Euille says payment from Hoffman was a loan

Euille says payment from Hoffman was a loan
Bill Euille in front of his old desk in the Alexandria mayoral office. The checkbook register with the check stub of the $260,000 payment from Hubert “Jay” Hoffman III to Euille was found in the lateral file to the right of the City of Alexandria flag. (Photo/Office_Washington Post via Getty Images)

By Alexander Fernandez and Denise Dunbar | Alexandria Journalism Project

Former Mayor Bill Euille sent a statement to the Alexandria Times last week in which he said a $260,000 check issued to him by leading Alexandria developer Hubert “Jay” Hoffman III, while Euille was mayor, was a loan rather than a gift.

The statement was in response to an investigative story by the Alexandria Journalism Project that ran in the February 15 Alexandria Times. The story detailed the discovery of the check stub from Hoffman and a slip showing a corresponding deposit into Euille’s personal bank account of $260,000 on June 18, 2012. 

This payment took place the week following the 2012 Democratic primary for mayor, in which Euille prevailed – all but ensuring that he would remain Alexandria’s mayor for the next three years – and during a timeframe when Hoffman had multiple projects worth tens of millions of dollars before City Council.

In the statement, which Euille began with “Dear fellow Alexandrians,” he said:

“To be clear, this was a loan that was appropriately supported by a promissory note. Mr. Hoffman and I have been friends since the 1970s, having first met when I graduated from college and returned to Alexandria to begin a career in the construction industry,” Euille said in the statement.

Euille also said in the statement that the loan was made because a former business partner had absconded with $200,000 earlier in 2012, leaving him in need of funds to prevent foreclosure on his home.

“So, I turned to my friend Mr. Hoffman for a loan. The loan was timely repaid in full. I thank Mr. Hoffman for coming to my rescue,” Euille said in the statement.

Euille did not respond to several requests from the AJP for further elaboration, including an email in which we asked if he was willing to provide a copy of the promissory note or documentation of the loan repayment.

When the AJP reached Jay Hoffman by phone at his Florida winter residence for the February 15 story, Hoffman did not comment on the nature of the payment he made to Euille, or whether it had been repaid.

Hoffman’s only comment on the payment was to say, in response to being told that the AJP had talked with Silberberg, “If you’ve talked to her, then you’ve got the story. You don’t need me.”

The AJP learned of another instance of an Alexandria business owner making a significantly smaller “loan” of $1,500 to Euille the next year, in 2013, that this business owner said was not repaid.

A copy of the check written to Euille from this business owner, who the AJP is not naming because they do not do business before City Council, was also in the checkbook register that was discovered in the mayoral office in January 2017 by a volunteer for former Mayor Allison Silberberg.

“I knew Bill was on rough times,” the business owner said in an email to the AJP. “He dropped by my office one day and asked if I could loan him a small amount of money. … I felt bad for him and wrote a check for $1,500 to him personally. I doubted that I would ever get repaid, but was OK with that.”

Financial troubles

There is documentation to support Euille’s contention that he was having financial difficulties in 2012, though the amounts involved and timing differ somewhat from his statement.

According to City of Alexandria land use records, Virginia Commerce Bank granted Euille a loan modification, secured by his home, on his original line of credit of $750,000 on Sept. 6, 2011. The line of credit had a principal balance of $747,832.18, which the bank reduced all the way down to $320,282.

A loan modification is granted to individuals experiencing financial hardship who may face foreclosure. Individuals have to provide their bank with proof that payments cannot be made according to the loan’s original terms. Modifications are based on income, debt, assets and proof of hardship, according to federal code §1024.41, loss mitigation procedures and the Consumer Financial Protection Bureau.

Despite Euille’s claim in his statement printed in the March 21 Alexandria Times that his financial hardship occurred in 2012, evidence suggests that he had financial hardship in 2011, which was addressed by his bank’s loan modification and his more than $400,000 line of credit loan forgiveness in September 2011.

Following the June 18, 2012, payment from Hoffman, Euille then satisfied two loans in just over two months’ time: one was for $50,000 and the other for $322,450, according to Alexandria land use records. Those loan repayments left his property at 106 E. Nelson Ave. free and clear of any loans or liens.

The City of Alexandria, for tax purposes, assessed Euille’s 106 E. Nelson Ave. property in 2012 as having a value of $1,148,791, according to the City of Alexandria Office of Real Estate Assessments – though these city assessments may not reflect the true sellable value of a property.

Following the September 2011 loan modification and the June 2012 payment from Hoffman, Euille then sold the 106 E. Nelson Ave. house on Sept. 30, 2013, for $855,000, according to City of Alexandria land use records.

A former senior official in the U.S. Department of Justice, who worked on public corruption cases and agreed to talk to AJP on background for this story, said the transaction between Hoffman and Euille looked like a loan.

“My gut reaction when I first read the article is that it likely was a loan, for a couple of reasons,” the former Justice Department official said. “One, it was a very large payment and, two, it was by check. Criminals very rarely write checks to other criminals. … Of course, you would want to verify through investigation that it was a loan. You would look, for instance, for a promissory note and evidence of repayment of the loan, among other things.”

Difficult to prosecute

Transactions of this kind between an elected official and a person who stands to benefit financially from actions by the local official are difficult to prove and prosecute, because it requires a quid pro quo.

“Here’s one of the complications: If the mayor was going to take some official action anyway, or if he can claim credibly that whatever he was given didn’t affect his official conduct, it may not legally be a bribe, because there is no quid pro quo,” the former Justice Department official said. “That is, it would be difficult to prove that something of value was given to the payor in return for some official act.”

The former Justice Department official also clarified the roles played by the FBI and the U.S. Attorney’s Office in public corruption investigations.

