In the latest seesaw turn of events over one of the District’s more intractable controversies, Mayor Muriel Bowser has elected not to circumvent her own agencies and a court order barring installation of digital signs across the city.
Facing pressure to exercise rule-making authority from Digi Outdoor Media, which has already installed more than a dozen signs without the requisite permits—and likewise from Digi’s competitors for her to refrain from taking such action—the mayor has chosen to stand down for now. That leaves the matter in the hands of D.C. Superior Court, which is considering a permanent injunction being sought by the Office of the Attorney General.
Just a couple weeks ago, Loose Lips reported that Bowser’s top aide Beverly Perry was overseeing a plan to work around a temporary injunction D.C. Attorney General Karl Racine had obtained that slammed the door on further installation of digital signs. It came after the Department of Consumer and Regulatory Affairs (DCRA) took action against Digi Media last year.
But word is now leaking out of the mayor’s office that Bowser wants nothing to do with the controversy left to her by Ward 2 Councilmember Jack Evans. In December, he introduced emergency legislation that would have overridden the court’s injunction and allowed Digi to keep (and turn on) its signs and install new ones. When he realized he didn’t have the votes, he promptly withdrew it.
At stake for Digi is close to $20 million already invested in production and installation of the signs—and now legal costs. At stake for the city is untold millions in taxable revenue that could be generated by developers and property owners who have partnered with Digi in a plan to adorn some of the choicest real estate in the city, from Georgetown to Petworth and L’Enfant Plaza to Mazza Gallerie.
At stake for Bowser and Racine is a potential political pissing match as they both eye the prospects of a bruising mayoral race in 2018.
Digi Media CEO Donald MacCord tells LL that Bowser supported Evans’ legislation and was preparing to exercise rule-making authority after he withdrew his bill, but at the last minute she pulled back under pressure from larger sign companies that compete against Digi. In a harbinger of things to come, MacCord says he is ready to fight back. (In reality, he already is: Racine is seeking, and Digi is opposing, a permanent injunction that would force Digi to remove its signs.)
“Over 100 developers and building owners have written to [Bowser], and it doesn’t make sense,” MacCord says. “The sad thing is we’re going to win and the city is going to lose. We’re not going away. I’m not going to roll over. I’ve been in many fights before.”
With Bowser on the sidelines—for now-—and litigation ongoing, MacCord says he will turn his attention back to the D.C. Council, which was divided in December when Evans tried to move the emergency measure that would have paved the way for Digi to move forward. “All we want is a fair shake,” MacCord says. “I believe and hope the council will give us a fair and transparent hearing and let the people speak.”
MacCord describes his venture as a “dynamic, fluid network of signs” that can be used for different purposes to generate revenue and jobs and enliven the city. Thus far, Digi has installed roughly 15 of them at eight locations, he says, but because of the court’s injunction, they cannot be turned on. “This about-face by the mayor is sad for the District, which should be building its tax base and not hurting small companies that want to do business here,” MacCord says.
Meanwhile, the mayor’s office is cryptic. “We cannot comment on ongoing litigation that relates to the head of Digi Media, who took investor dollars in a scheme to affix illegal signs throughout the District of Columbia,” says Bowser spokesman Kevin Harris.
Last spring, Digi began installing a network of 60 digital signs with a projected value of $800 million over the next five or so years. DCRA issued stop-work orders because the signs violated permit regulations. In July, with work still underway, City Administrator Rashad Young issued emergency regulations requiring permits for signs that were located inside building facades but clearly discernible from other properties.
Digi ignored those actions until Racine obtained a temporary injunction in November. Evans, who along with MacCord bundled $52,300 in campaign contributions to Hillary Clinton from business interests that included developers with ties to Bowser, then pulled his bill for lack of votes.
Meanwhile, as LL recently reported, lawyer, lobbyist and campaign fundraiser extraordinaire David Wilmot had been lobbying Perry and the council and directing financial contributions to various candidates and elected officials from himself, his associates, MacCord, and other Digi executives.
Interest began to peak last week when WAMU’s Kojo Nnamdi raised the issue with Racine on his show, and NBC4 reporterTom Sherwood, also a guest on the show, indicated that pressure was mounting for Bowser to take decisive action. Earlier this week, Bowser fielded a question from NBC4 about what she intended to do. “I don’t know the details of any lawsuit,” she said unconvincingly of Racine’s efforts. “But we can change the rules at any time.”
