PROVIDENCE — The room where the state decides how to spend millions in public funds to help businesses is not spacious, as boardrooms go. But when the Commerce Corporation’s board convened there on July 25 to take up the subject of $60 million for the Tidewater Landing soccer stadium project in Pawtucket, it must have felt even smaller, given all the connections.
There’s the attorney for the Commerce Corporation, whose law partners are registered as lobbyists for the developer. There’s the board member whose sister is trying to unseat the incumbent governor, who chairs the Commerce board. And there’s the Pawtucket city official who helped shepherd the deal through by working with the Commerce official who is now running for treasurer against the Pawtucket official’s fiance.
On July 25, the Commerce board voted to shift most of its previously-approved funding for the Tidewater Landing project to the stadium itself, after the developer faced cost inflation. Behind the scenes was a tangled web of seemingly only-in-Rhode Island connections. One raises legal conflict-of-interest questions, while two others serve as simple familial and political curiosities that did not escape the notice of people in that crowded boardroom.
The connection: Tom Carlotto, an attorney at the law firm DarrowEverett, has served as outside counsel on the Tidewater deal since 2019, a role he’s played on other Commerce matters for a decade. Two other DarrowEverett attorneys, chair Zachary Darrow and partner Nicholas Hemond, are registered lobbyists for Fortuitous Partners, the developer of Tidewater Landing. This lobbying occurs through a separate entity that is affiliated with DarrowEverett called Capitol Communications Group.
Carlotto’s role as Commerce attorney involves giving legal advice on the deal. Carlotto discussed with one board member whether he needed to recuse from the vote because of a separate conflict of interest; he sent all the members materials as they prepared to vote on July 14, while warning them the documents were confidential; and he generally advised the board about following the law and not getting sued.
DarrowEverett and the Commerce Corporation both said they did not believe there was a conflict of interest, and Carlotto emphasized in a letter to Commerce that at no time did he “undertake any action in conflict with my duties as counsel to the (Commerce) Corporation.”
Bill Fischer, spokesman for DarrowEverett, said the firm takes conflicts of interest seriously, including by conducting conflict of interest checks every time it takes on a new client. Although Hemond and Darrow registered as of January to lobby on behalf of Fortuitous, including at Commerce, Fischer said they didn’t actually have any role in lobbying Commerce staff or board members over the subsequent seven months. No DarrowEverett attorney did so, Fischer said. Darrow himself registered to lobby out of an abundance of caution for potential work in the year ahead that he didn’t end up having any involvement in, Fischer said. Neither Darrow nor Hemond represented the developer as attorneys.
A different Capitol Communications lobbyist who is a partner with Darrow and Hemond at the lobbying firm, Peter Baptista, attended Commerce meetings about the project as part of his lobbying work. Baptista isn’t a lawyer and has no financial interest or arrangement in the law firm DarrowEverett, Baptista said.
“In this matter, Mr. Carlotto provided legal counsel solely to RI Commerce,” said Fischer, speaking for DarrowEverett. “The developer utilized another law firm to provide legal services related to its application to RI Commerce. No attorney at DarrowEverett had any role in advocating for any outcome with Commerce staff or board members.”
Carlotto, in a disclosure letter to R.I. Secretary of Commerce Elizabeth Tanner on Wednesday that was apparently prompted by the Globe’s inquiries, said that he didn’t share any confidential materials or discuss the Tidewater development with other DarrowEverett attorneys. He also said he did not advocate one way or the other for the deal as attorney for Commerce. Carlotto said Hemond told him that he’d had discussions about a potential legislative lobbying strategy for Fortuitous, but that Hemond had no involvement in executive branch lobbying.
And the Commerce Corporation told the Globe in a statement that after reviewing the facts, it was confident that there was no conflict of interest, although it acknowledged it did not seek independent counsel to come to that conclusion. Commerce said Thursday that it became aware of the role that two DarrowEverett attorneys have as registered lobbyists for Fortuitous after the Tidewater deal was approved.
Yet one legal ethics expert, given the outlines of the arrangement, including Carlotto’s disclosure letter, said it raised concerns. While he’s representing Commerce, Carlotto also has a personal interest in maintaining good relationships with partners at his law firm, who are being paid to lobby for a business with a matter before the Commerce board, said Peter Margulies, a law professor at the Roger Williams University School of Law.
Margulies explained that under Rhode Island rules of professional conduct for lawyers, Darrow and Hemond, as Carlotto’s law partners, have the same obligations to Carlotto’s clients as Carlotto does. That includes Commerce, and it raises potentially thorny issues: Say, hypothetically, Darrow and Hemond learned of some adverse information about the developer through their lobbying. Because as law partners they share the same duty to Carlotto’s client, Commerce, they’d have an obligation to report any adverse information to Commerce as the agency was evaluating whether Fortuitous’ development was a wise investment. But they’d also have a big reason not to — because Fortuitous is paying their lobbying firm $48,000 this year to lobby for them.
