New Orleans City Council members grilled a top city official, Jonathan Rhodes, while he was under oath on Wednesday over a now-abandoned “smart cities” project that he played a central role in developing, and which has become the subject of a formal council investigation over potential contract-rigging and conflicts of interest.
In a vote following Rhodes’ testimony, the council formally requested the city’s Office of Inspector General to open an investigation into the city’s bidding process for the project.
The investigation drew an angry response from Mayor LaToya Cantrell, who called it an “attack” and said that the hearing was a “spectacle” in a letter. The council and Cantrell have been at odds over the mayor’s style of governance — council members have characterized the administration as being obsessed with maintaining control, often at the expense of transparency and cooperation — since the beginning of her second term. Recently, council members have frozen the budgets of underperforming city departments as a way to hold the administration accountable.
And in another vote Wednesday, they approved a resolution seeking to stop disbursements from a city-controlled fund— the Edward Wisner Donation — while a legal fight over the fund plays out in court. As the Times-Picayune recently reported, some of those funds were being routed through a charity Cantrell created and used for gun violence prevention programs.
Rhodes was directed to appear at Wednesday’s meeting through a subpoena issued by the council earlier this month, as questions began to mount about the process that led the city to award the smart cities project to a consortium of companies called Smart+Connected NOLA. Rhodes had been in contact with the consortium for months before the RFP was released to the public, and worked closely with a “pro bono” consultant that is partnered with those same companies.
Rhodes also co-founded a company in 2020 called Verge Internet with another city employee who worked with Rhodes on New Orleans’ smart cities plan. The company advised a Smart+Connected NOLA partner on a project in Los Angeles, at the same time the two employees were in communication with Smart+Connected NOLA about work in New Orleans.
Neither Rhodes nor the other employee, IT staffer Christopher Wolff, disclosed the existence of the company to the city.
In testimony, Rhodes conceded that he understood why outside observers perceived impropriety, but maintained throughout that nothing unethical or illegal had been done by himself, Wolff, the city or the various companies involved in the allegations.
While acknowledging that the situation may look bad, Rhodes insisted, “There was no contract-rigging. … There was no quid pro quo.”
He said he never felt the need to disclose Verge Internet to the city because, although he and Wolff actively tried to attract millions in seed investment, they have so far been unable to do so.
“The fact that it currently has no money, it isn’t for lack of trying right?” Councilman JP Morrell asked.
“Correct,” Rhodes said.
The council questioned Rhodes for roughly four hours. His responses answered some questions, but raised some new ones, in some cases contradicting documents recently subpoenaed by the council and released publicly. Councilwoman Helena Moreno vowed the investigation would continue to move forward, even though the companies that the city awarded the project to announced this week that they were dropping out of contract negotiations.
‘A bad deal with significant ethical and legal concerns’
In November, The Lens first reported on the Smart+Connected NOLA proposal, a sprawling, multi-million dollar project that promised to create a new private internet service to compete with existing providers, while installing thousands of smart cities devices to improve city services and raise revenues.
The Lens also reported on contract-fixing allegations lodged by a rival bidder for the project, Cox Communications. Cox accused the city of conspiring with a “pro-bono” consultant — Chicago-based Ignite Cities — to compromise the public bid process and guarantee the contract went to a predetermined winner.
That winner was Smart-Connected NOLA, a consortium of businesses led by wireless giant Qualcomm and JLC Infrastructure, an investment firm co-founded by NBA legend Earvin “Magic” Johnosn. A city selection committee, which included Wolff, chose Smart+Connected NOLA as the top bidder for the project last summer, allowing the city to begin contract negotiations with the group.
In its protest, Cox cited email communications between city officials, including Rhodes, and the founder of Ignite, George Burciaga. In one instance, Rhodes sent Burciaga an advance copy of the bid documents, called a request for proposals or RFP, weeks before the document was available to the public. Ignite had previously announced a partnership with Qualcomm and JLC, leading Cox to question whether Smart+Connected NOLA had an inside track to the business through the consulting firm.
The city dismissed Cox’s protest, a decision that Cox later said it would not appeal.
Earlier this month, due to those allegations and mounting pressure from Cantrell to support the project, the council issued the subpoena for a wide array of documents related to the project. Last week, the city handed over those documents, which showed that, for months leading up to the April 2021 RFP announcement, Rhodes was in communication with Burciaga, Qualcomm and JLC, appearing in some emails to discuss details of the upcoming RFP.
The documents also showed that, as public scrutiny of the deal grew, the Cantrell administration was working on a one-year pilot contract with Smart+Connected NOLA, rather than the group’s initial proposal of a multi-year agreement. (Wolff emailed a draft version of the one-year agreement to Smart+Connected partners, as well as Burciaga, earlier this month.)
The pivot to a short-term contract concerned council members because, unlike a multiyear agreement, a one-year agreement does not require council approval.
The situation intensified further when it was revealed that Rhodes maintained two side businesses in the smart cities industry and even consulted for Qualcomm on a smart cities project in Los Angeles. Then this week, Smart+Connected NOLA declared that it was pulling out of New Orleans, and no contract would be finalized.
The move did not put an end to the council probe. In response to the investigation, Cantrell on Tuesday submitted a public letter to the council, which accused the council of “disturbing rhetoric” and “efforts to obstruct my administration.”
“The Council’s investigatory authority is limited by the City Charter and we will not allow them to exceed their authority or abuse their power,” the letter said.
Cantrell seemed to blame the council for Smart+Connected NOLA’s decision to drop out of the project. And she said that will only slow the city’s attempts to close the digital divide and get internet to those who currently lack it.
On Wednesday, two council members — Moreno and JP Morrell — fired back at the mayor, especially on the idea that the council got in the way of expanding WiFi access.
Moreno repeatedly pointed out that the council had previously convened a working group with the aim of providing affordable or free public internet to the city. She also said that the Smart+Connected NOLA project provided little in the way of detail as to how to pay for or implement free or affordable public broadband. It was, Moreno said, more a smart cities plan — focused on the installation of smart devices around the city — than a public WiFi plan.
In his response to Cantrell’s letter, Morrell said the project was “a bad deal with significant ethical and legal concerns that you continue to ignore and refuse to address.” He also expressed skepticism about claims from the Cantrell administration that the deal could be done with zero additional costs to the city, saying it was to be “financed with payday loans.”
In her remarks, Moreno acknowledged that the council’s investigative and subpoena powers had limits. That’s why, she said, the council passed a resolution on Wednesday asking the Office of Inspector General to open its own investigation into “any potential ethical or other improper actions by City employees” in the development of the smart cities project.
‘I had a very limited role’
The top two questions for Rhodes on Wednesday was whether he tipped the scales of the public bid process to favor Smart+Connected NOLA, and whether he stood to financially gain from it. On both counts, Rhodes said that simply was not the case.
On the first question, Rhodes downplayed the role he played in writing and developing the RFP. In his opening comments on Wednesday, he said he neither wrote the RFP nor oversaw the procurement process.
Rhodes said on Wednesday that the public bid documents — called a Request for Proposals, or RFP — were written and sponsored by the city’s Department of Information, Technology and Innovation. However, city documents indicate it was Rhodes’ office — the Mayor’s Office of Utilities — was a sponsor of the RFP.
And emails show that Rhodes was intimately involved in crafting and developing the RFP for roughly a year before it was released to the public. After council members pushed Rhodes to clarify his role, he conceded that his role was at least less than nothing.
“I had a very limited role. I didn’t draft the RFP but I may have reviewed it or made some comments, minor, that may or may not have been accepted by the IT department. But I think overall, my involvement was in the concept at the high level.”
The council also questioned whether the RFP could have been improperly steered to Smart+Connected NOLA through the involvement of Ignite Cities. Ignite Cities has been associated with the project from the moment the RFP was announced, when Rhodes specifically thanked the Chicago-based consultant for “pro bono services for the city of New Orleans.”
Ignite Cities wasn’t part of the Smart+Connected NOLA RFP response. It is, however, a formal partner with Qualcomm and JLC — the two leading members of Smart+Connected NOLA. And council members say that based on emails and public descriptions of their partnership, it is clear that Ignite was working in partnership with Qualcomm and JLC, and that it tried to steer the project toward Qualcomm and JLC, rather than acting as an objective city consultant.
In addition, Reyahd Kazmi, identified in emails as Ignite’s managing director, is a registered lobbyist for IKE Smart City, a WiFi kiosk manufacturer that was part of the Smart+Connected NOLA team. (Kazmi’s wife, Chicago City Clerk Anna Valencia, may be facing an investigation at home in part over communications between her office, Ignite and city of New Orleans officials, Politico reported today.)
