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A Hummel Report Investigation

Phantom Address

It is a taxpayer-funded loan program run by the city of Providence - designed to help Providence businesses that can't get traditional financing. So how did a company with no Providence connection score a loan? And what role did one of the state's most prominent politicians play in the deal? Jim Hummel has the answers.

 

SCRIPT

Eight twenty-five Pontiac Avenue is a sprawling apartment complex in Cranston.

It is also the address a woman named Donna Mollo first gave when she applied for a loan in 2010 from the Providence Economic Development Partnership - a program run by the city's Planning Department aimed at helping Providence businesses that can't get traditional financing.

Mollo owns North Shore Construction and Electric, which ran into financial trouble two years ago. So she turned to the city of Providence for help in the summer of 2010.

Reilly: ``I never really got a straight answer to  what was the economic development justification for the loan.''

Judith Reilly of Providence has been a longtime critic of the PEDP and its loan program. We first spoke with her last fall, when she discovered one of the federal agencies overseeing the program called the default rate `astounding' during the administration of former Mayor David Cicilline.  Reilly says North Shore's loan bothered her right from the start.

Hummel: ``What was the red flag on this one that stood out for you?''

Reilly: ``All I could discover about this company was that it was a one-woman construction or contracting company that was located in Cranston.''

Reilly  put in a public records request for the file. She got most, but not all of  it. A PEDP lawyer ruled some of the application documents were confidential.

Reilly: ``The documents, once I got them, didn't show me the economic development justification that  should have been there.  I couldn't find any Providence connection in terms of maybe buying  buildings,  or rehabbing buildings or something like that. I couldn't find any record of Providence people being employed and jobs that were created by this company.''

Mollo had first approached the Capital Good Fund, a private non-profit micro-lender that was located in this building on Dorrance Street in Providence at the time.  Its executive director  tells the Hummel Report his agency helped Mollo, but when she needed more money, he directed her to the PEDP.

As collateral for a $4,000 loan, Mollo put up a car, which was registered to this address on Wheeler Avenue in Cranston. Mollo also listed her business address with the Rhode Island Contractors Registration board as Cranston.

When applying for the PEDP loan, Mollo first listed her business address as Pontiac Avenue.

But the Hummel Report has learned that a high-ranking official in the city's Planning Department told her she needed a Providence address to get the loan, and suggested Mollo use 127 Dorrance  Street - the same building as the Capital Good Fund. It is also the same address for the attorney who closed on the loan for the city PEDP, Gordon Fox, speaker of the House in the Rhode Island General Assembly.

Reilly: ``The earliest piece of documentation that I was supplied with - and remember some  was withheld - the business address was down as Cranston and then shortly thereafter it suddenly became a Providence address at 127 Dorrance Street.''

Through a spokesman, Fox tells the Hummel Report he remembered asking Mollo about having the same address as his offices and was told she was operating her business out of the Capital Good Fund offices on the 5th floor.

Reilly believes Fox - who was representing the city in the transaction - should have asked more questions.

Reilly: ``It's a condo building and there are 20 units so it's not it's like it's the Textron building or the Empire State building.  It would seem odd to me that you wouldn't talk about that and if it came up that it was just a `care of' address and she wasn't really operating out of that, I would have hoped the next question would have been: `Hey wait a minute, how are you getting this loan? Let's  talk about - let's talk about your responsibilities to Providence and how are they being fulfilled?''

Hummel: ``Because PEDP has hired him to represent their interests in this transaction.''

Reilly: ``Yes. Yes.''

One of the requirements of the loan is that Mollo operate the business out of 127 Dorrance.

The PEDP's former executive director Thomas Deller, and Amintha Cinotti, the  deputy director of Planning at the time, signed off on Mollo's loan. Deller took a job in Hartford earlier this year and Cinotti is no long with the city.

Meanwhile, to begin drawing on the loan, Mollo began faxing work invoices - from this Office Max in Cranston. They included work on this house in North Providence,  another in Cranston and Solitto's Liquors in South Providence.

Hummel: ``When you started to look through the file and you saw the documentation that she was submitting, what were some of the concerns you had?''

Reilly:: ``I was very, very surprised that the economic development coordinator and the director of compliance and Thom Deller, basically, since the paperwork went through him, would have signed off on reimbursement for paying  employees in cash; paying with employees with,  apparently, according to the documentation, no withholding for taxes, Medicare, Social Security, income tax,  and then no payment for overtime. There were 48-hour work  weeks in the documentation and no indication that anyone ever got paid more  than $20 an hour.''

Hummel: ``So if those things were there, you didn't see them in the file.''

Reilly: ``I did not see them in the file.''

Mollo also submitted an invoice for work at 187 Washington Street in Providence, two blocks from PEDP's offices. It's an address that doesn't exist. 165 Washington is a parking garage, 201 is Trinity Rep,  with a street in between.

Reilly: ``Most of the money - $18,000 and change of this loan was paid out for what seems like casual hourly labor, some of which took place before the loan was even issued. So you can't create a job, retroactively, and there's no particular job that was in existence for more than 6 weeks.''

By the end of 2010, Mollo asked for her loan to be increased to $20,000. PEDP approved it with no additional collateral requirements.

Reilly who has a master's in business administration, has won every one of the half dozen open records complaints she's filed with the Rhode Island Attorney General's office.

She's filed another complaint in this case, saying the city is improperly withholding information on Mollo's loan, citing confidentiality - when some of the documents it produced contained personal information such as her car's Vehicle Identification Number and Mollo's cell phone number.

Reilly: ``I suspect there might be information on these applications that would confirm my worry that somewhere at some point staff decided to use that Providence address and give that out on all the paperwork that might end up before the board or might end up before - well not the public, because they thought at that point they were safe from the public - but might end of up before the Economicl Development Administration of the U.S. government who actually...they're the funding source for these loans.''

Mollo was granted a payment moratorium last fall that ended in March. A spokesman for the mayor tells the Hummel Report Mollo has not resumed payments and her outstanding balance to the city now exceeds $22,000. Mollo did not respond to our emails or phone messages.

Hummel: ``Some people will say,  `Hey it's a $20,000 microloan.' Is your concern that the same procedures and principals and review and all of that for a $20,000 loan might be going to a half a million loan or an $800,000 loan?''

Reilly: ``Oh absolutely. I think it's very important to have internal controls. And  they either work , or they don't work. In this case, I'm not seeing the type of very basic internal controls that would have had people asking questions about this.''

 

And Reilly says, while the Taveras administration and its economic development director Jim Bennett have made a good faith effort to clean up the program, she says it's time to start again from scratch.

Hummel:  ``If managed properly do you think this is a program that can work, or do you think there's some real concerns about whether taxpayer money should be getting involved in private business.  Is there a model where it could work?''

Reilly: ``This could work in theory,  but at this point I'm just convinced Providence should not have this program - this economic development partnership anymore.  I hate to hurt the feelings of new people there who may have been trying very hard but this seems to be a very deep and tangled mess. And I'm not seeing on the part of the Taveras administration steps to pull it all apart and put it back together.

It seems like the steps that have been taken have been just enough to get more money out of the federal government.''
Hummel: ``Did you have hopes they were going to turn it around?''
Reilly: ``Yes I did, and I think it's possible that it will turn around, but for me the important thing would be to have all of the nasty parts come out in public - a complete and thorough investigation and a complete and thorough public report.''
Hummel: ``And you don't think that's happening , or is going  to happen?''
Reilly: ``I don't think it's happening voluntarily on the part of the city administration.''
Hummel: ``Still?''
Reilly: ``Still.''
In Providence,  Jim Hummel, for The Hummel Report.

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