Back to previous section of report Back to Inspector Generals main page Forward to next section of report
Government and People
1. The Public - Private Partnership ConceptWhen Mayor Anthony WILLIAMS took office, his vision for the city of Washington, D.C., included safer streets, better schools, clean and healthy neighborhoods, affordable housing, accessible and affordable health care, and a vibrant downtown. Subsequently, he has touted the fact that his commitment to bring prosperity to neighborhoods has led to the infusion of more than $1.5 billion in private investments and has attracted major businesses to the city. According to Mayor Williams, "We're no longer just a city of monuments, memorials and museums. With new economic and employment opportunities, we're moving out of the shadow of the past and becoming a city of the future." (Mayor WILLIAMS' Calendar, January 9, 2001, Phone Call to Washington Post - Talking Points Mem. at 4)
During the course of his interview with the OIG, the Mayor was asked to comment on the concept of public - private partnerships. He stated:
I just received illustrative and I thought instructive help from other mayors that I visited before I was inaugurated. And I was impressed by the strong public-private partnerships that existed in these communities - communities like Indianapolis; or Detroit; or Portland, Oregon; or Phoenix, Arizona. Subsequent to that I traveled to Cleveland, Ohio . . . and I was impressed by the civic leadership, the major non-profit entities in that city, business entities in that city, certainly some of them regulated who were joined [in] a very strong partnership with the city. And I was simply trying to build that same kind of unit and teamwork here in our city . . . . [I]t was certainly always my expectation that these funds were always raised for public benefit. Certainly there is the understanding that if I do a good job as mayor and I pave enough streets that - that redounds [to] my benefit.(WILLIAMS Tr. at 20-21)
(WILLIAMS Tr. at 19)
The first formal public-private partnership was initiated in June 1999 and was active for a little over a year. During the course of its existence, the 501(c)(3) non-profit organization formed from this partnership raised close to $2 million, far more than any other partnership activity described in this report.VI-31 "Millennium Washington," as the partnership concept was first known before its formal incorporation, was designed by Mayor WILLIAMS initially to provide an opportunity to promote the city of Washington, D.C., the nation's capital, on the occasion of the new Millennium. Dr. Abdusalam OMER, the Mayor's former Chief of Staff, appointed in April 1999 after having previously served as Budget Director, Office of the Chief Financial Officer at the time that Anthony WILLIAMS was the Chief Financial Officer, stated that Millennium Washington was expected to be a "collaboration" between the local business sector, the White House, and the District government. The strategy for Millennium Washington was to capitalize on the national Millennium celebration being planned by the White House and Smithsonian Institution by organizing and staging an equivalent but less elaborate celebration for the city on its "Main Street" - Constitution Avenue.
Dr. OMER could not recall who actually initiated the concept of a city celebration of the new Millennium, but believes it may have originated during the Mayor BARRY administration. Henry "Sandy" McCALL, a businessman and political supporter of Mayor WILLIAMS, having previously worked on the WILLIAMS mayoral campaign, became the Mayor's first Deputy Chief of Staff for External Affairs, and made clear that toward the end of June 1999, Dr. OMER told him specifically that Mayor WILLIAMS wanted the District government to host a Millennium New Year's celebration for the city. Dr. OMER explained to McCALL that the celebration was to be a partnership between the Executive Office of the Mayor (EOM) and the community. He was further told that it had the endorsement of the Mayor and that it would be part of his official duties as Deputy Chief of Staff for External Affairs to "spearhead" the effort. He recalled Dr. OMER promising a budget of $500,000 for the Millennium Office. Dr. OMER claimed he made no such promise. McCALL understood Millennium Washington to have been organized for three purposes: 1) to provide a vehicle by which the District could celebrate the New Year and the Millennium; 2) to put a national spotlight on the city; and 3) to speed up the procurement process to pay for planned activities. By June 1999 the concept of Millennium Washington began to take shape. As originally envisioned, the celebration would last for the better part of a week and cost upwards of $3 million.
However, because of funding difficulties, as explained below, the celebratory events were scaled back to just a New Year's gala to be held over a twenty-hour, two day period from December 31, 1999, through January 1, 2000. Millennium Washington activities were to be in the nature of a family-friendly festival that was intended to showcase the city's sights and sounds. Most events were to be free of charge and held along a four-block section of Constitution Avenue, N.W; they were collectively identified as "Main Street Millennium," thereby distinguishing them from the more elaborate federal Millennium celebration conducted over the same period of time on the Mall. There were to be two major performance stages and a variety of community and business sponsored exhibits. Temporary pavilions would highlight the history, development and culture of the city. Speaker corners were designed to celebrate the First Amendment; wandering actors would be dressed in historic garb and represent historical figures.
The concept of Millennium Washington quickly evolved, with the knowledge and approval of Mayor WILLIAMS, Dr. OMER and McCALL, to incorporate the 200th anniversary of the arrival of the U.S. Congress to the city of Washington, D.C., in a series of community events to be held throughout the city during the course of the new year. Dr. OMER stated that Main Street Millennium began as an official function of the EOM, and that he approved the expenditure of approximately $80,000 of EOM funds to hire temporary contract employees, or consultants, to assist with the initial development of the city's celebration of the New Year. Dr. OMER stated that the District's fiscal year (FY) 2000 budget included a line item associated with the EOM's Millennium Office and that the EOM continued to fund the project until Main Street Millennium concluded. McCALL worked out of the offices of the EOM on the 10th and 11th floors of 441 4th St., N.W., a location also referred to by McCALL and others working for Millennium Washington as One Judiciary Square. Millennium Office staff employees initially consisted of a combination of EOM government employees and temporary contract employees, all of whom worked out of District government office space at 441 4th St., N.W. Numerous District government employees promoted and developed Main Street Millennium on government time and as part of their official duties.
McCALL worked with Hyong YI, then Special Assistant to the Chief of Staff, EOM, to hire contract employees with District government funds. District government space, office equipment and furniture were provided to EOM contract employees at no cost to Millennium Washington. Dr. OMER asserted that he authorized this activity under his authority as Chief of Staff and without the approval of the Mayor. In approximately July 1999, McCALL began working on the Millennium project full-time and the Mayor changed his job title to Special Assistant. Dr. OMER expected Millennium Washington's Main Street Millennium celebration to cost approximately $1 million and he anticipated receiving financial assistance from the federal government. With this expectation, Dr. OMER and McCALL approved the expenditure of District government funds to pay Main Street Millennium start-up costs. DR. OMER believed that funds expended from the EOM's budget or elsewhere in the District budget would be reimbursed after Congress approved the District's FY 2000 budget.
Dr. OMER clarified that Congress earmarked $50 million in the FY 2000 District appropriations bill for economic development within the District. Per Congressional request, the District government submitted a spending plan for these proposed economic development funds, which included funding for the EOM's Millennium Office. Dr. OMER believed the funding request was approximately $1 million, with an explanation in the plan that the Millennium celebration would promote the city and attract and retain businesses - a worthy economic development purpose. Dr. OMER stated that there was no alternative means, or backup plan, to fund the Millennium celebration in the event Congress did not approve this item in the economic development funds spending plan.
At some point after October 1999, it became clear to Dr. OMER that Congress would not fund the economic development plan. (Congress formally rejected the use of any appropriated FY 2000 funds to support Millennium Washington when the District's budget was passed on November 17, 1999.) Dr. OMER then attempted to use $3.5 million from a reserve fund to offset Millennium Washington expenses. However, according to Dr. OMER, Congress placed reporting requirements and other restrictions on the reserve fund's use and he concluded that this fund was not a viable funding option. Because of the breadth of the undertaking and the size of the anticipated expenses, other funding options, such as the Constituent Service Fund for citizen-service programs, were not helpful. Further, with respect to District government funds that might have been available to McCALL, procurement rules required competition in contracting. By the summer of 1999, McCALL realized that the time-consuming government procurement process would take too long to be a practical mechanism to obtain goods and services for the Main Street Millennium celebration, which was now just a few months away. Also by this time, the EOM had broken off negotiations with a prospective private event promoter. There was a general consensus on the part of everyone associated with Millennium Washington that event planning should have started two years earlier and funding sources secured at a much earlier date. Nevertheless, the EOM moved forward because, according to McCALL, "This is what grown-up cities do. They celebrate incredibly rare experiences . . . . We are determined to be a grown-up city." (The Washington Post, November 1, 1999, at B3)
According to Valerie HOLT, then Chief Financial Officer for the District government, by early fall, Dr. OMER became "frantic" in his search for funds to pay for Millennium Washington's early expenses. As detailed below, he and McCALL explored the feasibility of using the Washington Convention Center Authority (WCCA) and the D.C. Lottery and Charitable Games Control Board (DCLB) as funding vehicles for Millennium Washington.
DR. OMER and McCALL both conceded that, from its inception, Millennium Washington's Main Street Millennium celebration was intended to be a public-private partnership and that private donations were anticipated and needed. The Main Street Millennium events themselves were intended to raise money to help defray expenses. Vendors were charged fees and Millennium Washington sold its own trinkets and other Millennium and Bicentennial paraphernalia. Nevertheless, the inability to find public funding sources, coupled with the looming deadline for the start of the Millennium, left McCALL with no choice but to seek substantial funding from the private sector.
