D.C. Deputy Mayor Alphonse G. Hill submitted his resignation yesterday after the disclosure last week that he accepted $3,000 in payments from a city auditing contractor -- the latest blow to an administration that has been beset by corruption investigations.
Annette Samuels, press secretary to Mayor Marion Barry, said the mayor had received Hill's four-page letter of resignation but would have no immediate comment.
Hill's resignation, effective March 31, comes amid a federal grand jury investigation into whether he received kickbacks or other financial considerations from James Hill Jr., the head of a Chicago-based auditing firm. Ivanhoe Donaldson, a former deputy mayor and architect of Barry's political career, pleaded guilty in December to having defrauded the city of $190,000.
In an interview yesterday, Hill denied that the payments were "payoffs," but he admitted he used "poor judgment" in accepting the $3,000 last year from James Hill, a longtime friend and the head of the accounting firm of Hill, Taylor & Co., which has received hundreds of thousands of dollars in city business.
Alphonse Hill, 45, deputy mayor for finance and a city official for nearly seven years, said he decided on his own to resign and was not forced out by Barry or other high-level officials. He said he was leaving to ensure the integrity of the city's $3 billion-a-year financial system, which he helped to design, and to defuse any further criticism of the administration.
"I would like to preserve the integrity of the work we have accomplished and the people we have brought in," Hill said during the interview in his District Building office. "I will take my public spanking."
Hill's resignation, while not unexpected in light of the mounting pressure on the deputy mayor, nonetheless raised questions among city political and business leaders about the immediate future of the city's budgetary and financial management operations.
Hill, a former D.C. controller who was appointed deputy mayor in 1983 as part of a major government reorganization, largely shaped the city's financial system. He also assumed full responsibility for the budget last fall, after the resignation of Betsy Reveal as budget director.
"He has been the point person on finances ," said Elijah B. Rogers, the former city administrator. "Obviously, he has a tremendous amount of knowledge that no one else in government has. It will be difficult, if not impossible, to replace him. He was the key person in terms of getting the government back on the right foot financially. I think it's going to be a tremendous loss."
D.C. City Council member John A. Wilson (D-Ward 2), chairman of the Finance and Revenue Committee who strongly criticized Hill for investing $100 million of city funds with a firm that later went bankrupt, said, "This is a big blow to the financial management situation.
"I would assume it would be a very difficult [position] to fill at this time," Wilson said. " . . . There's been a litany of people to leave here for one reason or another. It's just a mess."
John Hechinger, a businessman and the Democratic national committeeman from the District, said the city was losing "a good technician," but he said he doubted that the resignation will adversely affect the government's fiscal affairs.
"It's always sad to see repeated violations of trust that the mayor put in his officials," Hechinger said. "But so long as Marion Barry is not involved, I think it will have no effect."
Hill is one of three deputy mayors, along with City Administrator Thomas E. Downs and Curtis McClinton, deputy for economic development.
There was no indication yesterday of who would replace Hill as deputy mayor for finance, although possible candidates include Melvin Jones, director of the D.C. Department of Finance and Revenue; Edward Winner, director of the Office of Financial Information Systems; Controller N. Anthony Calhoun, and Gladys Mack, former budget director and a top adviser to the mayor.
Hill's resignation capped a dramatic week in which Barry and his aides shifted from defending Hill to strongly hinting that his resignation was imminent.
The turnabout came almost immediately after an attorney for James Hill -- who is not related to Alphonse Hill -- told reporters last week about the $3,000 in payments to the deputy mayor. The lawyer described the payments as fees in exchange for business referrals that were unrelated to city government.
One top Barry aide called the news "devastating" and predicted that Barry, who is preparing to run for a third term this year, would have to act swiftly to minimize the damage to his administration.
Even as Hill was preparing to announce his resignation, Barry aides were huddling late last week to resolve the long-simmering controversy over the fate of the top management of the D.C. Department of Employment Services.
A number of agency officials, including director Matthew F. Shannon and deputy director James George, were cited in the corruption case involving Ivanhoe Donaldson, the former deputy mayor for economic development, who in late January began serving a seven-year federal prison sentence.
Barry, who was privately criticized by some City Council members for failing to swiftly discipline those officials for their involvement, in late January placed Shannon, George and two others on administrative leave with pay.
The mayor said in an interview Thursday that a decision on the fate of Shannon and the others was imminent. "I'm trying to untangle all these things and get them out of the way," Barry said.
Hill, a low-profile accountant who had no government experience when he arrived here from Chicago seven years ago, molded a highly complex $3 billion-a-year apparatus run by handpicked subordinates charged with enforcing essential financial controls throughout the government.
He rose to the apex of a financial empire that controls city investments, tax collection, issuance of nearly a half-billion dollars in municipal bonds and annually disburses millions of dollars in auditing, banking and other financial contracts to firms.
Hill's supporters and critics agree that he played the leading role in establishing the credibility of the District government's once-maligned financial system, winning the acceptance of skeptical Wall Street investment houses and bringing the city into the bond market for the first time less than two years ago.
Hill's government career has been haunted by his penchant for mixing private business relations with his official duties.
