opposing a procurement exemption, to approving a no-bid contract rooted in that exemption, to preserving Evans’s committee memberships, stokes differing reactions.
Attorney William Lightfoot, a former Council member and chair of Bowser’s last two campaign committees says McDuffie is aware of the great weight of responsibility for managing the city’s finances, and credits him for embracing that role.
“There’s no perfect answer,” Lightfoot tells The Dig. “It’s a lot of money at stake, and the tradeoff is between perception and securing revenue for city services. He made a decision to protect the financial interests of the city.”
Some are not as complimentary. Former Ward 5 Advisory Neighborhood Commissioner Deborah Smith-Steiner said, “I don’t know what’s going on with Kenyan. He goes whichever way the winds blow. You never know what he’s gonna do at any given time.”
Ward 1 resident Tony Norman, a land use lawyer with longstanding ties to Ward 5 who considers McDuffie a friend, agrees that his colleague can be expected to follow Evans in leaning toward the business community. “The rationale for urgency in awarding a no-bid lottery contract is simply not there,” Norman said. “That tells us there are other pressures persuading him to do it. He usually doesn’t go against the status quo.”
Signs abound that McDuffie’s flip on the sports betting and lottery contract means he is beholden to the lobbyist-driven, pro-business, pro-developer agenda favored by Bowser and Evans—and, increasingly, Mendelson. When he skipped the second vote on the Exemption Act, for instance, as his colleagues argued in opposition to a bill he too had opposed, McDuffie was with the Mayor on a business development trip to Silicon Valley along with his former chief of staff Corey Griffin, a member of Vince Gray’s 2010 transition team who has lobbied on behalf of DC09 to legalize sports betting.
McDuffie and Griffin were among the delegation of business and political leaders led by Bowser on an annual trip to International Conference of Shopping Centers in Las Vegas in July, billed as the largest retail real estate gathering in the world. While on that trip, Bowser announced a revised agreement for the Reunion Square mixed-use development in Anacostia, having worked out a deal with McDuffie, the developers and Ward 8 Councilmember Trayon White.
McDuffie and Griffin also made the scene—along with McDuffie’s cousin, Keith McDuffie, a friend of a McDuffie campaign fundraiser and subcontractor on the lottery contract—at Del Frisco’s Double Eagle Steakhouse, right after the Council’s final sports betting contract approval, where Bailey was celebrating his $110 million subcontract, according to multiple sources.
Just days later, the Greater Washington Black Chamber of Commerce, which counts Griffin, a partner with Global Government and Industrial Partners as a board member, recognized McDuffie with its “Business Influencer Award.”
Griffin told The Dig that he has no connection to the lottery and sports betting; McDuffie has publicly stated that his ties to beneficiaries of the contract award are not sufficient reason to vote against it.
There were reasons to vote for it, though: On the day of the final vote, reporters spotted McDuffie and Robert White coming out of a private meeting with Mendelson, shortly before casting their “Yes” votes in favor of the lottery contract.
McDuffie and White didn’t simply emerge as “Yes” votes; they emerged as beneficiaries of a committee re-shuffling engineered by Mendelson, who stripped Evans of his chairmanship of the finance committee, disbanded it and placed much of its responsibility under McDuffie’s purview as Chairman of the Committee on Business and Economic Development. (White ended up with oversight of WMATA under his Committee on Government Operations.)
Evans was wounded, but he held on to his position on the revamped committee, where his experience, institutional knowledge, connections and power of persuasion will be at McDuffie’s disposal. Asked what he expects from McDuffie in his new role, Reverend Graylan Hagler, D.C. Chairperson of Faith Strategies, a group that advocates for social and economic justice, says, “He’s not going to be independent, I can tell you that. He tries to act like he’s down with the community when he’s not. He plays smoke and mirrors.”
Yet despite public denials by Mendelson that he offered the committee to McDuffie in exchange for a yes vote on the lottery contract, there is evidence to suggest the Evans-Bowser crowd is looking to get its hooks into McDuffie—if they haven’t already.
Perhaps the most conspicuous connection is lawyer-lobbyist Thorn Pozen, who was retained by Intralot to opine on whether to avoid competitive bidding the OCFO could simply extend the existing lottery contract to include sports betting. (Pozen said they could, but OCFO lawyers disagreed.)
Pozen is the consummate insider: He is Director of Metropolitan Washington Airports Authority, former Special Counsel for the OAG, legal counsel to Bowser’s FreshPAC fund, and chairman of her constituent services fund. He accompanied her on trade and diplomatic missions to Canada and Israel.
