City Paper is not for tourists
Eric Denchfield started working to support his mom and five siblings during his senior year at St. John’s Military High School. After graduation, he ditched plans for college and soon started his own roofing company, DHI Construction. Now, at 39, he can afford to save money for his three girls’ education and take his family on weekend trips to a bungalow in Ocean City, Md.
But with 20 years in this business, Denchfield knows it takes only one bad deal to put everything in jeopardy. It’s a lesson he learned from a developer named Douglas Jemal.
In the summer of 2000, Denchfield won a bid with Jemal’s Douglas Development to put the roof on the old People’s Drug warehouse, a 350,000-square-foot property on New York Avenue NE that now houses government offices. Jemal’s payments were slow from the start. After a few months, they stopped entirely, recalls Denchfield during an interview in his cramped construction office, nestled next to the laundry room of a redbrick apartment building he owns in Takoma Park.
When he complained to the superintendents Jemal hired to oversee construction, Denchfield says, “They’d always said, ‘I’m not in that department.’ ” The answer always came from a different person. Turnover among supers was high—Denchfield dealt with five different men in six months. “I guess it was a stressful job,” he says. “The superintendents were caught in the middle.”
Even though Jemal owed him more than $100,000, Denchfield kept working. More than a year passed before he went after his money.
Denchfield’s frustrations are of great interest to federal prosecutors looking for a stiff sentence in what’s left of their case against Jemal. Last October, a D.C. jury acquitted the 64-year-old developer on charges of bribery, conspiracy, and tax evasion. They returned a guilty verdict on just one charge: wire fraud. Compared to the stinkier corruption of bribery, the conviction seems like a few white lies. But for now, it’s the prosecutors’ last chance to convince Judge Ricardo Urbina to send Jemal away.
On April 16, Urbina will listen to both sides before deciding on Jemal’s sentence, which could be as long as 20 years. More than 200 people have written letters to the judge, pleading for leniency on Jemal’s behalf, among them are members of the clergy, politicians, contractors, and developers.
The prosecution’s pitch for jail time relies, in part, on people who have minted the public record with breach-of-contract suits. People like Denchfield, that is, whose case is one of 47 such suits against Douglas Development from D.C., Maryland, and Virginia listed by prosecutors. The bulging court docket against Jemal, prosecutors suggest, makes a clear point: In his routine business dealings, Jemal thought he was above the law.
Assistant U.S. Attorneys Mark Dubester and Timothy Lynch wrote in their Feb. 20 sentencing memorandum that the volume of legal complaints against Jemal demonstrates a pattern of abuse. “Although any one suit, or even any few such suits, may be easily disregarded as having no significance,” they wrote, “the sheer number of times that vendors have had to sue the defendant for failing to pay debts cannot be so easily dismissed.…[T]he defendant’s routine practice of failing to honor business debts was a business choice that he made so as to have cash to grow his business and support his lifestyle.”
The developer’s lawyers hope their client will get far less than the statutory limit for his crime. They have asked the judge for a slap of probation only, which is a possibility under sentencing guidelines. Jemal’s leasing agent, Blake Esherick, received just eight months plus a year of supervision for charges of tax evasion and wire fraud, while his son and vice president, Norman Jemal, was acquitted of all charges.
Small construction contractors probably wish Jemal had been as generous with them as he was with his friends, and one in particular: Michael Lorusso. In April 2001, Jemal met Lorusso, then the deputy director of D.C.’s Office of Property Management. The Boston developer turned D.C. bureaucrat quickly found a place in Jemal’s inner circle. He dined with the entourage at Thursday night sessions at the Capital Grille, where Jemal, the freewheeling mogul, always picked up the bill. According to the Washington Post, Lorusso even had a key to the Douglas Development offices. Prosecutors said Jemal and his associates spent freely on Lorusso, buying him trips to Vegas, a Rolex watch, two pairs of $500 cowboy boots, and even helped him out with $15,000 in cash.
A single real estate transaction drew a target on Jemal’s relationship with the District. In 2002, the city approved the purchase of an impound lot from Jemal for $12.5 million, nearly 10 times the amount he’d paid for it just four years earlier. Lorusso helped set up the deal.
