D.C. businesses want the city to bail them out
By Jeffrey Anderson, additional reporting by Pete Tucker
Numerous members of DC2021, the group of business moguls and developers who recently asked Mayor Muriel Bowser and the D.C. Council for hundreds of millions of dollars in tax relief to rescue the D.C. economy, have profited from their ties to two prime figures accused of insider self-dealing in the last couple of years: former D.C. Councilmember Jack Evans and former CEO and President of EagleBank, Ron Paul.
The list of businesses—33 of the biggest players in town— consists of real estate companies, sports team owners, hotel and entertainment operators, restaurant groups and political insiders that have flourished for more than a decade in a thriving economic era that is now in jeopardy.
At least 14 of them are either EagleBank clients or companies whose contact information Paul provided to Evans in 2016—or both—after advising him to set up a private consultancy that Evans then used to peddle influence in the John. A. Wilson Building.
District Dig has identified at least 15 participants that have been involved in more than 50 high-end construction projects over the last five years—many of which received loans from EagleBank and/or benefited from tax abatements, financing incentives and government subsidies, according to Unified Economic Development Reports from the Office of the Chief Financial Officer.
Almost half of those projects are located in Ward 2, which Evans represented for three decades while running the powerful Committee of Finance and Revenue for 20 years.
EagleBank is not affiliated with DC2021, though the distancing makes sense: Its parent company, Eagle Bancorp, Inc. is beset by legal costs associated with government investigations into the bank’s—and Paul’s—relationship with Evans; a federal class action lawsuit against Eagle Bancorp alleges securities violations and names Paul and several executives including the president and CEO.
Hovering over the nest of incestuousness that is the D.C. business and political establishment is Evans, whose private consultancy had a business retainer with EagleBank—and a pair of companies owned by Paul—at the same time he promoted the interests of their respective clients and partners before the City Council.
Evans had also cut himself in on deals financed by EagleBank back when Paul was its president.
Reactions to DC2021’s proposal have ranged from skepticism to outrage. Haven’t these companies, individually and collectively, benefited enough from public financing over the years, many want to know.
Ward 3 Member Mary Cheh observed that DC2021 made no connection between tax breaks and the problems facing city residents, workers and small businesses hardest hit by the coronavirus pandemic and the recession that D.C. Chief Financial Officer CFO Jeffrey DeWitt projected will create a revenue shortfall of around $800 million in 2021.
At-Large Member Elissa Silverman was bothered that developers have no trouble getting financing in good times, but now want to shift the risks to the public in bad times as well? “Do we want to bail out the big cheese, or the little guy?” said Silverman, a staunch advocate for the working poor and middle class.
Why not focus the stimulus on small businesses and individuals who pay the rent in all of D.C.’s shiny new buildings, she asked. “Is this the best way to do it, to let the relief filter down? Why not have the relief filter up?”
An even greater frustration for grassroots advocates is they see no chance of Bowser standing up to businesses that have been at the public trough for years.
“Grassroots voices and small businesses, without political connections and access to capital, will bear the brunt of the COVID19 recession,” said Parisa Norouzi, Executive Director at Empower DC. “And the Mayor will continue her policy of only getting near ‘safe’ political insiders and inner circle members—those who she has bought off with government grants and contracts, and those who have bought her favor through campaign contributions and a pledge of allegiance to her administration.”
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DC2021 embodies the city’s rampant gentrification, even as elected city leaders have pledged to reform schools, end homelessness and overcome an affordable housing crisis.
Its chief organizer is PN Hoffman founder Monty Hoffman, who in turn personifies D.C.’s open-wallet approach to growing its population and revenue base: His development team was slated for $293 million in subsidies as the lead developer of The Wharf, according to a 2013 WAMU investigative project.
After Hoffman convened DC2021, and DC2021 produced its report, Evans began shopping it around as fodder for an op-ed—to no avail—then showed it to Colbert King of The Washington Post, who penned a column on the challenges facing the District:
Restaurant and hotel closures costing $6 billion in lost sales and revenue; an 8 percent increase in unemployment; $700 million reduction in revenue per month due to lack of tourism.
To beat back the devastation, King reported, the group proposed a one-year, $346 million tax abatement for all restaurant, retail, hotel, sports and entertainment businesses, and suspension of franchise, property recordation and transfer taxes.
DC2021 also wants to tap the city’s $1.43 billion “rainy day fund,” withdraw funds from a $123 million reserve held by Events DC, and take out a Treasury bond that would allow the District to borrow against a fifth of its revenue.
Such relief, DC2021, said, would save 10,065 businesses and 172,399 jobs, including 80,000 resident jobs.
“The District is facing the most serious financial crisis since the mid-1990s,” Evans told King. “The mayor and the council will have to make difficult and unpopular decisions to reduce spending in order to balance the budget and keep the city solvent.”
