‘Why is there a cover-up?’ Wilder responds to VCU Health payout report, repeats call for state investigation

wildercomposite

Former Gov. Doug Wilder has called for a state investigation into the handling of an aborted downtown development plan involving VCU Health. (BizSense composite)

Doug Wilder wants more answers.

The former governor of Virginia, former mayor of Richmond and distinguished professor and namesake of Virginia Commonwealth University’s L. Douglas Wilder School of Government and Public Affairs said he isn’t satisfied with the results that came back last week of a VCU-driven review into VCU Health’s ill-fated and costly downtown development deal.

Just days after reporting by Richmond BizSense revealed that the health system had made a $73 million payment to back out of the project, Wilder called a press conference at the Virginia State Capitol in which he urged an investigation from the state, as well as for VCU President Michael Rao to be fired.

Wilder called on the Joint Legislative Audit & Review Commission (JLARC) to investigate the payment that allowed VCU Health to buy its way out of its lease as the master tenant for a $325 million development that would have replaced the city’s Public Safety Building at 500 N. 10th St.

VCU Health has since said it was willing to make the payment to avoid financial obligations that came with the deal, including more than a half billion dollars in rent over the 25-year lease, and in light of challenges and changes in needs for office space that came with the pandemic.

A third-party review initiated by Rao was presented last week to the boards of the health system and the university. The review, conducted by law firm Saul Ewing, found that “insufficient due diligence,” turnover in management and “inadequate in-house real estate expertise” were contributing factors to the costly exit from the project, and included recommendations for improving processes going forward.

In interviews conducted before and after the report was released, Wilder, 92, shared with BizSense his thoughts on the review’s findings, why he says an investigation from JLARC is still needed, and why he’s still calling for Rao’s dismissal. The following is an edited transcript:

Richmond BizSense: What are your thoughts on the review and the findings that were presented?

Wilder1cropped

Wilder in his office at VCU’s L. Douglas Wilder School of Government and Public Affairs. (Jonathan Spiers photos)

Doug Wilder: I think the report was an eye-opener, because it wasn’t whitewashed. By the same token, it was a bit sparing, and that in my judgment was surprising. I would imagine that this is not anything that the boards nor Rao would ever have expected.

They entered into a credit tenant lease agreement where VCU assumed the risk. The question is, why did they do that? The question then becomes: Have you done this before with other VCU projects? Why now? They say that the project was impossible to build within the budget. When was this discussed and by whom? And if it was impossible to build within budget, then who said go ahead on anyway?

When the report says no due diligence, why? That’s the first order of business today in the world we live in. Then it said the lack of communication with the board had an impact on the decision-making. What does this mean? Lack of communication with the board? Who in the hell were you talking to if you’re not talking with the board?

Then when you look at the management issues: three CEOs and one interim, and then you have the departure of the chief financial officer and the general counsel. I wonder, why? The project, it said, did not prioritize financial terms. Well, who decided all this? When you consider that you had communication with emails and phone records, make all of those public. Issues and records relative to emails and phone calls, make them available.

Then to ensure that board composition includes relevant expertise including financial, well what in the hell did they have if they didn’t have those people? Who would be making the decision? They included both boards.

This doesn’t do it. The recommendations are weak; they’re not going to change anything. And I will repeat: Rao must go.

RBS: Do you still feel an investigation from JLARC is needed?

Wilder: I am not satisfied with the review, because this was not an investigated review. This was a review that Rao hired the firm himself. Rao made that decision to hire these people.

You cannot investigate yourself. It’s important for the attorney general and the governor to speak up right now. It’s important for the governor of the state to take a position of what he knows about this. If he knows nothing about it, say that.

What we have now is not any closing of any inquiry. We don’t even have the beginning of an inquiry, because no inquiry has been made.

RBS: Is there support in the General Assembly for an investigation?

WilderVCUHS

Wilder in the press conference he called last month at the Capitol. (BizSense file photo)

Wilder: I have heard nothing positive. Nobody at the legislature has made any request of JLARC to study anything. I say that categorically and would defy anyone to refute it. JLARC has not been asked to investigate it, so the next question is, who speaks for the legislature as it relates to this measure? Who speaks for the Senate, who speaks for the House? Who speaks for the attorney general’s office as it relates to this? And who speaks for the governor?

