James L. Denson, chairman of the D.C. Board of Elections and Ethics, resigned yesterday as president of the D.C. Chamber of Commerce in the face of three investigations into whether he misappropriated thousands of dollars in chamber funds.
At a closed session of the 35-member board yesterday morning, Denson preempted what some members said would have been his forced removal by offering to "step aside until these matters might be cleared up." His motion was accepted unanimously.
A U.S. grand jury, the city's inspection general and a special committee of the chambers' board are investigating charges that Denson misused chamber funds -- most of which are provided through public grants -- to further his own private business interests.
D.C. Inspector General Joyce Blalock said yesterday that she would expand her investigation of the chamber's expenditure of $472,000 in federal and city funds to include Denson's conduct as city elections chief.
Blalock said the new phase of the investigation would examine the city's purchase of voting machines last June from a California firm for $647,000. The purchase was made without competitive bidding, and the payment was rushed through the city bureaucracy before the purchase could be effectively challenged in court by rival bidder, according to the city auditors. At the time, Denson was chairman of the elections board.
Mayor Marion Barry said yesterday that if he decides to take action against Denson, whose position makes him the chief standard-bearer for ethics in city government, it would not occur before Friday, when Blalock is to give Barry an interim report.
Meanwhile, there were indications yesterday that Barry himself played a role -- perhaps unwittingly -- in Denson's effort to develop a $6 million commerical project in Northeast Washington that was billed as a chamber project but actually was a private venture by Denson.
Documents obtained by The Washington Post show that earlier this year Barry wrote to the federal Economic Development Administration urging approval of Denson's request for a $6 million grant to purchase and renovate the Washington Coliseum and Uline Ice House at Third and M streets NE.
Denson had told EDA and some city officials that the project, to be carried out by the D.C. Institute for Economic Development, was an official effort of the Chamber of Commerce. In reality, he has since acknowledged, it was not. The institute was actually controlled by Denson, and planned to purchase the aging Coliseum complex for $1.2 million and spend another $4 million on rehabilitation.
EDA officials told Denson he would need the support of the District of Columbia government for any serious consideration of the grant. He asked Barry for assistance and the mayor sent a letter to Curtis R. McClinton Jr., director of EDA's office of special projects.
"I met with Jim Denson right before Christmas on the proposal submitted to you by the D.C. Institute of Economic Development to determine the feasibility of acquiring and developing the Washington Coliseum as a recreational and community center combined with a profit-making ice plant, Barry wrote.
"I asked the Office of Business and Economic Development to look into all aspects of their proposal and determine what commitments the District Government could make to the proposal at this time . . . The District Government is happy to endorse the concept of the proposal."
The city's economic development director, Ann Kenney, said through a spokesman that Denson promoted the project as an undertaking by the institute, which Kinney said she took to be an organization affiliated with the D.C. chamber.
Barry said through a spokesman yesterday that the Coliseum project conformed with the city's economic development policy and on that basis he asked Kinney to study the proposal.
"She did not investigate the ownership of the [Denson's] institute," said Kwame Hollman, the mayor's press spokesman.
Carbon copies of the mayor's endorsement were sent to D.C. Housing Director Robert L. Moore and to Joseph D. Jackson, president of the D.C. Development Corp., a private investment corporation funded by the city to assist in housing and economic development projects.
Jackson's city-funded corporation already had lent $50,000 to Denson's institute for the nonrefundable deposit Denson put up on the $1.2 million purchase contract that is still pending.
Yesterday's chamber board meeting was called specifically for the purpose of forcing Denson's resignation, according to board members interviewed Denson, his base of support severely eroded by the series of allegations, offered a motion allowing him to "step aside" for an unspecified period.
According to one board member, Denson subsequently sought to control appointments to an internal chamber board of inquiry empowered to look into the charges against him, but other board members intervened. Denson was forced to give up the chair of the meeting to Margaret Stewart, who was elected acting president of the chamber, and presided over selection of the panel.
The chamber board, which for weeks has been divided -- often along racial lines -- by the controversy surrounding Denson, then shuffled its top officers and staff members.
Board members Richard J. Hopkins, as assistant counsel at Howard University, was named general counsel to the chamber, replacing Sidney Freidberg of the law firm of Arent, Fox, Kinter, Plotnick & Kahn. Freidberg resigned last week to protest the board's refusal to act on what he said was evidence of misappropriation of funds.
While chamber board members search for a new executive vice president, Jerri Warren, wife of D.C. School Board member John E. Warren, will serve as acting staff director.
The current acting executive vice president, Edward J. van Kloberg, was relegated to a secondary staff position to run the chamber's membership campaigns.
Blalock's announcement yesterday of an additional area of interest in her investigation put the city's probe on a dual track.
Blalock was authorized Monday by Barry to audit all public funds received by the chamber to determine whether any money had been misappropriated. The chamber receives $291,000 in federal Comprehensive Training and Employment Act funds, $129,000 in the commercial revitalization funds from the city's housing department and $52,000 from the City Council for minority tourism promotion.
The expanded investigation will focus on Denson's duties as elections chairman, especially his approval of purchase of the city's new voting machines, manufactured by Datavote, a subsidiary of Diamond International Corp. of San Francisco.
Only two of the three elections board members voted to grant the award, Denson and former board member Jeanus Parks Jr.
Questions have been raised about whether the District of Columbia got a "new" system for its money, as the contract specifies. D.C. Auditor Matthew S. Watson said that voting instructions written in Chinese have been found covered over by new instruction labels on voting booths. This might be explained, he said, by the fact that the voting system manufacturer, Datavote, a subsidiary of the San Francisco-based Diamond International Corp., had tested the system during elections on the West Coast where there is a large Chinese speaking population.
Montgomery County, which bought a Datavote system in 1978, paid up to $15 less per voting machine, according to elections officials there.
"The mayor requested us to look into the matter involving James Denson," Blalock said. "It all goes to the matter of misuse of D.C. government funds and it seemed relevant to us to at least look at the [voting equipment] contract."
Blalock said she will receive the files of City Auditor Matthew S. Watson, who issued a report last September criticizing the procedures followed by the elections board in awarding the voting equipment contract.
Moreover, Watson wrote a stinging preamble to his report in which he said, "The Board of Elections and Ethics has unlawfully attempted to frustrate our investigation by refusing to give access to their contract files or the equipment itself."
Denson could not be reached for comment yesterday. In an interview several days ago, he acknowledged that he may have broken some laws in handling chamber funds, but that he had not done so intentionally.