2. The Millennium & Bicentennial Commission
According to McCALL, he and the Mayor agreed to approach James KIMSEY, co-founder of America OnLine and chairman/CFO of the Kimsey Foundation, a non-profit organization, and ask him to chair a public-private partnership to be officially known as the Millennium & Bicentennial Commission (Commission). KIMSEY received a July 26, 1999, letter from the EOM asking him to consider chairing the Commission. (Ex. MW 1) Later, he received a follow-up call from McCALL, concerning the same issue, wherein McCALL asked KIMSEY to lend his name to the city's Millennium and Bicentennial celebration. KIMSEY made no commitment at this time; he then received a telephone call directly from the Mayor who again asked him to chair the Commission. Again he made no commitment. McCALL called KIMSEY a second time, explaining that the EOM wanted the Commission to consist of high profile business and community leaders and that KIMSEY's presence as chairman would lend credence to the Commission and its purpose. Thereafter, Janet HOWARD, Vice President for Coca-Cola, and Bill McSWEENY, whose wife worked for the D.C. Commission on Arts & Humanities, paid a follow up visit to KIMSEY and, at the behest of the Mayor, again urged him to chair the Commission. This time KIMSEY agreed.
Beginning in July 1999, KIMSEY worked to recruit business and community leaders to support the Commission by lending their names as Commission members and/or by providing monetary support. An official Commission brochure and a Millennium Washington website stated that the year 2000 in Washington, D.C. would be a year of on-going cultural, artistic and historical events designed to celebrate the nation's capital and its bicentennial. The year-long commemoration was described as including historic trails projects, artists' markets in the parks, and lunchtime neighborhood lectures. (Ex. MW 2) According to KIMSEY, the men and women recruited to join the Commission all had a strong interest in helping the District. He declared it to be a wonderful opportunity to have a catalytic event for the city. He expected Commission members to lend their names and energy to the project, but to also contribute to a "war chest." (The Washington Post, November 3, 1999, at B1) KIMSEY initially envisioned a major marketing and media effort, with event banners, advertisements and souvenirs, and with corporate sponsorship underwriting the majority of program activity. Although the Commission had no particular fundraising target, KIMSEY stated, "I'm going to try and raise as much money as I can." Id., at B2. Mayor WILLIAMS had equally high expectations for the Commission, which he believed would "foster a real sense of respect for our city and sketch a vision for our city into the next century." Id. at B3.
Initially, KIMSEY used official District government letterhead stationery to communicate in writing to his friends in the business and civic communities to ask them to serve on the Commission. (Ex. MW 3) According to KIMSEY, with the exception of elected officials, everyone listed as commissioners on the Commission's letterhead stationery was asked to donate money to Millennium Washington, either in their personal capacity or on behalf of their businesses. A review of Millennium Washington's records confirmed that most Commission members donated money. Eventually the Commission obtained its own stationery that included the District of Columbia seal and a return address of Office of the Mayor, Suite 1040, One Judiciary Square, Washington, D.C. Id.
3. Millennium Washington's 501(c)(3) Non-profit OrganizationAlthough it is not clear exactly who initiated the idea, KIMSEY and McCALL agreed that a 501(c)(3) non-profit organization, to be known as Millennium Washington-Capital Bicentennial (MWCB), should be set up as the vehicle to accept donations. (Ex. MW 4) KIMSEY understood the tax advantages associated with non-profit charitable fundraising and knew that this would appeal to his friends and acquaintances in the business sector, who he hoped would be more inclined to donate funds for the Millennium celebration if their donations were tax deductible.
McCALL then engaged a law firm to draft Articles of Incorporation for MWCB. Its stated purpose was to support, fund and conduct events, festivals and other celebrity activities for the benefit of the public and to commemorate the new Millennium and the Congressional - move Bicentennial. (Arts. of Inc. - Millennium Washington - Capital Bicentennial) The board of directors included Marie DRISELL, then Special Assistant to the Mayor for Boards and Commissions; Katherine DONNER, then contract employee to Millennium Washington and Creative Director for MWCB; Gregory McCARTHY, then Director of Policy, EOM; and McCALL. By October 1999 this new organizational entity had obtained federal tax exempt status, was lawfully incorporated in the District, and was authorized and approved to conduct business and to solicit.As a private non-profit entity, MWCB could raise funds, enter into contracts (without the restrictions of government procurement safeguards) and otherwise conduct business independent of the District government. However, McCALL served as its president and worked for the MWCB full time after June 1999 in his official capacity as a District government employee with the position of Special Assistant to the Mayor at a salary of approximately $105,000. There is no evidence that McCALL received a second salary from MWCB or anyone else. McCALL claimed that he solicited advice from the Office of Corporation Counsel as to the propriety of setting up MWCB. However, no record could be located of such contact or of any advice that may have been rendered.
DRISELL advised that McCALL presented her with the incorporation papers and asked her to sign her name as treasurer. She stated that she was "just a body" and treasurer in name only and that the only duties she performed in this capacity was to sign approximately ten checks from one of the MWBC checking accounts. She expressed her concern about the legitimacy of the corporation in view of the fact that there was never an organizational meeting to vote on officers or to draft and adopt by-laws.
During October 1999, McCALL approached James DAY to be Executive Director of MWCB. DAY had recently begun working as the Mayor's scheduler and, after resigning from that position, agreed to take the job. McCALL recalled that someone from the White House, whom he could not remember, might have recommended DAY, purportedly for his expertise in planning large events. McCALL presented DAY with a personal services contract, whereby he would begin working as a consultant for MWCB at a fee of approximately $10,000 per month, but with McCALL as his immediate supervisor. It was DAY's understanding that funding for his position came through the Office of Economic Development. He submitted his time sheets to McCALL's assistant and his first paychecks were from the District government. McCALL hired other EOM staff under the same confusing arrangement, whereby they were hired by the District government under personal service contracts but for the purpose of working for a private non-profit organization.
DAY recommended to McCALL that he hire David GREEN as Managing Producer to assist with organizing and managing Millennium Washington events. McCALL agreed and entered into a personal services contract with GREEN at a rate of $7,500 per month. From November 1999 to February 2000, DAY, GREEN and other MWCB support staff hired by McCALL worked out of EOM office space at 441 4`h St., N.W. However, DAY in particular was seldom in the offce. Some interviewees, to include KIMSEY, criticized both DAY and GREEN for their time away from the office, for minimum event production and for their inability to secure a financially solvent operation. Some MWCB employees cited DAY for hiring his friends as employees and contractors, and then paying the contractors fees that were far in excess of the value of their services. KIMSEY has been particularly vocal, asserting publicly that their malfeasance in event management and lack of financial responsibility borders on the criminal. (The Washington Post, January 11, 2002, at B l) Once MWCB became a non-profit organization, McCALL understood that District government procurement rules did not apply and that event planning could move along much faster. He ignored bids submitted by contractors pursuant to a solicitation to provide event production for Main Street Millennium and gave the project to Allen TUBIS, president of Barbecue Battle, Inc., who was not one of the original bidders. McCALL stated that he selected TUBIS because he was known for sponsoring an annual barbecue festival on Pennsylvania Avenue and because he was less expensive than any of the bids that had been submitted. TUBIS was paid $100,000 for work he performed in November and December 1999.
Approximately nine additional individuals were hired by MWCB. Some were reassigned from the EOM's Millennium Office, some were new hires, some worked out of their residences and some worked at the EOM. For the time period beginning with MWCB's incorporation until it was moved out of the EOM in early January 2000, almost everyone who was associated with MWCB was confused as to whether MWCB was a District government entity or a private organization working out of District government space. The employees themselves were not sure. Some thought they were working for MWCB but received District government checks. Everyone knew, however, that MCCALL was in charge and that MCCALL was a District government employee. MWCB's internal Operation Plan added further to the confusion:
(Ex. MW 5b at Ά2)
No one knew what "instituted" and "commissioned" meant. Dr. OMER was concerned with the use of the term "commission" and advised McCALL to stop using it so as not to confuse it with the Millennium Washington. McCALL advised that KIMSEY came up with the term, although there was never any formally organized commission.
MWCB's status was also confusing to the private sector. For example, in approximately February 2000, a letter on EOM stationery bearing the Mayor's signature was sent to the Administrator of the U.S. General Services Administration (GSA) seeking federal assistance in obtaining office space for MWCB. (Ex. MW 6) Eventually, GSA was able to accommodate this request and issued a Revocable License for Non-Federal Use of Real Property. DAY signed the document as Executive Director of Millennium Washington (not MWCB) and as licensee. Elsewhere in the document the name and address of the licensee is listed as the Office of the Mayor of the District of Columbia - Planning and Production Group for Millennium Year events, 441 4th Street, N.W., Suite 1040. (Ex. MW 7) As the document notes, it is also in the nature of a hold harmless agreement with enumerated obligations on the part of the licensee.
