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Slowly bot surely

From health care to real estate and law, artificial intelligence is becoming an increasingly bigger part of many industries, with executives rolling out new tools and updating policies. Like other businesses, banks and credit unions too have been exploring this electronic frontier, although they’re pairing technological progress with caution.

Even if you’re new to the topic, you probably have heard of ChatGPT, the trailblazing generative AI chatbot launched by OpenAI in November 2022. It was a big deal, gathering more than 100 million monthly users just two months after launch, but ChatGPT is just the tip of the iceberg. Artificial intelligence has been developing in many forms for decades.

When it comes to technology in use or under consideration at financial institutions, most AI tools are focused on behind-the-scenes work.

With the notable exception of Bank of America’s Erica — an AI-powered virtual assistant launched in 2018 that helps customers find banking information via voice and text — financial institutions’ new tools are not personalized but can make customer service faster and more efficient, detect malware reliably and prequalify customers for loans, among other tasks.

While the possibilities for AI seem endless, banks and credit unions have to balance that sense of adventure with the weighty responsibility of keeping their customers’ sensitive financial and personal information secure.

Separating wheat from chaff

Fairfax-based Apple Federal Credit Union is a member of Curql Collective, a capital fund through which credit unions invest in fintech companies developing AI tools, says the credit union’s chief information officer, John Wyatt. Photo by Will Schermerhorn

Fairfax-based Apple Federal Credit Union, which had more than $4.3 billion in assets and 242,473 members at the end of 2023, is among the top 10 largest credit unions based in Virginia, and it’s also an early AI adopter among credit unions, with several applications currently in place and others in the wings.

John Wyatt, the credit union’s chief information officer, says Apple FCU uses a tool called Zest AI that provides more information on loan seekers than the traditional FICO credit scoring model. It opens doors to borrowers who may have previously had a difficult time getting approved for a loan through no fault of their own.

“We’re looking for … that hidden prime borrower that may not have the credit history that you would need to have a high FICO score,” he says. “What we’re trying to do is qualify more members for loans.”

Another product, CrowdStrike Falcon, helps the credit union examine behavioral indicators to bolster cybersecurity. “It can detect, isolate and respond to threats in real time,” Wyatt explains, as opposed to traditional malware-detection programs, which can take up to three or four months to detect a pattern. By that time, bad actors could have done their damage and moved on to new targets.

Apple FCU is a member of the Curql Collective, a technology capital fund that connects fintech companies creating AI-powered tools with credit unions for investment. In turn, Apple and other members decide which new tools would be appropriate for their organizations. In the past year, with more AI-driven products and entrepreneurs available, Curql (pronounced “circle”) provides a helpful filter for what’s worthwhile and what isn’t, Wyatt says.

“We get first look at vendors that have products that meet the needs of credit unions, and we go to conferences where they actually bring people in to talk about their products. We evaluate them, and we can vote on them and … fund them or not,” he says. “You kind of see what’s coming down the pipeline.”

Wyatt also attended a December 2023 AI innovation conference at which some of the bigger players like Microsoft and Midjourney rolled out new tools and updates. “Things are changing every three, four days,” Wyatt says. “You kind of have to stay ahead of it, and the hype around it is way beyond the peak of inflated expectations.”

In Virginia Beach, Chartway Federal Credit Union has two AI-powered projects underway that are set to go live in March, says Rob Keatts, Chartway’s executive vice president and chief strategy officer. One is Experian’s custom credit score program powered by AI. The other is a customer- facing telephone banking system that will use a “conversational AI bot” that will allow customers to “call in and just check your balance or move money between your own accounts,” Keatts explains. “And for whatever reason, it is extremely popular with people.”

Interestingly, the demographic breakdown of phone banking shows it is most popular among Chartway’s members over age 50 and its youngest members, in their 20s, Keatts notes. Gen Xers and millennials tend to prefer mobile banking, according to statistics pulled by Chartway’s analytics consultants in late 2022.

Last year, Chartway started Chartway Ventures, a credit union-backed venture capital fund to invest in fintech startups, similar to Curql. It helps Keatts learn more about what tools are under development, as well as what is worth investing in — since part of a credit union’s charter is managing its customers’ money responsibly.

“Being a member-owned cooperative credit union, it’s truly our members’ money,” Keatts says. “We really do look to see [if] we’re going to put out x amount for this product, what are we getting back? And then, from a cybersecurity standpoint, everything goes through our standard security checks before we go live. We do a deep dive into the background of the organization we’re partnering with. We don’t put any sensitive information into a public large-language model like a ChatGPT.”

Keatts also learns about new tools and gets recommendations through relationships with other credit unions and attending events where fintech startups present their products.

Both Wyatt and Keatts note that the size of their financial institutions — sitting in the top 10 largest credit unions based in Virginia — allows them to invest in and explore AI tools more easily than smaller credit unions or smaller banks can.

Big banks, bigger investments

On the leading edge of AI use in the finance sector, however, are the nation’s largest banks, among them McLean-based Capital One Financial and Bank of America. Unlike Apple and Chartway, these banking giants build their own tech in-house in addition to collaborating with third parties.

