Carcieri Calls for Audit of Landfill

By Mike Stanton; Journal Staff Writer

Among the items that the governor wants investigated is how the Rhode Island Resource Recovery Corporation spends money, invests it and gives it away.

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There’s trouble at the state landfill.

Swirling about Rhode Island’s mountain of trash in Johnston like seagulls are allegations of wasteful spending, conflicts of interest and inflated land deals. As a result, board members of the Rhode Island Resource Recovery Corporation haven’t met in months, one has resigned after being accused of a conflict of interest and the governor is calling for an audit of the $70-million agency that oversees the state’s Central Landfill and recycling programs.

In November, Resource Recovery’s new executive director, Michael O’Connell, sent Governor Carcieri a memo questioning $2.1 million in charitable donations over the past five years and $24 million in land purchases for a nearby Johnston industrial park that he warned could lose $8 million to $10 million.

The memo, obtained by The Providence Journal, also criticized the placement of $100 million in agency funds with Van Liew Trust, an investment firm whose paid chairman, John St. Sauveur, was a Resource Recovery board member. Although agency minutes reflect that St. Sauveur recused himself from votes to hire Van Liew, O’Connell accused him of improperly participating in the deliberations. St. Sauveur resigned in August, one day after a stormy meeting in which O’Connell threatened to file a state ethics complaint against him.

Among the charitable spending that O’Connell questions: $4,000 to a surfing group involved in beach clean-up efforts that was used to purchase surfboards.

Jeff Neal, Carcieri’s spokesman, confirmed last night that the governor is asking the state Bureau of Audits to conduct a 45-day audit.

“He is specifically focused on the management of the corporation and he has asked the auditors to look into questions surrounding charitable contributions, pension funds and land transfers,” said Neal. “He wants to make sure that the corporation is acting within the law and within its own regulations and that the corporation’s money, which is ultimately taxpayer money, is being used appropriately and wisely.”

The trouble apparently began last summer, when a newly hired investment adviser recommended that Resource Recovery shift $23 million in pension funds, all of which were invested with Van Liew, a Providence investment firm. The adviser, from Smith Barney, reported that the money invested with Van Liew had performed “below its benchmark for the quarter, six months, one year and three years,” according to minutes of the Aug. 7 meeting of the pension committee.

Resource Recovery also had $80 million in federal environmental trust funds, to be used for the landfill, invested with Van Liew, meaning that 25 percent of the investment company’s $400 million in assets was with Resource Recovery – which the pension adviser termed “an unacceptable level of risk,” according to the minutes.

St. Sauveur, who has been a board member and also the paid chairman of Van Liew, was present at the meeting, according to the minutes. According to a draft of an ethics complaint prepared by O’Connell, St. Sauveur “participated in discussions at this meeting as to whether or not the Corporation should change money managers and actually expressed his discontent with the recommendation to terminate the Van Liew Trust Company and never disclosed his financial interests and official positions with Van Liew.”

O’Connell wrote in the draft complaint that he didn’t learn of St. Sauveur’s ties to Van Liew until after the meeting, when another commissioner mentioned the connection. Two days later, O’Connell wrote, St. Sauveur “contacted me by telephone and complained to me about what he had considered had been bashing’ of Van Liew.”

That led to a stormy meeting on Aug. 27, in which O’Connell demanded St. Sauveur’s resignation. Another board member who was there, Kenneth Aurecchia, said that questions arose about whether Resource Recovery’s chairman, A. Austin Ferland, also had personal money invested with Van Liew.

“He said, I’ve got money everywhere,’ ” said Aurecchia, the business manager of Local 51 of the Plumbers and Pipefitters Union, in East Providence.

St. Sauveur and Ferland could not be reached for comment for this story. Resource Recovery has since moved its money out of Van Liew.

In the fall, following St. Sauveur’s resignation, O’Connell clashed with another commissioner, Michael Salvadore Jr., over charitable contributions.

The issue was a $2,500 donation that Salvadore wanted to make to the Diabetes Foundation of Rhode Island, for a charitable roast for Providence traffic court judge Frank Caprio. Salvadore was the chairman of Resource Recovery’s finance subcommittee, and is also on the board of the diabetes foundation.