However, it is not clear who the licensee is, either DAY representing MWCB or the Mayor representing the EOM and the District government.To promote the two-day New Year's Main Street Millennium gala, MWCB printed flyers and other promotional material under the official name and title of the Mayor. MCCALL also had the EOM print Commission letterhead paper at District government expense. The letterhead contained the District seal and the Mayor's name and title in addition to that of KIMSEY as
Commission chairman. (Ex. MW 3) By implementing this practice, MWCB erroneously represented to individuals and corporations communicating with MWCB that it was a legal instrumentality of the District government. The manner in which McCALL operated the private entity MWCB led some donors and others to believe that Millennium Washington activities and Main Street Millennium events were official activities of the District government when, in fact, they were private activities of MWCB.The District government has the authority to support and even sponsor a private activity that has a civic purpose. However, the EOM so intertwined itself with the MWCB, whereby almost all MWCB business was conducted out of the EOM until January 2000, that the EOM was, as a "practical matter, running a private business. For example, a Millennium Washington press release of March 27, 2000, is entitled, "Mayor Williams Launches Millennium Washington Program" The release does not explain that Millennium Washington was just a program of MWCB, a non-profit 501(c)(3) that had entered into a partnership with the District government. (Ex. MW 8) One can fairly and incorrectly infer from this press release that Millennium Washington was a District government program.
McCALL and certain members of his support staff who were District government employees and who assisted him with MWCB business admitted that they engaged in fundraising activity on District government time, from government space, and by using government resources. McCALL documented some of his telephone conversations with donors in a letter to an assistant for KIMSEY. (Ex. MW 9) Consequently, the activities of numerous District government employees working on behalf of MWCB, to include McCALL, Dr. OMER, MARK JONES, YI, DRISELL, Elizabeth VALENCIA, then Special Assistants to the Chief of Staff, EOM, and Lisa MORGAN, then Director, Customer Service Operations, EOM, ran afoul of the provision in the District government's Standards of Conduct that prohibits private or personal business activity on government time and with the use of government resources. When queried as to whether he had a concern about the applicability of the Standards of Employee Conduct to the Millennium Washington work, McCALL stated that at one point or another everyone in the EOM was working on fundraising. He asserted that he was just doing what the Mayor wanted him to do, what the Mayor knew he was doing, and that he did not see anything wrong with his employees doing what the Mayor wanted them to do.
With respect to fundraising efforts, KIMSEY confirmed that this was McCALL's primary responsibility at MWCB. KIMSEY made the initial contact with possible donors identified from lists of businessmen and women supplied by KIMSEY, as well as lists of corporate supporters provided by the EOM. (Ex. MW 10) McCALL or KIMSEY would then supplement these telephone calls with follow-up letters. The letters inquired if the potential donor would be interested in adding his or her name to the leadership group, noting that KIMSEY would "very much like to have your participation." These letters were signed by KIMSEY but with a return address on the letterhead stationery of the Office of the Mayor. (Ex. MW 3)
Interviews with a number of donors confirmed that when KIMSEY made a personal contact, he would explain MWCB's purpose and solicit a donation. He would then advise the donor that someone from MWCB would make a follow-up telephone call and provide further details. That follow-up call or visit usually came directly from McCALL, who would provide such specifics as to where and when to send the donation, and the fact that a donation to the non-profit MWCB was tax deductible. He would explain that a donation in the nature of a corporate sponsorship, although not carrying a benefit that is tax deductible, would entitle the sponsor to promotional activity at MWCB events. McCALL instructed almost all the donors and sponsors to send their checks directly to 441 4th St., N.W., Washington, D.C.
Most donors, or their nominees writing the checks, claimed that they did not know that the donations were being sent directly to the Mayor's Office because McCALL told them to send the money to 441 4`h St., N.W., leading them to believe that this was the business address of MWCB. Some checks, however, were addressed to McCALL, EOM, at 441 4`h Street, N.W. McCALL introduced himself to potential donors as affiliated with MWCB; it is not clear to what extent he explained that he was a full-time District government employee and Special Assistant to the Mayor. All of the checks were made out to MWCB; none of the checks on their face indicated that the check was intended for any expense associated with the EOM. Neither KIMSEY nor McCALL made any effort to distinguish their solicitations between those individuals and organizations that were regulated by or had a business relationship with District government and those that did not.
Prior to the Main Street Millennium celebration, KIMSEY and McCALL raised donations in excess of $10,000 from the following donors/sponsors:
Subsequent to January 1, 2000, they raised donations in excess of $10,000 from the following donors/sponsors:
Between $100,000 to $200,000 was raised from hundreds of smaller donations.
5. The Donors
KIMSEY and McCALL developed a pattern, or "template" as JONES came to know it, for their fundraising activities. A few examples are illustrative. In one instance, an official at District Cablevision (at that time the regulated District cable television service provider) received a telephone call from McCALL requesting District Cablevision's support of Millennium Washington. This official passed the solicitation on to authorizing officials who approved the decision for Cablevision to promote the events and to disburse a $50,000 donation. The authorizing official was not aware that his disbursing department made the check payable to MWCB at 441 4th St., N.W., Suite 1040, nor that this was the location of the EOM. He believed that whoever originally spoke with McCALL obtained that address as the place to send the donation. This official never personally discussed this donation with McCALL or anyone else at MWCB. He was not concerned whether MWCB was a non-profit entity or part of the District government. District Cablevision was, however, intent on receiving some promotional benefit from its sponsorship of the Main Street Millennium celebration.
However, the $50,000 check came from TCI, the corporate parent of District Cablevision and a company that does not appear to do business with the District government in its own name. When corporate parents provide the funding for partnership events, it becomes all the more difficult to determine the appropriateness of the District government's solicitation or acceptance of such donations. In any event, in exchange for the $50,000 sponsorship donation, District Cablevision was permitted to erect a promotional screen, several hospitality tents along pedestrian walkways and otherwise engage in promotional activity during the Main Street Millennium celebration.
In a second instance KIMSEY, who is on the Board of Directors of Capital One, a financial institution popularly known for its credit card operations, contacted the chairman of the company and asked him to consider donating between $500,000 and $1,000,000 for Main Street Millennium. McCALL then made a follow-up telephone call to the chairman regarding the specifics of the donation and visited the chairman at Capital One's Fairfax, Virginia facility.
McCALL told the chairman that he was a businessman who had taken a year off to volunteer his time to help Mayor WILLIAMS with the Millennium Washington celebration. He characterized the organization as a private event supported with private funds. He explained that no District government funds were used for the celebration. He made no promises to Capitol One in exchange for any donation. The chairman responded to the solicitation with a $100,000 donation; the check was made out to MCWB but, according to a company spokesperson, sent to Mayor WILLIAMS' office at 441 4th St., N.W., Suite 1100. The spokesperson stated that Capital One has no contracts or other financial dealings with the District government.
In a third instance, the corporate donor actually initiated the donation contact. Eastman Kodak was seeking to sponsor millennium celebrations in target cities throughout the country. The District of Columbia was one of those cities. Kodak made its initial inquiry through officials at the Americas Millennium, the non-profit entity that was coordinating the federal government's national millennium celebration that was to be conducted on the Mall. Americas Millennium was soliciting corporate donations in the range of $500,000 to $1,000,000, which was too high a price for Kodak. It was then suggested to Kodak that Millennium Washington could be an alternative activity to sponsor. Americas Millennium and Millennium Washington officials negotiated the details for Kodak's support and Kodak's CFO signed a sponsorship agreement. Thereafter, Kodak donated $150,000 to MWBC. Kodak officials could not state with certainty whether Kodak had any contracts or other business relationships with the District government.
In a fourth instance, Mario MORINO, President, Morino Institute, Reston, Virginia, a company that promotes technology development in the greater Washington, D.C. area, donated $100,000. MORINO advised that KIMSEY, a friend and business acquaintance, contacted him informally by telephone. Thereafter, McCALL made a more formal follow-up telephone call and twice visited MORINO at his office. McCALL explained Millennium Washington's goals and led MORINO to believe that Millennium Washington was working with the White House on a New Year's Eve celebration in the city and planning year-long civic events for the District. MORINO understood McCALL to be representing the Office of the Mayor but he felt no pressure to donate funds. He stated that no one promised him or his business anything in return for his donation and that his business had no financial relationship with the District government. MORINO's check was made out to MWCB and sent in care of Nancy TESSMERBELMONT (TESSMER-BELMONT), Director of Operations for MWCB, 1730 K St., N.W., Suite 426, Washington, D.C. (After the Main Street Millennium two-day celebration, MWCB relocated to 1730 K Street, N.W., in office space donated by the GSA.)
