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Pam Gencarella: Ethics is Good Business for Rhode Island

Thursday, April 03, 2014

 

It’s not a liberal vs. conservative issue. It’s not a Democrat vs. Republican issue. It’s an issue that every citizen and elected official can rally around because who doesn’t believe that politicians should be held to high standards when it comes to ethics?

When a 2004 University of Connecticut corruption study was released, the Hartford Courant reported the findings. While the study findings were enlightening, what was more interesting in that article was the prosaic manner in which the writer stated that if the study results held true, “states with longtime reputations for corruption, including Rhode Island and New Jersey, would apparently have the worst job growth and the worst economies”. Interpretation: as of 2004, everyone knows that Rhode Island and New Jersey are two of the most corrupt states in the country, and we certainly have one of the worst economies today.

In RI politics perception too often becomes reality

So, what has happened in RI since 2004? Oddly enough, an unusual twist in the 2009 case against Senate President William Irons is what happened. RI had its Ethics Commission castrated. The court decided that the relatively new Ethics Commission, provided by a 1986 amendment to the RI Constitution, did not have jurisdiction over General Assembly members.

Then, more recently, former Speaker of the House, Gordon Fox, had his personal residence and State House office raided by federal and state officials. In addition to the national attention RI has drawn resulting from the Speaker’s resignation, there are the usual campaign finance issues that pop up. Newly appointed House Deputy Majority Whip Almeida seems to have raised the ire of the Board of Elections, and, as a result, his campaign finance case has been sent to the Attorney General’s office, which, according to the executive director, “is rather rare”. If the general perception in 2004 was that RI was one of the most corrupt states, we wonder what the general perception is today, ten years later.

Ethics is a matter of jobs, economy and infrastructure

Ed Fitzpatrick’s March 27th column, published in the ProJo, quoted newly elected Speaker Mattiello as saying “I have to work on jobs and the economy. The Ethics Bill is a talking point. That’s a feel good issue”. Fitzpatrick called upon Speaker Mattiello to reconsider the necessity of passing ethics reform as part and parcel of a comprehensive plan to address job growth and the economy. He referenced the University of Connecticut corruption study, which, among other things, found that government corruption can create uncertainty for businesses and stunt job growth - even more than rising taxes. That is a powerful finding. If that is the case, how can one speak to a focus on jobs and the economy, yet claim that an Ethics Bill to provide for jurisdiction over General Assembly members is a “talking point” or a “feel-good” issue?

It seems intuitive that businesses consider the “corruption factor” when deciding on a place to locate their company, if for no other reason than because it would clearly mean a more difficult landscape in which to do business, especially for a relatively small company. After all, if you don’t know someone, how can you cultivate the appropriate “relationship”? If you can’t, what additional cost will be inherent in the ability to establish and then maintain your business?

The University of Connecticut study also stated that “businesses may begin to feel that to operate, they have to know the right people in government rather than just knowing how to do their job.” A former Connecticut House Democrat and University of Hartford economics professor agreed with the study and said that it makes sense. “Businesses want stability, and corruption implies instability in government. It’s not a level playing field. Some people are favored over others. You’re inflating the costs of doing business.” It seems one of Connecticut’s former Senators believed that business leaders simply refused to move to Bridgeport because they did not want to pay bribes.

There are many research papers, in addition to the research from the University of Connecticut, that studied corruption and its relation to economic growth. While many of those studies were performed at a national level, it would stand to reason that the research would hold true at the state and local level.

The International Monetary Fund, for example, has released a report that indicates that “the allocation of public procurement contracts through a corrupt system may lead to lower quality of infrastructure and public services. Corruption may distort the composition of government expenditure... it may tempt government officials to choose government expenditures less on the basis of public welfare than on the opportunity they provide for extorting. Empirical evidence suggests that corruption lowers investment and retards economic growth to a significant extent.”

While repairs and maintenance for RI’s roads and bridges have languished over the past 20 years, the benefits for public employees soared out of control, to the point that even the politicians had to agree the debt that was accumulating could not be sustained. Government made a choice over these years to invest in public union benefits over infrastructure maintenance.

