Sweet Deal: Costantino’s Family Scores on Compassion Center

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Tuesday, April 05, 2011

Stephen Beale, GoLocalProv News Editor

A GoLocalProv investigation has found that the family of Steven Costantino—arguably the most powerful state health official—will benefit from the opening of one of the new medical marijuana compassion centers.

Two of Costantino’s relatives are managers in the company that owns the land where one of the new compassion centers would be located. The company, Cannoli, LLC, would lease the land to the compassion center, known as the Thomas C. Slater Compassion Center.

The most recently available state records list Costantino’s sister-in-law, Lisa Costantino, and her sister, Julie Zito, as managers at Cannoli, LLC. 

As Secretary of Health and Human Services, Steven Costantino oversees the Health Department, which approved the compassion centers. The Slater Compassion Center is one of three that were approved, out of 18 applicants (Click here to read the application.)

Even though Costantino told GoLocalProv that he was not involved in the decision, several state ethics experts said he could still be facing a potential conflict of interest.

State ethics code has strict rules on nepotism

Slater applied to run a compassion center about a week after the November 2010 election and a month before Costantino’s potential appointment by then-Governor-elect Lincoln Chafee was announced. But the application was not approved until the middle of this month—a week after Costantino was confirmed by the state Senate.

It’s unclear exactly how much his extended family stands to gain from the opening of the Slater Compassion Center at their property.

A spokesman for Slater yesterday would not disclose financial terms of the lease, but said the agreement reflected the market rates for the area. The property in question is located at 170 Royal Little Drive in Providence. It is also listed as the main office for Pastry Gourmet, a chain founded by Julie Zito and Lisa Costantino. The 1.31-acre property—including the 16,000-square foot building—has a total assessed value of $902,600, according to city records.

The state ethics code bars public officials from participating in “any matter” that could bring a “direct monetary gain” to anyone in his or her family. The code also says that public officials cannot be involved in discussions or decision-making on a budget line item that could affect the “employment, compensation or benefits” of a family member. The code broadly defines family, even including more distant relatives like first cousins-in-law.

Costantino: ‘I was not involved in that at all’

The code was enough of a worry for Charles Fogarty, the new Director of the Department  of Labor and Training, to ask the Rhode Island Ethics Commission to weigh in on whether he had done enough to avoid any conflicts of interest due to the fact that his first cousin’s husband was a long-time employee at the department. The Ethics Commission ruled that the code did apply to Fogarty—and that he had taken the necessary steps to insulate himself from a conflict of interest.

But Costantino did not seek an Ethics Commission opinion on whether he faced any conflict of interest over the decision on the compassion centers.

Costantino did not hesitate to go to the commission for advice on another ethical question. Last December, he asked the commission if the state ethics code allowed him to go from being a state legislator to an appointed official in the executive branch. The commission said the move was OK. (Last year Costantino ran unsuccessfully to be Providence mayor. Zito also lost her bid for state rep.)

Costantino told GoLocalProv that he did not ask for an opinion on the compassion centers because he was not involved in the decision about which applications for compassion centers were approved. “All I can say is I was not involved in that at all,” Costantino said.

Instead, he said the decision was made by the Health Department. A spokesman said a staff committee reviewed the applications. But Dr. Michael Fine, the interim director, was the person “ultimately responsible” for making the call, according to a news release. Fine reports to both Costantino and the Governor’s office.

Costantino said he was aware that his relatives' business owned the land where one of the compassion centers could be located—before the applications were approved.

Costantino told GoLocalProv that he also felt an ethics opinion was unnecessary because he has no stake in his sister-in-law’s business. “Again, that’s my brother’s wife’s family business,” Costantino said, referring to his brother, Gregory Costantino, who is married to Lisa Costantino.

Still could be a conflict of interest

But Costantino may not be out of the ethical woods yet, according to the leaders of two local good government groups.

Just because he was not involved in the decision does not necessarily mean there is no conflict of interest, said John Marion, executive director of Common Cause Rhode Island. He offered a hypothetical example of a mid-level employee who hires a relative of his boss. Even if the employee acted alone, he could have made the hire in order to please his boss—or avoid offending him.

But, Marion added that there could be “internal controls” that the public might not be aware of that would prevent such a conflict in the case of Costantino and the compassion centers.

The head of Operation Clean Government raised similar concerns. “We’d have to look a lot more closely at the process, who made the decisions, at what point were the decisions made,” said Margaret Kane, the president. “I think these questions could and should be raised.”

It’s unclear what will happen to the pastry business once the compassion center opens. State records indicate that the Secretary of State revoked the certificate of organization for Cannoli, LLC in 2009 after the owners failed to file an annual report. Yesterday, neither Zito nor Lisa Costantino returned calls for comment.

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VIEW THE STATE RECORDS

1. Summary information on Cannoli, LLC

2. Excerpt from 2007 annual report

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• Interesting People Running the Compassion Centers
• NEW: Compassion Centers Announcement Postponed until March 15
• RI Dept. of Health Calls for New Compassion Center Applications
• RI Hospital Expert: Is Medical Marijuana Bad for MS Patients?

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