DURING the past month, I have heard that question multiple times from people across DC who are not satisfied with AG Brian Schwalb’s performance. Some are upset with his apparent unwillingness to aggressively prosecute juvenile crime in many instances. Others complain that he is too focused on big legal cases either unrelated or tangentially related to the District.
Still others argue that Schwalb doesn’t understand the critical role he and his office plays in setting standards that enhance public decorum and public safety for the entire city. “Justice is sometimes in the small matters,” said one civic leader with whom I spoke who requested anonymity.
Turning a blind eye to scofflaws certainly can corrode a community’s moral touchstones while clearing a path for larger criminal activity. Think of it as an unassailable version of giving them an inch.
Consider, for example, Schwalb’s handling of two civil lawsuits — one filed in 2021, the other in 2022, both by his predecessor. While Karl Racine may have been chasing down violators of DC’s nonprofit laws, the current OAG seems determined to let them escape full accountability, settling cases rather than sending a consistent, unambiguous message about what won’t be tolerated among businesses and nonprofit organizations. Equally disconcerting is that the “settle them, settle them now” mentality is harming District residents.
The 2022 lawsuit is against the Janet Keenan Housing Corp. (JKHC), a nonprofit established to provide and preserve affordable housing in the District. Pete Farina, a senior citizen who has called 1304 Euclid St. NW home since 1989, and the five other tenants are sure to be displaced under the deal to end the litigation that is being negotiated by the OAG.
JKHC crossed the legal line when, without receiving prior approval from the DC court, it signed a $750,000 sales contract for the Euclid Street property, which had been purchased in 2000 for a mere $200,000, according to the OAG’s lawsuit. Rather than pushing for the judge to punish the lawbreaker, the OAG worked out a settlement that would advantage JKHC, facilitate the sale and force the relocation of Farina and his housemates.
Last month, hoping to stop the OAG’s reckless insensitivity to the tenants’ plight, Farina filed, pro se, a motion to intervene in the case. He called it a “Hail Mary” maneuver. The force with which OAG responded might have persuaded a casual observer that Farina and the other tenants had broken the law instead of JKHC.
Regrettably, the judge presiding over the case denied the motion. Farina told me earlier this week that he intends to ask for a reconsideration.
AG Schwalb’s coddling of lawbreakers extends to the 2021 case. The complaint asserts that Terrence Boyle, the board of directors of Delta Phi Epsilon Inc., and the board of directors of Delta Phi Epsilon Foundation for Foreign Service Education also had violated the DC Nonprofit Corporation Act, among other things. A judge ruled in 2022 in favor of the District on some of the allegations, although others remain the subject of court proceedings.
Truth be told, I am incredulous that the case against Boyle and the DPE entities wasn’t referred to the Office of the U.S. Attorney for the District of Columbia for criminal prosecution. It involves flagrant misuse of large sums of money and other nonprofit assets seemingly acquired through deception and deliberate misrepresentations.
Still, Schwalb’s name appears on the proposed agreement — submitted on July 24 with the defendants — that everyone expected would be approved by DC Superior Court Judge Shana Frost Matini on Aug. 11.
However, on Aug. 7, she received an “ex parte email correspondence” signed by 12 individuals who identified themselves as members and initiates of Delta Phi Epsilon corporation. The group asked her to “not approve the consent motion for entry of consent judgment,” citing evidence of early violations. They also said that the agreement as written “fails to achieve the objective of banning directors, officers and trustees of the defendant organizations from de facto control of DPE organizations and other organizations chartered under the Nonprofit Corporation Act”; “fails to compensate the members of DPE’s Alpha Chapter, for the loss of benefits they have and the losses they will have because of the defendants’ actions that were contrary to the NCA and the law”; and is “inconsistent” with other similar agreements reached in DC.
When OAG lawyers showed up at court on Aug. 11, Judge Matini “expressed some concerns about the adequacy of the agreement,” according to a court spokesperson. “A further evidentiary hearing was set for 9/26/2023, and deadlines were set for the parties to file written submissions; that hearing was recently converted to a status hearing at the request of the District as the parties were going to work together to submit joint submissions, and to jointly address the concerns of the court.”
In other words, she didn’t approve the agreement. Let’s all salute her.