Capital One’s mobile app and fraud detection tools, among other products, use AI and machine learning, and the bank has created a framework to “manage and mitigate risks associated with AI,” its chief scientist and head of enterprise AI, Prem Natarajan, said during congressional testimony in November 2023. “We have a wide range of tools for managing risk relating to AI, including model risk management, credit risk, strategic risk, third-party risk, data management [and] compliance risk.”

Beyond tools in use by the bank, Capital One has invested in broader educational efforts, including its internal Tech College, which provides training to its employees on machine learning-based systems and products.

Meanwhile, as of July 2023 more than 38 million Bank of America customers engaged with virtual assistant Erica to manage their bank accounts through 1.5 billion interactions — making requests like “Replace my credit card,” or “What’s my FICO score?”

In Virginia, 27% of Bank of America clients used Erica as of October 2023, up from 22% a year earlier. In September 2023, using the same proprietary AI and machine- learning capabilities as Erica, Bank of America launched an AI chat function for corporate and commercial clients to manage their finances on its CashPro platform.

Like the credit unions, Bank of America is focused on security of its customers’ sensitive information when developing new products.

“Our approach has never been to … chase the shiny objects,” says Nikki Katz, Bank of America’s Los Angeles-based head of digital. “We’re always looking at it from the perspective of, ‘How does this translate to client benefit?’”

Digital banking is in more demand than ever, as during the pandemic, many banks and credit unions customers moved to online, phone or mobile banking options.

Tom Durkin, global product head of CashPro in Global Transaction Services at Bank of America, says expectations for digital banking “really hit the business community a lot harder, as they had to adapt and leverage some of these capabilities. I think those things factored into expectations … coming off the pandemic, in terms of accessibility to information and the ability to get access.”

Although Bank of America was the first bank to launch a virtual assistant, back in 2018 — an eon ago in technological terms — innovations related to Erica are still going forward even as customer usage increases, Katz notes.

“There’s definitely climbing interest in this space, and we’re continuing to see new applications, whether it’s helping our clients stay on top of their cash flow or changes to their recurring charges,” she says. “As there’s more investment in the space, we’re going to examine opportunities to evolve and improve that client experience and our associate experience with it.”


After long delay, Va. lawmakers appoint two SCC judges

The Virginia General Assembly unanimously elected two attorneys to fill two vacancies on the Virginia State Corporation Commission on Wednesday, after more than a year of understaffing and partisan battles.

State senators and delegates voted 40-0 and 98-0, respectively, to approve the nominations of Kelsey Bagot, a former legal adviser with the Federal Energy Regulatory Commission who lives in Loudoun County, and Sam Towell, a former deputy attorney general who is now associate general counsel for litigation for Smithfield Foods and resides in Richmond.

The SCC governs utilities, state-chartered financial institutions, securities, insurance, retail franchising and the Virginia Health Benefit Exchange. Its three-judge panel has been short two judges since the December 2022 resignation of Judge Judith Jagdmann, and nominations have been held up by partisan politics.

Angela Navarro, the state’s former deputy secretary of commerce and trade, was appointed as a judge in January 2021, replacing Mark Christie, the former SCC chairman, who was appointed to the Federal Energy Regulatory Commission in 2020. However, Navarro left office in March 2022 after Republican state legislators declined to elect her to a full term, and the split General Assembly was unable to come to an agreement on a replacement for Navarro in 2022.

SCC judges are named by state legislators or, if they can’t agree on a candidate, the governor can name a commissioner on a temporary basis, although the state Senate and House of Delegates must elect a judge to a six-year term.

Sam Towell

Bagot’s six-year term will start April 1, and Towell’s term will begin March 17 and end Jan. 31, 2028, as he would replace Jagdmann, who left in the fourth year of her third term.

Since January 2023, Judge Jehmal T. Hudson has been the only sitting Virginia SCC commissioner. He is in his first six-year term on the commission.

Backed by Democrats who hold control of the House and Senate labor and commerce committees, Bagot is currently employed as a senior attorney at NextEra Energy, a Florida-based renewable energy company focused on solar energy generation, and Towell was previously deputy attorney general for civil litigation under former state Attorney Gen. Mark Herring.

A graduate of the University of Virginia School of Law, Towell was also deputy secretary of agriculture and forestry under Gov. Terry McAuliffe and was a litigation attorney at McGuireWoods. Bagot, a graduate of Harvard Law School, was a trial attorney at FERC and a legal adviser to Christie during his recent term as a FERC commissioner. She also was an associate at Troutman Sanders.

Fairfax, Petersburg could hold casino referendums

Two pending Virginia State Senate bills would change the list of locations eligible to host a casino, adding Petersburg and Fairfax County to the mix and removing Richmond.

On Tuesday, the Senate Committee on General Laws and Technology’s gaming subcommittee met to discuss these and other measures regarding skill games, sports betting and horse racing. Both casino measures received enough votes to move forward to a full vote of the Senate General Laws and Technology Committee expected Wednesday.

Sen. Dave Marsden, D-Fairfax, sponsored SB 675, a bill that would add Fairfax County to the list of localities that could host a casino in Virginia if voters pass a referendum — although Marsden placed some restrictions on the measure, including that a casino would have to be located within a quarter-mile of an existing Metro station on the Silver Line. Also, the locality’s officials are required to consider a gaming operator’s history of paying prevailing wages to construction workers and entering into labor agreements with unions when awarding the contract.