That’s the sort of potential conflict that the Commerce Corporation may not be able to consent to, Margulies said: It puts the Commerce Corporation, a fiduciary to the state of Rhode Island, in the position where it’s agreeing not to receive information that gets to the heart of the deal.
“Carlotto’s statement in his letter that he hasn’t talked to Hemond or Darrow doesn’t cure the conflict,” Margulies said in a follow-up email.
Carlotto might well have been correct in all the legal advice he gave the board on the Tidewater development, Margulies said. But another attorney who wasn’t law partners with two people paid to advocate on behalf of Tidewater’s developer could have given that same legal advice, Margulies said. Indeed, the Globe has found no evidence Carlotto put his thumb on the scale for the developer, violated any confidences, or gave Commerce anything but good legal advice.
But “at the very least, this is an obstacle course,” Margulies said. “At the worst, it’s a clear conflict of interest. I would not do this and would not advise anyone I know to do it.”
The connections apparent around the Commerce/Tidewater/Pawtucket deal are not just legal, but in some cases personal, familial, and political, three things that often go together in Rhode Island. They don’t raise the same legal-ethical concerns, but they did not go unnoticed.
The campaign for governor
The connection: Bernard V. Bounanno III, a member of the Commerce board, is a brother of Helena Bounanno Foulkes, a former CVS executive who is running in the September Democratic primary against McKee.
When the Commerce board took up a proposal to move most of the state’s support for the project to the stadium itself to help the developer make up for cost inflation, Buonanno voted no. He says he evaluated the deal on the merits, rather than based on his sister’s campaign for governor. Buonanno raised concerns that if the state moved all its support to the stadium by itself, the rest of the development — like housing, commercial and retail — would happen only if the state ponied up another still undetermined but eye-popping amount of taxpayer support.
But, Buonanno said in an email, “Helena and I had zero conversations about the Tidewater decision. My sole responsibility was and is to the RI taxpayer and politics had nothing whatsoever to do with my decision.”
(Foulkes, herself a former member of Commerce’s predecessor agency, said in a previous statement that she would not have voted for a deal that included just support for the stadium, but she supported the overall deal with housing and other development.)
In a lengthy email, Bernard Buonanno went on to take issue both with McKee, who he said “forced a vote on a half-baked cake,” and with the way the vote went down July 25. Two members of the Commerce board who McKee had only recently appointed voted in favor of the deal: Michael Solomon, a former Providence city councilman and restaurant owner, and Liz Catucci, the president of the Northern Rhode Island Chamber of Commerce. They got on the board well into the board’s deliberations, and had no time to understand the intricacies of the deal they were approving, Buonanno said.
“If anyone should be accused of playing politics with this decision, it should be the Governor,” Buonanno said. “It was pretty clear they were appointed for the affirmative vote after the discussion at the prior meeting made it clear there was significant board push back.”
Andrea Palagi, spokeswoman for McKee, responded in an email to Buonanno’s statement that McKee appointed board members to vote yes on the reworked Tidewater deal: “It’s time, as other Board members have said, to rally around this project and make sure it’s the best outcome possible for the City of Pawtucket and our state. Clearly the decision to make appointments to open seats wasn’t political or we could have also replaced Mr. Bounanno whose term on the board expired in 2019.”
Audrey Lucas, spokeswoman for the Foulkes campaign, said in an emailed response to a question about whether Foulkes had any involvement in her brother’s deliberations on Tidewater: “This is very easy! No.”
Cano, Diossa, and Pryor
The connection: Sandra Cano is the director of commerce for the city of Pawtucket and also a state senator (those dual roles alone prompted her to get an ethics advisory opinion). She’s engaged to be married to the former mayor of Central Falls who is running in the Democratic primary for state treasurer, James Diossa. Diossa’s opponent in that primary is Stefan Pryor, who stepped down from his role as state commerce secretary in June to run in the race. As state commerce secretary, Pryor helped craft the Tidewater Landing deal. So did Cano: The City of Pawtucket was the applicant to Commerce for state incentives, along with Fortuitous. Cano attended most if not every meeting in the lead-up to the shifting of funds. The deal Pyror shaped got over the finish line after he left to run against Diossa in the September Democratic primary.
In other words, Pryor was dealing with an application for state incentives developed by the fiancee of the person who’s competing for the job he’s applying for.
Each person involved said this connection had no bearing on the eventual deal, which all three support. Diossa said he didn’t advise Cano on it.
“I commend all her hard work on getting this deal over the finish line, along with the leadership of Governor McKee and (Pawtucket) Mayor (Don) Grebien,” Diossa said in an email.
Cano, for her part, said she did not think the personal connections had any bearing on the deal.
“Through the hard work and partnership of the State, City, and Fortuitous along with the many residents and businesses, we were able to bring this to Rhode Island,” Cano said in an email. “I am proud to have contributed to this success for Pawtucket.”
Pryor said in a written statement in response to questions about the personal and political connection: “It wasn’t a factor.”
Tom Carlotto’s disclosure letter: