By Susan A. Baird
PBN Web Editor
PROVIDENCE – Preliminary results from the state’s ongoing examination of the R.I. Resource Recovery Corporation raise “serious concerns about how the state’s landfill and recycling operation have been managed,” Gov. Donald L. Carcieri said in a statement today. “At minimum, these findings validate my decision to conduct the examination. At maximum, they may lead to criminal investigations.”
The RIRRC will continue to cooperate fully with authorities, “to ensure they have the access they need to complete a thorough investigation,” Michael J. OConnell, the RIRRC’s executive director, said in a statement. “Under my watch, RIRRC will be run in the best interests of Rhode Island taxpayers.”
The probe was undertaken by the R.I. Department of Administration’s Bureau of Audits in January – at the governor’s request, and with the assistance of Deloitte Financial Advisory Services LLC, the same forensic accounting and business advisory firm that assisted the R.I. Department of Business Regulation in its investigation of The Beacon Mutual Insurance Co. (READ MORE)
The probe “found several instances in which various current and former [RIRRC] commissioners and employees appear to have compromised their fiduciary and ethical responsibilities to the corporation and to the public,” the Audit Bureau says in the executive summary of its prelimary report, released today.
“In apparently violating such responsibilities to this end, these individuals may have strayed from their mission to ensure that solid waste of the state is managed in an effective and cost-efficient manner for the benefit of all Rhode Island residents, now and in the future.”
Bureau chief H. Chris Der Vartanian writes in an introduction to the report that the probe focused mainly on issues raised by OConnell in a Nov. 12 memo to Carcieri, about RIRRC real estate transactions, the state Central Landfill Remediation Trust, the agency pension plan and various civic and charitable contributions. But, Der Vartanian adds, investigators also considered “the appropriateness of other issues.”
The findings “fall into three distinct categories,” Carcieri said.
“First, the corporation has paid above market value to purchase numerous pieces of property,” the governor said. “In a number of cases, the owners of those plots had relationships to the corporation or to the Town of Johnston, creating at least the perception of a conflict of interest. … The recent sales of the first two prime parcels of the Industrial Park have resulted in a loss of potentially more than $1.8 million, and it is questionable as to whether this project should have ever gone forward ….
“Second, the corporation allowed its pension fund and other monies to be managed by Van Liew Trust Co., even though a corporation board member had an ownership interest in a Van Liew affiliate,” Carcieri said. “In my mind, this is a conflict of interest. …
“Finally, the corporation has spent at least $2.1 million on charitable contributions over the years,” the governor said. “In some cases, these included payments for items such as sporting events that corporation board members or employees were allowed to enjoy. As a state-authorized monopoly, it isn’t clear why the corporation needed to curry favor with community organizations by making these types of contributions. Certainly, corporation board members and employees shouldn’t have been allowed to take advantage of opportunities created by these contributions. …
“The examination is far from complete,” the governor concluded. “But this preliminary information alone shows that the Resource Recovery Corporation has been mismanaged for years. Because every citizen of Rhode Island is affected by the work of the corporation, every citizen should be outraged.”
Today’s report “begins the second phase of the investigation into Rhode Island Resource Recovery Corporation practices and policies,” OConnell said. “The first phase was the identification of suspicious practices and alleged wrongdoing, and bringing it to the attention of state authorities.”
But, he noted, “Since I was named executive director, we have made significant and positive policy changes.
“First, we decided to change the investment firm that manages the employee pension funds and the Superfund closure/post-closure funds. The choice of the former firm was questionable and the funds were underperforming. … The board member with the alleged pension-fund conflict was asked to leave the board, and he did.
“Second, we suspended the practice of awarding grants and underwriting charity and non-profit events and causes. … We do not have a policy in place for sponsorships and continue to evaluate whether we will underwrite sponsorships at all. This will be a decision for our new board. We eagerly await the appointments of the new commissioners to get on with necessary business.
“Regarding land purchases, construction of new facilities and other alleged mismanagement, we are prohibited from discussing these matters further while they remain part of an active investigation. I reiterate that my staff and I will continue to cooperate fully.”
The 46-page “Preliminary 45-day Examination of the R.I. Resource Recovery Corporation: Summary of Findings, March 2008,” is attached below.
Information about the R.I. Bureau of Audits, a division of the state Department of Administration, is available at www.audits.ri.gov. News and information from the governor’s office is available online at www.ri.gov/governor.
Attachments
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“Preliminary 45-day Examination of the R.I. Resource Recovery Corporation: Summary of Findings, March 2008,” is a 46-page report released March 13 by the R.I. Department of Administration’s Bureau of Audits.
PDF Document, 2.8 MB
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