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The New Orleans City Council on Thursday opened a formal investigation into the City Hall employees involved in the controversial “smart city” technology contract, as one city IT staffer defended ties he had with a winning bidder through an outside company he cofounded.
Council members voted unanimously to begin the probe, which under the City Charter will let them issue subpoenas and take testimony under oath. The investigation will focus on the bidding process for a pending contract with a private consortium, known as Smart+Connected NOLA, that includes San Diego telecom giant Qualcomm and a firm cofounded by Earvin “Magic” Johnson.
In recent days, documents and other information surfaced showing that Jonathan Rhodes, a senior staffer for Mayor LaToya Cantrell, and Christopher Wolff, a City Hall IT staffer, advised Qualcomm on a project in Los Angeles weeks after they traded emails with Qualcomm employees on their city accounts about New Orleans’ technology needs. Rhodes also set up a meeting with Qualcomm officials and Cantrell before the bid process launched.
The Cantrell administration acknowledged Wednesday that a company the two City Hall employees cofounded known as Verge Internet had aided Qualcomm on a Los Angeles “smart city” program, though the administration said they were working for free.
Council President Helena Moreno said Thursday she was worried about ties between the winning companies and a consulting firm that aided the city as it was crafting the “smart city” solicitation, which has yet to result in a formal contract. She noted she was especially concerned about the revelations concerning Verge Internet.
“It is a very unfortunate day that we are in, that we even have to proceed in this manner,” said Moreno. She added that new information “unfortunately gave us no other course of action but to move down this route.”
The formal investigation came days after Moreno announced plans to grill Rhodes at an April 27 hearing. On Thursday, Moreno said she will invite the city’s inspector general to the hearing.
The Mayor’s Office rejects the idea that Verge Internet was a conflict of interest and said Thursday that it welcomed the council’s attention.
“We welcome any opportunity to speak with the City Council and the public, especially as it relates to the City’s efforts to bridge the digital divide,” said Beau Tidwell, a city spokesman.
On the verge
The smart city project is aimed at creating a new city-controlled broadband network and bringing WiFi to underserved neighborhoods. But council members have criticized the plan for lacking specifics.
As the backlash to the smart city plan has intensified, new details have emerged about a hitherto obscure Delaware corporation called Verge Internet.
Verge Internet was established in Delaware in August 2020, according to incorporation papers in a public database. The company listed as its chief executive officer Wolff, an employee for years of the city information technology department. On his LinkedIn page, Rhodes says he was cofounder.
Yet while the company’s website makes bold statements about how it is “disrupting the broadband industry to connect people and improve lives,” in an interview Thursday, Wolff said that the website was a “blog.”
The company, he said, was a “hobby” and a “fantasy.”
“We got together one night over a couple of beers and said, ‘hey, let’s solve the digital divide,’ and drew up a website and a corporation. That’s Verge Internet,” Wolff said when reached by phone. “Verge Internet has never paid a check, it has never received a dime. It has just been sitting there for the last three years, almost.”
‘Big picture’ advice for Qualcomm
On at least one occasion, Wolff acknowledged, Verge Internet did do something. According to a statement from the city, the company in February and March 2021 provided to Qualcomm “pro bono assistance developing strategies for digital equity and public WiFi networks.”
Wolff said that assistance involved “maybe a couple meetings over a couple weeks” on “big picture” ideas. Rhodes did not respond to a request for comment.
The dates provided by the city mean that Rhodes and Wolff were interacting with Qualcomm through their outside gig just weeks before the “smart city” solicitation was issued in April 2021.
With a market capitalization of $153 billion, Qualcomm is one of the largest companies in the U.S. and has sought to establish itself as a player in the emerging “smart city” sector. Wolff, an information technology specialist who said he’s founded several tech companies, said the company sought his advice as a WiFi expert.
Wolff compared his advice to the company to the help he gives people who have printer trouble.
“I know this is not exciting stuff for you, because you want to find out, ‘how many hours of the day did you give to Qualcomm?,’” said Wolff. “I give technical assistance all day to all sorts of different people, because I’m a geek.”
Qualcomm did not respond to a request for comment.
A Magic proposal
In addition to Verge’s outside aid to Qualcomm, Wolff and Rhodes played integral roles in crafting and awarding the winning “smart city” bid to Qualcomm and JLC Infrastructure, the firm cofounded by Johnson, according to documents obtained by Moreno under subpoena.
Rhodes helped write the request for proposals as director of the Mayor’s Office of Utilities. Wolff was a technical expert on the selection committee, and he gave Qualcomm’s consortium a final score of 84 compared to 47 for the company that placed second overall, Cox.
Rhodes’ emails, which were obtained under subpoena by Moreno, show him interacting with Qualcomm employees about New Orleans’ infrastructure and smart city needs on numerous instances in the months leading up to the formal solicitation in April 2021.
Wolff said there was no conflict between Verge Interent’s advice to the company and the men’s role in the procurement process because Qualcomm never paid them. The city has sided Wolff and Rhodes on that point.
“Mr. Rhodes was one of several involved in drafting the RFP, and Mr. Wolff was one of several on the selection committee. They believe their pro Bono work did not present any ethical conflict,” said Tidwell.
Wolff said that he gave a high score to the winning consortium for a simple reason: because it promised to deploy smart city technology at no upfront cost.
While the city has defended the men’s relationship with Qualcomm, it was apparently in the dark about that tie during the solicitation. Wolff said he never sought approval to start the company, and in its statement Thursday, the city said that the men did not disclose their relationship with Qualcomm.
“Because there were no conflicts and no formal relationship, there was nothing to disclose,” said Tidwell.
At one point, Verge Internet at least entertained visions of attracting millions of dollars in capital, according to a slide deck first reported by the Lens and independently obtained by The Times-Picayune. In the investment pitch, the company says that it had had $250,000 “committed” toward a total $5 million seed round investment goal and had “started taking pre-orders.”
In Wolff’s telling, that was nothing more than puffery.
“There is no angel investment. That was all very forward-looking,” said Wolff. “There has been absolutely no money, and please make a note of this. There is no money coming into Verge. There is no money coming into me. There is no nothing.”
Tidwell said the presentation doesn’t constitute an after-hours job. “No money was paid to any city employees,” he said.
Smaller plan in doubt
As new information became public about the bidding process for the “smart city” contract, the Cantrell administration has backed down from its initial plan for a 15-year contract that would require City Council approval to a 1-year plan that would not.
However, the city has yet to finalize the 1-year plan, and Wolff lamented the possibility that it might never come to fruition and expand internet access in the city.
“I don’t know if it’s going to go anywhere. It’s sad,” he said. “It’s taken five years to get here.”
Mayor’s Office put ‘on notice’
District A Council member Joe Giarrusso, who voted for the investigation resolution sponsored by Moreno, said that as the probe proceeds, it will take a close look at Verge Internet to make sure that “there isn’t anything that is amiss.”
Separate from Moreno’s investigative resolution, Council Vice President JP Morrell sponsored another measure warning the Mayor’s Office against trying to sign any kind of contract with the winning vendors without council approval.
That resolution invokes the City Council’s power over franchise agreements with utilities. Morrell described it as putting the Mayor’s Office “on notice.”
All of the council’s members voted for both resolutions with the exception of District C member Freddie King III and District E member Oliver Thomas, who were absent for the votes.
Morrell has often tangled with Cantrell administration officials during his nearly five months on the council, but on Thursday said he did not relish his vote for the investigation.
“This is not a good thing. This is not a good day. We are not happy about having to take these actions,” he said.