“The work [between the FBI and U.S. Attorney’s office] is collaborative. Particularly on a public corruption case the work is always collaborative. For instance, the FBI might get a tip. They might open a case. They might do a few interviews, get some bank records … but the FBI agent would go to find the U.S. [Attorney] pretty quickly. These are sensitive and difficult cases, and agents and prosecutors would absolutely work closely together throughout the investigation.”

At the end of the day, however, the U.S. Attorney’s office has the final say in whether to prosecute.

“The U.S. Attorney is the chief law enforcement officer for the district and so the final prosecutive judgment always, always belongs to the U.S. Attorney and not the FBI,” the former Justice Department official said.

The reported three-year timeframe for the investigation into the Hoffman payment to Euille is fairly typical, according to the former Justice official.

“There’s more crime than there are FBI agents or [Assistant U.S. Attorneys]. And the typical FBI special agent or AUSA will have dozens of open cases. This is not an excuse but an explanation. I think three years is too long, but it often takes that long to finish an investigation and make a prosecutive judgment.”

The former official said the decision to prosecute a case requires a federal prosecutor to follow the Department of Justice protocols. Even if the prosecutor has some evidence, that evidence may not be “conclusive or determinative.”

“One requirement is that a prosecutor must have a reasonable probability of conviction,” the former Justice Department official said. “And that means evidence that is relevant and admissible to convince a jury unanimously, by proof beyond a reasonable doubt. Properly, that is a tough standard.”

The former Justice official added it seems likely that the U.S. Attorney found no federal violations, or at least none that could be proven.

“It is an excellent U.S. Attorney’s Office, and they would not shy away from a difficult case, if they had one,” the former Justice official said.

Though it is possible, according to the former official, for federal prosecutors to turn a case back over to state prosecutors if the U.S. Attorney determines they can’t prove that federal law was broken, that option can be cumbersome.

“Rule 6(e) of the Federal Rules of Criminal Procedure prohibit the disclosure of grand jury information, except in limited and enumerated circumstances,” the former Justice Department official said.

For instance, there is an exception to Rule 6(e) that allows a U.S. Attorney to go before a federal judge and ask for an order letting them share federal grand jury information with a state or local prosecutor “if you have a good faith basis to believe you have a violation of state law,” the former Justice official said.

But even if the Grand Jury information is turned over by a judge’s order to the state, it would be highly unusual for a local prosecutor to prosecute the local mayor.

“That strikes me as an odd and problematic situation,” the former Justice official said. “More likely, a local prosecutor would recuse and a local prosecutor from another part of the Commonwealth would take charge of the case. There is no evidence that that happened here.”

Alexandria’s local prosecutor is Commonwealth’s Attorney Bryan Porter, who was initially elected in 2013. Porter said in an email that he was not consulted in 2017 when the payment from Hoffman to Euille was discovered, and that he first learned of it in the AJP story. Because the case was investigated by the federal government, Porter declined to be interviewed for this story.

“For the record, however, my office was never consulted about this situation and therefore we did not decline to move forward,” Porter said in the email.

Virginia code

Alexandria resident John Frost asserted in a letter to the editor that ran in the March 7 Alexandria Times, “Still waiting for Euille’s response” that the payment from Hoffman to Euille was both a “breach of trust” and a possible “violation of the Code of Virginia.”

“But the fact is that it really doesn’t matter what the payment was for. It was a very large financial transaction between a sitting mayor and, as the investigative story pointed out, a major landowner who came before Council to amend numerous special use permits to allow far more density on his land holdings than had been granted previously,” Frost said in his letter.

While Frost cited Title 30- 108 of the Code of Virginia to support his assertion that the payment was illegal, that section of the code appears to only pertain to members of the Virginia General Assembly.

However, there is a section of Virginia law that applies to conduct by local elected and appointed officials as well as city staff.

Virginia code in § 2.2-3103, in the State and Local Government Conflict of Interests Act, appears to prohibit a sitting mayor, City Councilor or member of city staff from accepting payments from people who do business before local government, whether that payment is in the form of a gift or a loan.

2.2-3103 begins with “No officer or employee of a state or local governmental or advisory agency shall” and section 5 continues with “Accept any money, loan, gift, favor, service, or business or professional opportunity that reasonably tends to influence him in the performance of his official duties. This subdivision shall not apply to any political contribution actually used for political campaigns or constituent service purposes and reported as required” by state code. (Emphasis added.)

Virginia code provides for civil penalties for violations of the State and Local Government Conflict of Interests Act:

“2.2-3124. Civil penalty from violation of this chapter. A. In addition to any other fine or penalty provided by law, an officer or employee who knowingly violates any provision of §§ 2.2-3103 through 2.2-3112 shall be subject to a civil penalty in an amount equal to the amount of money or thing of value received as a result of such violation.”

The code goes on to say enforcement of this code falls to the local common-wealth’s attorney.

Additionally, Euille did not disclose the payment from Hoffman in any City Council meeting when Hoffman projects came before Council, nor did he recuse himself from any votes involving Hoffman.

Former City Councilor Frank Fannon, who was on City Council in 2012 when the payment took place, told the AJP that Euille also never disclosed the payment from Hoffman in private to members of City Council.

“No. None of this,” Fannon said in an interview. “I know Euille and I know Hoffman, but I never knew of any inside deals.”

Euille accepted campaign donations from developers and others who did business before City Council throughout his tenure on City Council and as mayor, according to campaign reports available on the Virginia Public Access Project website.

In his statement that ran in the March 21 Alexandria Times, Euille said his vote was never for sale while in elective office.

“I have not and would never accept a payment of any kind from anyone for my vote or support,” Euille said in the statement.

Euille concluded his statement with remorse for how the payment appears.

“I am deeply embarrassed by this situation and express my remorse for the resulting optics,” Euille said in the statement.