When I asked the OAG via email about what happened in August, a spokesperson replied: “Our office investigates all complaints regarding non-profits in the District of Columbia and pursues legal action where appropriate to ensure every organization is compliant with DC law.”
“As our latest filing indicated to the Court, based on new information, we have additional concerns and are seeking additional settlement terms to address those concerns,” the spokesperson added.
Except the OAG appeared in court seemingly ready to move ahead with an agreement that, according to the 12 DPE members and initiates, was already being flagrantly violated by the defendants.
James Abely, one of the signers of that email to Judge Matini, told me that many other members and initiates are upset over the misuse of funds and self-dealing by Boyle especially. He noted that while the foundation’s leaders said they were raising money for scholarships none had ever been given.
He asked whether the OAG agreement is saying that “it’s OK to be a nonprofit crook as long as it’s under $3 million” — referencing the amount in an escrow account, the control of which remains a point of contention.
From my vantage point, there is little question about the crookery: Boyle, who was then an officer of the foundation, urged his colleagues to use money in the nonprofit’s account to purchase a house in Georgetown in 1990.
The foundation paid $150,000 toward the $200,000 mortgage down payment. Boyle paid only $50,000 in the deal. They split 50-50 the property taxes and insurance premiums. The house on 34th Street NW in Georgetown ultimately became Boyle’s personal residence, according to the OAG’s complaint, “without [him] paying any rent to the foundation,” which also authorized him to “lease rooms … to other individuals to help defray Boyle’s portion of the costs.”
Unsurprisingly, eight years later, the foundation sold its ownership interest to Boyle for only $150,000. It didn’t “recover any of its mortgage, tax, or insurance payments.” What’s more, the house’s 1990 tax assessed value of $294,557 had increased to more than $2 million by 1998, according to the OAG lawsuit.
That wasn’t some kind of miracle on 34th Street. Rather it was putrid corruption.
Boyle and crew didn’t stop there, according to the OAG complaint. In June 2020, he orchestrated the transfer of the fraternity’s largest asset — Alpha House on Prospect Street NW — to the foundation for $1, “with no restrictions or conditions.” That same month, the foundation sold the property to 3401 Prospect Street LLC, owned by Nashville Peart, for $2.6 million — although the house was appraised at more than $4 million.
While investigating, the OAG learned of the latter sale while it was still in the works. Confronted, the foundation pledged to put the proceeds into an escrow account. Except Boyle and his cohorts didn’t “disclose at the time that the foundation was receiving interest and payments from the buyer or that Boyle was obtaining disbursements from escrow funds,” according to the OAG’s complaint.
Where are the handcuffs?
When I called Boyle at his home earlier this week, he shouted that “It’s an ongoing lawsuit, and I shouldn’t talk to anyone about that.” He abruptly hung up. I called back to ask whether he wanted me to contact his lawyer. He hung up on me, again.
His lawyer of record, Harvey Volzer, didn’t return my telephone calls to his office. (When The Washington Post first reported on the case in 2021, Boyle and Volzer denounced all of the allegations as unfounded.)
The OAG, in its lawsuit, asked the court to appoint a “receiver or other Court-supervised official” to reform the governance and management of the DPE entities; implement and oversee a special election for an entirely new slate of directors; and remedy defendants’ impermissible use of nonprofit assets for private benefit. It also sought to bar Boyle from serving as an officer or director of the DPE entities and the creation of a “trust over nonprofit funds, assets, and gains improperly paid to or obtained by Boyle, the Foundation, the Fraternity, or any other individuals or entities.”
The draft agreement negotiated by the OAG and defendants watered down or backed away from some of those conditions. After Judge Matini’s decision not to approve the settlement as initially proposed, the OAG filed a motion asking the court to change dates involving the case, including allowing for the submission of yet another joint filing with the defendants on Sept. 22, with a possible final ruling on Sept. 26. If the judge is still dissatisfied, the AG seemed to suggest the office would be ready to go to trial.
Considering the letter Abely and others sent to the court, there seems to be little reason to think that Boyle and crew can be trusted to do the right thing. More importantly, if Schwalb wants to give District residents confidence that he’s serious about enforcing the law in the
city, he should propose to go straight to trial and stop mollycoddling scofflaws.