The governor has the ultimate responsibility. Gov. (Glenn) Youngkin has a tremendous responsibility to explain to the people of Virginia what’s happening, what’s going on. You were elected to represent the people, and this attorney general was on your ticket. The attorney general is your legal advisor. The legislative leadership is there to pass laws. Which laws have they not passed that you want passed addressing to this?

RBS: VCU is now pursuing a new project for the site that would include a $415 million dentistry center. Funding for that project also requires General Assembly approval.

Wilder: Exactly. How can the General Assembly approve anything in the absence of answers to these questions? To do so would be reckless and irresponsible, because it’s not their money. We’re talking about taxpayer dollars being spent. And where did this money come from? No one really knows.

RBS: VCU Health and VCU have said that the $73 million project-exit payment was made using operating or reserve funds and did not involve state funds or taxpayer dollars. They’ve also stressed they are separate entities, despite their “One VCU” branding and some overlap in board members and administrators.

Wilder: The health system doesn’t have any independent money. That’s the state’s money, period. How do they operate? With taxpayer dollars. Who do you think is responsible for MCV being there? Taxpayers of Virginia. Who pays the salaries? It’s taxpayers of Virginia.

Let’s quit this nonsense and stupidity about saying you’re not talking about taxpayer dollars. Tell me who the money belongs to if it isn’t belonging to the taxpayers of the commonwealth of Virginia. And then to assume that people are that stupid is more insulting.

RBS: You’ve butted heads with Rao before on other issues. Can you talk about your history and where the two of you don’t see eye to eye?

Wilder: I have no personal problem with Dr. Rao. My problem with Dr. Rao is that the whole commitment of the establishment of VCU was to make it an urban university, to use the urban energies, students, faculty, etcetera. (Prior president) Dr. (Eugene) Trani did that. He was in the community on a regular basis; Dr. Rao is not.

It’s not a personal thing; it’s a leadership thing. If this is the best that you can do, to waste this kind of money, and then you come back again and say you want to raise tuition, and then you’re going to ask for more money to be involved with another developer or the same developer with the same building (site)? The excuses we’ve heard, that the ground beneath the building was not solid enough; it’s the same building (site) that you want to now put a new dental hospital there.

The sincerity, the straightforwardness, and the involvement in the community to represent people is what bothers me.

RBS: How would you describe your relationship otherwise? In the weeks after your press conference, Rao shared a photo on social media of the two of you at a recognition event for you, with the two of you standing side by side.

WilderRaoLinkedIn

Wilder with Rao to his left at a VCU Black Education Association event honoring Wilder last month, two weeks after Wilder called for Rao’s dismissal. (LinkedIn)

Wilder: Those kinds of things are not descriptive of a relationship. He was required to be there. This picture-taking, that doesn’t do it.

RBS: You mentioned the leadership changes over the course of the project. Do you think they affected the decision-making as far as the change in direction?

Wilder: Oh yeah, because I am of the opinion that Dr. (Art) Kellermann was not in favor of this thing going forward. He’s no longer there. [Kellermann was VCU Health’s CEO when the project was approved and resigned last November at the request of Rao.]

RBS: What do you make of that?

Wilder: I think he was frowned upon – “How dare you suggest that we don’t want this” – so he’s gone. I do know that there have been others who have not seen it in the best interest to pursue the route spending this kind of money, and they might be gone too.

RBS: Why is this such an important issue to you?

Wilder: When I see and hear people decrying the raising of tuition and how much it hurts them, when I see the wasting of money that was wasted, when I see the lack of leadership, that is not how anybody would allow it to continue. When I was in the legislature, this would have never happened, because the leadership would never have permitted anything like this to happen.

Wilder2

‘The fault is in the leadership, at all levels,’ Wilder said.

The fault is in the leadership, at all levels. Look at the (Freedom of Information Act) request you had to make. If you’ve got something that’s so open and so clear, why didn’t somebody say, “Here, look at this.” You’ve never had that.

What I hate to conclude, because I’m trying to be positive, is there has got to be something, as the old expression is, “rotten in Denmark.” There’s got to be something that someone doesn’t want the people of Virginia to know about. What is it? Why is there a cover-up?

