Founders of Capco Steel Contributed Over $50,000 to Local Politicians
Wednesday, July 18, 2012
The founders of the once prospering and now struggling Providence construction company that received a $5 million loan guarantee from the state’s Economic Development Corporation (EDC) have contributed $55,600 to political campaigns since 2002, according to a review of state and federal campaign finance reports.
Over the last decade, through the good times and even as the economy took a turn for the worse, records show Capco Steel founders Michael and Patricia Caparco have given to more than a dozen office holders or candidates on both sides of the aisle.
Topping the list is Congressman David Cicilline, who between his tenure as Mayor of Providence and his time in Washington, has received $13,900 from the Caparcos. The Rhode Island Victory Fund, which is a joint committee set up by Cicilline and the Democratic Congressional Campaign Committee has received another $15,000.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe list goes on. Congressman James Langevin has received $7,100 in contributions. Lieutenant Governor Elizabeth Roberts received $3,000. Mayor Angel Taveras, former Mayor Joe Paolino and former Governor Don Carcieri were all given $2,000.
Earlier this week, nearly three months after GoLocalProv first reported the company had fallen on hard times, the EDC confirmed that it has been making loan payments on the company’s behalf since February.
Capco, which has worked on the new Yankee Stadium, Gillette Stadium, the Boston Convention Center, and Pfizer World Headquarters Power Plant, still owes $4.6 million on a loan guarantee that was part of $26 million the company secured from Webster Bank in March 2010.
That financing package included a $20 million line of credit and a $6 million loan. $5 million of the loan was guaranteed through the Rhode Island Industrial and Recreational Bond Authority (IRBA), which is part of the EDC.
“IRBA has been working diligently with Capco and Webster to find solutions to navigate through the downturn in the construction industry, including a plan to keep the company operating at a much smaller level,” and EDC statement released this week said. “The state is working to ensure that the employees are provided with assistance during this challenging time and taxpayers are protected by recouping value against the building and equipment, which IRBA has a secured first position.”
Michael Caparco did not respond to a request for comment.
Most Contributions Came in 2010
During the 2010 election season, Capco was a prime location for candidates running for office to tout their plans for job creation and the Caparcos became major players in local fundraising. Records show well over half of their $55,600 in contributions came during the 2010 election cycle.
In June of that year, then-Mayor Cicilline unveiled Jobs Now Providence, a program funded by economic stimulus dollars. At that point, the company had already hired 14 workers through the program. A month later, Providence Mayoral candidate Steven Costantino offered his plan to create jobs in front of the company. Multiple campaign commercials also included the company that year.
But long before the 2010 elections and his company’s new financing deal, Caparco made it clear he was concerned about what the recession would do to business.
“You know, I am concerned about the economy but we’ve got a lot of work ahead in 2008 and we’re probably going to start booking work now for 2009,” he said in a January 2008 newsletter published by the city of Providence. “ I see what’s happening out there, with the housing foreclosure crisis, the housing market down – eventually that does affect us, in a way because, if you’re having a bad economy, it will affect businesses in some way, shape or form. So what I’m trying to do with my company, which is roughly a $120 million dollar a year company, is not to grow it during a bad economy. I want to add the jobs but keep things at a level that we’re comfortable with.”
By May of this year, Caparco said the company had lost $85 million in contracts during the recession. The company went from a high point of approximately 900 employees and was down to just 100, he said.
“We’re really trying to keep it going,” Caparco said. “Hopefully we can save this thing and turn this around.”
Mazze: Not the EDC’s Fault
But with few new projects on the horizon, Dr. Edward Mazze, a professor of business administration at the University of Rhode Island, said Capco Steel was forced to lay off employees and that it appears the company will be unable to pay back its loan.
Mazze said any default on the loan will be paid off from reserve funds and not by Rhode Island taxpayers. He called the company important to Providence and the state because of the number of people it employs and its track record of community involvement.
“It is unfortunate to see Capco Steel with over twenty years of experience and one of the largest steel fabricators in the Northeast in financial trouble,” Mazze said. “The financial difficulty is because there are fewer large construction projects to bid-on in the northeastern states. Commercial construction has taken a beating in the last four years with numbers of construction and construction related companies going out of business.”
Capco’s financial problems come on the heels of the 38 Studios bankruptcy, which received a $75 million loan guarantee in 2010 and now appears to have left taxpayers on the hook for a significant portion of those funds. But while the EDC has been criticized for its lack of oversight over 38 Studios, Mazze said the agency should not be blamed for the loan failure of Capco. He said it is clear the company’s problems stem from the poor economy.
Mazze did, however, say he still has several questions about the company: 1) Did the EDC have the knowhow to evaluate and finance companies like Capco? 2) Was Capco’s $5 million loan guarantee pushed through because of political connections?
“EDC should not be financing any businesses since it is too easy for political people to use their influence with EDC to help others obtain a financing package,” Mazze said. “In a small state every medium- and large-sized business has a friend in government when it comes to getting financing while each small business has to fend for itself.”
Dan McGowan can be reached at [email protected].