In a fifth instance, Donald GRAHAM, Chairman of the Board, The Washington Post Company, was approached by KIMSEY at a meeting in September 1999. KIMSEY told GRAHAM that he was chairing the Commission at the request of Mayor WILLIAMS and was seeking financial help. GRAHAM did not make a commitment at this time. Shortly thereafter he received a telephone call from McCALL, who GRAHAM believes identified himself as Deputy Mayor, at which time McCALL "pitched for large amounts of money." (GRAHAM MOI at 1) At this time GRAHAM agreed to make a $25,000 charitable contribution to Millennium Washington.
In November, GRAHAM received a letter from McCALL asking that The Washington Post (Post) newspaper run free advertisement for Main Street Millennium. Although GRAHAM explained to McCALL that this was contrary to Post's policy, he later made a one-time exception and made arrangements for an insert to be included in a Sunday newspaper. GRAHAM did not immediately forward the donation to McCall and received another letter in April 2000 reminding him of his $25,000 pledge. GRAHAM then sent a check in this amount to MWCB. GRAHAM stated that this was his only involvement with MWCB. He did not feel comfortable giving this donation to MWCB because he felt that civic and charitable donations from local businesses should be for activities of higher importance than putting together a year-long party.
A final instance of MWCB fundraising implicated the now Governor of the Commonwealth of Virginia. The relationships involved in this particular donation demonstrated the need for caution when District government employees engage in fundraising. In October 1999, KIMSEY sent a letter to Mark WARNER formally soliciting a contribution. At the time, WARNER was in private business, a Virginia resident, gubernatorial hopeful and president of the philanthropic Collins/Warner Foundation, Alexandria, Virginia. According to a Collins/Warner Foundation spokesperson, this foundation was established for the purpose of underwriting grants and making charitable donations to causes WARNER supported. KIMSEY and WARNER subsequently discussed the solicitation further and WARNER agreed that the foundation would donate $25,000. A foundation official contacted McCALL to obtain further details and inquired as to where to send the check. McCALL advised the official to send the check to KIMSEY's office in Washington, D.C. The Collins/Warner Foundation spokesperson asserted that the foundation does not have any contracts or other economic relationships with the District.
These and other smaller donations and sponsorship funds received prior to January 2000 were sufficient to fund Main Street Millennium. In addition, McCALL and his staff maintained a valuable relationship with the White House Millennium Council; which directed Eastman Kodak to McCALL, but also contributed $400,000 in their own right to Millennium Washington. In addition, the Council allowed Millennium Washington to piggyback on its existing contracts for goods and services for the Americas Millennium celebration on the Mall. The actual expense for the Main Street Millennium celebration totaled approximately $1 million.
As a final note on the donors, particularly with respect to KIMSEY, who devoted so much of his time and reputation to Millennium Washington, this investigation uncovered no evidence or any indication that the donors engaged in any improper conduct. Only GRAHAM voiced a concern with respect to the solicitation and that was related to his own company's internal policies. None of the donors claimed to have felt pressured; no quid pro quo was offered or expected. Those donors who wanted to obtain a business advantage for helping Millennium Washington had the option of becoming a sponsor. Other donors with more altruistic motives supported Millennium Washington because they believed it to be a worthy civic cause with the added tax advantage of being a 501(c)(3) non-profit. According to MWCB employees, some donors, such as GRAHAM and KIMSEY, joined the Mayor and other prominent civic and public dignitaries at a New Year's Eve light show at the Dupont Circle Metro Station. The light show was donated by the Mayor of Helsinki, Sweden.
6. Managing the Non-profitTo the extent that it can be determined, all funds raised by and for Millennium Washington, and later MWCB, were placed in three Chevy Chase Bank (CCB) accounts as described above. A fourth account was opened briefly to hold a security deposit for a short period of time at the request of a vendor. The funds held for security were restored to one of the CCB accounts after Main Street Millennium concluded. MWCB'S internal check processing procedures required that all checks for payment of goods, services and payroll be signed by an MWCB employee and countersigned by a District government employee. District government employees with signatory authority included McCALL, MORGAN, VALENCIA, and DRISELL. According to McCALL, these District government employees were signatories on all MWCB accounts because he wanted to ensure that the money was not misused by the non-profit. In practice, TESSMER-BELMONT would bring expense checks to the EOM at least once per week, whereupon one of the four District government employee cosignatories would sign the checks, thereby authorizing the withdrawal of funds for necessary expenses. They would also ensure the deposit of all donated funds and other income.
VALENCIA stated that she had telephonic and in-person discussions with TESSMER-BELMONT concerning MWCB management and budget issues and used her government computer to conduct MWCB business and to communicate with various individuals associated with MWCB.'VALENCIA also stated that MORGAN, who was her supervisor, first approached her to solicit her help with MWCB business in March 2000. MORGAN wanted VALENCIA to oversee the budget, which included countersigning MWCB checks and tracking budget data to ensure that the organization had sufficient operating funds.
MORGAN's interview is illustrative of the confusion created by McCALL's use of the EOM to conduct MWCB business. She stated that she first became involved with MWCB when McCALL left the District government. Dr. OMER asked her to oversee MWCB business until McCALL's position was filled. She understood MWCB to be a collaborative effort whereby a non-profit was sponsoring the District government's year-long series of millennium events, for which she and other District employees were authorized to provide assistance as part of their official duties. She also understood that it was her responsibility to oversee the budget and ensure that the theme of each planned event was consistent with the Mayor's vision for the city, but was uncomfortable managing an organization with which she had little knowledge; given that Dr. OMER advised her of his concern that MWCB appeared to be disorganized and the budget would not support all the planned events.VI-32 It was not clear to MORGAN whether MWCB was part of the District government or an independent entity.
MWCB staff began to prepare the series of year-long events after the Main Street Millennium celebration concluded. They worked to plan the longest Ringling Bros. and Barnum & Bailey Circus parade since the 1930s. Free Mall concerts starring Placido DOMINGO and Ricky MARTIN were scheduled for the fall, and a two-day musical festival was scheduled for the Anacostia River Park .in the summer. Some of the two-dozen planned events were to be sponsored by the city with the cooperation of the National Park Service. (Ex. MW 11) Projects included building a house for Habitat for Humanity with labor from the staff of the city's many embassies, construction of a cross-city bicycle trail, upgrades to a city golf course, tours of historic Anacostia and Shaw neighborhoods, and the creation of a Civil War trail. (The Washington Post, March 24, 2000, at B8) MWCB began in February with an essay contest for school children and a light show sponsored by the Embassy of Finland. McCALL commented at the time that the success of the Main Street Millennium celebration encouraged him to expand MWCB. McCALL stated, "We delivered a world-class millennium celebration under budget. While other millennium celebrations were going south, we were heading upwards." Id.
During the first quarter of calendar year 2000, the books and records of MWCB showed diminishing donations and other revenue sources, but continuing expenses, to include almost $40,000 in payroll charges per month. By the middle of January 2000, after MWCB moved its offices to a private building, McCALL became less involved in fundraising and MWCB management. He went on a month-long vacation to Europe in February and, shortly after his return, resigned from government service. Dr. OMER then instructed MORGAN to provide oversight to MWCB, which, by her own admission, was a job she was ill-equipped to perform.
In March 2000, the National Park Service declined to issue a permit to MWCB to use the Anacostia River Park for the planned two-day music festival because it was not large enough to accommodate the expected crowd. Concert promoters continued to advertise the location as Anacostia River Park; however, just three weeks before the concert, DAY and JONES, a DCLB employee at that time, were still scrambling to find an alternative site for the event. Through the personal intercession of JONES, the D.C. Sports and Entertainment Commission allowed MWCB to use a parking lot at RFK Stadium (RFK), but at an unanticipated cost of $40,000. By April 2000, JONES was on board at the EOM as Assistant Chief of Staff for External Affairs and shortly thereafter placed in charge of MWCB by Dr. OMER.
On June 26, 2000, Millennium Washington held a Jazz/Blues Festival at RFK. To help promote and organize the event, DAY hired a friend, William COPE, a local producer of public events, and paid him $43,000. COPE then hired DAY's wife to be his co-producer. According to one MWCB employee, COPE had worked with DAY's wife at a local jazz institute and stated that he paid her a substantial amount of that money. She was responsible for making travel and hotel arrangements for the guest artists. MWCB secured performing artists and food vendors. MWCB staff also initiated additional fundraising to help defray the cost of the event, but several large, anticipated donations never materialized. MWCB expected to earn a substantial profit from vendor fees and sales, as was the case with the two-day Main Street Millennium. However, the event lacked the attendance required to generate a profit because it was so poorly promoted. As a consequence, the event suffered a loss of between $300,000-$350,000. Although ambitious in design, MWCB was short on production. The Mall concerts were canceled, as was a proposed Washington International Music Festival. MWCB's Operations Plan timeline of millennium events listed at least five for the first quarter of the year; the OIG is only aware of one - the Saturday Artists Market - that was actually conducted. GREEN claimed the MWCB provided assistance to other civic events not affiliated with MWCB, such as a Spelling Bee, an Earth Day celebration, and the Million Mom March.