A study by the George Mason University Department of Economics reported that “corruption is never good for growth, but its impact becomes worse the more invasive the regulatory environment.” We know how invasive Rhode Island’s regulatory environment is. To that point, our governor actually distributed a survey to engage the business community, providing them an opportunity to speak to the most egregious regulations their business must contend with and the cost these regulations add to their product or service. Just think about the current bills heard in committee hearings this week that may potentially shut out private contractors from bidding on public projects.

The vision thing

If the new Speaker of the House of Representatives is to put RI on the economic road to recovery, there must be a multi-pronged approach. The idea that the Assembly can only focus on one general concept at a time is very disheartening. This is where the whole ‘vision thing’ comes in. RI needs an all encompassing vision to improve its economic outlook, not tunnel vision that sees only incremental steps.

In order to deliver on the economy and jobs we must include ethics reform, which would give citizens a reason to trust their government again and would let businesses know that RI leadership wants to ensure a level playing field. The focus on creating an inviting economic landscape for businesses, big and small is vital. As CVS’ John Kennedy explained, his company looks at the state’s fiscal stability, the cost of doing business and the available infrastructure. And, because an educated workforce is critical in establishing or expanding business, full support for education reform is necessary to ensure our graduates are employable and to supply the labor force we will need once businesses begin flocking to RI.

 

Pam Gencarella is a member of OSTPA, a taxpayer advocacy organization in Rhode Island.

 

Related Slideshow: The History of Gordon Fox: From Camp St. to Speaker to…

Prev Next

1992

Reform Candidate

In 1992, Gordon Fox ran for (then) House District 5 seat replacing Dr. Nick Tsiongas.

Fox, an ally of then-Councilman Josh Fenton and former College Hill State Representative Ray Rickman, won the seat easily. 

Gordon Fox (D) 2,253

Michael Mitchell (R) 525

Jay Enderle (I) 407

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1994 and

Under Harwood 

Gordon Fox gained power right out of the block. He was appointed to Finance immediately and rose quickly to be Chairman of the House Finance Committee - arguably one of the three or four most powerful positions in Rhode Island state government.
 
As Finance Committee Chair he emerged as a supporter of progressive causes.
 
In addition, Fox scored a job in then-Mayor Buddy Cianci's Law Department.
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2002

Murphy - Fox Team 2002

John Harwood was forced out as Speaker and the combo of the popular Bill Murphy from West Warwick and Gordon Fox teamed up to take control of the House. Murphy and Fox were young, both grew up in working class neighborhoods and lawyers.
 
The two of them were popular and press savvy - together they guided the team for nearly a decade.
Prev Next

2003

Fox and GTech and the Ethics Commission 2003

In 2003, Majority Leader Fox faced harsh criticism and an investigation for his law firm's role and his involvement in the effort to reach an agreement with GTECH to stay in RI. Ultimately, Fox pleaded guilty and was issued one of the largest penalties in the history of the Ethics Commission.
 
Pursuant to the above Findings of Fact, Conclusions of Law and Mitigating Factors, the Prosecution and the Respondent agree, pursuant to R.I. Gen. Laws § 36-14-13(d), to the imposition by the Commission and to payment by the Respondent of a civil penalty of Ten Thousand ($10,000) Dollars. The above terms represent the full and complete Informal Resolution and Settlement for Complaint Nos. 2003-6 and 2003-7.
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2004

Openly Gay - 2004

In 2004, Gordon Fox announced that he was openly gay. The announcement was a breakthrough for the gay community at the time.  He became the first openly gay speaker of any House of Representatives.
 
He married his long-time partner Marcus LaFond in November of 2013.
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2010

Speaker of the House

The rise of Gordon Fox was now complete. In February of 2010, Fox was elected Speaker of the House. He was the first Minority to rise to such a position of power in Rhode Island's history.
 