The price tag alarmed Ward 1 Councilmember Jim Graham, who convened more than 60 hours of hearings investigating the developer’s dealings with the city. Jemal stopped cooperating when the tone became accusatory, twice invoking his Fifth Amendment rights. Testimony eventually linked the high price for the lot to an appraisal falsified and approved by Lorusso. He had also approved a $1 million lease payment to Jemal from the city.
It was clear that the city had a soft spot for the developer. In September 2005, Post columnist Steven Pearlstein described the U.S. Attorney’s indictment as “a repetitious list of infractions, some of them embarrassingly penny-ante.” Barring any revelations at trial, he wrote, “I’m sticking by a colorful and committed businessman who’s done more than anyone to enrich the quality of life in downtown Washington.”
Jemal’s successes are the result of what many saw as a risky gamble. He invested in real estate and retail when no one believed the city could support it—and sat on his properties until the deals started rolling in. His faith that the money would come represented faith in the city itself.
“His timing seems to be perfect,” says Michael Beyard, a senior fellow at the Urban Land Institute, which studies development in cities. “There is an air of mystery about him. No one’s quite sure how he’s become so successful.”
The Bic-bald, motorcycle-obsessed grandfather still goes to work in cowboy boots and calls his daughters his “gangsta girls.” He keeps a poster of Marlon Brando from The Godfather, with the standard “deal you can’t refuse” quote, in his Chinatown office. The industrial-chic space also includes a tank of tropical fish, two parakeets, spike-collared dogs, and an assortment of historic artifacts.
Many of the relics are souvenirs taken from the dozens of downtrodden properties Jemal has resurrected in the last 15 years. He has left evidence of his acumen for transformation in more than a million square feet of real estate in the region, from the row of restaurants and shops across from Gallery Place to new condos on F Street and H Street and historic monoliths like the old People’s Drug warehouse and the Woodies building. His name is on the deeds to as-yet-undeveloped properties near the site of the future ballpark along the Anacostia River.
Beyard says Jemal capitalized on D.C.’s historic lack of shopping. In real estate jargon, the city is massively “under-stored,” with about half the national average of retail space per capita. Jemal avoided, for the most part, the typical high-rent tenants: banks, drugstores, office dwellers—and held out for high-end retailers that would bump up the profile of a neighborhood. He had a keen read on the wants of the typical D.C. consumer. His projects are filled with mainstream chains that skew toward the vanilla: West Elm, Fuddruckers, and Trader Joe’s.
Jemal put on a suit to attend last year’s trial, which was correspondingly stuffy and dry. The proceedings were dominated by days of testimony about how Douglas Development handled its books. Jurors were observed doodling in the notebooks. Newspaper reporters struggled to find drama in the action.
Despite receipts and bank records documenting a lusty list of goodies passed from Douglas Development to Lorusso, a jury of 12 failed to find evidence of a quid pro quo relationship. It didn’t seem to matter that two years earlier Lorusso had pleaded guilty to two counts of accepting bribes from Jemal and his associates: Though Lorusso was bribed by Jemal, Jemal was not guilty of bribing Lorusso.
The defense argument rested largely upon the defendant’s unorthodox reputation. Douglas Jemal couldn’t be guilty of pay to play, it seemed, because Douglas Jemal always paid for everyone. The defense also succeeded in portraying Lorusso as a weasely climber who dragged himself into the mud.
In pushing for a lighter sentence for the wire-fraud verdict, Jemal’s lawyers have repeatedly emphasized that disputes over payments are standard fare in the world of construction.
The defense’s sentencing memorandum called the government’s obsession with the lawsuits “silly.” The lawyers wrote, “It is a fact of life in the real estate development and construction industries that disputes often arise between developers, contractors and subcontractors.…If anything, it is a testament to Mr. Jemal’s business integrity that an operation as large as Douglas Development, in the litigation-heavy real estate development and construction industries, has been targeted by so few lawsuits over the years.”
