Bid-rigging, ethics violations found in unreleased New Orleans ‘smart cities’ investigation

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Investigators hired by the New Orleans City Council last year to look into the now-abandoned “smart cities” project found evidence of potential contract-rigging, ethics violations and perjury by city officials.

The council received the investigative report months ago, but never released it publicly. The long-awaited results, obtained by Verite, leave some questions unanswered due to the fact that the investigation was never completed. Although the council’s hired investigators said they would need more time and money to finish, the council chose to end their contract.

The final product, an 18-page “investigative status report”, concluded that the consortium of businesses that was selected for  the proposed contract — Smart+Connected NOLA — had an unfair advantage in the public bidding process, and that undisclosed financial relationships compromised the integrity of the process.

The report, along with thousands of pages of accompanying documents, add new evidence to support the allegations that emerged before the smart cities project was canceled in late April 2022, when Smart+Connected NOLA dropped out amid public scrutiny.

“The Council’s suspicions have been confirmed and this investigation has produced significant evidence we have now turned over to the relevant Federal, State, and local enforcement agencies,” Councilwoman Helena Moreno told Verite in an email.

Two city officials in charge of the project — Director of the Mayor’s Office of Utilities Jonathan Rhodes and Christopher Wolff, a city IT staffer — were simultaneously running a side business called Verge Internet. The investigation found that throughout the New Orleans smart cities public bid process in 2021, Wolff and Rhodes were actively meeting with key members of Smart+Connected NOLA to pitch similar smart cities projects in Miami and Los Angeles.

Wolff was a member of the city purchasing committee that chose Smart+Connected NOLA as the top candidate for the project, while also working with the Smart+Connected NOLA team through Verge.

Some of the findings simply add further support to allegations that were already well documented by local media and the council. But other documents include previously unknown information.

Many of the allegations centered on the role of a self-described “pro-bono” city consultant — Ignite Cities — that helped design the project and had access to a draft of the city’s public bid before it was made public. Evidence already showed Ignite Cities had some existing relationship with the Smart+Connected NOLA team, raising questions about whether it was proper for a contractor to design a city project while also working with one of the teams bidding on that project.

The investigators — from the firms DeLuca Advisory & Consulting Services and Triangle Investigations — concluded that Ignite had a pre-existing business relationship with Smart+Connected NOLA. In interviews, city officials admitted that shortly before Smart+Connected NOLA dropped out, an executive informed the city that Ignite Cities did have a financial stake in the project.

“The investigative findings have identified a number of apparent ethical and conflict of interest violations and instances whereby there may have been, at a minimum, an appearance of impropriety,” the report said.

Wolff’s lawyer, Michael Kennedy, told Verite that Wolff, who is still employed by the city, “​​is being put forth as a scapegoat.”

“Flat out my client committed no violation, ethical or otherwise,” Kennedy said. “And it is wholly incorrect to put him up as the demon here, when we all as citizens of New Orleans know that nothing in this city runs right and they’re just trying to blame it on him.”

Mayor LaToya Cantrell’s office didn’t respond to requests for comment. Neither did either of the firms hired for the investigation. Rhodes resigned from city employment last year. Efforts to reach him through several known phone numbers were unsuccessful.

Moreno said the decision, in February, to end the investigation was largely based on the fact that the projected cost to finish it was twice what the council originally budgeted. She said by early 2023, investigators had confirmed the council’s suspicions, and it was time for the matter to be taken up by “enforcement agencies.”

“The Council’s charter-authorized investigation is part of a continuum of justice, which would conclude with action by the appropriate enforcement and prosecutorial agencies,” Moreno said. “The investigation largely reached a point at which it was critical that those outside agencies take on the next steps of holding the involved individuals accountable.”

None of the leading companies comprising Smart+Connected NOLA responded to requests for comment. George Burciaga, the founder of Ignite Cities, now named Elevate Cities, did not immediately respond  to a voicemail on Thursday (July 20).

April 2022: The deal collapses

In April 2022, Cantrell held three events to promote what she called her “WiFi for All” initiative — a rebranding of the smart cities project that, by that point, had been in the works for more than a year. The press conferences had larger-than-usual audiences, many of them drawn in by the star power of NBA legend Earvin “Magic” Johnson, who spoke alongside Cantrell in support of the multimillion-dollar project.

“It’s going to change all of your lives, it’s going to make it better,” Johnson told the crowd, according to a report by The Lens.

He was speaking on behalf of Smart+Connected NOLA, a business consortium led by wireless giant Qualcomm and JLC infrastructure, an investment firm founded by Johnson and a Chicago businessman named Jim Reynolds.

The consortium was poised to sign a 15-year contract with the Cantrell administration, almost a year after it had been selected to lead the smart cities initiative in June 2021. The team was trying to rally support from the public, as well as the City Council, which would have to approve such a large contract.