Also this week, D.C. Council Chairman Phil Mendelson told constituents he had “heard rumors” about Bowser considering emergency rule-making with regard to digital signs. “I think that would be inappropriate, given this is an area that the council would have to legislate,” he said during a public meeting. “And it would be inappropriate [to issue an emergency rule], particularly if it is permissive, before going through the council.” (Mendelson did not respond to a request for comment about Bowser’s decision to relent on rulemaking.)
Bowser has faced pressure from others, including the Committee of the 100 citizen group, which has opposed rewriting laws and regulations to favor private interests in the face of public concerns about health, safety, the environment, and preservation of open space and cityscapes.
Real leverage was brought to bear, however, when Clear Channel and Out Front Media, large companies operating signs and billboards throughout the city that have not been targeted by DCRA or Racine, laid their opposition to any change in the law at the mayor’s feet.
“Following our very helpful meeting … I write to further express Outfront Media’s serious concern over Digi Media’s effort to seek the assistance of your office in legalizing digital signs constructed by Digi in blatant disregard of the District’s construction code and sign regulations, as well as binding orders of the Department of Consumer and Regulatory Affairs,” Outfront Media executive vice president Richard H. Sauer wrote in a March 3 letter to Bowser. He copied Young, Mendelson, and Racine. “If Digi is successful in legalizing the signs it has already illegally constructed, it will have earned an unfair advantage to operate new digital signage in the District by flouting the very laws other industry participants have respected.”
MacCord mounted his own offensive and demonstrated his willingness to play hardball in emails to his investors, obtained by LL. “I need all of our Landlords to Please call the Mayor, Mendelson, and Racine,” the subject line read, in bold. “Everyone please also write emails using the following info as your outline for a letter. We need to do this first thing in the morning to try and protect our legislation. It is very vital. Also please get all of your friends to do this as well.”
The suggested outline, addressed “Dear Mayor Bowser,” begins: “As a significant investor in the District, I write to you to express our strong support for your administration taking leadership with regards to commercial signage and displays in the District. Due to a number of issues that have arisen recently, there is the need for legislation that clarifies the regulations and addresses the concerns of interested parties in a fair and equitable manner.”
Further down, the script addresses “significant investments in the District (including in Digi Media)” that were made in reliance on a “stable and consistent regulatory framework that is maintained through proper and transparent legislative processes.” It continues: “It’s imperative to clarify building regulations so investors are no longer faced with confusion and an uncertain regulatory environment where an agency picks winners and losers. Its also important to make clear that the significant investments made based on current regulations will not have those investments be at risk due to an unstable regulatory environment. This type of political investment risk is unacceptable for any serious investor looking to commit substantial time, human resources, and dollars into the District. There have already been substantial adverse consequences for my firm, my staff, and my investors. Our investment in Digi Media presents a significant economic opportunity, and any denial of the right of this project to proceed is blatantly unfair and will materially impact our business.”
Included at the bottom of one of the emails are cell phone numbers for Mayor Bowser and her chief of staff John Falcicchio. LL tried to leave a message for the mayor, but her voicemail was full. In reply to a text message, Falcicchio reiterated the spokesman’s statement that the mayor would not comment on subjects of ongoing litigation. Yet the additional assertion that MacCord “took investor dollars in a scheme to affix illegal signs” left LL with a funny taste, as no allegations of investor fraud come to mind in MacCord’s D.C. dealings thus far. Yet a quick database search in fact turned up a pair of out-of-state cases that roughly fit that description.
Institutional investors in a company once run by MacCord alleged in a Washington state court in 2010 that he transferred assets to a third party and operated a business in direct competition with his company, and that he misled investors while violating fiduciary duties for his own benefit. In a separate but related federal court case, filed in 2013, also in Washington state, an independent investor alleged that MacCord used investment capital to pay his company’s operating expenses and debt. MacCord acknowledges that he was sued by his hedge fund after the company went south in a bad economy. But he says both cases were settled with no findings of wrongdoing.
In response to a request for comment on the D.C. action against Digi Media, Racine sticks to the four corners of his complaint, and reiterates his position that Digi simply violated District law in erecting its signs without requisite permits. Of the jurisdictional aspect to the matter, he allows: “While sign regulation is certainly within the purview of the mayor, it is clear that District residents want comprehensive sign legislation enacted by an open and transparent process that allows for public input regarding their growing concerns over the proliferation of signs in the District.”
Evans, a would-be savior to MacCord and Digi, is out of town and unavailable for comment. But his time to speak up could be coming soon. Because now the matter pivots back to the council, while court proceedings regarding a permanent injunction with hundreds of millions of dollars at stake drag on.