The Hummel Report

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A Question of Disclosure

 

He is the most powerful politician in Rhode Island. But it's House Speaker Gordon Fox's work as a private attorney for a troubled Providence agency that has caught the attention of federal overseers. Our months-long investigation has turned up potential conflicts of interest and questions about disclosure of income on his ethics form.

 

See our past reports on the PEDP: Risky Business - 11/17/2011, Mopping Up - 7/19/2012, and Phantom Address - 9/27/2012.

SCRIPT:

He is one of the highest-profile politicians in Rhode Island.  And, as Speaker of the House, the most powerful.

But it's Gordon Fox's work as a private attorney for a troubled Providence agency over much of the last decade that has caught the attention of a federal agency: part of a top-to-bottom review of the Providence Economic Development Partnership - a taxpayer-funded business loan program that had an exorbitant default rate under former Mayor David Cicilline.

Cicilline paved the way for Fox to make tens of thousands of dollars as the closing attorney on dozens  of loans for an agency that operated largely under the public's radar. Our investigation shows that for five years Fox did not list that income on his Rhode Island Ethics Commission financial disclosure form.

We do know from post-closing filings Fox made on behalf of PEDP that he handled approximately 80 loans. But the city could not tell us exactly how much Fox made because he was paid by Joshua Teverow - PEDP's longtime legal counsel, who Cicilline told to send some legal work Fox's way. That all changed in April 2010, when the Taveras administration made Fox register directly with the city. Records show he then made $40,000 closing on 29 loans.

Fox then began reporting the PEDP income on his ethics form - beginning in 2010.

Fox declined our request for an interview about his legal work. Instead he issued a statement through his legislative spokesman Larry Berman:

“While I appreciate your invitation, I have no further comment on this issue at this time.  I have not served as the closing attorney for PEDP for many months.  I performed this work as a sub-contractor through another attorney (Josh Teverow) from 2005 to 2010, and then I received the loan information directly from PEDP from 2010 through last year.''

So we tried to get more answers after a House session last week.

Hummel: ``And I'm just curious as to why you don't want to answer our questions about PEDP.

Fox: ``Because a certain other reporter put an inquiry into the Housing and Urban Development and I guess they're looking into things - so I don't even know what they're looking into. I imagine that  months ago there was some request and while that's open I'm not commenting, because it has nothing to do with me being speaker, it has nothing to do with my public office. It has to do with me being a practicing lawyer- who happens to be the Speaker of the House.''

Hummel: ``I understand that but you're in public life also and it's a public agency.''

Fox: ``And a lot of those funds were paid for by private people that were paying those funds.''

What is unclear is who set Fox's rates for the closings and how much he charged businesses, many of which had come to the city because they couldn't get loans anywhere else. In a review last year, the federal agency providing much of the loan money cited excessive legal fees. The program was in such disarray that the city suspended issuing new loans pending a federal review.

We emailed Teverow to find out how much he paid Fox over the five years. Teverow, who was replaced at PEDP's legal counsel after Angel Taveras became mayor, did not return our repeated emails or a follow-up phone message.

Fox: ``And again, until this is clear - at some  point  I'll talk about all of this when it's relevant, but again I'm a part-time (legislator), my legal practice is not subject to scrutiny in my mind and I live by the ethical rules, I work by the ethical rules.

In 2004 then-House Majority Leader Fox paid a $10,000 fine to the Rhode Island Ethics Commision, which found he voted on a $770 million, no-bid deal that his law firm was involved in with the lottery company GTECH.

Cicilline last fall told the Providence Journal Fox's leadership role at the State House - and his personal  and political relationship with the former mayor- had nothing to do with his getting Fox the legal work at PEDP. Rather, Cicilline was quoted as saying Fox was ``clearly a very competent lawyer.''

Hummel: ``But if there's nothing to hide would you have a problem talking about  it?''

Fox: ``There's nothing to hide but I'm not going to say something on record that's going to somehow implicate a look at, or whatever, because I don't really know what's being asked.''

Hummel: ``Well, we haven't been able to pose the questions to you.''

Fox: ``Well, maybe I'm not the right guy to pose the questions to. Maybe you need to pose them to somebody else.''

The Hummel Report has also learned that Fox was the registered agent for at three of the companies that got PEDP loans, while closing on those loans for the city. They included a company owned by Michael van Leesten, a political contributor to Cicilline.

Peter Margulies,  who teaches Legal Ethics at Roger Williams Law School, says being a registered agent poses a potential conflict, depending on how the attorney handles it.

Margulies: ``That's certainly a red flag if you're engaged in a transaction with someone else on the company's behalf, but you're also representing that other party to the transaction. That's probably not the best thing to do and certainly at the very last what you have to do is be transparent about it.''

The Hummel Report discovered last fall that Fox closed on a loan for North Shore construction, which listed as its address in the same building as Fox's law office - when in fact the Cranston company had no connection to the city of Providence, one of the prerequisites for getting a loan.

We've also learned that on several occasions Fox closed on loans for companies that had had their charters revoked by the secretary of state, some of the loans later went into default.

In his statement,  Fox said: ``My role was to make certain that documents were drafted correctly and that the interest of PEDP was protected.”

Margulies: ``Your responsibility isn't to reinvent the wheel, you're not supposed to litigate all of the terms of the transaction.

 

But there are facts that might change whether the loan is a prudent loan and one fact that would make a difference is, is the corporation currently registered as a corporation in a particular state - can the corporation do business as a corporation? So that's something the attorney for the lender really needs to know. That's basic competence for an attorney for a lender at a closing.''

Hummel: ``So in the checklist of things to do, if you're going to the closing, would you put that among the basic things to do, just do a quick check?''

Margulies: ``That should be  at the top of the list.''

Hummel: ``There are questions specifically related to what you did for the PEDP, not anybody else.''

Fox: ``Well no, no , there's a...you have to understand the process in terms of what's being alleged that I did, or didn't do, is something that may not have even been in my control.''

Hummel: ``Well what about closing for businesses that you were also the registered agent for?''

Fox: ``Well I'm not going to comment on anything that's going to be looked at in terms of...''

Hummel: ``Well, how do you know it's being looked at?''

Fox: ``Because I was asked questions by an agency. How would I not know...Jim, c'mon...''

In Providence, Jim Hummel, for The Hummel Report.