7. Closing the Non-profitIn view of the Jazz/Blues festival's deficit, it became apparent to both Dr. OMER and JONES that MWCB was not going to be able to support itself financially for the remainder of the Millennium year. JONES recognized, upon assuming responsibility for MWCB, that it suffered from management and financial difficulties and took action to resolve the problems. First, he requested DAY to cease all future contracting until they had a chance to meet and discuss Millennium Washington's finances. (Ex. MW 12)
Second, and according to Polly RICH, Assistant Corporation Counsel and D.C. Ethics Counselor, in April 2000 someone from the EOM informally contacted her and inquired about District employees working for non-profit entities. She provided an informal response by memorandum to JONES and to his Deputy, Thomas TUCKER, dated April 13, 2000. (Ex. MW 13) Although her advice is not specific to MWCB, she did express a concern with government employees engaging in fundraising for private nonprofit organizations. She cited a 1998 U.S. Office of Government Ethics (OGE) opinion concerning an analogous situation to support her opinion that the District's Standards of Conduct would preclude such fundraising because it night result in or create the appearance of using public office for private gain. She also cited the standard that applies to solicitation of funds from individuals or entities that have a particular enumerated financial relationship with the District government, leading the reader to, infer that solicitation in such a context is also prohibited.
Unfortunately, this memorandum does not clearly draw the distinction between fundraising in a personal capacity and fundraising in an official capacity pursuant to the Mayor's solicitation and gift acceptance authority. RICH's subsequent opinions and testimony before the D.C. Council state that official fundraising need not draw a distinction between those entities that have a business relationship with the District government and those that do not, despite the Standard of Conduct provision that precludes even the appearance of a conflict of interest or other impropriety. See D. C. City Council Comm. on Gov't Operations Pub. Oversight Hr'g, Dec. 3, 2001, Tr. at 62-63. In providing the April 2000 advice, it does not appear that RICH formally solicited details of the activity that prompted the inquiry so that she could have provided more comprehensive guidance and more clear advice as to the propriety of EOM employees' activities on behalf of MWCB. Most importantly, the OCC, through the auspices of the District's Ethics Counselor, did not insure that the EOM had an Ethics Officer and that EOM employees were appropriately trained on ethics matters.
JONES and VALENCIA confirmed that in June 2000, they met with Office of the Corporation Counsel (OCC) representatives, who they could not remember by name or position, to discuss the legal implications of EOM employees working on MWCB private business activities. JONES and VALENCIA stated that OCC attorneys advised them that District government employees could not conduct MWCB activity on government time, and that this would include any time spent terminating the non-profit. JONES' subsequent activities indicate that he disregarded this advice. VALENCIA instructed the Director of Operations for MWCB to write termination letters to the employees and contractors, which she did. In late June or early July 2000, JONES went to MWCB's headquarters at 1730 K St., N.W., to meet with MWCB staff. He advised them that the non-profit was depleted of funds and would be shut down in two weeks. He requested final reports on all project events before authorizing payment of final paychecks. According to the former Director of Operations for MWCB, the last remaining funds in MWCB's accounts were used to reimburse the EOM $30,000 for outstanding Main Street Millennium expenses.KIMSEY began to have misgivings about MWCB after the Jazz/Blues Festival. He publicly commented, "People who write checks expect their money will be used wisely. I'm not sure this was an example of a wise use of resources." (The Washington Post, March 18, 2001, at C2) KIMSEY told the OIG that he initiated a telephone conversation with the Mayor after this failed event and cautioned him that he would withdraw his support for MWCB, for the Mayor's re-election bid and for other District government partnership activities if MWCB's problems were not corrected. According to KIMSEY, the Mayor told him he would have his wife look into the matter and have her conduct an audit. According to all the MWCB employees interviewed, no final audit was ever conducted.
The Mayor's wife, Diane SIMMONS-WILLIAMS, advised that her husband did ask her to look into MWCB's business operations in approximately July or August of 2000. He did not provide her with any details and only requested that she look at MWCB's financial condition. At that time she knew nothing about MWCB, but was aware of Millennium Washington and its goals. Shortly thereafter, JONES contacted SIMMONS-WILLIAMS, advised her of MWCB's financial plight and made arrangements to take her to MWCB's office on K Street, N.W. (Ex. MW 14) When they arrived at this location, the office was closed and empty. She was aware that by this time, MWCB had ceased doing business and no longer had any employees. JONES gave her a notebook of financial records from MWCB, which she subsequently made available to the OIG. SIMMONS-WILLIAMS did not remember having any conversation with JONES about MWCB but she did recollect that by this time she knew that it was a 501(c)(3) non-profit organization.
SIMMONS -WILLIAMS stated that she did not find time to conduct a review of MWCB'S financial records for a couple of months. When she did review them she immediately concluded that MWCB was insolvent. She reviewed the bank statements and other financial records and concluded that outstanding, invoices totaled approximately $164,000 and that the balance of available funds was approximately $33,000. (Ex. MW 15) She advised the Mayor late in the fall that MWCB was in trouble because it did not have funds to pay its debts. She did not discuss MWCB further with the Mayor or anyone else; she did not recall whether she mentioned to the Mayor that MWCB was a 501(c)(3) non-profit organization. She asserted that she knew it was a 501(c)(3) and just assumed the Mayor knew as well. SIMMONS-WILLIAMS did not suggest any course of action to the Mayor on account of MWCB's financial status. She could not recall whether he made any particular comments to her based on the conclusions she drew from MWCB's finances and did not know whether he took any kind of corrective action.
By the time MWCB ceased operation in July 2000, it had produced only two significant events. It had raised approximately $1,900,000, mostly from private donors, spent every penny and ceased doing business approximately $130,000 in debt. There are no funds left in any of MWCB's accounts, and bills from approximately 20 vendors, mostly local businesses, remain unpaid. JONES never secured a final accounting of expenditures and receipts.
At least one creditor turned to the EOM for help. A spokesperson for the Kimsey Foundation provided documents to the OIG which reflect that MWCB owed Brotman-Winter-Fried Communications (BWFC) $23,000 for advertising expenses. The president of BWFC wrote several letters to the EOM requesting payment, without success, and then turned to the Kimsey Foundation for help. KIMSEY himself personally paid BWFC $15,000 with the understanding that BWFC would reimburse KIMSEY when it received payment from MWCB. MWCB, however, had no money.
The Department of Consumer and Regulatory Affairs (DCRA) advised that as of March 2002, MWCB's Charter to do business in the District has been revoked for failure to file non-profit entity biannual dues in the amount of $50. Since MWCB is not in good standing with DCRA, it is not permitted to files articles of dissolution and, in fact, has not done so. MWCB would have to apply for reinstatement and satisfy its outstanding dues obligation before it may voluntarily dissolve. See D.C. Code §§29-549 to 553; 29-563; 29-584 to 587; and 29-591 to 593 (1994 Repl. & Supp. 1999). The Mayor may institute involuntary dissolution procedures; however, since there are no MWCB assets to distribute towards its liabilities, this process would have no practical effect. See D.C. Code §§29-554 to 563 (1994 Repl.& Supp. 1999).
It is beyond the scope of this investigation to determine whether past and present District government employees who served as officers and members of the board of directors of the MWCB corporation may have had a responsibility to ensure that MWCB exercised due care in its business activities, particularly with respect to the many vendors who remain unpaid. However, certain provisions of the Standards of Conduct, as later detailed, were implicated as a result of these potential financial obligations.
8. The Mayor's KnowledgeWhen he was interviewed, Mayor WILLIAMS claimed to have had very little knowledge of the day-to-day operations of Millennium Washington. He admitted that he knew that McCALL and other EOM employees spent "a lot of their time . . . working with on this Millennium thing." (WILLIAMS Tr. at 52) He denied any knowledge of particular accounts or financial structuring. He admitted knowing that they were managing Millennium Washington accounts and saw no problem with that activity: "My general understanding is that they were taking in proceeds and expanding proceeds . . . that they were involved in their . . . jobs in doing that." Id. He believed this was appropriate EOM activity:
Id. at 52-53. Most importantly, the Mayor claimed that he did not know at the time that the private funding mechanism used to raise funds for the celebration was a 501(c)(3) non-profit entity. "I was aware [members of the EOM staff) were actually involved in the Millennium . . . in working with the supporting structure that had been set up by corporate leaders, not that they had set up another structure [501(c)(3))." Id. at 49-50.
A contrary conclusion can be inferred by a preponderance of the evidence uncovered during the investigation. McCALL adamantly asserts that he met with the Mayor every week to brief him on every aspect of Millennium Washington, to include the fundraising activities of the nonprofit. Dr. OMER stated that McCALL provided a full report concerning the Millennium Washington at every Monday EOM meeting. This included the identity of donors and the value of their donations. The statement of JONES supports this assertion, as do those of EOM and MWCB staff who were privy to these meetings.