It was a remarkable trip from being bullied as a kid for being mixed-race in a predominately black neighborhood to the most powerful political position in the State of Rhode Island.
Prev Next

2007 - 2010

Fox and 38 Studios

The genesis of 38 Studios started when Gordon Fox's close friend and fundraiser Michael Corso hosted a private meeting between Fox and 38 Studios executives. This meeting was the spark for the General Assembly passing special legislation after the legislative deadline. The result, $75 million to 38 Studios.
 
The Fox and Corso relationship included Corso being the landlord to Fox's now husband Marcus LaFond's hair salon.
 
As GoLocal reported in July of 2012:
 
House Speaker Gordon Fox on Tuesday wrote a check to the business owned by 38 Studios insider Michael Corso to cover previously undocumented expenses from a March 2007 fundraiser, according to a letter obtained by GoLocalProv.
 
The $648 payment came nearly two months after initial inquires into the event, which was hosted by Corso, Steven Nappa and Robert Britto of Nappa Building Corp. and former State Representative Ray Rickman. Fox spokesman Larry Berman said the payment will appear on Fox’s third quarter campaign finance reports.
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2013

Fox and Gay Marriage

Gordon Fox was an advocate for the passage of civil unions and then marriage equality legislation. Both bills languished for years. Then, Senator Donna Nesselbush arrived in the legislature and changed the political dynamics.
 
Nesselbush created a new political dynamic in the Senate and drove the effort to push the legislation through the Senate. Combined, Fox and Nesselbush ushered through gay marriage legislation through both Chambers.
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2010-2013

Providence Economic Development Partnership 

Speaker Fox did work for a number of applicants for the federally investigated Providence Economic Development Partnership (PEDP). GoLocalProv, which has written more than 50 articles on PEDP, reported in January that the RI Ethics Commission had fined Fox for a second time tied to his PEDP work:
 
The Rhode Island Ethics Commission has fined Speaker of the House Gordon Fox $1500 for violating the state's code of ethics.  
 
Fox was fined $500 for each of the three years between 2007 and 2009 he did not report income for legal work with the Providence Economic Development Partnership, the quasi-public agency under the Department of Planning and Development for the City of Providence.
 
In 2004, Fox was fined $10,000 by the Ethics Commission while House Majority leader for voting on a no-bid deal for GTECH in which his law firm was involved.  
 
Statement in Response:
 
Fox's lawyer, Albin Moser, Esq., issued the following statement following the ruling on Tuesday:
 
“Speaker Fox had stated from the beginning that if the Ethics Commission would like his Financial Disclosure report to be amended, then he would do so. That being the case, Speaker Fox has amended his reports for 2007, 2008 and 2009.
 
In keeping with past practice of the Commission, there is usually a fine involved. He will pay the fine of $500 per year for each of those three years.
 
He did not list work for PEDP in those years because he believed he was a subcontractor to Joshua Teverow’s law firm on his loan closings that were performed at Mr. Teverow’s office.
 
Beginning in 2010 and continuing in 2011 and 2012, Speaker Fox began doing the closings directly for PEDP, which he reported during those three years and the Ethics Commission has acknowledged. He has not performed any work for PEDP since 2012.” 
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2014

Raid and Resignation

On Friday, the State House office of Gordon Fox was raided by RI State Police in conjuction with FBI and IRS agents. This was the first time a State House office was ever raided by law enforcement officials.

By end of day Saturday, Fox had resigned, here is his statement:

The Rhode Island House of Representatives is an institution that I deeply respect and serving my constituents has been a major part of my life for the past 22 years. I will not let yesterday’s events distract my colleagues from addressing the challenges facing Rhode Island.”
 
“Because of the respect I have for all members of the House of Representatives, I am resigning as Speaker. The process of governing must continue and the transition of leadership must be conducted in an orderly manner.”
 
“I want to thank my colleagues and loyal staff for all that we were able to accomplish together. I will continue to serve out the remainder of my term and represent my neighbors and constituents in District 4. That said, I do not intend to seek another term in the House.”
 
“My personal focus going forward will be on my family and dealing with the investigation. Because of the nature of this matter, I will not be commenting further.”
 
 

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