But while negotiations over construction fees do keep attorneys in business, Jemal’s firm tends to find itself in court more often than other developers. A search of the D.C. Superior Court docket turns up 29 civil suits filed since 2000 in which Douglas Development is listed as defendant. Just four such cases come up for developer John Akridge, three for Riverdale International, and two for Western Development.
Douglas Development’s reputation for ending up in court has been industry lore for nearly two decades.
The one charge that stuck against Jemal—wire fraud—had a compelling backstory. In November 2002, Jemal and a business partner arranged to take out a loan through Morgan Stanley. Much of the money was set aside in a holding account to be used later to pay construction costs at their 77 P St. NE development. But around the same time, Jemal had his eyes on another property, 111 Massachusetts Ave. NW. So the developer drew up an invoice for a fake real estate brokerage, collected $400,000 of the money on hold, and bought the Massachusetts Avenue property, all without informing his business partner.
That investor was Joseph Cayre, an old friend whose nephew was married to one of Jemal’s daughters. Victims of wire fraud don’t usually defend their perpetrators. But Cayre strained to convince jurors that, though he testified as a government witness, he held his defrauder in the highest regard.
He submitted a glowing letter asking Urbina to go easy on Jemal. The New York businessman, whom Jemal supposedly bilked, described his friend as a champion of the underprivileged and “a very special human being that we all need on the streets helping people and not behind bars.” During his testimony, Cayre also told the jury he would make a deal with Jemal again. He offered only one reason: He “made two tons of money” with Jemal.
Of course, not everyone cashed in with Jemal.
The government’s evidence included a series of fraught correspondence between Douglas Development and the Keystone Plus Construction Co. in Virginia. After not receiving payments, the small contractor agreed to give Jemal a substantial discount, slicing more than $150,000 off the bill and drawing up a payment plan for the remaining $425,000.
Even with the cushy deal, Jemal continued to miss payments and bounce checks. Keystone filed suit and settled out of court three years later.
With all of Jemal’s success—and his reputation for picking up the bill—it may be hard to believe that he would stiff a small business. But like many in the world of real estate, Jemal doesn’t have a lot of cash to show for his massive investments. He leverages his wealth to buy more property, increasing his fortune but staying cash-poor.
According to court testimony, his development firm has always had trouble paying its bills on time. “There were cash-flow issues throughout [my] tenure,” testified David Medding, Douglas Development’s former comptroller. Medding explained to the jury how the company structured its accounts payable. At the beginning of each month, when rent came in from Jemal’s hundreds of tenants, mortgage payments went out first, quickly bringing account totals to “next to a zero balance.” The accounts often dropped to an overdraft state and within a week or so, the coffers were bare. Then Medding and Jemal began the nuanced process of giving small contractors the slip. “It was sort of a ‘check’s in the mail’ routine,” he said.
Douglas Development didn’t just stall on payments. The company also routinely sent out checks when the money wasn’t in the bank. Charges for insufficient funds became a part of the business plan, Medding said. And small contractors continued to wait for payments.
Despite Jemal’s reputation, many contractors say they were tempted to work with the developer. In his jeans and boots, Jemal looked like the men he hired to put up drywall, especially compared to the square-jawed dealmakers who dominate the industry. With new projects launching every few months, he offered a potentially unending supply of work at premium rates.
Most of the contractors who sued Jemal asked not to have their names printed. “I lost a lot of money with him,” one said, “but this guy has got a lot of power and influence in the District.” The man, who co-owns a construction company in Virginia, said Jemal would hint at the possibility of contracts on future projects to soften the blow of late payments and heavy discounts on current projects. “He’d dangle the carrot,” he said. “They knew what they were doing.”
A Maryland contractor said Jemal actually hinted at the risks of doing business with Douglas Development.
“He kind of warned you up front not to take too much on because he might take advantage of the situation,” said the contractor, who ignored the advice. “When you’re at the beginning of the relationship, you’re trying to get your volume increased. I thought he might not really mean that.”
At first, he said, Jemal came off as “down to earth. He was your buddy.” The bills got paid on time, and he was always buzzed in from downstairs at Jemal’s office. But once the firm took on a few larger projects, the money stopped. Jemal’s guards wouldn’t let him back into the office. When he asked about payments, company representatives said they could write a check but only if the contractor offered a 10 percent discount—which amounted to his entire profit margin.