WILLIAMS personally interceded in the activities of the Millennium Washington, to include calling KIMSEY to ask him to chair the fundraising initiative that was to be officially known as Millennium Washington Bicentennial Commission. KIMSEY himself donated $100,000 to fund Millennium Washington activities through a 501(c)(3) non-profit. It strains credulity to believe that the Mayor did not know this, or the fact that the company that provided regulated cable television service to the city donated $50,000, or that the White House donated $400,000, or that distinguished local business leaders such as Donald GRAHAM, Mark WARNER and Mario MORINO donated upwards of $100,000 each.Witnesses advised the OIG that the Mayor was instrumental in securing space in the District government building at 441 4th St., N.W. for Millennium Washington consultants to work and that he was aware that initial funding for the event planning came from his own EOM budget. He also presumably signed the letter seeking the assistance of GSA to provide office space for MWCB. When Mayor WILLIAMS was interviewed, he stated that he was not familiar with the MWCB move from 441 4th St., N.W. to 1730 K Street, N.W. (WILLIAMS Tr. at 53-54) When asked how he came to believe that his staff's activities were becoming a problem, Mayor WILLIAMS stated that his wife told him. Id. at 102; see also 97-98, 101, and 103. SIMMONS-WILLIAMS could not recall what time period the Mayor referred to by this comment since they frequently discussed EOM matters, but she believed it was probably late in the fall of 2000 after she had reviewed MWCB's records. (SIMMONS-WILLIAMS Tr. at 26)
Although KIMSEY warned the Mayor of problems with MWCB as early as June of 2000, Mayor WILLIAMS' only action in response thereto was to solicit his wife's help in reviewing the corporation's finances. He did not receive feedback on that request until late November or December 2000 and, as best can be determined, took no action to resolve MWCB's unpaid bills or to ensure that other on-going public-private partnership activities did not suffer similar consequences. As soon as JONES came on board as Deputy Chief of Staff for External Affairs in April 2000, he was tasked by the Mayor to coordinate the partnership with the CACS. Simultaneously he was developing other partnerships, fundraising, and coordinating a host of civic events, some of which also suffered deficits. According to the statements of both Mayor WILLIAMS and Dr. OMER, JONES was left unsupervised in these endeavors. To compound the problem, when JONES took a leave of absence to work on Peggy COOPER-CAFRITZ'S school board election campaign, Thomas TUCKER, his assistant, took it upon himself, and without close supervision, to continue to aggressively coordinate fundraising, partnership and event development.
The breadth of the Mayor's knowledge, or lack thereof, of the activities of Millennium Washington and MWCB is also significant because, as JONES makes clear, MWCB fundraising set the "template" or pattern for future fundraising activities by the EOM. With respect to these later partnerships, the weight of the evidence suggests that the Mayor, as well as Dr. OMER, knew or should have known that the EOM was creating and using 501(c)(3) and other kinds of non-profits to raise tens of thousands of dollars from corporations, many of which had economic relationships with the District government, in order to support civic, ceremonial, and social events.
9. The Cost to the District GovernmentDr. OMER stated that approximately $80,000 in District government funds was used to pay Millennium Washington expenses. This money came from funds set aside for this purpose in the EOM's FY 2000 budget. Dr. OMER expected the EOM budget to be reimbursed for any Millennium Washington expenses when Congress passed the FY 2000 budget for the District government, wherein $1 million was earmarked for Millennium Washington. Although MWCB was incorporated in October 2000, donations did not begin to arrive until the middle of November, and event-planning expenses had to be paid prior to that time. Unlike vendors, who could be paid after donated funds were received, Millennium Washington staff had to be paid when they came on board in September, October and November 2000. In addition, there were other start-up costs for such items as postage, stationery, office supplies and a long distance telephone line. A review of Millennium records, coupled with the statement of Dr. OMER, reflect that these costs came to $92,571, of which $70,063 was for salaries for the contract consultants. (See Ex. MW 16) Dr. OMER never asked for nor did MWCB ever reimburse the District for these expenses. Dr. OMER believed that these were legitimate, budgeted EOM expenses for the District government's share of the costs for Main Street Millennium. The District's partner in this venture, MWCB, used donated funds and event profits to pay all remaining expenses.
In addition, Peter LaPORTE, Director, Emergency Management Agency, advised that he paid $18,000 to a contractor to develop an Operations Plan for Main Street Millennium sometime just before the event occurred. It was apparent to LAPORTE that Millennium Washington's staff did not have the experience in event-planning to know how to develop such a plan for an event as large as Main Street Millennium LaPORTE stated that McCALL advised him that he would be reimbursed. To LaPORTE'S knowledge, his agency never received reimbursement for this expense.
Millennium records also reflect $175,000 for the services of police officers for Main Street Millennium. (Ex. MW 17) McCALL and DAY recollected that this was just a guess concerning this cost. According to Millennium records and the general recollection of DAY, MWCB made an initial $60,000 payment on this expense by check to the D.C. Treasurer. (Ex. MW 18) McCALL and DAY believed Dr. OMER forgave payment on another $60,000 . and allowed MWCB to delay payment on the remaining $55,000. MWCB became insolvent before they could pay the full $55,000. Dr. OMER does not recall making these decisions. The investigation has not been able to determine whether Dr. OMER made a commitment to or on behalf of the police department to have MWCB only pay a portion of the cost of police services for Main Street Millennium, or whether the police department expected to get paid the full $175,000.
In any event, and assuming MWCB was not obliged to pay more than $60,000 for police services for Main Street Millennium, the EOM costs ($92,571) occurred prior to the incorporation of MWCB and were, arguably, legitimate expenses of the EOM authorized by the Chief of Staff. The expenses incurred by the Emergency Management Agency ($18,000), however, did arise after MWCB was operational. Since MWCB did eventually reimburse the District $30,000 for expenses when it ceased doing business in July, 2000, we are unable to conclude that MWCB has a remaining financial obligation to the District government. MWCB is insolvent and has no assets or income.
10. Other Financial and Procurement Irregularities
The EOM's relationship with the MWCB generated a number of unusual financial transactions, with none more questionable than the $175,000 loan from the Washington Convention Center Authority (WCCA) to MWCB. (Ex. MW 19) According to Lewis DAWLEY, Executive Director, WCCA, McCALL first approached him in the fall of 1999 with an application for a grant for $325,000 from WCCA's Marketing Fund, which was established to help promote business and revitalize the District of Columbia and was funded by WCCA's share of the District government's hotel and restaurant tax. WCCA declined to grant the request, citing the fact that it was not a good investment and did not meet the fund's statutory requirements. Thereafter, McCALL sent invoices for goods and services for Millennium Washington to WCCA in an attempt to get WCCA to pay them. WCCA rejected payment on the invoices because its annual budget had already been approved and no additional funds were available for that type of disbursement.
YI advised that through 1999 he had responsibility for oversight of the EOM budget and worked closely with Barbara JUMPER, Deputy Chief Financial Officer, Office of Finance and Resource Management. YI became involved with MWCB around October 1999 when Dr. OMER asked him to meet with HOLT to discuss a means by which the District government could financially support MWCB's promotion of the Main Street Millennium celebration. YI was told that the District government had poorly planned the celebration and did not have appropriated funds available for Main Street Millennium expenses. Dr. OMER told YI that MWCB needed upfront money right away and to discuss ways of acquiring the money with HOLT.
Thereafter, YI met with HOLT and members of her staff and explained Dr. OMER's request. Various funding options were discussed, to include the possibility of a contract or grant to MWCB. YI pointed out that the EOM could not send money directly to MWCB because to do so would have required either a supplemental appropriation or authority to spend appropriated money. The implementation of these mechanisms would have taken months, time that MWCB did not have with the New Year fast approaching. YI also advised that MWCB needed $175,000 to pay for supplies for the planned celebration. HOLT suggested that in light of the time constraints it would be most efficient for the EOM to issue a check to the WCCA and then have WCCA issue a check in the same amount to MWBC. HOLT was on the WCCA's board of directors and believed WCCA, as a quasi-agency, could accept money from the EOM and could send money to MWCB. HOLT then made a telephone call to a WCCA official, explained the issue, and advised that a follow-up telephone call would come from the EOM. When YI told Dr. OMER of this plan, Dr. OMER commented that if HOLT approves the transaction, then they would do it.
On October 22, 1999, at the direction of Dr. OMER and YI, the Office of Finance and Resource Management disbursed a check for $175,000 to the WCCA. (Ex. MW 19) However, some WCCA officials were not aware of the check's purpose, and others had second thoughts about the propriety of the arrangement. As a result, WCCA refused to issue its own check to MWCB and returned the District government check, which was subsequently cancelled.
DAWLEY discussed this problem further with Dr. OMER, and eventually agreed that WCCA would loan $175,000 to MWCB upon the condition that the District of Columbia Financial Responsibility and Management Assistance Authority (Control Board) guarantee repayment. WCCA officials stated that it was their initial belief that the loan was being made to the EOM. WCCA had never given a loan to any District government agency in the past and had never transferred its funds to another agency in such a manner. McCALL assured DAWLEY and other WCCA officials that the loan would be repaid once Congress approved the Millennium Washington proposed budget. Tracy HARRIS, Chief Financial Officer, WCCA, was interviewed and acknowledged that in October 1999, McCALL sent documents to WCCA that reflected the fact that the loan was to MWCB.
