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INVESTIGATION: Raimondo Gives State Contracts to Campaign Donors

Thursday, August 09, 2012


General Treasurer Gina Raimondo’s office has granted lucrative state contracts and poured tens of millions worth of public investments into firms and companies whose employees donated thousands to her campaign, a review of state records has revealed.

“If any of the individuals in those firms had given money and the money was more than the de minimis of $350, she should not be doing work with any of these firms,” said URI business professor Ed Mazze. “There would be the feeling that these firms ‘paid to play.’”

(Mazze said his proposed $350 limit would apply to the total amount of contributions that came from employees or managers at a company.)

In the year and a half since the election, the Rhode Island State Investment Commission—an arm of her office which Raimondo chairs—has hired a major New York-based bank to manage an estimated $8 billion in pension funds and cash assets for the state. Another contract was issued to another top bank to handle half a billion dollars in liquid assets. And, the commission has held direct votes to make investments of up to $75 million in four separate firms.

All six banks or firms contributed to Raimondo’s campaign through their managers or employees, collectively amounting to $5,849, according to state campaign finance records. In particular:

■ $10 Million investment: Last September, the investment commission voted to invest $10 million in Braemar Energy Ventures III. State records show that in 2010 one of the partners at Braemar Energy Ventures contributed $1,000, the maximum allowable by state law.

■ $20 Million investment: At that same meeting, the commission invested $20 million in the Summit Partners Credit Fund. A senior advisor at Summit Partners contributed $2,000 total between 2009 and 2010.

■ $500 Million state investment pool: Last November, the commission selected Fidelity Investments to manage the Ocean State Investment Pool, a new venture initiated by Raimondo. The pool was expected to have up to $500 million in liquid assets from the state and cities and towns. Contributions from Fidelity employees: $2,050.

■ Bank for $8 billion in state assets: Last month, the General Treasurer’s office announced that BNY Mellon has been selected to provide “master custody banking services” for state assets worth about $8 billion, which includes pension funds and cash assets, according to a press release. BNY Mellon employee contributions: $350.

In two cases, contributions from companies that received investments fell below that $350 threshold: $249 from a cofounder of Centerbridge Partners, which received a $25 million investment, and $200 from a managing director of Nautic Partners which also received an investment of $20 million.

Raimondo was present at all the meetings where decisions on those investments and contracts were made and she did not recuse herself from the votes, with the potential exception of BNY Mellon. (Those minutes have yet to be published and her spokeswoman yesterday would not say whether Raimondo had attended the meeting or recused herself.)

Notably, two other members of the investment commission recused themselves from the votes. On Feb. 27, 2012, commission member Rosemary Booth Gallogly, who is the state revenue director, recused herself from the vote to invest $25 million in Centerbridge. She did not give a reason, at least according to the minutes, but her brother, Mark Gallogly is the cofounder and managing principal of Centerbridge Partners. He is also the source of the $249 donation to Raimondo’s campaign.

A second commission member, newly appointed Paula McNamara, abstained from the Nov. 23, 2011 vote on the Fidelity contract. McNamara held the post of Senior Director of Client Services Development for Fidelity at the time of her appointment last year.

Conceivably, Raimondo also could have mitigated any potential pay-to-play issues by returning the campaign contributions, but as of this week, that had not been done. (Mazze, however, doubts that returning donations would actually accomplish that much, saying the “damage has been done.”)

‘Here we go again’

Mazze said Raimondo and the companies could face issues of how the donations will be perceived. “If it looks like garbage and it smells like garbage, there’s a high probability that it’s garbage,” Mazze said. “In other words, you don’t do business when there is a perception you paid to do business.”

“It may not be bad, but it certainly looks bad,” said Mark Zaccaria, chairman of the state GOP.

He noted that since the votes were all unanimous, Raimondo could have easily recused herself without endangering the deals.

Zaccaria said the perception that is left with voters will not be a positive one, increasing public disillusionment with state politics and perpetuating a trend towards low turnout in elections. “The point is, it’s a ‘here we go again’ moment,” Zaccaria said.

“All these things bear watching,” added Margaret Kane, president of Operation Clean Government, who said she would need more information before she could determine whether the donations—and the ensuring contracts—constituted cases of pay to play. “I think it’s worth looking into,” Kane concluded.

Raimondo: I will hold myself to a higher standard

‘Pay to play’ is defined by Common Cause, a good government group, as the exchange of money or even gifts—such as Super Bowl tickets—in return for political favors.