According to a testy e-mail exchange, O’Connell objected, calling the Caprio roast “primarily a political event and secondarily a charitable contribution. Neither is an appropriate expenditure for RIRRC.”

Salvadore shot back that the roast was to benefit Camp Surefire, a program run for children by the Diabetes Foundation -”an important partner for RIRRC in the diversion of needles” from the landfill.

“It is your job to carry out the policy of the corporation that is set by the Board,” Salvadore wrote O’Connell. “It is not your job to undercut those actions or to act contrary to those directives You are way out of line.”

The following month, in a Nov. 12 memo to the governor, O’Connell criticized $2.1 million in donations, grants and sponsorships by Resource Recovery over the past five years. He accused unnamed commissioners of “incestuous relationships with charities,” of purchasing golf outings and paying for $4,000 worth of surfboards.

O’Connell wrote that the donations were “excessive” and that many “had little to do with the business and interests of the RIRRC.”

Among the donations he singled out: $15,000 to the Surfrider Foundation in 2005 and $6,000 to the Eastern Surfing Association in 2002.

Salvadore belongs to both groups and is a competitive amateur surfer, he said in an interview yesterday. He said the money was well spent, promoting successful twice-a-year beach cleanups in Rhode Island.

Volunteers cleaned up beach waste from Newport to Charlestown, and bins and trucks are placed in the parking lot at Narragansett Town Beach for South County residents to safely dispose of household toxic fluids and waste, oil, old computer and electronic equipment and other waste that would have otherwise wound up at the landfill in Johnston.

“It’s one of the largest beach cleanups on the East Coast,” said Salvadore. “I even have a picture in my office of Governor Carcieri putting the first computer on a truck. This is something I’m very proud of. It’s a perfect example of how a state agency works with local people in the community to build a successful program.”

Even the $4,000 spent on surfboards was part of the cause, said Peter Panagiotis, the Rhode Island surfing guru known as Peter Pan and a leader of the Eastern Surfing Association.

“We run free surfing clinics and use boards with the Resource Recovery logo to draw people to the beach for the cleanups,” Panagiotis said last night in an interview from a surfing trade show in Orlando, Fla. “We’ve been doing this for years on our own – surfers are always concerned about the environment. And then, finally, we got some backing from a state agency. It’s one of the most successful cleanup programs around. We even got surfboards made from recycled plastic . . . from France. We still use them.

“If there’s ever been money well spent, this is it.”

Salvadore said O’Connell “isn’t doing his homework” when he questions legitimate donations that promote Resource Recovery’s recycling mission, and that Carcieri “just listens to one side.”

O’Connell’s memo to Carcieri also raised concerns about a series of land acquisitions that Resource Recovery has made in the area around Shun Pike, off Interstate 295, for an industrial park in Johnston near the landfill. Since 2000, the agency has paid more than $24 million for the land, paying an average of $185,000 an acre for undeveloped land actually worth $50,000 to $100,000.

As a result, the corporation stands to lose $8 million to $10 million, wrote O’Connell. He called some of the appraisals used to justify the purchases “highly suspect” and also raised questions of “self-dealing” and “conflicts of interest.” The memo did not elaborate, and O’Connell declined comment yesterday.

“These matters,” he wrote the governor, “are currently being investigated.”

As a result of the controversy roiling Resource Recovery, the board has not met since September. Warwick Mayor Scott Avedisian, who was appointed to the board a year ago, said last night that the governor has asked his designee to the board, deputy budget officer George Welly, and Aurecchia not to attend meetings, to prevent a quorum. Avedisian said that the dispute centers on who will succeed Ferland as chairman – Salvadore, who is backed by Ferland and Avedisian, or Aurecchia, who the governor favors.

Neal, the governor’s spokesman, confirmed that the governor has asked Welly not to attend a December board meeting, “because we had already received information raising the concerns that will be covered in the audit – concerns that need to be addressed before a major change in leadership.”

In a Dec. 31 annual financial statement to the state auditor general, O’Connell wrote that the board now has five members “irreconcilably split . . . . As a result, key hiring, contract, construction and other important decisions are on hold. Failure to resolve this inability to act by the end of February will precipitate a trash collection crisis in 2009 as we will miss the 2008 construction season for our Phase VI expansion.”

mstanton@projo.com (401) 277-7724

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