“We could have taken our check anywhere, because a lot of cities want this,” Johnson said during a press conference, according to The Lens article. “There’s no magic without the City Council.”

The stated aims of the smart cities deal were to provide a new “city-directed” internet service to compete with existing providers like Cox Communications and replace traditional city infrastructure with “smart,” internet-connected devices packed with data-collecting sensors. The project was also sold to the public as a way to reduce the “digital divide” and provide WiFi to households that can’t currently afford it.

By that time, however, reporting in The Lens had raised potential issues with the project. Those included allegations from Cox, a losing bidder, that Ignite Cities was not acting as an impartial consultant to the city on the project, and was actually partnered with members of Smart+Connected NOLA.

There were also questions about the technical side of the Smart+Connected NOLA proposal, including whether it would provide sufficient internet speed and whether the thousands of new cameras, audio recorders and other data-collecting sensors presented a privacy concern.

Smart+Connected NOLA’s proposal was also vague on how the company would provide free or cheap internet service for low-income residents. The proposal didn’t include details about whether internet plans would be cheaper than existing services, or any built-in mechanism to give subsidized internet to those who couldn’t afford it.

Skepticism also grew around the proposal’s lofty promise that the project would bring tens of millions of dollars of investment with no net cost increases to the city. The promise to keep the project “cost-neutral” for the city ultimately depended on a number of variables, including the city’s ability to mine and monetize data.

Within weeks of the “Wifi for All” events, the deal was falling apart. Concerns grew among some members of the City Council, and in late April the council opened a formal investigation into the bidding process and started issuing subpoenas to the Cantrell administration, including one that compelled Rhodes to give sworn testimony at a public meeting.

The Times-Picayune that month also reported that Wolff and Rhodes, who were intimately involved in building the project and the bid process, were partners in Verge Internet, and were working with Qualcomm and JLC on pitches for similar projects in Los Angeles.

Soon after that, Smart+Connected NOLA dropped out of contract negotiations, and the project was essentially dead. In May 2022, the council voted to hire outside investigators, signing contracts with Deluca and Triangle about two months later.

‘These aren’t allegations … This is established fact’

The investigation used evidence from interviews with 10 city officials and thousands of pages of emails, memoranda and procurement documents to try to answer a series of questions from the council. Among them: Was there evidence that the bidding process was rigged? Did city employees benefit from Smart+Connected NOLA winning the bid? And did officials commit perjury or ethics violations?

They confirmed reporting by The Lens that Smart+Connected NOLA appeared to have improper access to and influence on top officials, largely through Ignite Cities, months before the city publicly released a request for proposals seeking bidders for the smart cities contract. That included an opportunity for Ignite members of the Smart+Connected team to directly pitch Cantrell on their smart cities proposal in January 2021, three months before the city released a public request for proposals seeking bidders.

City Chief Information Officer Kim LaGrue told investigators that the presentation “probably” became the basis for the request for proposals that Smart+Connected NOLA would go on to win. The report also notes that, in March 2021, weeks before the public bidding process began, Rhodes shared portions of the request for proposals with Burciaga, founder and CEO of Ignite Cities.

The investigators were unable to draw any conclusions about whether Rhodes or Wolff benefitted from Smart+Connected NOLA winning the smart cities bid. But they noted that neither disclosed their interest in Verge Internet or their work on smart cities projects in other cities.

“At a minimum it created an appearance of impropriety in that they had the potential to benefit from these relationships,” the investigators found.

The investigators’ report also alleged that Rhodes likely committed perjury when speaking under oath in front of the council about the apparent irregularities in the smart cities procurement process in April 2022, saying Rhodes “was not truthful” and “gave less than fully accurate responses” when questioned about his outside business dealings in Miami and Los Angeles.

And it found that Rhodes and Wolff appear to have violated the city’s code of ethics due to their failure to disclose apparent conflicts of interest and Rhodes’ communications with Burciaga.

Though much of the evidence supports allegations that have been previously documented, the investigators also uncovered some new information.

For example, investigators claimed during interviews that a signed contract between the city and Ignite Cities — which the city originally claimed did not exist — was improperly stored in Cantrell’s office and wasn’t put on the city’s central contract database.

They also found that just weeks before the public bid went out, Rhodes tried to avoid a bidding process by awarding Smart+Connected NOLA the job through a type of contract called a cooperative endeavor agreement, which is not subject to city public bidding rules. Though Smart+Connected NOLA was seeking a multi-year deal, Rhodes apparently tried to award a single-year agreement. Cooperative endeavor agreements lasting more than one year require a council vote.

The new evidence indicates that within six months of awarding the contract, one of the city officials in charge of the project — Wolff — expressed serious doubts about the technical and financial viability of the Smart+Connected NOLA plan. Wolff said he recommended canceling contract negotiations and putting the project back out for public bid in December 2021 — months before Cantrell’s WiFi for All events.

Wolff said in a recorded interview with investigators that after he brought up issues, LaGrue and senior advisor Josh Cox tried to “rein him in” and told him, “Don’t be an obstacle. Figure out a way to make it work.”

That flies in the face of the narrative Cantrell rolled out when the issue was making front page news last year. She continued to claim that Smart+Connected NOLA was forced to drop out of the project because of the “contentious atmosphere” created by meddling City Council members and local media.

Cantrell did not admit that internally, there were concerns both about the ethics of the contract award and the viability of the entire project.

In April 2022, she described the council’s investigation as a “spectacle” meant to “attack” and “obstruct my administration.” At no point did Cantrell acknowledge that the allegations had any merit.

On top of all the existing evidence, the release of the council’s investigation leaves little doubt there is some legitimacy to the council’s suspicions.

“These aren’t allegations at this point, I mean, this is established fact,” one of the investigators said to Cantrell’s Director of Intergovernmental Relations Arthur Walton in a recorded interview.

The end of the investigation

The investigation still left some open questions, in part because the council chose to end it before it was finished.

Among the unanswered key questions: Did Rhodes, Wolff or LaGrue personally benefit from their involvement?

“It is unknown at this time what, if any, benefits were received due to S+C NOLA winning the NOLA RFP,” the report said.

The investigators also hoped to interview more key witnesses, including Rhodes and Burciaga, who, according to the report, did not respond to requests for interviews. Nor did they speak to Cox or the other losing bidders about the procurement process. The report also references electronic data files investigators received just before the closure of the probe.

According to Moreno’s Chief of Staff Andrew Tuozzolo, the contractors hired by the council to conduct the investigation used up the entire original budget, $364,000, by early 2023, and that the cost to finish it was “projected to nearly double the original cost to the public.”

“By this past winter, the findings already clearly indicated that the Council’s concerns had been verified and that further action by Federal, State, and/or Local enforcement agencies would be necessary,” Tuozollo said.

The final work product handed in by the investigators wasn’t a final report, but rather an updated “investigative status report.” It included a list of actions they hadn’t been able to complete, including interview Rhodes, review new files handed over by city officials and “pursue non-compliance with council subpoenas.”

The main reason the investigation was stopped, Moreno said, was the amount of money the council would have to spend and the fact that they believed that the investigation reached a point where it should be continued by law enforcement agencies. Tuozzolo said the evidence had been turned over to the Louisiana Board of Ethics and the New Orleans Office of Inspector General.

Representatives of  the Ethics Board, Office of Inspector General and the U.S. Attorney’s Office for the Eastern District of Louisiana said they couldn’t confirm or deny pending investigations.

On Friday (July 21), after this this article was first published, Kennedy, Wolff’s attorney, sent Verite a July 13 letter from the state Board of Ethics addressed to Wolff. The letter said that early this month, the board considered a “confidential investigation report” related to Wolff’s employment at the city. According to the letter, the investigation found no violations of the state Code of Governmental Ethics, and the board ordered the matter to be closed. Officials with the Board of Ethics did not immediately respond to requests for comment. Rhodes sent Verite a letter containing the same language from the state Board of Ethics, addressed to him, on Friday evening.

Moreno also mentioned the fact that some of the key figures in the allegations detailed by the City Council’s investigators, including Rhodes and Cox, had since resigned from the city.

Several officials implicated in the allegations still work for the city, including LaGrue and Wolff.

The fact that the council didn’t release the findings to the public may come as a surprise to those following the news last year. The issue was such a priority for the council that it took the rare steps of launching an investigation into the administration and subpoenaing government officials. The Cantrell administration resisted complying with the subpoenas, and took the council to court to stop it. The council fought back and eventually was able to get some of the documents it was seeking.

Asked why the report wasn’t released publicly, Moreno characterized it as an oversight.

“The Smart Cities investigation report was sent to all Council members and should have been released and posted online by [the Council Utilities Regulatory Office],” Moreno said. “It will be posted asap. This was the first official Council investigation in decades. Since then we’ve now had a series of even more serious matters to come under our review.”

Beyond its inquiries into potential wrongdoing, the investigators in their report also suggested weaknesses it found in the city’s procurement process. For example, members of the selection committee for the smart cities contract didn’t comply with a requirement to hand in a conflict of interest disclosure form prior to choosing a winner.

Moreno pointed out that last year, in part as a result of the smart cities allegations, the council passed a new law that greatly expanded its authority to review and approve contracts the mayor wants to sign.

“The Council has already begun the process of reforming the procurement process, as recommended in the investigation,” Moreno said.

This article first appeared on Verite and is republished here under a Creative Commons license.

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