The owner of a Maryland moving company said he learned quickly that Jemal preyed upon small businesses like his. He took a job hauling the contents of one warehouse to another warehouse even though he’d heard horror stories about working with Jemal. When he stopped getting paid, he sued.
“Douglas goes after the smaller contractors,” he says, because “they have a hard time getting money out of him.”
The small company ultimately lost the 2003 suit, the owner says, because his own employee hadn’t kept very good records. “[Jemal] was right on that one. We didn’t have everything we needed to have, so he won that round.” After the trial ended, he said, Jemal’s attorney, Robert Leibner, approached and said, laughing, that he wasn’t accustomed to representing the party who deserved to get paid. “He said, ‘Usually it’s the other way around. I’m amazed he’s actually right this time.’ ”
“I would categorically deny that,” says Leibner, who is now retired. “Douglas Jemal is and always has been an entirely honest businessman.”
Not long after Eric Denchfield stopped receiving payments from Jemal, he met a former Douglas Development supervisor at another job and got the advice he’d been dreading: He needed to sue. According to the super, Douglas Development routinely stalled on payments to small contractors and wouldn’t write a check unless a lawsuit was actually filed. Even then, the superintendent said, Jemal would countersue and wait to settle on the contractor’s suit until the day before the trial was set to begin.
Denchfield decided to fight, but first he had to figure out who had the money.
“From start to finish, we dealt with three different development companies, front companies for Jemal,” he said, adding that checks came from companies in D.C., New York, and Chicago. “It was real confusing to do the legal work later to figure out who to sue,” Denchfield says. Lots of developers bicker over payments, he said, but Jemal proved the most slippery. “He’s mastered the invisible man routine.”
When Denchfield threatened to sue, he got more than half of what he was owed. He filed suit for the rest in November 2001, and Jemal filed a countersuit. Denchfield held on and, as expected, received a settlement deal as the trial date approached.
“You really have to fight to get paid,” he says. Even though he got “reamed” with more than $15,000 in legal fees, he says the fight was worth it.
The process dinged Denchfield for more than just legal costs. He took out a second line of credit on his home to buy materials for Jemal’s job and temporarily gave the boot to nine of his 12-man crew.
When Dennis Kane met the developer back in the early 1990s, he wanted nothing to do with Jemal. The economy was unstable, and commercial real estate in the District had hit bottom. But Kane, who owns the large general contractor Kane Construction, says circumstances forced him to work for Jemal anyway. True to the rumors, Jemal took his time making payments. Kane billed Jemal $100,000 for one early job before he’d had any children. When the last check finally arrived, he had three.
And yet, Kane may be Jemal’s biggest fan. Kane wrote his own letter to Judge Urbina pleading for a lenient sentence for his tycoon friend of nearly two decades. “When you have a handshake relationship,” Kane says, “it means something at the end of the day.”
In his case, it meant money. Kane says Jemal taught him how to play the edge. Jemal may have spread himself thin and gambled on properties in untested neighborhoods, but he always cashed in in the end. “Who the hell wants to play with a shovel in the dirt unless you’re getting paid for it?” Kane says.
Kane claims he hasn’t billed Jemal in three years and, thus, had no financial incentive to write the letter. His three-page note is frank. Working for Douglas Development, he said, was “a thrilling experience—even if sometimes frustrating from a payment consistency standpoint. If I didn’t admit that, you would have good reason to question the validity of this entire letter. The office has never been particularly well managed and it can take a while to get paid. Patience is probably a virtue when working for his firm.”
Kane says Jemal sees contractors as partners who should be willing to wait for their money, not as vendors who ought to get paid on time.
“You can get caught in a situation with him where you don’t want to put any more work on the books,” Kane says. “Everyone has a different pain threshold.”
Does he blame Jemal for taking advantage of the little guys? “No,” he says. “He did some things I wouldn’t do, but that’s just looking from the outside.”
Dennis Kane has a little advice for the small contractors who got hosed by Jemal: “If you don’t know who you’re doing business with, you don’t deserve to do business with them.”