SPECIAL FEATURE: Good Government. Virginia Beach-Style. Part II
The 11-member Virginia Beach Development Authority, according to its own website, was created by the General Assembly in 1964 “as a component, but legally separate unit, of the City of Virginia Beach.” The members are appointed by the city council to staggered four-year terms.
The VBDA’s stated mission is simple: To expand the city’s tax base through increased business investment.
Yet members of the authority have repeated conflicts of interest and enter into deals that benefit each other.
John Holland spent two months looking at every VBDA vote. He spent several uncomfortable days in the authority’s offices with a portable scanner copying minutes and supporting documentation of every VBDA meeting since Jan. 1, 2010.
Here's some of what he found:
INVESTIGATIVE COMMENTARY BY JOHN HOLLAND
Linwood Branch had been at his new job for less than an hour when he started throwing taxpayer money at Virginia Beach developer Bruce Thompson.
Thompson’s request at the Sept. 21, 2010 meeting of the Virginia Beach Development Authority seemed pretty outlandish, even by the authority’s rather lax standards. Thompson wanted taxpayers to spend $55,000 for capital maintenance on the elevators at his Beach Quarters Inn, which he sold to the VBDA in 2002 for $2.5 million, then immediately leased back.
Three members on the board balked, setting up the body’s only non-unanimous vote in the past decade.
There was no apparent reason for the city to agree to Thompson’s request, especially since the lease was due to expire in less than a year. The terms of the lease made it clear that Thompson, the tenant, and not the VBDA, the landlord, was responsible for the cost of maintenance.
That didn’t deter Branch and the majority of VBDA board members who voted 7-3 to change the lease in order to give your money to Bruce Thompson’s company. Former Commissioners Elizabeth Twohy, Donald Jellig and Paul Michels voted no.
It wouldn’t be the last time the authority lavished dollars on companies associated with Thompson, of course. And it wouldn’t be the last time Branch supported Thompson while serving on that body. For example, one year later Branch voted to give a $1.8 million VBDA grant to Thompson’s Hi-Sea, LLC.
More importantly, it wouldn’t be the last time on the VBDA that Branch failed to publicly disclose a key fact: Companies connected to Linwood Branch have accepted tens of thousands of dollars from companies controlled by Bruce Thompson.
Branch was more open about payments years earlier, when he served on the City Council. City Attorney records show that Lynn-Dee Motel, Inc. - Branch’s family hotel - accepted referral fees from Thompson’s Gold Key/PHR company, “in excess of $10,000 per year,” according to a June 24, 2001 conflict opinion issued by former City Attorney Les Lilley.
In another 2001 conflict opinion, Lilley wrote that Gold Key had a second contract that paid $7,000 per year to a company called “Lar-Jac Corporation” to put promotional material in the Days Inn. Lar-Jac rented space in the hotel under a 15-year contract and sublet to Gold Key, Lilley wrote, without giving the exact time the contract began and ended.
Branch informed former City Attorney Lilley that he had “no ownership interest of any kind,” in Lar-Jac, and wasn’t employed by the company, according to Lilley’s April 24, 2001 opinion. Lilley then gave Branch the okay to vote on Thompson’s 31st Street Hilton Hotel project.
But state business registry records show that Branch served as President and Treasurer of Lar-Jac., from 1995 until at least 2000, and his own financial disclosure statements filed with the city between 2013 and 2015 list him as a partner in Lar-Jac.
Branch signed Lar-Jac’s annual reports until 2000, when the statements were signed by company Vice President Jacqueline McAfee. No president is listed on the annual reports filed between 2000 and 2005.
Branch didn't respond to an email asking about his Lar-Jac tenure but in a series of emails, Branch told me the payments from Gold Key to Lynn-Dee stopped sometime after he left the council in 2002. They started up again in 2013, Branch said, which is the same time Thompson formed a company that sought the VBDA’s help to buy the Cavalier Hotel.
Several months ago, I became curious about 2013 transactions connected to Branch’s resort area hotel and asked the city attorney’s office for Branch’s financial disclosures, and whether he had ever filed conflict of interest paperwork before key votes.
Before the city responded, Branch - apparently tipped off about my inquiry - sent me an unsolicited email on May 9, 2018.
In the email, Branch said his Lynn-Dee Motel, Inc. signed a three-year contract in 2013 with Thompson’s Ocean Beach Club, LLC. Under terms of the deal, Thompson’s time share company paid $10,000 per year for the right to offer “tickets and various attractions,” to Branch’s hotel patrons as a way to attract time share customers, Branch said.