According to WTOP, if successful, the casino would be placed in Tysons on Route 7 near the Spring Hill Metro station, on land where a car dealership was previously located. Marsden’s legislation previously included the possibility of building a casino in Reston, but after resident opposition, Reston has been excluded from consideration.

Advocating for his bill before the subcommittee, Marsden said that the MGM National Harbor Hotel & Casino in Maryland is “taking $150 million a year out of Virginia coffers,” and that Northern Virginia has suffered financially since the pandemic. He also emphasized that a casino project would include a convention center “that does not exist in Fairfax County. We’re also talking about a hotel, a concert venue and the casino itself.”

Subcommittee member Sen. Christopher Head, R-Roanoke, said he has received “hundreds and hundreds and hundreds” of emails from community members opposed to the Fairfax casino and asked whether Marsden had heard from any community groups that support a casino in Fairfax. Marsden replied that he believes MGM is stirring up opposition to a Tysons casino “to make sure that their interests are preserved, but I’m getting tired of paying for Maryland schools,” referring to Virginians spending money at the MGM casino.

Benita Thompson-Byas, senior vice president of Reston-based Thompson Hospitality, was one of a few speakers in support of a Fairfax casino and said her company would be a minority partner if the casino is approved by voters.

Another subcommittee member, Democratic Sen. Adam Ebbin of Alexandria, said he also has received “hundreds” of emails opposing a casino and said he wouldn’t support the proposal without more input from the Fairfax County government. Marsden said he has been in discussions with Fairfax supervisors who said they would follow through with due diligence if the bill progresses.

Subcommittee member Sen. Jennifer Carroll Foy, D-Woodbridge, said she would vote for the bill, noting that a referendum gives Fairfax voters the ultimate choice on the matter. “They are the best ones to decide,” she said. The bill ended in a 4-4 tie, sending it to the Senate General Laws committee for a vote.

Meanwhile, Sens. Lashrecse Aird, D-Petersburg, and Louise Lucas, D-Portsmouth, are chief co-sponsors of SB 628, which would replace Richmond with Petersburg on the list of cities eligible to host a casino if city voters pass a referendum. No one spoke in opposition to the bill, which passed the subcommittee and will go forward for a committee vote.

Aird emphasized Petersburg’s high poverty rates and aging infrastructure as factors in the city’s favor. “Petersburg needs a transformative economic development opportunity to generate immediate revenue and provide long-term benefits,” she said. Several people representing a hospitality workers’ union wore red T-shirts and sat in the audience, showing support for the measure.

Also, Sen. Lamont Bagby, D-Richmond, sponsored SB 541 removing Richmond as an eligible host city, which passed the subcommittee unanimously. Sen. Schuyler VanValkenburg, D-Henrico, sponsored a measure to reduce the number of casino-eligible cities from five to four, but struck the bill earlier Tuesday and instead supported the measure allowing Petersburg to vote on a referendum.

Republican Sen. Bryce Reeves sponsored a bill, SB 345, that would block a city from holding a second casino referendum within three years if a first referendum fails. That bill passed with seven ayes and one no vote.

Measures removing Richmond as a casino-eligible city were clear responses to last fall’s second unsuccessful referendum in Richmond to establish the $562 million Richmond Grand Resort & Casino on the city’s South Side. About 61% of city voters said “no” on November 2023 ballots to the do-over referendum, a much larger margin than in the 2021 vote, which was narrowly defeated by about 1,500 votes. During the 2023 session, Del. Kim Taylor, R-Petersburg, and former state Sen. Joe Morrissey, D-Petersburg, tried unsuccessfully to get a casino referendum on Petersburg’s ballots and prevent a second vote in Richmond.

Also under consideration Tuesday was SB 124, a bill from VanValkenburg that would permit betting on Virginia college sports, except for proposition betting, such as point spreads; under current law, the state allows betting on all college sports except those played by Virginia college athletes. Illegal betting is currently a class 1 misdemeanor in Virginia. The bill passed the subcommittee and will next be voted on by the Senate General Laws and Technology Committee.

Another measure, SB 212, would create a regulatory infrastructure for so-called “skill game” machines (also called “gray machines”) in Virginia convenience stores and other small businesses. Sponsored by Sen. Aaron Rouse, D-Virginia Beach, the bill would direct the state tax department to collect a 15% monthly tax from the gross revenue of every skill game machine. As of Tuesday, the bill has been re-referred to Senate Finance and Appropriations. SB 307, a bill sponsored by Democratic Sen. Jeremy McPike, would impose a 34% tax on all gross profits from gaming devices and would send most tax proceeds to the state’s general fund. The vote was postponed to make further adjustments to the bill.

Anthem, Va. Chamber partner on WiseChoice Healthcare Alliance

The Virginia Chamber of Commerce is partnering with Anthem Blue Cross and Blue Shield on the WiseChoice Healthcare Alliance, the next step in providing health insurance to small business owners through a newly legalized consortium structure, President and CEO Barry DuVal announced Wednesday.