Evans ought to know. He’s had his foot on the gas pedal of city finances for decades. He comes from a legacy of lawmakers who, as D.C. was climbing its way out from under the federal Control Board, advocated for a budget balancing maneuver known as “the fifth quarter.”
There isn’t an arena, stadium or other major venue that he doesn’t claim credit for, often after persuading his colleagues to approve tax incentives for his friends and clients—or clients of the law firms where he worked for decades while self-censoring his own ethics filings.
Evans’s upfront advocacy for DC2021 might not be the best look for the group. Not only is he politically toxic, with a federal investigation not formally resolved, he has the audacity to run (with public campaign financing) for a seat he vacated before the Council could expel him, after government investigations revealed his self-dealing.
His advocacy for the group also raises concerns about his relationships with its members, and about how much of it involved Paul and EagleBank over so many years.
In fact, it’s hard to tell where Evans’s and Paul’s mutual interests begin and end.
For instance, in 2010, as The Dig has reported, EagleBank approved an out-of-state, $200,000 loan for Evans, according to property records in Palm Beach County, Florida, shortly before Evans prodded the Council to increase the amount of District funds the city could deposit in local banks. Evans recorded a $200,000 promissory note, secured by a home he owns in Del Ray Beach, just one week after he paid off his 2003 mortgage, the records show.
Such loans are unusual for a community lender, even more so in Evans’s case considering his advocacy for the bank, and the fact that he went back to EagleBank in 2013 for a revolving line of credit up to $400,000, according to a separate mortgage he recorded on May 21, 2013.
In 2016, as Evans was casting about for outside employment, it was Paul who suggested he establish a private company and work as a consultant for EagleBank.
Once Evans set up his business, which he registered at his home in Georgetown, Paul provided him with a six-page spreadsheet containing names and contact information for 57 companies that could be potential clients. (Andrew Giambrone reporting for The D.C. Line got the scoop, with documents he obtained through the Freedom of Information Act.)
At least 10 of those companies are affiliated with DC2021, and according to public records, many of them have financed projects through EagleBank loans.
Only in the last year did it become known that Evans and Paul had already signed an agreement placing Evans on retainer with EagleBank for “information and advice,” when needed.
The contract extended to Paul and a pair of real estate investment and property management companies he founded in 1987, Ronald D. Paul Companies and RDP Management, Inc., known collectively as RDP.
An investigation by the law firm O’Melveny & Myers last year that the Council ordered (at taxpayer expense) found that Evans received $37,500 and $25,000 in the first year from EagleBank and RDP, respectively, for services “regarding business matters.”
In the second year of the contract, the figure jumped to $50,000 each from EagleBank and RDP.
Evans has yet to identify any actual work he did for Paul or his companies.
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DC2021 affiliates have received their share of public funding, but the company at the top of the list (by virtue of alphabetical order) is a major EagleBank customer that was on the list of prospective clients that Paul shared with Evans.
Such relationships can seem benign when power brokers pose for photos in the society pages and trade press. Others, if one peers through the chummy veneer, are more complicated.
Akridge Investment is a first generation real estate firm founded by John E. “Chip” Akridge III, in 1974. Among his bona fides, Akridge has worked closely with the Council to craft developer-friendly legislation and was the first ever to utilize tax increment funding from the D.C. government. (TIFs are a form of subsidy that allow recipients to divert taxes in order to pay for infrastructure improvements associated with new construction.)
On the Gallery Place project, his company, in a joint venture with Western Development Corps., received more than $73 million in tax increment financing, according to the Washington Business Journal (WBJ), then turned around and sold their interest in 2014 for $120 Million. (Akridge and a different partner also received an $11 tax exemption from the D.C. government for the renovation of the Anthony Bowen YMCA into a mixed-use development.)
But Akridge is a major EagleBank customer as well, and a partnership with RDP on a number of projects has come with more than the ordinary amount of risk. (Paul’s retention of Evans as a “consultant” has come with its own drawbacks.)
In 2017, Akridge told WBJ he had seven active projects with RDP. Property records show that in December 2016, EagleBank made a $63 million loan to an Akridge-RDP joint venture at 1711 Rhode Island Ave. N.W., to buy the downtown YMCA and replace it with what the developers referred to as a “trophy” office space at 1701 Rhode Island Ave.
Two years earlier, the two had teamed up on a major project in Reston that was not so straightforward.
According to an archived web page that The Dig located using the Wayback Machine, RDP at one time had listed 1760 Reston Parkway as a project that was “Under Development.” Records on file with the Delaware Division of Corporations show that a firm called 1760 Reston Investors LLC was established on October 31, 2014; on the same day, RDP registered a business in Maryland called 1760 Reston Managers LLC, located at the address of RDP’s headquarters in Bethesda.