What it amounts to is the Board of Visitors has not done its job. The president has not done his job. The attorney general has not done his job. And the people of Virginia are being ill-served.

wildercomposite

Former Gov. Doug Wilder has called for a state investigation into the handling of an aborted downtown development plan involving VCU Health. (BizSense composite)

Doug Wilder wants more answers.

The former governor of Virginia, former mayor of Richmond and distinguished professor and namesake of Virginia Commonwealth University’s L. Douglas Wilder School of Government and Public Affairs said he isn’t satisfied with the results that came back last week of a VCU-driven review into VCU Health’s ill-fated and costly downtown development deal.

Just days after reporting by Richmond BizSense revealed that the health system had made a $73 million payment to back out of the project, Wilder called a press conference at the Virginia State Capitol in which he urged an investigation from the state, as well as for VCU President Michael Rao to be fired.

Wilder called on the Joint Legislative Audit & Review Commission (JLARC) to investigate the payment that allowed VCU Health to buy its way out of its lease as the master tenant for a $325 million development that would have replaced the city’s Public Safety Building at 500 N. 10th St.

VCU Health has since said it was willing to make the payment to avoid financial obligations that came with the deal, including more than a half billion dollars in rent over the 25-year lease, and in light of challenges and changes in needs for office space that came with the pandemic.

A third-party review initiated by Rao was presented last week to the boards of the health system and the university. The review, conducted by law firm Saul Ewing, found that “insufficient due diligence,” turnover in management and “inadequate in-house real estate expertise” were contributing factors to the costly exit from the project, and included recommendations for improving processes going forward.

In interviews conducted before and after the report was released, Wilder, 92, shared with BizSense his thoughts on the review’s findings, why he says an investigation from JLARC is still needed, and why he’s still calling for Rao’s dismissal. The following is an edited transcript:

Richmond BizSense: What are your thoughts on the review and the findings that were presented?

Wilder1cropped

Wilder in his office at VCU’s L. Douglas Wilder School of Government and Public Affairs. (Jonathan Spiers photos)

Doug Wilder: I think the report was an eye-opener, because it wasn’t whitewashed. By the same token, it was a bit sparing, and that in my judgment was surprising. I would imagine that this is not anything that the boards nor Rao would ever have expected.

They entered into a credit tenant lease agreement where VCU assumed the risk. The question is, why did they do that? The question then becomes: Have you done this before with other VCU projects? Why now? They say that the project was impossible to build within the budget. When was this discussed and by whom? And if it was impossible to build within budget, then who said go ahead on anyway?

When the report says no due diligence, why? That’s the first order of business today in the world we live in. Then it said the lack of communication with the board had an impact on the decision-making. What does this mean? Lack of communication with the board? Who in the hell were you talking to if you’re not talking with the board?

Then when you look at the management issues: three CEOs and one interim, and then you have the departure of the chief financial officer and the general counsel. I wonder, why? The project, it said, did not prioritize financial terms. Well, who decided all this? When you consider that you had communication with emails and phone records, make all of those public. Issues and records relative to emails and phone calls, make them available.

Then to ensure that board composition includes relevant expertise including financial, well what in the hell did they have if they didn’t have those people? Who would be making the decision? They included both boards.

This doesn’t do it. The recommendations are weak; they’re not going to change anything. And I will repeat: Rao must go.

RBS: Do you still feel an investigation from JLARC is needed?

Wilder: I am not satisfied with the review, because this was not an investigated review. This was a review that Rao hired the firm himself. Rao made that decision to hire these people.

You cannot investigate yourself. It’s important for the attorney general and the governor to speak up right now. It’s important for the governor of the state to take a position of what he knows about this. If he knows nothing about it, say that.

What we have now is not any closing of any inquiry. We don’t even have the beginning of an inquiry, because no inquiry has been made.

RBS: Is there support in the General Assembly for an investigation?

WilderVCUHS

Wilder in the press conference he called last month at the Capitol. (BizSense file photo)

Wilder: I have heard nothing positive. Nobody at the legislature has made any request of JLARC to study anything. I say that categorically and would defy anyone to refute it. JLARC has not been asked to investigate it, so the next question is, who speaks for the legislature as it relates to this measure? Who speaks for the Senate, who speaks for the House? Who speaks for the attorney general’s office as it relates to this? And who speaks for the governor?