In June 2022, Gov. Glenn Youngkin signed legislation allowing associations — including chambers — to form consortiums and sell health care plans that cover small businesses with two to 50 employees. The consortiums are known as Multiple Employer Welfare Associations, or MEWAs, and their aim is to lower the per-person cost of insurance by creating a larger risk pool. The state Chamber was one of the primary proponents of the consortiums, which will be overseen by the State Corporation Commission’s Bureau of Insurance. According to the Chamber, the bureau took several months to approve WiseChoice’s application, which was submitted last summer.

According to Wednesday’s announcement, employers can qualify for membership to WiseChoice through membership with a participating local chamber of commerce, the Virginia Farm Bureau or any trade association with the program. Qualified employers must have their corporate headquarters in Anthem’s Virginia service area, which includes the whole state except for Fairfax city, Vienna and the area east of Route 123.

Youngkin spoke Wednesday at the Virginia Chamber’s annual meeting held at the Omni Richmond Hotel. “I want you to know, I am totally psyched. I can’t wait until we have our first group of Virginians who work for small businesses who now access health insurance through WiseChoice. This is going to be great.”

In a statement, Anthem Virginia President Monica Schmude said, “Strategic partnerships, like ours with the Virginia Chamber of Commerce, demonstrate our common goal to redefine health, reimagine the health system, and strengthen our communities. I am excited to see the hard work of so many result in a solution that makes sense for the small business community across the commonwealth addressing affordability and providing long-term stable access to care for Virginians.”

Youngkin also discussed his goal to revamp the state’s tax code, including reducing personal income tax and increasing sales and use taxes, and making sure that the state’s economic development wins continue. “We’ve had a tremendous economic development run. We’ve had $71 billion of new capital committed by companies who are either here and expanding or moving here over the course of the last few years.”

Speaking about the proposed $2 billion Alexandria arena and surrounding entertainment district, the governor also said that the opportunity to bring the Washington Capitals NHL team and the Washington Wizards NBA team to Virginia from Washington, D.C., “is most unique. … There’s never been a structure put together like this, with no upfront payment from the Commonwealth of Virginia and not [creating] new taxes. We created a sports entertainment authority that would really participate in the success of the district. It provides not only substantial capital to build the facility, but it also provides excess cash flow to the Commonwealth of Virginia in order to address other needs. That is a pretty unique arrangement, and one that I believe that is not only going to benefit Northern Virginia but can benefit all of Virginia.”

As of Wednesday, a bill with full financial details on the arena and the creation of the authority, which would own the land and structures, had not yet shown up on the Legislative Information System. According to a recent Washington Post story, House Appropriations Chairman Luke Torian said the governor asked him to consider carrying the House version of the bill, but he had not yet seen it last Friday.

FAA probes Boeing’s possible role in 737 Max 9 cabin blowout

Nearly a week after a four-foot wall panel blew out of a Boeing plane cabin midair, exposing Alaska Airlines passengers to open air at 16,000 feet, the Federal Aviation Administration formally notified the Arlington County-based aerospace giant Wednesday that it will investigate the company’s potential role in the incident and whether it failed to ensure its products were in safe operating condition.

The FAA investigation — separate from the National Transportation Safety Board’s probe into the Alaska Airlines flight’s emergency landing Friday in Portland, Oregon — will focus on whether Boeing is at fault for the panel flying off the plane.

In a letter written Wednesday and made public Thursday, FAA Director for Integrated Certificate Management Division John Piccola informed Boeing Commercial Airplanes Vice President Carole Murray that the agency is conducting an investigation into the Alaska Airlines cabin panel blowout. “After the incident, the FAA was notified of additional discrepancies on other Boeing 737-9 airplanes,” he wrote. “Boeing may have failed to ensure its completed products conformed to its approved design and were in a condition for safe operation in accordance with quality system inspection and test procedures.”

Piccola adds that Boeing can respond within 10 business days of receipt of the letter. The letter does not go into additional detail about the problems spotted on other aircraft.

Last Friday, the Boeing Model 737 Max 9 jet had just taken off from Portland, Oregon, when the 63-pound panel was ripped away; it was used to plug up a space for an unused door near the back of the aircraft, and the panel was later found in a Portland teacher’s backyard, according to the NTSB. Although passengers were reportedly terrified, no one was injured, and the plane was able to make an emergency landing. The FAA, meanwhile, ordered a temporary grounding of dozens of Boeing 737 Max 9 jets so they could be examined for similar problems.

Dave Calhoun, Boeing’s CEO and president, said in a statement Thursday that the company “will cooperate fully and transparently with the FAA and the NTSB on their investigations.” Calhoun, when speaking during a town hall meeting at a Boeing factory in Renton, Washington, earlier this week, showed emotion when discussing the incident. He said, “We’re going to approach this, No. 1, acknowledging our mistake. We’re going to approach it with 100% and complete transparency every step of the way.” 

The latest incident is just one in a series of problems that have plagued Boeing over the past few years. In April 2023, Boeing had to pause delivery of some of its 737 Max jets after some of their parts were installed incorrectly, and in January 2023, delivery of its 787 Dreamliner aircraft was halted over documentation problems. In December 2023, Boeing delivered its first Dreamliner to a Chinese airline since November 2019, but China grounded all 737 Max jets back in March 2019 after two fatal crashes of the jet in about five months. Although other countries followed suit in banning the plane, the U.S. lifted its ban in 2020, as did other countries, except for China.