Less than two weeks later, on November 12, 2014, a firm that Akridge controls, JACo 1760 Investors LLC, registered in Delaware as well. Delaware U.C.C. records show that company located at Akridge’s business address in D.C.
The U.C.C. filing shows EagleBank as a creditor for both Akridge’s company and RDP’s company—though The Dig could not confirm the amount of the loan. (JACo is the name Akridge uses on many of his real estate joint ventures, according to public records in D.C. and in Delaware, where he has registered 50 such LLCs.)
Akridge and RDP developed another “trophy” office building with ground floor retail and amenities out in Tysons Corner in 2015, though not with EagleBank financing. EagleBank, however, is financing another Akridge office tower at 1101 16th Street N.W., according to the developer’s website.)
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Borrowing from EagleBank while partnering with Paul has caused Akridge’s name to appear in a class action lawsuit against EagleBank’s parent company, Eagle Bancorp, in the U.S. District Court for the Southern District of New York.
In July, a group of investors filed a class action lawsuit alleging Paul and other executives made false and misleading statements that inflated Eagle Bancorp’s stock price, causing the price to drop after the company publicly disclosed “investigations and related document requests and subpoenas from government agencies.”
An amended complaint filed by a single plaintiff, first reported by WBJ, alleges that “EagleBank played a role in financing real estate projects that Paul personally backed through his own private firm, RDP Management, and his use of trusts and [LLCs] that the plaintiff claims helped avoid scrutiny from federal regulators.”
Essentially, the plaintiff charged that Paul would receive a fee or equity interest in a project, or arrange a favorable EagleBank loan to another venture, a practice known as issuing “cheap debt.”
“Despite Paul burying these deals through layers of limited liability companies and his family trust, in fact, Paul had ‘the power to exercise a controlling influence’ in the ventures and projects that received EagleBank loans, and thus these ventures and projects were related interests subject to regulation and disclosure,” the complaint states.
“Such a tying arrangement is a violation of the bank bribery statute, which makes it a felony for the officer of a financial institution to solicit or accept anything of value from anyone ‘intending to be influenced or rewarded in connection with any business or transaction of such an institution.'”
The beneficiaries of such transactions were referred to as “Friends of Ron,” the complaint states.
Though the complaint identifies three joint ventures between Akridge and RDP, there is no suggestion of wrongdoing on the part of Akridge or his company.
Paul has vehemently denied all of the allegations. He did not return calls from The Dig.
Whether or not Akridge qualifies as a “Friend of Ron,” safe to say that Evans, as a consultant who cannot point to any work he did while on retainer with EagleBank and Paul’s companies, would qualify in one way or another.
This has not worked to Paul’s benefit: Last March, citing health reasons, Paul “retired” from EagleBank, shortly after federal agents served subpoenas on Bowser and the Council related to Evans and his clients, including EagleBank, and Paul.
Since then, a number of executives and directors have bailed as well.
WBJ has followed the story closely, and reported just recently that the SEC investigation into “related party transactions” and the relationship of the bank (and Paul) to a “local public official”—Evans—have caused a spike in legal fees and tarnished an otherwise respected institution.
Despite the stain of scandal, Akridge and his firm have stood by EagleBank.
“We’re part of the same community, support the same charities, root for the same local teams,” Akridge told WBJ. “We have a meaningful relationship with the people of EagleBank.”
Akridge declined to discuss the class action or anything related to Paul, RDP or Eagle Bancorp. He wasn’t keen on talking about Evans either, though he said he did not know that his name was on the list of prospective clients Paul gave to Evans.
But he patiently responded to questions about what he describes as the community mindedness of DC2021. Akridge said he has no idea why EagleBank is not associated with DC2021, which he described as a group of people “willing to put their shoulder to the wheel and figure things out.”
“It’s a whole bunch of people who said, ‘sure, we can help the mayor get the facts and figures and help the city.’ There are complicated [problems] that the city isn’t able to solve by itself, but the private sector has the resources to do it.” Besides, he says, the local economy is not just for big companies and developers.
“This is to help all people. We’re all in trouble. It’s not just restaurant workers. Hotel and restaurant owners are in trouble too.”
Yet Akridge did not sound all that comfortable when asked why there are no grassroots groups, tenant associations or labor organizations in DC2021. “I’m not sure there’s not,” he replied. “I just don’t know.”
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Parisa Norouzi is keenly aware where grassroots advocates stand with regards to DC2021, and a second group of insiders Bowser recently tapped to guide her in “re-opening” the city.
“DC2021’s corporate elite launched their astroturf ‘Save Our Jobs’ campaign online, but many of the same political players will get to pitch their cause directly to the Mayor, who hand picked them to serve in her ReOpen DC Advisory Group,” Norouzi said in an email to The Dig.