The governor has the ultimate responsibility. Gov. (Glenn) Youngkin has a tremendous responsibility to explain to the people of Virginia what’s happening, what’s going on. You were elected to represent the people, and this attorney general was on your ticket. The attorney general is your legal advisor. The legislative leadership is there to pass laws. Which laws have they not passed that you want passed addressing to this?

RBS: VCU is now pursuing a new project for the site that would include a $415 million dentistry center. Funding for that project also requires General Assembly approval.

Wilder: Exactly. How can the General Assembly approve anything in the absence of answers to these questions? To do so would be reckless and irresponsible, because it’s not their money. We’re talking about taxpayer dollars being spent. And where did this money come from? No one really knows.

RBS: VCU Health and VCU have said that the $73 million project-exit payment was made using operating or reserve funds and did not involve state funds or taxpayer dollars. They’ve also stressed they are separate entities, despite their “One VCU” branding and some overlap in board members and administrators.

Wilder: The health system doesn’t have any independent money. That’s the state’s money, period. How do they operate? With taxpayer dollars. Who do you think is responsible for MCV being there? Taxpayers of Virginia. Who pays the salaries? It’s taxpayers of Virginia.

Let’s quit this nonsense and stupidity about saying you’re not talking about taxpayer dollars. Tell me who the money belongs to if it isn’t belonging to the taxpayers of the commonwealth of Virginia. And then to assume that people are that stupid is more insulting.

RBS: You’ve butted heads with Rao before on other issues. Can you talk about your history and where the two of you don’t see eye to eye?

Wilder: I have no personal problem with Dr. Rao. My problem with Dr. Rao is that the whole commitment of the establishment of VCU was to make it an urban university, to use the urban energies, students, faculty, etcetera. (Prior president) Dr. (Eugene) Trani did that. He was in the community on a regular basis; Dr. Rao is not.

It’s not a personal thing; it’s a leadership thing. If this is the best that you can do, to waste this kind of money, and then you come back again and say you want to raise tuition, and then you’re going to ask for more money to be involved with another developer or the same developer with the same building (site)? The excuses we’ve heard, that the ground beneath the building was not solid enough; it’s the same building (site) that you want to now put a new dental hospital there.

The sincerity, the straightforwardness, and the involvement in the community to represent people is what bothers me.

RBS: How would you describe your relationship otherwise? In the weeks after your press conference, Rao shared a photo on social media of the two of you at a recognition event for you, with the two of you standing side by side.

WilderRaoLinkedIn

Wilder with Rao to his left at a VCU Black Education Association event honoring Wilder last month, two weeks after Wilder called for Rao’s dismissal. (LinkedIn)

Wilder: Those kinds of things are not descriptive of a relationship. He was required to be there. This picture-taking, that doesn’t do it.

RBS: You mentioned the leadership changes over the course of the project. Do you think they affected the decision-making as far as the change in direction?

Wilder: Oh yeah, because I am of the opinion that Dr. (Art) Kellermann was not in favor of this thing going forward. He’s no longer there. [Kellermann was VCU Health’s CEO when the project was approved and resigned last November at the request of Rao.]

RBS: What do you make of that?

Wilder: I think he was frowned upon – “How dare you suggest that we don’t want this” – so he’s gone. I do know that there have been others who have not seen it in the best interest to pursue the route spending this kind of money, and they might be gone too.

RBS: Why is this such an important issue to you?

Wilder: When I see and hear people decrying the raising of tuition and how much it hurts them, when I see the wasting of money that was wasted, when I see the lack of leadership, that is not how anybody would allow it to continue. When I was in the legislature, this would have never happened, because the leadership would never have permitted anything like this to happen.

Wilder2

‘The fault is in the leadership, at all levels,’ Wilder said.

The fault is in the leadership, at all levels. Look at the (Freedom of Information Act) request you had to make. If you’ve got something that’s so open and so clear, why didn’t somebody say, “Here, look at this.” You’ve never had that.

What I hate to conclude, because I’m trying to be positive, is there has got to be something, as the old expression is, “rotten in Denmark.” There’s got to be something that someone doesn’t want the people of Virginia to know about. What is it? Why is there a cover-up?

