Jack Evans Went To Bat For A Company Accused Of Selling Phony Shares In A Digital Sign Business
By Jeffrey Anderson
In February 2016, prosecutors say, Don MacCord, the founder and CEO of Digi Outdoor Media, lied to the Securities and Exchange Commission in an effort to hide a scheme to lure investors with bogus lease agreements at commercial buildings in D.C. where the firm purported to be installing digital advertising signs.
Less than a month earlier, on January 31, MacCord had emailed Ward 2 Councilmember Jack Evans and Evans’ chief of staff, Schannette Grant, thanking them for unspecified assistance related to his firm’s foray into the digital sign business in D.C.
“We have finally completed our sign order and our financing is in place and our guys want to come in on Wednesday and say thank you,” MacCord wrote. “Thank you for everything and we look forward to your great event this week.”
Evans won’t return calls or emails from District Dig, which last week reported that his son received an offer for a paid internship from MacCord in June 2016, six months before the veteran Councilmember introduced emergency legislation to thwart regulatory efforts by the Department of Consumer and Regulatory Affairs (DCRA) that would impede Digi Outdoor Media.
Ethics experts say such a relationship exemplifies a culture that D.C. officials claim to be addressing through campaign finance reform. “D.C.’s got a serious problem with officials receiving favors and this is an example,” says Craig Holman, government affairs lobbyist of the non-profit watchdog group Public Citizen, who has been urging D.C. to pass a meaningful law prohibiting pay-to-play for years.
Evans is D.C.’s longest serving Councilmember and the Chairman of the Board of the Washington Metropolitan Area Transit Authority. A longtime partner at white-shoe law firms that have clients who do business in the District, he has walked a fine line between business and politics. But going to bat for a guy who allegedly was using D.C. as a venue to perpetrate a fraudulent advertising scheme is a different story.
The Evans-MacCord relationship became more worrisome on December 4, 2017, when the Securities and Exchange Commission filed a fraud complaint against MacCord and Digi Outdoor Media in U.S. District Court in Washington State; and federal prosecutors in San Francisco indicted MacCord and CFO Shannon Doyle in U.S. District Court in the Northern District of California on charges of conspiracy to commit wire fraud, obstruction of justice, and falsification of records in the SEC investigation.
Emails obtained by The Dig indicate that Evans engaged in a mutually beneficial relationship with MacCord during a time in which MacCord was allegedly selling shares of a company based on phony leases at proposed sign locations in Evans’ backyard.
In the emails, MacCord ingratiates himself to Evans, who was comfortable enough to arrange an interview for his son. In June 2016, MacCord informed Evans that he had offered his son a summer internship that paid $20 per hour. Months later, Evans crafted a bill to thwart DCRA’s enforcement efforts against Digi Outdoor Media. MacCord’s lawyer has declined to comment. MacCord did not return calls from The Dig.
The SEC complaint states that MacCord and Doyle have been friends for nearly 20 years and have formed and operated several companies together. In 2009, MacCord founded Digi Outdoor Media and according to the company’s business plan intended to install outdoor digital display signs for advertising in the D.C. metropolitan area. In the summer of 2013, MacCord, Doyle, and other board members sought private investors to pay for sign construction at commercial buildings in D.C. where they had obtained leases. The goal was to become a publicly-traded company.
From 2013 through November 2014, the complaint states, Digi Outdoor Media offered investors convertible promissory notes that paid 25 percent interest annually. Investors could convert those loans to common stock and become owners of the company. With more than 60 investors in the United States, the firm, led by MacCord, raised $4.5 million and touted “[h]igher than usual returns on investment.” The money was supposed to go to purchasing and installing signs, paying the leases, and hiring contractors.
MacCord and Doyle encouraged investors to convert their notes to common stock, and almost immediately, the complaint states, began using investor money for their personal benefit. From January 2014 through 2015, the company transferred approximately $3.6 million to a firm that they created and controlled called Signworks LLC, which consisted almost entirely of funds transferred from Digi Outdoor Media. They used at least $2.3 million of investor money to pay MacCord’s personal expenses and to fund Doyle’s other businesses, according to the complaint.