Francis SMITH, then Executive Director of the Control Board, stated that if MWCB had not repaid the loan, the Control Board would have guaranteed repayment from the District government's Interest Account, which was authorized by Congress and funded from the interest earned on other District government accounts. SMITH stated further that at the time of the loan, he did not know that MWCB was a private non-profit organization. He assumed it was a Bicentennial event sponsored by the EOM because of the involvement of McCALL and YI.
With respect to this $175,000 loan, as well as with the entire Millennium Washington story, it was particularly difficult to get responsible former District government officials to be cooperative and candid. Many did not recall events and denied knowledge of meetings and conversations until confronted with documentary or contrary evidence. For instance, HOLT initially denied any knowledge of a meeting where a $175,000 loan was discussed and denied any knowledge of such a disbursement to WCCA.
For his part, Dr. OMER denied having any knowledge of how MWCB was funded and denied engaging in any solicitation. He claimed to have left all the financial details to McCALL. However, Peggy ARMSTRONG, Press Secretary to the Mayor, stated that beginning in mid-November 1999, Dr. OMER convened daily meetings with McCALL to ensure Main Street Millennium's success. LaPORTE and Darlene TAYLOR, then Director of Intergovernmental Affairs, EOM, also attended these daily meetings with Dr. OMER. MORGAN recalled attending a meeting between Dr. OMER and DAY that she described as unpleasant. Dr. OMER had called for the meeting because he was concerned that each event was not properly closed out before another one was started. Dr. OMER began questioning DAY about MWCB'S operations and DAY took offense at his intrusion into the daily affairs of MWCB.
The preponderance of the evidence, as determined from numerous interviews, suggests that Dr. OMER is not credible on this point and that, in fact, he was well aware of the funding problems associated with MWCB. When queried about the $175,000 loan, Dr. OMER's detailed response belies his own general assertion of ignorance. At this time, he asserted that the Control Board and the CFO approved of the disbursement as "up fronting of funds" to MWCB under the premise that the WCCA would be reimbursed upon approval of the FY 2000 budget. Dr. OMER did not believe Mayor WILLIAMS was aware of this loan, and there is no evidence to suggest the contrary.
McCALL also called upon the D.C. Lottery and Charitable Games Control Board (DCLB) to help fund Millennium Washington. Claudia BOOKER, Director of Procurement, DCLB, stated that she received a letter from McCALL asking the Lottery Board to support Millennium Washington. The letter was written on EOM letterhead stationery. BOOKER questioned whether Millennium Washington was a part of the District government because the DCLB did not have contracts with other District government agencies and thought it unusual to receive a request from the EOM for funding assistance. Further, BOOKER believed that if the DCLB were to respond to McCALL's request, then intra-agency funding exchanges had to follow a certain process. When she queried McCALL on this point, he then produced documentation showing that MWCB was a non-profit entity. Thereafter, the DCLB issued two checks to MWCB, each for $37,500, for sponsorship of Main Street Millennium.
In another matter that more directly implicates contracting and procurement requirements, YI stated that Dr. OMER came to him in approximately November 2000 and asked him to process personal services contracts (actually consultant contractors) for Millennium Washington staff. YI questioned whether Millennium Washington had the budget authority and funds to initially hire the consultant contractors. He also recognized that the individuals Dr. OMER and McCALL wanted to hire were already on-board and working for Millennium Washington and thus were either contractors working without a valid contract or District government EOM employees working without proper authorization. He did not believe he could hire these individuals as EOM employees because he did not have funds available for this personnel expense in the EOM budget. YI remained uncertain as to how the employees were hired; however, he did recollect that all of the Millennium employees hired to work for Main Street Millennium were paid by the EOM.
Alfonza FITZGERALD, Support Services Officer, EOM, shed further light on the issue. He stated that in November 1999 YI presented him with several personal services contracts and requested that he process them. YI advised him that the EOM had specific individuals who they wanted to hire for the Millennium Washington celebration under sole source - single available source contracts. FITZGERALD asked YI for a Determination and Finding as required by the DCMR for such contracts. YI never provided this documentation and FITZGERALD did not follow-up to obtain proper justification, which was his obligation as contracting officer. Nevertheless, FITZGERALD went ahead anyway and prepared and signed the purchase notifications as contracting officer and had YI sign as authorizing official. Thereafter, he forwarded them to the Office of Finance and Resource Management for certification of the pre-encumbrance of funds. FITZGERALD admitted that he signed the notifications before the date of the encumbrance and before funds were available for this purpose. For example, the Purchase Notification for DAY reflects JDA Associates as the consultant, with work having begun on November 1, 1999. YI and FITZGERALD signed the authorization and procurement certifications on November 23, 1999. The pre-encumbrance fiscal certification, however, is not signed until November 30, 1999. (Ex. MW 20)
Although McCALL set up three bank accounts for the purpose of segregating funds generated for the Main Street Millennium (one for the WCCA loan, one for Main Street Millennium, and one for the year long Bicentennial celebration), a review of the bank account records suggests that as soon as donations began coming in, funds were moved from account to account to ensure that each account had sufficient funds to pay expenses. These accounting practices are significant because they appear to be part of the template of fundraising whereby EOM employees, particularly McCALL and later JONES, conducted fundraising, controlled finding and moved funds among accounts, irrespective of the purpose of those accounts. As this report indicates in the narratives of other event activity, this is the kind of financial irresponsibility JONES engaged in with respect to other donated funds.
Despite these unorthodox funding activities, and despite the failure of MWCB to achieve its goals and remain solvent, the OIG uncovered no evidence to suggest any District government employee or anyone else misappropriated MWCB funds for their personal benefit. In hindsight, and as some MWCB employees complained, salaries and vendor expenses may have been excessive. All of the expenditures made by MWCB and EOM employees from MWCB accounts appear to be for legitimate expenses. The OIG was not able to confirm that every donation was in fact deposited appropriately into MWCB accounts. However, there is no evidence to suggest that any donations were used for political campaign purposes or diverted elsewhere. Millennium Washington activities did not carry the indicia of political events, and there is no evidence that political fundraising was conducted at any event or that there were any violations of the Hatch Act.
B. ANALYSISThe Millennium Washington Public - Private partnership was hopelessly flawed from its initiation. Dr. OMER assumed, incorrectly as it turned out, that Congress would appropriate sufficient funds to finance the Main Street Millennium and that profits from the two-day gala would provide the financial impetus to continue with a year long celebration of the city's Bicentennial. During the latter months of FY 1999, Dr. OMER committed and expended District funds to plan for the event prior to Congressional approval of the District's FY 2000 budget, in hope that these expenses would be reimbursed with federal funding. Planning for the city's celebration of the Millennium started at least a year or two too late. By the early fall of 1999, Dr. OMER and McCALL had to begin planning for the event with or without a federal funding commitment. Even if District funds were otherwise available to plan for the Millennium, by this time it was too late to obtain goods and services through normal District procurement channels. Dr. OMER and McCALL tried to obtain financing through the WCCA and elsewhere within the District government, but with limited success.
KIMSEY bailed the EOM out of its funding predicament when he agreed to chair the Millennium Washington Commission and recommended to McCALL that donations from the private sector could fund Millennium Washington if the donors could be encouraged to make a charitable donation to a 501(c)(3) non-profit entity. McCALL not only took the initiative to create a 501(c)(3) non-profit entity for this purpose, but he also became personally involved with this new organization in the capacity of officer and director. He implicated other EOM employees who also joined on as officers and directors. McCALL then began to solicit funds personally as a follow-up to KIMSEY's introductory calls or letters of solicitation. To complicate matters, McCALL directed donors to send their donations to the Mayor's Office at 441 4th St. N.W., where he could control Millennium Washington's finances. After MWCB was incorporated in November 2000, McCALL and members of his staff at the EOM continued to work for this private entity, and did so on District government time and with the use of District government resources.
The success of Main Street Millennium gave everyone involved with MWCB the false hope that they could coordinate and run a year-long series of events to celebrate the city's Bicentennial. McCALL and members of his staff at the EOM continued to coordinate and participate in MWCB's private business affairs through the first half of calendar year 2000. JONES succeeded McCALL as Deputy Chief of Staff for External Affairs in April 2000 and assumed responsibility for MWCB. JONES claimed that he obtained the public - private partnership fundraising template from McCALL. Although JONES took action to close down MWCB because it was hemorrhaging money without an equivalent flow of donations, he merely moved on to other partnership and event activity where he engaged in misconduct similar to that of his predecessor.
1. Solicitation and Funding MechanismsThere are several avenues available to the EOM to fund public - private partnership activities such as Millennium Washington: 1) use appropriated funds; 2) use funds otherwise appropriated for purposes compatible with the partnership's purposes; 3) use money appropriated within the Ceremonial Fund; 4) use contributions made to the Constituent Services Fund; 5) use the Mayor's gift acceptance authority set forth in the Appropriations Act to solicit and accept monetary contributions; or 6) allow the partner (in this case MWCB) to engage in the fundraising independently of the EOM.