As of 4 p.m. Thursday, Boeing’s stock had fallen 2.27% since start of trading to $222.66 a share. Spirit AeroSystems Holdings, which was responsible for installing the panel that blew off, saw its stock fall nearly 6% to $27.60 a share. Alaska Air Group, however, mostly recovered after a dip earlier in the trading day, finishing the day at $36.99 a share, only .19% down from the start of trading.

Boeing is one of the world’s largest defense contractors and employs more than 140,000 people globally. In 2022, the company moved its headquarters from Chicago to Arlington County, where about 400 Boeing employees are based. 

Acentra Health acquires workplace mental health biz

McLean-based health care solutions company Acentra Health announced Thursday that it has acquired EAP Consultants, a workplace mental health company known as Espyr that is based in Marietta, Georgia. Terms of the deal were not disclosed.

Owned by Carlyle Group, Acentra was formed after its predecessor Client Network Services Inc. (CNSI) merged with health care management company Kepro in December 2022 and rebranded as Acentra Health in June 2023.

With the acquisition of Espyr, which has about 125 employees, Acentra expects to serve existing and new clients in government health care agencies with Espyr’s portfolio of employee assistance program services, which include health coaching, counseling and leadership programs that are aimed at increasing engagement and productivity at work. Traditionally, EAPs have provided mental health and other kinds of support for employees in need.

“The combination of Acentra Health and Espyr aligns with the strategic objectives of both companies to be at the forefront of helping our clients address our nation’s mental health crisis,” Acentra CEO Todd Stottlemyer said in a statement. “I am excited about the combination of our highly skilled teams, our technology-enabled products, solutions and services, and our increased ability to serve people in need of mental health services.”

The combined company will maintain Acentra’s McLean offices as its headquarters, according to the announcement. Bailey & Co. was financial adviser to Espyr, and Goodwin Procter was the company’s legal adviser. King & Spalding was Acentra’s legal adviser in the deal.

“Today’s mental health crisis demands that we change our approach and seek new ways to reach people where they are, with the workplace having a central role,” Rick Taweel, CEO of Espyr, said in a statement. “With more companies seeking to go beyond traditional EAP support, we believe our combined capabilities will help our clients meet and adapt to these changes and drive better outcomes in mental health and well-being.”

Richmond biotech company to buy contraceptive biz for $100M

Aditxt, a biotech company based in Richmond, expects to purchase California-based contraceptive maker Evofem Biosciences for $100 million, taking on the business’s debt of up to $18 million, according to Aditxt’s announcement. Both companies’ boards have unanimously approved the acquisition, which is expected to close in the first half of the year.

Evofem produces Phexxi, a non-hormonal contraceptive gel that garnered $13.4 million in net sales in the first nine months of 2023, Aditxt said in a December 2023 news release. Evofem, which is set to become a wholly owned subsidiary of Aditxt, earned $16.8 million in 2022.

However, Aditxt executives are optimistic, saying they expect to accelerate worldwide sales of Phexxi; according to Growth Plus Reports, the global market for non-hormonal birth control products was $27.7 billion in 2022 and is expected to rise to $52.2 billion by 2031.

Aditxt agreed to loan Evofem $3 million between the date of signing the acquisition agreement and closing to cover Evofem’s legal costs incurred during the transaction, and holders of Evofem’s common stock will exchange their 10.7 million shares for an aggregate of 610,000 shares of Aditxt common stock. Aditxt also agreed to issue 89,126 shares to other investors and debtholders.

Evofem’s CEO, Saundra Pelletier, and the current management team will remain in leadership of the subsidiary. Aditxt also assumed Evofem’s senior secured debt, agreeing to pay $5 million to the debtholder by end of 2023, $8 million by September and up to an additional $5 million later.

In February 2023, Evofem’s board agreed to start reviewing options that included a merger, licensing deal or asset sales. Evofem received FDA approval to market Phexxi in 2020, and the contraceptive market has become more competitive since the overturn of Roe v. Wade in 2022. Currently, Phexxi is only available by prescription.

“Evofem represents precisely the kind of groundbreaking innovation that aligns with our mission,” Amro Albanna, co-founder, chairman and CEO of Aditxt, said in a statement. “Aditxt will provide Evofem with a global platform to amplify their transformative innovation in women’s health. As we move forward, we aim to empower our shareholders to participate in this journey through their votes. This approach ensures that our stakeholders are integral in advancing these vital health innovations on the Aditxt platform, truly socializing how health innovations advance and impact lives worldwide.”

In 2021, then California-based Aditxt announced it would start its first AditxtScore Center, a facility to monitor patients’ immune systems, at Richmond’s Bio+Tech Park, and the company’s headquarters is now based in Richmond, according to Securities and Exchange Commission documents.

Back in the saddle again

The political version of musical chairs — aka the 2024 General Assembly session — begins again in Richmond this month, as legislative control shifts once again to Democrats, who won majorities in the House of Delegates and the state Senate in the November 2023 elections.

Nevertheless, a 6-foot-5-inch Republican roadblock stands in the way of overly liberal legislation: Gov. Glenn Youngkin.