The alleged scheme involved false invoices from Signworks that purported to bill Digi Outdoor Media for sign construction and installation at properties in D.C. The SEC has identified but not yet disclosed those properties.
The complaint states that the firm did not have actual leases for most of the properties, and had not even met with landlords, much less done construction.
In 2014 alone, Digi Outdoor Media transferred $2.4 million to Signworks for the purported payments on the phony invoices. MacCord used at least $1.6 million of that to pay $20,000 per month in rent for his Southern California mansion, a nanny and housekeeping services, private school tuition for his children, and multiple luxury vehicles, states the complaint. Doyle transferred more than $625,000 from Signworks’ bank account to two other entities that he owned and controlled, one of which he co-owned with MacCord.
In 2015, Doyle transferred another $1.2 million to Signworks, as he and MacCord used at least $790,000 for similar purposes. The complaint states that MacCord used some of that money to pay for a London vacation, apparel from Italian clothiers, and a deposit on a BMW vehicle for his stepson. MacCord also allegedly helped himself to Digi Outdoor Media’s bank account to make payments on a $177,000 Land Rover that was birthday gift for his wife.
Payments to Signworks from Digi Outdoor Media continued until approximately March 2017, according to the criminal indictment, which states that to sustain its business model, Digi Outdoor Media relied on entering into lease agreements with landlords and property owners in D.C. that allowed them to build and install digital signs expected to generate hundreds of millions of revenue over five-to-seven years.
In order to induce investors, states the indictment, MacCord and Doyle misrepresented the number of leases Digi Outdoor Media had negotiated and the time required for signs to become operational. MacCord spearheaded the effort to obtain leases, according to an SEC filing. “We have entered into approximately fourteen long term sign space lease commitments covering 76 (outdoor and indoor) sign sites with third party land owners ranging from 10 to 25 years, and are in negotiations for multiple additional locations,” says Digi Outdoor Media’s Registration Statement. (The company entered into only four leases covering 22 sites, the SEC says, and MacCord either forged, or directed the forgery, of 13 of them.)
MacCord and Doyle hid their scheme from investors, board members, shareholders, business partners and regulatory agencies, including local regulators, the indictment alleges. They did so to preserve their ability to raise money from new investors, extract money from the company via Signworks, and register more Digi Outdoor Media shares for sale on the public securities exchange.
They falsified, forged and deleted key documents, according to federal prosecutors, obtained and converted funds for their own use, and testified falsely before the SEC on February 29, 2016, May 4, 2016, and April 24, 2017.
MacCord and Evans were in frequent contact with one another during this time period, emails show. MacCord needed the city to approve of or at least not interfere with sign installation at locations where legitimate leases were in place. Sign installation began in May 2016, according to DCRA, which began enforcing a sign permit statute in August 2016, and issued stop-work orders that halted the whole enterprise. (Attorney General Karl Racine obtained an injunction in D.C. Superior Court to prevent further sign installation. Litigation is ongoing.)
That’s right about when Evans instructed MacCord how to bundle campaign contributions for the Hillary Victory Fund, emails show, so that Evans and he could attend a Clinton fundraiser in Nantucket.
Digi Outdoor Media continued to solicit investors, the SEC complaint states, as lobbyists David Wilmot and J.R. Meyers sought votes in favor of emergency legislation Evans introduced in December 2016 that would gut the sign permit regulations. Lacking the votes, Evans pulled his bill at the last minute.
From 2016 into 2017, Digi Outdoor Media, its principals, lobbyists and associates spread more than $20,000 in campaign contributions around the D.C. Council, until last March, when Mayor Muriel Bowser pocketed an emergency regulation that would have served similar purposes as Evans’ legislation. As of December 4, 2017, the SEC complaint states, MacCord and Doyle were still soliciting investors for a new digital advertising company.