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March 13, 2008

Update: Audit of R.I. trash agency reveals 'irregularities'

Journal photo / Kathy Borchers
New Resource Recovery Corp. Executive Director Michael O'Connell, who had raised concerns about the agency, talks at a press conference today about the resulting audit and its findings.

A preliminary audit of activities at Rhode Island’s $70 million trash agency has found possible "irregularities and appearances of impropriety," as well as potential criminal activity warranting further investigation.

The 33-page report, released today by Governor Carcieri, points to "many apparent relationships and possible conflicts of interest regarding current and former commissioners and employees’’ of the Rhode Island Resource Recovery Corp.

At a State House news conference this afternoon, Carcieri said that he has sent the report to the U.S. attorney, the Rhode Island attorney general and the Rhode Island State Police.

``I’m concerned that these problems are just the tip of the iceberg,’’ said Carcieri, adding that the report at minimum shows that Resource Recovery "has been mismanaged for years.’’

Carcieri vowed to submit nominations for a new board to the Rhode Island Senate on Monday. The board is down to just two voting members as a result of infighting, and Carcieri said that he intends to remove one of them – longtime chairman Austin Ferland.

The auditors, who spent 45 days digging into a host of concerns raised by new executive director Michael O’Connell, recommend a full-scale forensic audit to explore, among other things, unspecified allegations of ``employee theft’’ and ``other activities that might be criminal in nature.’’ The report also raises concerns about payments for services not rendered or services of questionable value, potential state ethics violations and violations of procurement procedures.

Much of the report is devoted to questions about the corporation’s development of a controversial industrial park near Rhode Island’s Central Landfill in Johnston. As a result of slipshod practices, the corporation stands to lose millions of dollars on the project, while taking land off the Johnston tax rolls.

And it singles out former Johnston Mayor William A. Macera, who supported creation of the controversial industrial park while ``members of his own family would benefit through land sales.’’

Extra: Read a summary of findings in the preliminary audit.

-- Journal staff writer Mike Stanton

In 2000, one year after Macera wrote an ``Open Letter to the People of Johnston’’ in support of the industrial park, Resource Recovery bought 36 acres from Macera’s cousin and other relatives for $6 million – land that included an old family dump.

Two years later, in 2002, Resource Recovery bought 67 acres from then-Mayor Macera and his family members for $2 million – land that was encumbered by wetlands. The land was "ostensibly’’ purchased for gravel that could be excavated as cover at the nearby landfill – but executive director Sherry Mulhearn had an engineering report before the sale that the presence of wetlands and high silt content made the land unsuitable for gravel extraction.

The report also cites irregularities in the corporation’s hiring of Van Liew Trust to manage more than $100 million in agency funds. John St. Sauveur, a Resource Recovery commissioner, failed to disclose that he had an ownership interest in Van Liew.

And the report questions the propriety of a quasi-public corporation spending more than $2 million in recent years on charitable and civic contributions.

Auditors from the state Bureau of Audits, working with private forensic auditors from a Boston firm, reviewed 10 real-estate transactions totaling $21.4 million, many of which they found exceeded market value. The corporation paid prices ranging from $476,000 to $829,000 an acre.

The report says that the transactions were riddled with poor planning, sketchy documentation, faulty due diligence, improper environmental review and potential conflicts involving Resource Recovery board members Austin Ferland and John St. Sauveur and executive director Sherry Mulhearn.

The sellers of two of the properties had done business with an associate of Ferland, a major Rhode Island real-estate businessman. The corporation also used an appraiser who had done business with Ferland’s company.

Title insurance was ``repeatedly provided’’ by the company of St. Sauveur’s son.

Two of the sellers were related by marriage to Mulhearn, who also used a law firm that employed another relative of the agency’s executive director.

Among other problems that the audit found: that several major construction projects were undertaken "without apparent consideration’’ that the buildings will have to be torn down to make way for the expanding landfill.

Posted by Jack Perry at 2:47 PM | Permalink

Comments

This is Rhode Island. What else is new?

Jim Burns | March 13, 2008 3:31 PM link

This is great, more laughter AT the state of Roe Diland. What a bunch of losers.

RAY DAIGLE | March 13, 2008 3:38 PM link

There is much, much more behind this story....the feds need uncover it all. Kudos to the new exec - Odonnell? - who did not do what his predecessor did - look the other way.

Dani | March 13, 2008 5:18 PM link

The reason this stuff keeps happening is because the perps get nothing more than a slap on the wrist, if they even are remonstrated at all.

We need to
1) bring back public stocks (not that these guys even have any shame, but at least we'll feel a little better)
2) impose hefty 6- or 7-digit fines for guilty parties
3) offer rewards to informants

Bring back stocks (the kind you stick your head through) | March 13, 2008 6:20 PM link

keep digging its only the beginning

former employee | March 13, 2008 7:08 PM link

Corruption in RI? Impossible. If so I will move. By the way,its 75 degrees in Arkansas,today.

Don | March 13, 2008 9:47 PM link

Michael, you rock!!!
Your admiring ex-cousin-in-law.

Nancy Dolce | March 13, 2008 10:25 PM link

So glad this is being investigated - this agency has been a dumping ground for unemployed and underemployed relatives and friends of RI politicians and Board members for years. Check out the 'qualifications' of the staff - former used car salesmen and waiters who all of a sudden were put in charge of programs there. Employees doing work on company time for the Execs and Board members - bartending their parties, building their new homes - the greed is endless! If all the truth came out, it would fill an entire novel. It is sad that all this money was wasted as other Rhode Islanders went cold and hungry when assistance programs were cut back. These sociopaths never thought they would get caught - they thought they were above the law in their own little fiefdom in Johnston.

Teresa | March 13, 2008 11:12 PM link

I give the new Director alot of credit. I say we prosecute them all to the fullest extent of the law, including all the relatives,friends and other beneficiaries.

I'm sure there is much more to this than we can even imagine. Go get 'em Governor Carcieri!!

After this, we can investigate every other branch of our Government via forensic audits, prosecute all wrongdoers and truly begin to end corruption in our state. Shouldn't we be looking at the dealing between the State and the Cardi Corporation in this way?

Rick | March 14, 2008 6:46 AM link

keep digging, not only is this the tip of a HUGE ice berg,you can't dreem of what goes on ther Kick backs, bookmaking,half of the operators are on drugs thats a FACT FIVE FAMILY MEMBER PART OF A LAND SALE TO GIVE THEM JOB. from the x-directer Sherry Giarusso on down ther all dirty i know THE TRUTH from a past employee

jim | March 14, 2008 7:17 AM link

March 13, 2008

Update: Audit of R.I. trash agency reveals 'irregularities'

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