His presence guarantees that the next two years will not be a repeat of 2020-21, when Democratic Gov. Ralph Northam and his party held full control over the executive and legislative branches and passed perhaps the most progressive slate of legislation in state history — abolishing the death penalty, legalizing marijuana possession, increasing the state’s minimum wage and expanding voting rights and reproductive freedom.

In last fall’s race, abortion access was a major motivating force for Democratic voters, especially women, after the U.S. Supreme Court overturned Roe v. Wade in June 2022. But political observers don’t expect many — if any — new laws regarding abortion rights in Virginia, because the Democratic majorities in the House and Senate are focused on preserving the state’s status quo, which allows abortions up to 26 weeks into a pregnancy.

As of early December 2023, Democrats had filed legislation pursuing a constitutional amendment that, if passed two years in a row by both houses and then by voters, would enshrine abortion rights in the state constitution — but not before 2026.

Some lawmakers and politics watchers see the possibility for less controversial compromises under Youngkin, who raised a lot of money and spent a lot of time stumping for candidates last fall in an unsuccessful attempt at gaining Republican legislative control. Speaking the day after Election Day, the governor sounded a conciliatory note, saying he would work with Democrats, adding, “I’m optimistic that we can continue to find a path forward.”

The upcoming General Assembly session, which convenes Jan. 10, will look different from any previous legislative gathering in Richmond. A statewide redistricting, coupled with every legislative seat being up for election in November 2023, resulted in an exodus of senior legislators, including former state Sens. Dick Saslaw, Janet Howell and Tommy Norment. It also caused significant turnover within the General Assembly, resulting in the most diverse legislature in state history, with more people of color and women in office than ever before. The new Assembly will include 25 Black delegates and seven Black senators, and 48 out of the 140 legislators will be women. Overall, there are 34 new delegates and 17 new senators. (Additionally, special elections are set for January to fill the seats of Del. Les Adams, R-Pittsylvania County, and Sen. Frank Ruff, R-Mecklenburg County, both of whom resigned in December. Adams said he was leaving to be available for another service opportunity; Ruff, who has served in the General Assembly since 1994 and was slated to be the senior Republican on the Senate Finance Committee, is fighting cancer.)

Significantly, Portsmouth Del. Don Scott will serve as Virginia’s first Black speaker of the House in the legislature’s 404-year history.

“The No. 1 thing I think the speaker’s job is not to be the speaker of the Democrats, not to be the speaker of the Republicans, but the speaker of the House — the people’s House — to handle the body on the floor with civility and respect,” says Scott, who was elected to the House in 2019 and was picked by House Democrats to serve as minority leader in 2022. “Obviously, we’re going to have heated debate, vociferous arguments, but all within the view that we are all here to do the same thing — to carry out our duties that our communities elected us to do, and to do it with the respect and dignity that the office has always provided.”

Karen Hult, a Virginia Tech political science professor, says, “There may be some narrow areas in which they can compromise. The difference [now], maybe, is that the new General Assembly members are probably a little bit more partisan than we’ve seen in the past two years. And they’re more distinct from each other.

“The other thing that I think may be important, that gives Gov. Youngkin the upper hand at least at the outset, is how many of the delegates and senators are new to the chamber. That means you’ve lost the institutional memory … and information on how things get done. On the other hand, you’ve got lots of new information and lots of new energy. That can be a good thing.”

Balancing the books

Republican Sen. Ryan McDougle is now the state Senate’s minority leader and expects to collaborate with Democrats on mental health, cannabis and education legislation. Photo by Caroline Martin

Pre-session rhetoric aside, legislators are bound by law to enact a balanced 2024-26 state budget, which the governor must ultimately sign. In 2023, the divided legislature was deadlocked on budget amendments until September, months past its deadline. Democrats in both houses shouldn’t encounter much disagreement on this year’s budget, but the governor is a different matter entirely.

On Dec. 20, 2023, Youngkin was set to submit his proposed state budget, which will serve as the framework of the finalized budget following legislative adjustments. But the governor can veto Democrats’ changes to the budget, and the party doesn’t have the supermajorities necessary to override Youngkin’s veto.

Virginia Commonwealth University Associate Professor of Political Science Amanda Wintersieck predicts “absolute gridlock. I think in this highly polarized air, there isn’t really indication that there’s going to be a willingness to compromise to move legislation forward.”

One possible upside is that increased partisanship will result in fewer in-party disagreements, forecasts David Ramadan, a former GOP delegate and now a professor at George Mason University’s Schar School of Policy and Government.

“There used to always be a problem between the House and Senate, regardless of who’s in control, between the priorities in the House and the Senate. I doubt that’s going to happen here,” Ramadan says. “You will probably see the Democrats coalesce with no differences between them because they know their fight is with the governor.”

The Senate’s new majority leader, Fairfax County Sen. Scott Surovell, says the Democratic caucus’s budget priorities this session will include correcting “severe underfunding” of the state’s K-12 education system. A 2023 study by the Joint Legislative Audit & Review Commission (JLARC) showed that state funding of public schools is 14% below the national average, “which is completely unacceptable, given our state has the 10th highest median income in America,” Surovell says. Workforce training for high school graduates and increasing mental health funding are other priorities for Senate Democrats, he notes.