A lobbyist for Digi Outdoor Media, a digital sign firm at the center of the Evans ethics scandal, Pozen’s firm also lobbied on behalf of DC09. Shortly before the lottery contract was approved, City Paper reported that his firm figures to make up to $300,000 as a subcontractor for “legal services.”
McDuffie turned to Pozen just last year for representation in an inquiry by the Office of Campaign Finance, which identified 52 business contributors to his 2018 campaign listed at a Baltimore City address for which he failed to file forms required to show that affiliated companies are not aggregating contributions in excess of legal limits, among other violations.
According to a June 12 report in the matter, OCF officials stated that McDuffie was able to reconcile most of his violations, but that his campaign has failed to provide the business contribution disclaimers, and has not communicated with OCF since December 18, 2018. (The office fined him $50 per day for the period of time for each day the campaign was non-compliant, from August 20, 2018 through December 1, for a total of $3,150.)
Campaign contributions underscore the perception that McDuffie is part of the in-crowd now.
Elected officials caution against drawing such conclusions, though the appearance that political money enhances one’s position when vying for public contracts and development deals cannot be avoided.
In this sense, McDuffie seems to be appealing to the same campaign contributors who enjoy easy access to Evans and Bowser, neither of whom are shy about what they will accept and from whom.
In his 2018 campaign, McDuffie took in $12,550 from friends, associates, clients and companies close to Evans. That includes money from Pozen, Bailey, Jarvis, and Greg Casten, who owns a restaurant and seafood company in Ivy City—in the heart of McDuffie’s ward—and who along with Jarvis is developing the historic site of the Alexander Crummell School. (The restaurant, Ivy City Smokehouse, has been the in-spot for Bowser events such as her birthday party in July 2018.)
McDuffie’s haul also includes contributions from the law firm Holland & Knight, whose partners Norman “Chip” Glasgow and Roderic Woodson are mainstays in Evans’s political orbit.
Holland & Knight has been a reliable fundraiser for numerous candidates over the years, but it also is land use counsel for Douglas Development Corporation, which has an enormous presence in Ward 5.
The company’s owner, Douglas Jemal, who contributed $2500 to McDuffie’s last campaign, recently decided not to lease property on New York Avenue in Northeast for a halfway house for returning citizens. McDuffie originally opposed the plan, but then dropped his opposition after a series of community meetings and a visit to the operator’s New York facility, by which time the plan was no longer viable and Jemal had pulled back the lease.
Hagler believes the marketability of the property played too great a role in McDuffie’s deliberation process, which dragged on until dropping his opposition looked like it was for show. When pressed, McDuffie denied any coordination with Jemal. “He changes his mind in the 11th hour and now supports the community but it’s BS,” said Hagler.
McDuffie also received political contributions from Forge Company and its owner Rusty Lindner, a friend and client of the consulting firm at the heart of the Evans ethics scandal; Richard Cohen, another Evans client with business before the city; and lottery subcontractor Okera Stewart, a friend of McDuffie’s cousin who held a fundraiser for him.
Some political insiders say that McDuffie has never presented himself as a true reformer. He voted “Present” on the first reading of the Campaign Finance Reform Amendment Act, telling D.C. Line, “What concerns me most is [that] this bill will create traps for people to fall into. People are able to see through the tactics that [lobbyists] employ. I’ve got faith in the residents of the District of Columbia to see through some of those tactics. Some of what’s in here is actually going to complicate this system.”
He was absent for the second reading,
Others told The Dig they don’t expect McDuffie to get steamrolled by Evans (or Phil Mendelson for that matter). Steamrolling might not be necessary: One lobbyist who keeps a running tally of voting records says that McDuffie and Evans vote together 75 percent of the time where business interests are concerned.
One thing is for certain: His flip-flop on the lottery and sports betting contract, which now has the District defending itself in Superior Court, has been a defining moment for McDuffie.
“He has the most power of any member other than Phil Mendelson, and look what he did in just the last six months,” says a longtime politics observer. “His impulse to be self-serving is his Achilles Heel, and he can’t hold up to a higher purpose.”
That purpose could be tested soon: Mendelson is poised to appoint a five-member ad hoc committee to review an ethics report on Evans by O’Melveny & Myers and recommend discipline if necessary. McDuffie has said he will serve if called upon. There’s little doubt he is on Mendelson’s short list.