First, with respect to appropriated funds, the EOM did not plan well enough in advance to try and obtain Congressional funding for Millennium Washington in the FY 1999 budget. If Congress denied such a request, the EOM would have had sufficient time to explore alternative funding sources. If Congress had appropriated funds for Millennium Washington in the FY 1999 budget, then Dr. OMER would have had funding to begin to plan the event throughout most of calendar year 1999. However, because the funding request was not made until the proposed FY 2000 budget was sent to Congress, and because Congress did not make a decision denying this funding request until November 2000, this first possible source of funding for Millennium Washington was not available.
Second, Dr. OMER and McCALL did attempt to finance Millennium Washington with economic development funds and funds from the WCCA. For reasons detailed above, these possible funding sources were either not available or did not have sufficient funds to cover the expected $1 million cost for Main Street Millennium.
Third, with respect to the Ceremonial Fund, it only authorizes the Mayor to expend up to $25,000 each FY for the reception and entertainment of government officials or eminent persons. However, Millennium Washington was not designed to be a reception for eminent persons, and the total cost of the event, approximately $1 million, far exceeded the Fund's cap. From both a legal and practical perspective, the Ceremonial Fund did not provide a useful means to finance Millennium Washington activities.
Fourth, the Constituent Services Fund only authorizes the Mayor to expend up to $40,000 each calendar year to fund "citizen-service" programs. Citizen-service programs can encompass any activity or program that provides services to the residents of the District and promotes their general welfare. However, Diane SIMMONS-WILLIAMS, the Mayor's wife, serves as Treasurer of the Mayor's Constituent Service Fund and she advised that it is her understanding that the fund, with its limited financial resources, is to be used for the purpose of providing "necessary services" to individual District citizens in financial need. In essence, Main Street Millennium was a public party open to anyone who cared to attend and not limited to District residents. Consequently, its purpose was far outside the scope of this Fund. In addition, the resources of this Fund were far less than those needed to finance Millennium Washington's activities. Consequently, the Constituent Services Fund also had legal and practical limitations that made it unsuitable as a funding source for Millennium Washington.
Fifth, with respect to the Mayor's gift acceptance and solicitation authority, the D.C. Appropriations Act, 2001 authorized the Mayor only to approve the solicitation, acceptance and use of donations to carryout the authorized functions of District government. For reasons detailed in the legal analysis section of the Report, we are not convinced that in granting gift acceptance and solicitation authority, Congress intended to permit the Mayor, through his delegatees, to engage in the broad range of solicitation activities as detailed throughout this report, and particularly as conducted by McCALL on behalf of Millennium Washington.
McCALL did not have statutory authority to solicit donations. The Mayor advised that he informally delegated his gift acceptance authority, which carries implied authority to solicit, to OMER and JONES (and before him, presumably to McCALL) to further his public-private partnerships, and that it was his understanding that they would adhere to the appropriate legal requirements in implementing the solicitation and receipt of donations on behalf of the EOM. (WILLIAMS Tr. at 14) However, McCall was bound to follow the restrictions placed upon this authority as mandated by the Appropriations Act and District law. Simply stated, the Mayor cannot delegate authority he does not have.
In any event, the Mayor, Dr. OMER, and McCALL did not use the Appropriations Act gift acceptance authority to fund Millennium Washington. Most solicitations were initiated by KIMSEY on behalf of the so-called Millennium Washington Commission with follow-up by McCALL on behalf of KIMSEY. None of the money solicited by McCALL was designated for the District treasury. Consequently, there was no District record-keeping or auditing mechanism in place to account for these funds. Accurate record-keeping is crucial not only to account for funds, but also to ensure that, through public disclosure, the acceptance of donations from any individual source does not create a conflict of interest or other appearance of impropriety. It was, in part, the failure to provide a public accounting of the EOM fundraising efforts that led the Mayor and D.C. Council to refer public disclosure of such fundraising to the OIG for investigation.
In effect, McCALL's fundraising activities were not in his official capacity, but in his private capacity on behalf of a private enterprise. The Mayor claimed to have generally delegated his solicitation and donation authority to his staff. We inferred from the Mayor's interview that he believed his solicitation authority to be almost unfettered, so long as the donations were for a public purpose. However, with respect to Millennium Washington, he asserted that he did not know a 501(c)(3) non-profit was created for fundraising purposes until sometime late in 2000. If the Mayor is to be believed, and there is disputed evidence on this point, McCALL could not have been acting on behalf of the Mayor when he assisted KIMSEY in soliciting donations for MWCB.
Last, the private partner Millennium Washington Commission, which KIMSEY agreed to chair, could have solicited funds on its own, with a private staff, to produce civic activities such as Main Street Millennium. Thereafter, the EOM could have assisted the Commission through event sponsorship and organizational support, to include the Mayor's attendance at events. We believe this would be proper activity inimical to the function of the Office of External Affairs. However, once McCALL took it upon himself to assist KIMSEY with fundraising, he moved beyond his official duties and began to act in a private capacity and on behalf of the private interests of the Commission and later MWCB. The conduct of McCALL became more egregious when he began to use his EOM staff to assist him in the conduct of MWCB business, and to do so from the offices of the EOM and with the use of District government resources. When McCALL and his staff became officers and directors of MWCB, they assumed a fiduciary and financial responsibility for MWCB's activities. They then walked away from MWCB after JONES closed it in July 2000 without ensuring that there was a final accounting of expenditures and receipts, and without addressing the outstanding liabilities.
2. The Mayor and Dr. OmerThe Mayor claimed that he did not know MWCB was a 501(c)(3) non-profit until late in the fall of 2000. A number of witnesses disputed this claim, to include McCALL. Nevertheless, it was incumbent upon the Mayor to ensure that the work of Dr. OMER and his staff, while developing the partnership and implementing its year-long goals, was conducted lawfully. This was the first major public-private partnership activity developed by the EOM in accordance with the Mayor's revitalization initiative. Some donors contributed $100,000 or more. KIMSEY had numerous conversations with the Mayor about MWCB, and some of the six-figure donors attended the light show on New Year's Eve with the Mayor. The preponderance of the evidence suggests that the Mayor had numerous and continuous opportunities to inquire about MWCB's status, particularly after the Mayor assigned McCALL to the Millennium Washington project full-time, and certainly after the EOM staff began to work for MWCB out of the Mayor's Office. The improper conduct of McCALL and his staff occurred over an extended period of time. Dr. OMER personally involved himself in the activities of MWCB; he attempted to obtain funds from various public sources and made such decisions as to how much MWCB had to pay for police services.
The Mayor, and Dr. OMER as Chief of Staff, claimed they were not aware of the improper actions of EOM employees. However, at the very least, we believe they are accountable for the actions of their subordinates and responsible for failure to properly supervise them. During the entire period of time Millennium Washington and MWCB were in operation (mid-1999 through mid-2000), EOM employees received no ethics training. McCALL may have solicited advice from OCC on one occasion, but there is no record of that advice or any indication that it was conveyed to others in the EOM. Thomas TUCKER or JONES requested the assistance of the District government's Ethics Officer on another occasion. However, based upon what the OIG determined actually occurred, the advice they obtained was inadequate. In fact, each step of the fundraising process should have been monitored by the OCC or by other legal counsel. During the course of their interviews, Dr. OMER and the Mayor both acknowledged the fact that, in hindsight, they should have paid closer attention to the activities of the Office of External Affairs. Dr. OMER took responsibility for any violations of law and regulations on the part of his staff. The Mayor has publicly apologized.
The OIG did not uncover any direct evidence that the Mayor intended to use the Millennium Washington or MWCB as a vehicle to raise money for political activities or to circumvent the campaign finance laws. Millennium Washington events themselves did not carry any of the indicia of campaign activity. In addition, the OIG did not uncover any evidence that McCALL'S fundraising for the events was political in purpose or a violation of the Hatch Act.
3. Sandy McCALL and His StaffWhen McCALL took it upon himself, with or without the knowledge of the Mayor, to assist KIMSEY with fundraising for a private non-profit organization, he began to participate personally in a private activity that implicated a variety of provisions of the Standards of Conduct. McCALL participated personally in creating MWCB and associated himself and his staff in the activities of this private entity both as members of the board and as officers of the corporation. He and his staff then began to conduct the affairs of this private corporation on District government time and with government resources. McCALL eventually resigned his position with the District government, but made no effort to resolve whatever fiduciary responsibility he and his staff may have had with respect to MWCB and its affairs. By July of 2000, MWCB had no income or source of income, but retained liabilities. Ironically, Millennium Washington was designed, in part, to improve the District's economic climate and to encourage businesses to relocate to the city. The net effect of MWCB, however, was to leave many local businesses with bills that could not be paid. Businesses that tried to obtain relief from the Mayor's Office were ignored.
4. Violations of the Law and Regulations
Back to top of page
Send mail with questions or comments to firstname.lastname@example.org
Web site copyright ©DCWatch (ISSN 1546-4296)