Rhodes on Wednesday said while he knew there was some relationship between Ignite, Qualcomm and JLC, he wasn’t aware of the extent of the partnership, which included a reported “$75 million in capital for investment in [smart cities] projects developed in collaboration with Qualcomm Technologies and IGNITE.”
“I knew they had a working relationship,” he said. “I don’t know about their partnership or financial arrangements.”
It’s unclear how Rhodes would remain unaware of the official partnership or the $75 million pledge since he presumably reviewed Cox’s protest, which included news articles and press releases about the partnership as exhibits. Last year, Rhodes’ office submitted a 12-page response to rebuke Cox’ allegations. And in a September 2020 email, Rhodes asks Ignite cities founder, George Burciaga, to help keep “momentum going on public WiFi with Qualcomm and partners.”
Council members also pushed Rhodes on a question the city has been asked, but has not answered, for months: Why would Ignite Cities, a for-profit company, provide significant help to the city for free if it didn’t have any financial stake in the contract?
Rhodes acknowledged that “there are no free lunches,” but also said that for-profit firms provide pro bono services all the time, and that he wasn’t aware of any financial incentive Ignite Cities had in the project. He also downplayed the role that Ignite Cities, Qualcomm and JLC had in crafting the RFP.
During questioning, Moreno presented a series of emails showing how Rhodes worked together with all three companies prior to the April 2021 smart cities bid opening. She pointed to one meeting that Rhodes facilitated between Mayor Cantrell, Ignite, JLC and Qualcomm that Rhodes described on Wednesday as “kind of an introduction to smart cities solutions for the mayor so she could be advised on what could be out there.”
Rhodes said it was just prior to the meeting that the city determined it would have to release a public bid in order to execute a smart cities project.
“As we’re kind of eagerly and urgently doing this … there was a point in time probably right around here where we realized, ‘Hold on. We can’t just do this. We have to procure this,’” he said. “If you’re going to want to work with the city on some of those elements that [the council] would oversee … we’re going to have to procure it.”
Emails show that only two days after the January meeting with Cantrell, Burciaga emailed Rhodes to say “the team is working on a draft scope to present to you.” A couple weeks later, Rhodes emailed burciaga saying “I would appreciate your insight” on a scope of services for the smart cities project that was attached to the email. Rhodes also sent Burciaga a final version of the RFP weeks before it was released to the public.
“I see what you’re saying and I see how this looks,” Rhodes said Wednesday. “I can’t control what Ignite Cities does. They may very well have provided a draft scope [of services for the RFP] … Qualcomm, JLC may have provided ideas on the phone or in a document. But what I can say is those ideas are not reflected in the RFP that was written.”
‘How do we help you?’
The other big question is whether Rhodes had a financial incentive to swing the project in a certain direction.
Rhodes said that he had no such motivations, and that nothing he did as a city employee was done for financial compensation, the promise of compensation or even the hope of future compensation.
Aside from his job, Rhodes also maintains a law firm that, according to its website, works specifically on smart cities projects and “helps clients navigate complex public procurement processes to successfully bid on and procure technology services.”
And in 2020, while he was already working for the city, Rhodes and Wolff started Verge Internet, which is incorporated in Delaware. Wolff and Rhodes produced a pitch deck for potential investors, which claims that the company already raised $250,000 toward their initial $5 million fundraising goal, and had entered “strategic alliance with 5G infrastructure providers.”
On Wednesday, Wolff said that those “commitments did not materialize” and that they have never raised a cent. Although when asked, he said the company would still be interested in raising money.
“Verge would be interested in raising capital certainly,” he said. “At some point in the future, it was envisioned that Verge could be a sustainable company.”
He said if the company ever did attract funding, he and Wolff would either stop working for the city or disclose it to the city and check with the city’s legal and ethics experts about whether continued employment was possible.
As for Verge’s consulting work with Qualcomm in Los Angeles, he said they were never paid. He said that Qualcomm was submitting information to assist on a Qualcomm response to a city of Los Angeles “request for information” for a smart cities plan. Verge helped on a “pro bono” basis, Rhodes said. But several council members questioned why they would work for free for a giant corporation like Qualcomm.
Rhodes said he saw their participation more as a way to get free information to the city of Los Angeles through Qualcomm’s response, and that their main motivation with Verge was to close the country’s digital divide.
“If you’re asking about our motivation, that’s our motivation: How do we help you?”