It’s a not uncommon practice, but proving that donations are being made with the express intent that favors will be repaid can be difficult, as the U.S. Securities and Exchange Commission noted two years ago, when it released a set of rules aimed at curbing the practice in the world of public pension funds.

“Pay to play practices may take a variety of forms, including an adviser’s direct contributions to government officials, an adviser’s solicitation of third parties to make contributions or payments to government officials or political parties in the state or locality where the adviser seeks to provide services, or an adviser’s payments to third parties to solicit … government business,” SEC regulators wrote. “As a result, the full extent of pay to play practice remains hidden and is often hard to prove.”

Raimondo’s predecessor, Frank Caprio, was caught in a pay-to-play flap in 2008 when $23,000 flowed in from two New York law firms—five days after he announced his office was issuing an RFP for securities-litigation law firms. After the contributions became public, Caprio returned the money, even as his campaign insisted that it had not sought the donations.

When she ran for office, Raimondo went out of her way to make an issue out of pay-to-play donations. In June 2010, her campaign announced that she would abide by proposed SEC rules barring individual “investment advisers” who contributed more than $350 from receiving an investment from a pension fund managed by the candidate, if elected. The ban would have been effective for two years from the date of the donation.

Raimondo issued a press release announcing her voluntary compliance with the rule and she urged its speedy passage. She followed up with a letter to the editor in which she declared that, “It’s time that we held all public officials and candidates—myself included—to a higher standard to protect the interests of taxpayers and ensure performance in our state government.”

The SEC eventually adopted the rules, although implementation is not yet complete.

Donors’ bank will be handling state pension funds

BNY Mellon, the state’s new custodial bank, would be involved in pension funds, according to a press release from the General Treasurer’s office. However, banks are exempt from the SEC rule because they are not considered investment advisers (even if they happen to give investment advice).

But even if BNY Mellon was under the jurisdiction of the rules, the donations don’t exceed the $350 individual limit because they came from two people. For an investment adviser who is eligible to vote for the candidate, the limit is $250. At least one of the two donors was eligible to vote for Raimondo: Roger Begin, a sales director who also is a former Rhode Island lieutenant governor who lives in Woonsocket. Even if he were considered an investment adviser, his $250 contribution does not exceed the maximum allowable for investment advisers who eligible voters. (Click here to read the SEC rules.)

The situation nonetheless raises the larger question of why Raimondo’s self-imposed rule against conflicts of interest with investment advisers who make political contributions would not apply more broadly to similar conflicts involving any other kind of individual or institution doing business with her office. That question went unanswered by Raimondo’s office yesterday.

“It just makes it that worse,” said Zaccaria.

Before BNY Mellon, State Street provided custodial banking services to the state government. State campaign finance records do not show any donations from State Street employees to Raimondo’s campaign.

Six months after taking office, Raimondo said her office would be issuing an RFP for a new custodial contract. At a later meeting of the investment commission, she said the last RFP was in 2000 and that “whenever a contract expires an RFP should be conducted to ensure competitive pricing and top-notch services,” according to the minutes for the April 25, 2012 meeting.

Spokeswoman: ‘Treasurer’s integrity is not for sale’

Yesterday, Raimondo spokeswoman Joy Fox declined to provide a list of what other banks responded to that RFP.

Instead, in e-mailed comments, Fox stressed that the new contract would be saving the state $300,000 annually, but she did not disclose, when asked, how much BNY Mellon would be making off of the deal.

“As previously reported by GoLocal in 2010, the Treasurer’s integrity is not for sale at any price. She governs based on merit and merit alone—her decisions are based on what is best for Rhode Island,” Fox said in her statement.

Fox was alluding to comments made by then-campaign manager Joseph Shekarchi, who is now running for state rep and is no longer affiliated with Raimondo’s campaign organization. He was responding to GoLocalProv’s finding that seven companies that had existing contracts with the Treasurer’s office had contributed $24,150 to Raimondo’s campaign by mid-2010. (East Providence-based accountant Ed Galvin is currently handling her campaign accounts. He did not return a call yesterday.)

“From pension reform that saves Rhode Island about $4 billion in the next 20 years to saving the state over $7 million in its recent bond offering, the Treasurer’s record speaks for itself,” Fox added.

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“From pension reform that saves Rhode Island about $4 billion in the next 20 years to saving the state over $7 million in its recent bond offering, the Treasurer’s record speaks for itself,” Fox added.

And your point is, Ms. Fox? Buddy revived a whole city and moved rivers. That record spoke for itself, too.