According to bank and deed records, Thompson obtained loans using the same Ocean Beach Club, LLC and other connected assets as he raised cash to buy the Cavalier Hotel. Cavalier Associates, the entity Thompson and partners formed to buy the hotel, also used $11.2 million from the VBDA to complete his purchase.
“During the time of this contract in 2014 a vote came up at the Development Authority for the performance agreement for the Cavalier project,” Branch wrote. “Although I did not have to abstain on this vote, I was unsure of any connection between Ocean Beach LLC and Cavalier Associates, and out of an abundance of caution I chose to abstain.”
There’s just one problem with Branch’s explanation. He seems to have told a different story to the Virginia Beach City Attorney’s office.
It appears that Branch never told City Attorney Mark Stiles about the $30,000 contract with Ocean Beach Club, or the thousands of dollars his companies accepted from Thompson entities when he served on the council. In fact, he never mentioned Ocean Beach Club or the previous payments from Gold Key/PHR, according to Stiles’ written opinion.
Instead, Branch simply asked the city attorney’s office for a written opinion on whether he had a conflict on Thompson’s latest project. Branch told Stiles he might be conflicted because he gave campaign donations to Mayor Will Sessoms and City Council members John Uhrin and Rosemary Wilson.
Stiles’ opinion makes no mention of the money Branch’s Lynn-Dee was getting each year from Thompson’s Ocean Beach Club. In his July 15, 2013 conflict opinion Stiles wrote that Branch could indeed vote on the Cavalier, but included this caveat:
“My analysis is based on the facts you provided, which are detailed below. Please review and verify the accuracy of the facts. Because my analysis is fact-specific, you may only rely upon this opinion to the extent that these facts are complete and accurate.’’
The facts Branch disclosed don’t appear to be close to being “complete and accurate.” So when Branch wrote to me in May, saying “I did not have to abstain … and out of an abundance of caution I chose to abstain,” during a March, 2014 Cavalier vote, he was relying on an opinion from Stiles that didn’t have all relevant facts.
According to VBDA minutes, Branch missed the July 16, 2013 vote to give the Cavalier $18 million, abstained during a March, 2014 meeting and then voted for a second, $8 million Cavalier grant in 2017.
Stiles did not return emails seeking comment.
It appears that Branch still hasn’t disclosed the total amount of money his companies took from Thompson’s.
This is critical information that the public has a right to know, even though Branch left the VBDA two weeks ago when his term expired. Branch is a key player in Virginia Beach politics, a long-time ally of former Mayor Will Sessoms and he briefly entered and then withdrew from the mayor’s race earlier this year.
In his current financial disclosures, Branch lists his financial interests in both Lynn-Dee and Lar-Jac. The disclosures don’t require him to list who does business with Lynn-Dee or Lar-Jac, but that doesn’t preclude him from being upfront with the city attorney’s office when asking for conflict opinions.
City business should always be done with full and complete transparency. That’s why the entire matter cries out for a true, independent investigation.
There is another reason to investigate. According to a review of VBDA minutes, city land records, bank loan documents and deeds, Branch was serving as an eager supporter of Thompson projects at the same time he was serving as an appointed official tasked with making independent decisions based on what was best for the city.
The records are full of examples, but I’ll share the most recent and most egregious: Earlier this year the City Council and VBDA rushed to make sure Bruce Thompson and his partners would win exclusive rights to build a pier on property owned by the VBDA.
But the bid process was so flawed that, on March 6, the city scrapped everything and decided to start the process over. Virginian-Pilot columnist Roger Chesley weighed in, writing that the playing field in Virginia Beach is tilted sharply in Bruce Thompson’s direction.
Four days later, in an email to Chesley obtained through FOIA, Linwood Branch continued to cheer for Thompson. Remember, at this point there was a new request for pier proposals and Branch, as a VBDA commissioner, would be expected to deliver a fair, impartial vote on all submissions.
“We will all benefit if, by continuing to submit the best bid as he has done before, (Thompson) may continue his amazing efforts to reshape the industry,” Branch wrote to the columnist. “The day will come when we will miss Bruce Thompson and his energy and vision. For now, we are lucky to have him.”
Just as Thompson was lucky to have Branch in his corner.
John Holland is an award-winning investigative reporter. He worked for The Virginian-Pilot from 2013 to 2015. In 2015 he was named the Virginia Press Association’s “Journalist of the Year.”