“Under the guise of promoting ‘equity,’ both [groups] will promote a continued subsidization of the city’s gentrification economy, justifying it with the trickle down effect of low wage, low opportunity employment for the masses.”
Many see D.C. as the gentrification capital of the country, and Evans as its standard-bearer. In the insular world of D.C. business and politics, being a “Friend of Jack” can be as beneficial as being a “Friend of Ron.”
In January 2011, the website Greater Greater Washington reported that Buzzard Point was on the short list of possible locations for a new soccer stadium for D.C. United—another member of DC2021.
The following year, Evans said that finding a new home for D.C. United was imminent. “I would say we are in final negotiations on the soccer stadium,” he said at the time, singling out a site diagonally across South Capitol Street S.W. from Nationals Park. (The family company of the Nationals’ owners, Lerner Enterprises, is involved with DC2021 as well.)
“It is a perfect area, bringing a lot of synergy with the baseball stadium,” Evans said of the $700 million publicly financed baseball stadium that is still being paid for. “There’s a lot of support for a soccer stadium because it doesn’t involve huge amounts of money.”
Well, not exactly.
The plan, in 2014, was for the District to acquire property owned by Akridge on Buzzard Point and enter into a 30-year ground lease with D.C. United, in exchange for the rights to purchase, lease back to the District and eventually redevelop the Frank D. Reeves Center at the corner of 14th and U streets for mixed use purposes.
The deal also called for a land swap with Pepco, which owned a pivotal site on Buzzard Point, in exchange for District property at 1st and K streets in Northwest.
According to a private independent cost-benefit analysis of the Soccer Stadium Development Act, in 2014, the stadium was supposed to come in at $286.7 million—by far the most expensive in Major Soccer League history—with the District contributing 46 percent of the cost of land acquisition, remediation and horizontal construction.
Among the findings of the analysts, including former city administrator Robert Bobb, was that the District had agreed to receive $11.2 million less than market price for the Reeves Center and pay $19.4 million more than market price for the properties at Buzzard Point.
Though Akridge and D.C. United contributed $4.9 million to offset the overpayment on the land for the stadium, a consultant’s report inflated the estimated net benefit to the city by $71 million over the 30-year lease term. (Sources familiar with the matter say Evans pushed for the higher figure by insisting the estimated net benefit include the value of the Reeves Center, which the city already owned.)
After the error was corrected, according to a letter to the Council, Bowser took office and nixed the Reeves Center as part of the deal. D.C. United would still pay more than half the cost to build the stadium, but would receive $43 million in property tax abatements over the lease term. (The Council later removed a proposed $7 million sales tax abatement.)
Akridge didn’t want to sell his land, however, which was a necessity to building the stadium. After the District seized it in an eminent domain proceeding, he learned that he received a settlement far below what he felt entitled to. A judge agreed, and awarded him a substantial settlement that exceeded the city’s $19 million overpayment by another $13 million. (Akridge says he still doesn’t think he got a fair deal.)
Two other pieces of property were necessary to build the stadium: a parcel owned by a scrap metal company, which cost the city $15 million, and an industrial lot belonging to a real estate company owned by “Friend of Jack” and Kastle Systems owner Mark Ein–yet another DC2021 participant.
Ein, a billionaire with a variety of interests, including an Esports team, the Washington Kastles tennis team and Washington City Paper, says he had been looking for and investing in properties in that area as early as 2005.
Ein just happened to find himself at the right place at the right time.
Land records show that he acquired the site on Second Street in Southwest through a limited liability company on February 7, 2011, for $2,175,000. He sold it to the District for $10,325,920, on October 27, 2015.
The Council approved the final development agreements and ground leases on June 30, 2015, with D.C. United, Rollingwood Real Estate, Super Salvage and Pepco. (The O’Melveny investigation concluded that on three occasions that same year, Evans took official action to influence support for the Pepco-Exelon merger while seeking a job with Manatt, Phelps & Phillips, which represented both Pepco and Exelon. [He got the job.])
After the dust cleared, the cement was set, and the ribbon had been cut—with Evans, per custom, standing next to whoever was holding the giant scissors—D.C. United had its brand new stadium, on July 10, 2018.
By the time it was completed, at the precise location that Evans singled out in 2012, the overall cost had climbed to about $400 million, with the District bearing a little less than half of that amount.
Soon, ubiquitous signage appeared in and around the stadium that would burn the name of a local institution into the brains of soccer fans from around the region:
D.C. United had announced a five-year partnership with EagleBank to be its official bank, after a series of banking and financial services and a $25 million funding package for a state-of-the-art clean energy and water program.
EagleBank has since discontinued its sponsorship deal.
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District Dig will continue to examine the power brokers of DC2021 that will be guiding the District out of the financial desert, as well as the history of dealings involving Ron Paul and Jack Evans.