Comment #1 by Edward Smith on 2012 08 09

Wow, these people never learn. Another crook at the trough. Another RI pol who will leave a millionaire.

Comment #2 by tom brady on 2012 08 09

I don't buy any conflict here, I mean let's get real, $1,000 to $2,000 donation would get a billion dollar bank management deal, I'd line up for that if that were the case.

Comment #3 by Gary Arnold on 2012 08 09

Raimondo=Cicilline What else did you expect?

Comment #4 by guy smily on 2012 08 09

Gary Arnold ROLMFAO

Comment #5 by Jay Mmmm on 2012 08 09

When your obsessed on liking someone, they can never do wrong.

The Rhode Island taxpayer is broke, and she is raking in millions. Yup she is in touch with us.

Comment #6 by Jay Mmmm on 2012 08 09

The only thing to prosper in this State is Corruption the tax collector

Comment #7 by happy harry101 on 2012 08 09

This doesn't sound like a big deal to me.I can see if it was a million dollars,but 5 grand,no biggie.

Comment #8 by anthony sionni on 2012 08 09

And so it continues.

Comment #9 by Dave Barry on 2012 08 09

This is going to be an interesting race. I know I candidate that lives by four basic principals. Integrity,Reliability, Independence, and Accountability.Not Politcs as usual. Ernie Almonte in 2014 !

Comment #10 by Stuart Mundy on 2012 08 09

Gina Raimondo is a fraud.
She is finally being exposed as the sneak she really is...and a shrewd sneak at that! She not only cooked the books for the pension but she will probably cook the books for her campaign contributor donations as well.

Raimondo not only had people here contribute money to her campaign coffers with ulterior motives but she also accepted money from the Connecticut commissioner. So the incestuous relationships continue on...even beyond the state borders!

Comment #11 by dis gusted on 2012 08 09

Okay, I will grant you that the first two items here have merit and should be examined. But seriously, Fidelity and Mellon EMPLOYEES and such small amounts??? That's a non-starter. No politician could ever award contracts if we eliminated ANY company where ANY employee donated. There would be no companies left to do business with, and the most competent ones to help the state would be looked over. And I seriously doubt in this day and age, that any politician is swayed by contributions under $1000.....they just don't matter that much given the cost of campaigns....

Comment #12 by Natasha Betenoff on 2012 08 09

SOLD! FOR $350! .......Really? Professor Mazze's $350 limit is silly. It also gives an advantage to special interest groups and out of state firms. The State's current laws are enough to protect the pensions (including monies set aside for the reduced URI pensions). It would be much different if Raimondo had gotten $24,000 from a winning applicant.

Comment #13 by a y on 2012 08 09

So a total contribution of $350 from an employee (or two?) was the reason that BNY Mellon was given control over $8 billion? Really? This is a bit much. To be fair, this story ought to examine whether (and to whom) employees of the banks/companies that did not receive contracts/investments donated money as well. That seems like relevant context. I understand that given our state's track record there is a healthy skepticism involved, but the insinuation here seems to be based on a less than thorough reporting of the facts. Ms. Raimondo was making a lot more in the private sector than she will ever make as a public servant... I'm willing to give her the benefit of the doubt here.

Comment #14 by Tim Groves on 2012 08 09

To Tom Brady,
Your comment is erroneous...
Raimondo already IS a millionaire! She did not do her New York capital investment for nothing.
She worked for a decade as co-founder and general partner of Point Judith Capital, a venture capital firm.

And wait and see... when her children are old enough for middle school. She will yank them out of public education and put them in a private school. She can afford it..And she has organizations like EngageRI and RISc behind her!

Comment #15 by dis gusted on 2012 08 09

And to Tim Groves:
Your statement is dumb and foolish:

"Ms. Raimondo was making a lot more in the private sector than she will ever make as a public servant."

The aim in politics is not money in a salary but in the power and control one receives when you are a leader...and your personality has to be one of arrogance aggressiveness and shrewdness....
And guess what? She has all three. She is a quick learner.
Why do you think a high percentage of the Gen Assembly lawmakers are lawyers?
They make hefty 6 figure salaries...It is the power, prestige and the ability to act like God with control that is the driving force

Comment #16 by dis gusted on 2012 08 09

Shocking, eh? Does it sound as if the ones who at the outset said the RI retirees and workers were being falsely blamed for the 'shenanigans' of the insiders were in fact right on the money?

Comment #17 by paul zecchino on 2012 08 09

Maybe there were contributions to her opponents as well, not an uncommon practice. This piece appears to be selective reporting with an agenda.

