LL logged on to Twitter last week, and almost spit out his coffee.
Headlines featuring words like “indictment,” “guilty,” “fraud,” and “public official” flashed on the screen. “Did it happen?” LL thought to himself. “Is today the day Ward 2 Councilmember Jack Evans gets indicted?”
But it was former Baltimore Mayor Catherine Pugh who was indicted and then promptly pleaded guilty to conspiracy and tax evasion charges for a scandal involving her poorly edited, self-published series of Healthy Holly books for children.
Since 2011, Pugh raked in nearly $800,000 through her home-based company, Healthy Holly LLC, by selling her books to business and nonprofit organizations, many of which had or were seeking business with the state of Maryland and the city of Baltimore. LL is using the term “selling” loosely here. According to the indictment, in some cases, Pugh “sold” more books than she actually printed, double sold others, and used the proceeds to fund her mayoral campaign and buy a house.
Since 2014, Evans has raked in more than $400,000 through his now disbanded, formerly home-based company, NSE Consulting LLC, and by working for law firms on behalf of people and entities doing or seeking business with the District government. LL is using the term “working” loosely here. According to the summary of an investigation by the law firm O’Melveny and Myers, “[Evans] received over $400,000 for doing little or no documented work for consulting clients.”
In interviews with O’Melveny lawyers, Evans struggled to explain the specific work he did for his private clients.
“I was available to do what they needed me to do when they contacted me, if they ever did,” Evan told the lawyers.
Pugh’s case and Evans’ ethics catastrophe are not completely analogous, but the similarities lead LL to wonder: Is NSE Consulting really just a criminal conspiracy to funnel money to the Ward 2 councilmember?
Jeffrey Jacobovitz, a criminal defense attorney who deals with white collar crime, says it’s unclear whether Evans will face criminal charges. But the federal statute that could get him in trouble, Jacobovitz says, is known as “honest services fraud.”
That law distinguishes Evans’ situation from Pugh’s, who pleaded guilty to wire fraud, with a side of tax evasion. The difference is essentially the victim. Where Pugh defrauded her customers who purchased her books, victims of Evans’ potential “honest services fraud” would be anyone robbed of the “intangible right of honest services,” or in other words, the public.
Evans would be in good company. Honest services fraud has nailed former New York state Senate leader Dean Skelos, former Illinois Gov. Rod Blagojevich, former California Congressman Randy “Duke” Cunningham, Washington lobbyist Jack Abramoff, and Felicity Huffman and Lori Loughlin, along with other wealthy parents who paid hundreds of thousands of dollars in bribes to get their kids into elite universities.
The honest services statute has been around since the 1980s and was traditionally an effective tool for prosecutors going after corruption among public officials because it did not require any proof that the defendant benefited.
But in the 2010 case of former Enron CEO Jeffrey Skilling, the U.S. Supreme Court narrowed the scope of honest services fraud to bribery and kickback schemes.
Generally, bribery requires a quid pro quo, or an agreement to give something of value in exchange for an official act. A kickback generally involves an employee steering their company’s business to a third party in exchange for a cut of the profits or a referral fee.
In Skilling’s case, the court rejected the government’s argument that honest services fraud should be construed to “extend as well to ‘undisclosed self-dealing by a public official or private employee—i.e., the taking of official action by the employee that furthers his own undisclosed financial interests while purporting to act in the interests of those to whom he owes a fiduciary duty,’” according to a January 2019 Congressional Research Service report.
Jacobovitz says prosecutors generally don’t need to show a specific statement from Evans agreeing to take a specific action in exchange for money, “but it has to be pretty direct, where he receives a favor or money in return for him granting a favor or money to somebody else.”
He adds that generally “if a prosecutor wants to indict somebody, it’s pretty easy to do with the grand jury.”
The U.S. Attorney’s Office issued subpoenas to the Council and the mayor’s office seeking information about Evans’ consulting clients. Federal agents raided his Georgetown home over the summer, but he has not been charged with a crime.
O’Melveny’s report drips with examples of Evans taking official actions that directly benefited his paying clients.
To wit:
In August 2016, Evans had his staff facilitate special late-night access to a Metro station for one of his NSE clients, Don MacCord, the owner of a digital sign company. Evans also circulated emergency legislation that effectively would have given the company a monopoly on the digital sign market, according to O’Melveny’s report. Evans later withdrew the bill when he realized he didn’t have the votes. MacCord cut Evans two checks for a total of $50,000. Evans claims he returned the checks.
In November and December 2016, Evans twice voted in favor of a bill that “included funds to maintain buildings associated with, or nearby to, the Squash on Fire facility,” while Anthony Lanier, who owns Squash on Fire and EastBanc Inc., was a client of NSE, according to the report. Lanier agreed to pay Evans a total of $40,000 from November 2016 through June 2019, O’Melveny’s report says.
In March 2017, Evans introduced a bill giving financial incentives for film, TV, and digital media production facilities while his client, Richard Cohen, was developing a proposal for a sound studio through his real estate company, Willco. Cohen agreed to pay Evans a total of $100,000 from December 2016 through November 2018, according to the report.(Evans tried to tell O’Melveny’s investigators that his actions did not rise to an ethics violation because he had previously supported incentivizing filmmakers to come to D.C., but the lawyers weren’t buying it. “This notion that if you previously support something, it’s not a conflict if you then take financial interest in the issue and continue to do the same thing, that’s just sort of bizarre,” Steve Bunnell, one of the O’Melveny attorneys who conducted the investigation testified last week. “[It] doesn’t make any sense, and it’s not part of the code.”)
In May and June 2017, Evans voted on legislation to keep the District’s parking tax static while he had a contractual agreement with Rusty Lindner, the executive chairman of the Forge Company, which operates parking garages. Lindner agreed to pay Evans $75,000 between October 2016 and January 2019, according to the report.
Lindner was the only one of Evans’ clients who agreed to speak with the O’Melveny investigators. The others invoked their 5th Amendment right protecting against self-incrimination.
In describing NSE, Lindner told investigators the firm was a vehicle for Evans to do the same work he did while employed at different times by the firms Patton Boggs and Manatt. With NSE, however, the profits “would run entirely to [Evans]” rather than Evans receiving a cut of Lindner’s fee, he told O’Melveny.
The question of Evans’ criminal exposure is one lawyers at O’Melveny declined to answer in their 100-page report and during a hearing last week before the ad hoc committee, which will recommend discipline for the embattled lawmaker.
But some of Evans’ colleagues certainly weren’t shy about raising the issue.
At-Large Councilmember Elissa Silverman asked the O’Melveny lawyers last week about the federal law that prohibits public officials from taking actions that affect their personal financial interests. The law also closely mimics the section of the Council’s code of conduct that the O’Melveny investigators believe Evans repeatedly trampled.
The difference between the code and the law, Bunnell explained, is whether Evans willfully violated the law, or if he simply misunderstood it.
“Do you think Mr. Evans’ actions were willful or a misunderstanding?” Silverman asked.
“I don’t think I can answer that question in the general,” Bunnell said. “It has to be assessed in each specific context, and frankly that’s, I believe, a question the U.S. Attorney’s Office is looking at.”
At-Large Councilmember David Grosso, who has gone blue in the face yelling for Evans’ ousting for the past several months, was more direct.
“He did all this for his general financial benefit, and his greed knows no bounds,” Grosso said. “This is not only public corruption, but I believe this is a criminal act, and there’s no question in my mind that he should be expelled from this body.”
Asked in a September interview whether he had future plans for outside consulting work, Evans was finally clear with the O’Melveny lawyers. “Never again,” he told them. “Probably the biggest mistake one makes in life sometimes.”