The Hummel Report

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On The Hook

A town councilman whose seafood packaging business ran into deep financial trouble in 2015 left taxpayers on the hook for nearly $90,000 after defaulting on a small business loan he had taken out through the Rhode Island Commerce Corporation. Jim Hummel looks into what happened with that loan - and the long list of creditors who filed claims for millions of dollars when the business went into receivership.

SCRIPT:

 

Already the longest-serving member on the Smithfield Town Council, Al LaGreca is seeking an 11th term next month, saying the town needs experienced council members to help navigate Smithfield through expected budget challenges.

But is LaGreca the right person to do that? We asked the vice president of the council after a meeting earlier this month.

Hummel: “I understand you were having some financial issues with your business?”

LaGreca: “No, not anymore, my business went bankrupt.”

The business was Rome Packing in East Providence. For nearly 40 years Rome operated as a seafood packaging and processing operation. Until 2014 - when it began to run into serious financial trouble after two federal recalls because of concerns over Listeria contamination at the plant.

Hummel: “What went wrong?”

LaGreca: “We had a problem with the FDA. We had a recall, actually we had two recalls. We processed a lot of crab. And there was listeria in some of the samples. We tested every sample, every batch we made we tested. We retrieved all of the product. We went through a period of three weeks, every shift clean, we didn’t process at the request of the Rhode Island Health Department.”

The company never recovered, going into receivership in the spring of 2015. LaGreca’s company left a long line of creditors seeking millions of dollars they claimed Rome owed them. They included this temporary employee service agency in New Bedford, which supplied workers for seven months - but claims Rome stiffed the company for more than $283,000.

LaGreca also defaulted on a taxpayer-funded loan issued through the Rhode Island Commerce Corporation that had a balance just shy of $90,000 when Rome closed its doors.

The Hummel Report has learned that the longtime chairman of the federally-funded Small Business Loan Fund Corporation was Raymond Fogarty, first cousin of LaGreca’s wife. According to meeting minutes, Fogarty voted in February of 2016 to write off then entire balance.

Hummel: “You had a small business loan with the state, right? Through the Commerce Corporation.”

LaGreca: “Yeah.”

Hummel: “And $90,000 of that got written off.”

LaGreca: “I’m not sure if it got written off yet, I was not notified of that.”

Hummel: “ The Commerce Corporation voted on it, they voted to write it off, it’s been several years.”

Lagreca: “I didn’t get a copy or any notification it was written off. I can’t tell you the loan was originally $325K or $320,000 and when I ran into problems it was down to about $80,000 or $85,000 - it could have been $90 (thousand).”

Records show the original amount was $250,000 and the loan was issued in 2012.

Hummel: “Have you heard anybody raise the issue that your wife is related head of that loan corporation.”

LaGreca: “Well, he wasn’t the head, but he was on it.”

Hummel: “You don’t see that as a conflict of interest…not for you, but for him?”

LaGreca: “You can check the records: he recused himself from any vote. He recused himself for any vote that had to do with me. You can check the records.

Hummel: “You’re sure of that? I did check the records.

LaGreca: “That’s what I was told by Ray.”

Fogarty died unexpectedly last month at age 61.

A second company LaGreca owned - 2266 Pawtucket Avenue LLC - the address where the packing company was located in East Providence, also went bankrupt, eventually leaving TD Bank on the hook for hundreds of thousands of dollars on the mortgage.

Despite the recalls, Rome tried to get back on its feet. According to court filings the president of BJ’s Service Company in New Bedford, Jose DaSilva, said Rome approached him about providing temporary employees, saying it was having a hard time maintaining a workforce.

BJ’s provided the employees and sent an invoice, with payment due on arrival. DaSilva said he supplied workers faithfully from May through November 2014, but during that time Rome was regularly behind on paying BJs invoices. Despite that, he continued to send workers.

DaSilva said from early November, 2014 to mid-January 2015 he received no payment, eventually learning that the plant had stopped processing. The tab when it closed: $283,539. DaSilva said that put quote: ‘tremendous stress’ on his temp agency.

BJs never got paid.

Hummel: “Do you have assets to pay off those liabilities? They seem seems pretty substantial: $7 million.”

LaGreca: “Well it’s not $7 million in liabilities, but no, I don’t have the assets to pay them off.”

Hummel: “Well how much in liabilities is it?”

LaGreca: “Um, I think it’s about a million (point) seven for one bank and the SBA could be about $80,000 and I’m working off my memory, so I don’t have the exact figures in front of me.

Hummel: “And so where is that now?”

LaGreca: “It’s still in the receiver’s hands.”

Hummel: “Do you expect to pay those debts off?”

LaGreca: “I would certainly hope so, but we don’t know.”

Hummel: “But it’s been several years.”

LaGreca: “Yes it has. We haven’t gotten the final papers yet.”

On Tuesday, Attorney Stephen Del Sesto, the attorney appointed to handle Rome’s receivership, was in Superior Court to close out the case. Del Sesto had negotiated with two major creditors, but told us it still left about a million dollars in outstanding debt.

The Rhode Island Commerce Corporation refused to release minutes from the 2016 meeting explaining why the staff recommended writing off Rome’s debt. A spokesman said releasing the documents “may jeopardize staff’s ability to recover funds.”

Nearly three years later, the state has not recovered any of the remaining $89,800 on the loan - even though LaGreca put up a personal guarantee to obtain the funds.

Hummel: “What message does that send to taxpayers.”

LaGreca: “I think it sends a message that ‘you know what? I’ve been on the top and I’ve been on the bottom and I understand both sides.’ So I don’t think it sends a bad message at all. I had a hundred people working for me, a hundred good people and that’s who I feel bad for. I don’t feel bad for me because I’ll survive in my family. I have three meals a day and a roof over my head.

The 67-year-old LaGreca, who owns this four bedroom house set on seven acres, had his property taxes frozen for life when he turned 65. He also enjoys, along with Smithfield’s other senior citizens, an $8,000 discount off his valuation. He earns $4,000 a year as a councilman.

Hummel: “I was in business for over 40 years, I employed over 100 people when I had a problem with the FDA, that subsequently led to my going out of business. Nothing I’m ashamed of. I feel bad for the 100 employees that I had because a lot of them were very dedicated employees.”

Hummel: “Do you think the taxpayers would have an issue with that? You’re deciding a $70 million budget every year. Do you think they would have an issue with what you had gone through. Do you think they relate that to your ability to serve or not?’

LaGreca: “You know what? Some of them may, but all I can tell you is my record is here. I’ve been on the council for a long time. They know who I am, they know how I serve. I’ve never taken a dime from anybody in the the public. I’ve never had a fundraiser so they know where my allegiance lies. It lies with the people in the town of Smithfield. Not to other people.”

Hummel: “I understand that, but you’ve take dimes, a lot of dimes, from taxpayer funded (loan)….”

LaGreca: “Well you could say that.”

Hummel: “Was that not accurate? “

LaGreca: “If you want to portray it like that, it’s accurate.”

In Smithfield, Jim Hummel for The Hummel Report.