Comment #18 by Harvey Waxman on 2012 08 09

Stephen Beale,

Did she get money from investment firms that didn't get contracts? She's from the investment world. It's natural that people there would support her.

Comment #19 by george pratt on 2012 08 09

To Harvey Waxman,
Your statement is also foolish:
"Maybe there were contributions to her opponents as well, not an uncommon practice."

It is not the contributions but the rewarding of contracts to those who contributed to her campaign...Pay for play...
She gave away state contracts to them...
And it is not selective reporting to tell the facts...
She got the contributions.
She gave them state contracts.
This is public information
This is called transparency....Voters have a right to know if she is rewarding people with taxpayer funds...

Comment #20 by dis gusted on 2012 08 09

It appears that if you want to support a candidate, but you do business with the state you can't support that persons run for office. If thats the standard people want to follow the unions had better stop contributing to politicians as well.

Comment #21 by george pratt on 2012 08 09

I know we're a cynical bunch in RI but this headline is sensationalistic to the max and is not really supported by the body of the article. Like other posters, I'm not even slightly convinced Ms. Raimondo acted unethically, especially for a $350 donation. I would hope that this publication is above such deceptive "reporting." It seems Go Local has a penchant for trying to invent breaking news articles where non exists.

Comment #22 by Harold Stassen on 2012 08 09

Bank of New York Mellon, the firm from which she took campaign contributions to set up management of the pension system, is being sued in several states for cooking the pension books on Forex transactions to skim public money for private profit:


Gina "money rules everything around me" Raimondo has sold Rhode Island out yet again.

And for cheap.

Comment #23 by Donnn Roach on 2012 08 09


Comment #24 by The Investigator on 2012 08 09

Ok so less than $6,000 of her $800,000!!! War chest influenced billions in contracts. Really? This is getting to ridiculous. She raises more money getting a cup of coffee in the morning honestly!

Comment #25 by John Locke on 2012 08 09

While the donations may be small its the donations made by these same individuals to groups like Engage RI who then filter the money to support Raimondo and her ilk that is much more disturbing. We'll see what happens at the next labor convention when Raimondo is begging for votes in a three way race.

Comment #26 by Ernie Watson on 2012 08 09

dis gusted,

Wow, talk about painting with a broad brush. It must be nice to be omniscient. You apparently know exactly what is in the heart and mind of each one of our elected officials. I guess I must be foolish, since you say so, but I happen to believe that some people actually run for office because they hope to do some good. Ms. Raimondo had plenty of power and prestige before she ran for office. She is tackling problems that numerous elected officials that came before her chose to ignore. I don't know if she's arrogant or not (nor do you, I'd wager), but when did aggressive and shrewd become bad words?

Comment #27 by Tim Groves on 2012 08 09

Supporting David Cicilline STRIKE 1,
This is STRIKE 2

No doubt STRIKE 3 will come soon.

Comment #28 by Scott Dickerson on 2012 08 09

This is great fodder for the union goombah mentality still seething over the pension reform. Pssst, Rhode Island has been awash in pay to play for since the invention of the wheel. Pretty much sour grapes on the union side now.

Comment #29 by David Beagle on 2012 08 09

Supporting David Cicilline was her biggest misstep to date, however there is no doubt she was strong-armed by the threat of Cicilline spreading false lies about her...as he is known to do.

What is very clear is that political aspirations frequently cloud the judgment of good people...thereby making them politicians...

Comment #30 by David Allen on 2012 08 09

For all who post here who think nothing of the small amount overall, it is the PRINCIPLE of the matter. You may have to look up that word.

Comment #31 by guy smily on 2012 08 09

Wow I'm so shocked.

Comment #32 by Ed Jucation on 2012 08 09

Stephen Beale, you usually write well but this article takes the cake. I mean come on. Is that the best you guys found out? She took a few hundred dollars for millions in contracts? In that case most of her colleagues must be laughing at her for getting so little. Here's a test. Quick, name a politician and let your readers point out contributors who have been given state/city business. The more important issue is the major quid pro quo going on behind the scenes rather than in public. Do an undercover investigation on that and then you might be onto something.

Comment #33 by Keith Fernandes on 2012 08 09

Stephen Beale go to votesmart.org and look at who donates to Dominic Ruggerio. Its the unions. This guy needs to return the donations or recuse himself from any legislation that effects labor. Raimondo is the best thing thats happened to Rhode Island in a long time. Why are you trying to destroy her? BTW still waiting for the list of people that work for banks that didn't get state business. HELLO

Comment #34 by george pratt on 2012 08 10

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