What it amounts to is the Board of Visitors has not done its job. The president has not done his job. The attorney general has not done his job. And the people of Virginia are being ill-served.

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Jim Jones
Jim Jones
11 months ago

It is just time to put this guy out to pasture………

John Gerencser
John Gerencser
11 months ago
Reply to  Jim Jones

Why should he be put out to pastiure? He asks valid questions. How can BCU investigate itself? It can certainly do an internal audit/ investigation, But they just gave away many many millions of taxpayer money. The state shoild also determine what happened, and why!

Hassan Leroux
Hassan Leroux
11 months ago
Reply to  Jim Jones

It is wild that this comment is even allowed in this political climate. This could be definitely taken as a threat. I have my screenshot to send to the local news.

Jordan Tucker
Jordan Tucker
11 months ago
Reply to  Hassan Leroux

Wow.

Eric Smith
Eric Smith
11 months ago

nothing else to report on today, so let’s see if we can stir something up.

Facts:

the whole deal sucked and once it came to light how bad it was, it was very expensive to unwind. Leadership at the hospital who made mistakes with the deal were asked to leave.

Wilder is old and needs to retire. He’s has his own share of issues and its amazing to me that he’s still around trying to grandstand.

Taylor Murphy
Taylor Murphy
11 months ago

The real questions that need to be asked, why are they having to pay an exit fee for a building that was never going to be built. Why didn’t leadership say we signed a lease for this building, if this building is not going to be built, this is a breach of contract. They never needed to pullout of this deal, they should have said were committed to this deal, and we expect a building and we’ll start making our lease payments when the building is finished. If the developer didn’t have any intention of building it, then they would… Read more »

Victoria Woodhull
Victoria Woodhull
11 months ago

OK Jonathan, I’ll ask again – when do we get the article on Henrico County and their Green City ties to CCP, Eastridge & Hallmark developers. Please!

Julian Stein
Julian Stein
11 months ago

Doug Wilder is a legend and a Virginia hero. He’s the only one willing to take a stand against this fraud. And it’s a shame that no else is willing to stand up to this absurdity. This is honest services fraud and the people responsible should not only resign they should be thrown in jail not given a free pass to get into another boondoggle where hundreds of millions are given to some syndicate for doing absolutely nothing.

David Howard
David Howard
11 months ago

I don’t always agree with Wilder but in this case/fiasco he is asking the hard questions that need to be asked. Dr. Rao has been notably quiet on this debacle while his team fumbled $80 million+ with nothing to show for it. As another commenter stated, if the building was no longer feasible, VCU should not have been obligated to pay the lease. Its hard to fathom VCU can commit to a deal which obligates them to hundreds of millions in rent payments and they don’t have the expertise? An entity not tied to VCU needs to investigate if for… Read more »

Brian King
Brian King
11 months ago

Don’t forget about the 240 million Art & Innovation building funded by the Commonwealth – any bombs in that contract? Yeah this is total cluster by VCU – any politician that agrees to fund the Dentistry building on that land should be recalled.

Brian Glass
Brian Glass
11 months ago

Former Governor Wilder is absolutely correct in his statements. I’m a Commercial Real Estate Broker, and it’s obvious to me that Due Diligence wasn’t conducted with regard to this project. Furthermore, for the lead Tenant to be on the hook for73 million dollars is absurd.

Craig Davis
Craig Davis
11 months ago

Wilder raises some good questions but regardless of his historic and legendary past, he’s at best an imperfect messenger on this. The articles detailing the issues, lawsuits, allegations, complaints and everything else by and against him with respect to VCU the last few years while simultaneously serving on the faculty and having a school named after him make for a really messy scenario. Heck he sued Rao personally last summer.

Jim Jacobs
Jim Jacobs
11 months ago

https://en.wikipedia.org/wiki/United_States_National_Slavery_Museum

Governor Wilder DOES bring up some good and necessary points regarding this real estate debacle. But what a hypocrite for him to come across as he does, seeing as he was at the head of the failed Slavery Museum in Fredericksburg two decades ago. Funds were squandered and communication ceased when things didn’t work out.

Talk is cheap, Mr. Wilder.

Paul Miliped
Paul Miliped
11 months ago

I wonder if any of the parties involved got an insurance payout resulting from the failure of the deal?