One area that could hit a roadblock from Youngkin would be Democratic proposals to raise the state’s minimum wage to $13.50 per hour by Jan. 1, 2025, and $15 an hour by 2026, up from the current minimum wage of $12.50.

Even though bipartisan cooperation may not be at the top of legislators’ agendas this session, the Senate Republicans’ minority leader, Sen. Ryan McDougle, says he has met frequently with Surovell and other Democratic leaders ahead of the 2024 session. “We do tend to work together to try to come up with solutions,” McDougle says. “I think we’re going to all work together to pass a budget. We’re all concerned and focused on education … and mental health.”

But with less surplus revenue anticipated this year, as well as the political shift in the House, Youngkin’s desired corporate tax cuts are likely not to be part of that budget. Scott says it’s a no-go for him, just like it was last year for some members of the GOP legislative budget leadership, who backed down on Youngkin’s proposed permanent corporate tax rebates during last year’s budget negotiations.

“Prior to any tax cuts, Virginia was doing very well,” Scott says. “We attracted Amazon HQ2 without corporate tax cuts,” as well as Lego Group and Boeing, he adds. “I think, in combination with the governor’s true business acumen, along with commonsense policies for everyday hardworking Virginians, we could make some change. I’ll be shocked if we don’t get a budget in on time.”

Areas for compromise

Scott also anticipates that the legislature will fill two vacant State Corporation Commission judgeships, appointments that have been held up by partisan bickering over the past two years.

Transportation infrastructure, economic development, opioid treatment, mental health access and higher living expenses are other areas where Scott says he sees room for bipartisan cooperation, as well as lowering prescription drug prices.

Another area that may see joint support is Youngkin’s budget proposal to allocate $90 million in one-time funds to create “Virginia’s Research Triangle,” a network between the University of Virginia, Virginia Commonwealth University and Virginia Tech to build collaboration in biotechnology, life sciences and pharmaceutical manufacturing and compete with other East Coast hubs such as North Carolina’s Research Triangle or Boston’s biotech industry.

Also under legislative consideration is a proposed state authority that would own a new $2 billion entertainment district in Alexandria, including an arena for the Washington Capitals and the Washington Wizards teams (see related story)

Energy — including legislation regarding renewable sources and grid reliability — will also be a priority this session, Republicans and Democrats say.

Greg Habeeb, a former Republican delegate who is president of Gentry Locke Consulting and an energy and cannabis lobbyist now, says diversifying energy sources is important to both parties. Solar and offshore wind, as well as nuclear energy, which the governor has championed, are all going to be part of important discussions during the session, Habeeb predicts.

Ramadan says that legislators who accepted campaign financing from Dominion Energy or Clean Virginia — a PAC created by Charlottesville millionaire Michael Bills to dilute the utility’s political influence — could form interesting bipartisan alliances on energy legislation. “I have no idea how that’s going to play,” Ramadan says.

Also, two new delegates representing Prince William County — Democrat Josh Thomas and Republican Ian Lovejoy — join newly elected Democratic Sen. Danica Roem, who previously represented the county as a delegate, in pushing for stronger state oversight of the data center industry, which added more than $54 billion to Virginia’s gross domestic product from 2017 to 2021, according to a PricewaterhouseCoopers study released in 2023.

Prince William has been the epicenter of public opposition to data center growth in recent months; Roem, who spoke out last year against the controversial Digital Gateway data center complex that was approved in December (see related story), announced she will sponsor five pieces of legislation to add more state regulation over the fast-growing industry.

Another area for compromise, adds Habeeb, who represents the Virginia Cannabis Association as a lobbyist, may include legalizing retail sales of cannabis to adults without a medical prescription.

When Democrats legalized cannabis in 2021, they said they’d return to the matter in the 2022 session to create a retail structure for recreational purchases. But when Republicans won the governorship and the House in 2021, weed legislation was off the table. However, Habeeb says there’s an opening now.

“Everybody seems to agree that the status quo doesn’t work,” he says. “This idea that you can have homegrown [marijuana], legal consumption, legal possession [and] an exploding black market and gray market for intoxicating products and do nothing about it, everybody seems to agree that that doesn’t work in any kind of long-term sustainable way.”

As of early December, Youngkin had not taken a public position on establishing or opposing a legal cannabis retail market, although in July, Virginia Department of Agriculture and Consumer Services Commissioner Joseph Guthrie, a Youngkin appointee, said the governor is “not interested” in further cannabis legislation. That’s not true of everyone in the GOP, though.

In the state Senate, McDougle says that although he and other Republicans don’t support legal cannabis sales, he sees a problem with Virginia’s lack of a retail structure. “Our system right now doesn’t let anybody know what the rules are, and that’s not tenable. So … I do think we need to make it a system so Virginians know what the rules are. I think we’ll come together and work across party lines.”

Surovell agrees, saying, “We have to do something about starting a retail cannabis market … so we have safe products in the market … [that are] taxed and licensed like most other Virginia businesses.”

JM Pedini, executive director of Virginia NORML, the state chapter of the pro-cannabis organization, says that Virginia’s illicit marijuana market increased from $1.8 billion in 2020 to a projected $2.4 billion in 2023, according to New Frontier Data, a group that studies the cannabis industry.