In 1981, Alphonse Hill recommended James Hill's firm, among others, for city auditing contracts. James Hill's firm received more than $200,000 in city contracts within a year after opening a branch office in the District in 1981.
A D.C. inspector general's investigation into Alphonse Hill's relationship with James Hill failed to turn up evidence of criminal wrongdoing. However, in 1982 the inspector general warned Alphonse Hill that he should distance himself from his friend's firm.
In the course of the investigation, the inspector general discovered that he had substantial assets when he defaulted on a $123,000 U.S. Small Business Administration loan in 1977. Hill, who is paid $65,930 a year as deputy mayor, paid the SBA $80,000 as a settlement in late 1983.
In addition, according to Hill, he had to pay $9,300 last year to satisfy a 1983 court judgment against him, which stemmed from his failure to repay fully a loan on an investment property in Chicago.
Hill also came under fire last spring after it was learned that he had approved investing nearly $100 million in city funds with the New Jersey securities firm of Bevill, Bresler & Schulman Inc., despite a warning from then-senior cash management analyst Alvin Frost that the firm was "thinly capitalized." The firm later went bankrupt.
The city did not lose money, but Hill and other D.C. financial officers were criticized during City Council hearings conducted by Wilson and Council Chairman David A. Clarke. It was also disclosed during those hearings that Assistant Treasurer Fred Williams had submitted a backdated memorandum to the council to justify the decision to invest with BB&S.
Hill, a tall, slender man who views himself as a loner within the bureaucracy, is considered by some experts to be among the top black municipal financial officers in the country. He stresses his family ties, and his professional style has been to rely heavily on a small coterie of trusted aides. Hill has not always been wedded to the formal table of organization, preferring to assume some of the responsibilities of underlings by leaving key posts vacant over long periods.
Hill, who said he viewed government as "too cumbersome," last week attributed his success to a willingness to cut through red tape. "You were paid to make a decision, not to stew in the regulations. A senior cash manager has to be able to move the bureaucracy . . . . I may have cut a rule, a law or something, but I made a decision."
Hill's imprint on the city's financial apparatus in the wake of home rule is indelible.
Under Hill, the city's financial accounts, once lumped together in the U.S. Treasury, were broken up into nearly 30 separate accounts handled by local banks. About $3.3 billion flows through those accounts annually. Hill sits atop the contract review system that selects the banks that receive about $1.7 million in fees to handle the money.
Hill also assumed authority over the issuance of virtually all auditing contracts performed for the city by private firms. Those contracts were worth about $974,000 in 1985.
Under the deputy mayor, an aggressive cash management policy was developed, with investments doubling in the last two years from $123.9 million to $256.2 million. Hill retains approval power over the firms and banks with which the city invests.
Finally, Hill shepherded the District into the bond market for the first time in late 1984. With nearly a half-billion dollars in general obligation bonds issued so far, Hill's office controls the selection of firms that perform lucrative roles as bond counsel, underwriter and financial adviser.
Hill said his name was forwarded for the controller's post in early 1979 by Lillian Adkins Sedgwick, then a special assistant to the mayor who was also a neighbor and friend of Hill's mother, Lozzie York, a longtime Ward 1 community activist.
"You probably would not have predicted that he had the talent," said Bert Edwards, a top executive with the Arthur Andersen & Co. accounting firm and a financial adviser to the Barry administration in its early years. "But whoever found him found a diamond in the rough."
When he arrived here, Hill said, "I knew not a damn thing about government . . . but most of the things I had done in the past had been deteriorating situations and I was called in to try to improve or turn them around."
A native of Southern Pines, N.C., Hill graduated from Howard University in 1965 with a business administration degree, and then earned a master's degree from the University of Chicago before signing on for two successive posts as a fiscal officer for small, predominantly black colleges suffering financial difficulties -- Knoxville College in Tennessee and Malcolm X College in Chicago.
In 1969, he said, he walked into a "cesspool" at Malcolm X College, a two-year community college in Chicago. Malcolm X was plagued by discord and political tensions revolving around its controversial president, Dr. Charles G. Hurst Jr., a former Howard University professor who had recruited Hill.
In late 1974, while a controller for the Chicago-based W. Clement Stone Foundation, Hill and a partner obtained a $123,000 SBA loan to run a coin-operated laundry and two dry-cleaning stores in the Chicago area.
"I didn't know anything about the damn laundromat business," Hill said, but he was persuaded to become a partner by Norman S. Jones, who also had worked for him at Malcolm X.
Hill said his role was confined to providing financial backing and advice. He said Jones actually worked in the stores and ran the business, which operated under the name H&J Enterprises.
Jones, now the manager of a Chicago-area fast-food restaurant, recently blamed the business' failure on a downturn in the economy and bad luck.
When Hill and Jones fell behind on the rent on one store, "we had to get them out of there," said the wife of a former landlord.
Hill's last job before becoming D.C. controller was as a partner with two other Chicago accountants who operated in the late 1970s under the name of Hill, Whiteside and Wiley.
"We were a small, struggling accounting firm," Alonzo Whiteside, one of the three partners, recalled in a recent interview. Whiteside said the accounting office closed down when Hill left for the District, largely because without Hill's share of the expenses they could not afford the rent.rt.