“Democrats controlling the House and Senate does create a path for an adult-use retail sales bill to reach the governor’s desk. While members of the Youngkin administration have made statements regarding the governor’s opposition to legalization, Youngkin himself has largely been silent on cannabis policy, instead indicating it is the responsibility of the legislature to send him a bill,” Pedini adds.

“It’s important to recognize that without the supermajority required to overturn a Youngkin veto, any serious adult-use retail legislation must be both pragmatic and palatable in order to succeed. It should be easy to read, narrow in scope and have strong bipartisan support.”  

U.Va. appoints alumna as new law school dean

A professor and former vice dean has been named the next dean of the University of Virginia School of Law, the school announced Monday. Leslie Kendrick, also a U.Va. Law alumna, will succeed Risa Goluboff in July 2024, becoming the second woman to serve as the law school’s dean.

Kendrick graduated from the law school in 2006 and became a member of its faculty in 2008, and is now the White Burkett Miller Professor of Law and Public Affairs, the Elizabeth D. and Richard A. Merrill Professor of Law and director of the school’s Center for the First Amendment. She also serves as a special adviser on free expression and inquiry to U.Va.’s provost and was vice dean of the law school from 2017 to 2021, according to the university’s announcement.

“The law school has been my home since I arrived as a student 20 years ago,” Kendrick said in a statement. “I believe now, as I believed then, that the U.Va. combination of world-class research, consummate professional preparation and deep sense of community makes this the best law school in the country. The law school faculty, staff, students and alumni are my beloved colleagues and friends, and I am honored to partner with them in building the future of this exceptional institution.”

Goluboff’s last day as dean will be June 30, 2024, after serving eight years in the role. She announced her decision to step down in September, but she plans to remain at U.Va. to teach. She and Kendrick co-hosted U.Va.’s “Common Law” podcast for its first three seasons, and Goluboff said in a statement that she “cannot imagine a better prepared, more highly qualified or more exciting successor. Leslie is simply fantastic.”

Kendrick is a Kentucky native who was a Rhodes Scholar and received her master’s and doctorate degrees in English literature at the University of Oxford, after earning a bachelor’s degree in classics and English at the University of North Carolina. After deciding to enter law, Kendrick was a Hardy Cross Dillard Scholar at U.Va. and won the Margaret G. Hyde Award, the law school’s highest honor. She clerked for former U.S. Supreme Court Associate Justice David Souter and for Judge J. Harvie Wilkinson III of the U.S. Court of Appeals for the Fourth Circuit.

In addition to serving on the Charlottesville-Albemarle Bar Association’s executive committee, Kendrick was an adviser for an American Law Institute course on defamation and privacy, part of a series on legal principles for judges and lawyers. Her work has been published in the Yale Law Journal and the Harvard Law Review, and she received an all-university teaching award and the law school’s Carl McFarland Prize for outstanding research by a junior faculty member.

“I’m thrilled to welcome Leslie Kendrick as the new dean of the law school,” said U.Va. President Jim Ryan, a former U.Va. law professor. “She has a tremendous record of teaching and scholarship in torts and the First Amendment, and her university service has been invaluable. She ably led the committee that crafted U.Va.’s Statement on Free Expression and Free Inquiry and served as vice dean of the law school during a time of rapid growth.”

SAIC reorganizes C-suite, with changes effective in Feb.

Reston-based Fortune 500 federal contractor Science Applications International Corp. (SAIC) announced Monday that it is reorganizing its business, leading to four executives’ promotions and the departure of two others, effective Feb. 2, 2024.

SAIC’s defense and civilian sector and national security and space sector will be replaced by five new business groups: Army, Navy, Air Force and combatant commands; space and intelligence; and civilian, which will encompass civilian, health, state and local businesses.

Four current SAIC senior vice presidents will be promoted to executive vice president and answer to SAIC CEO Toni Townes-Whitley starting Feb. 3, 2024: Josh Jackson will lead Army; Barbara Supplee, Navy; Vinnie DiFronzo, Air Force; and David Ray, space and intelligence. SAIC will conduct an external search for the civilian sector leader. Bob Genter, president of SAIC’s defense and civilian sector, and Michael LaRouche, president of the contractor’s national security and space sector, will leave by Feb. 2, 2024, the news release said.

The announcement came after Townes-Whitley, former president of Microsoft’s U.S. Regulated Industries, succeeded former SAIC CEO Nazzic Keene in October.

“SAIC has an unmatched history of partnering with our nation’s most critical mission-driven government customers and offering a best-in-class portfolio of capabilities. As we look ahead, we are becoming a more focused and growth-oriented SAIC that realizes the full potential of our differentiators, fueled by our innovation factory. This builds upon our recent decision to centralize our business development function to prioritize the quality and pace at which we execute our market opportunities,” Townes-Whitley said in a statement. “We are confident the company will continue to bring innovative solutions to market, further prioritize growth and deliver significant long-term value for our shareholders, customers and employees.”

She thanked Genter and LaRouche for their contributions; Genter joined the company in 2013 as senior vice president and general manager of SAIC’s strategic growth markets customer group, and LaRouche started in 2019 as president of the national security and space business.

In September, SAIC hired a new chief innovation officer and chief of staff. SAIC employs about 24,000 people and reported $7.7 billion in fiscal 2023 revenue.