Secrets and Scandals - Reforming Rhode Island 1986-2006, Chapter Four

Monday, March 30, 2015

H. Philip West Jr.

Between 1986 and 2006, Rhode Island ran a gauntlet of scandals that exposed corruption and aroused public rage. Protesters marched on the State House. Coalitions formed to fight for systemic changes. Under intense public pressure, lawmakers enacted historic laws and allowed voters to amend defects in the state’s constitution.

Since colonial times, the legislature had controlled state government. Governors were barred from making many executive appointments, and judges could never forget that on a single day in 1935 the General Assembly sacked the entire Supreme Court. 

Without constitutional checks and balances, citizens suffered under single party control. Republicans ruled during the nineteenth and early twentieth centuries; Democrats held sway from the 1930s into the twenty-first century. In their eras of unchecked control, both parties became corrupt.

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H Philip West's SECRETS & SCANDALS tells the inside story of events that shook Rhode Island’s culture of corruption, gave birth to the nation’s strongest ethics commission, and finally brought separation of powers in 2004. No single leader, no political party, no organization could have converted betrayals of public trust into historic reforms. But when citizen coalitions worked with dedicated public officials to address systemic failures, government changed.

Three times—in 2002, 2008, and 2013—Chicago’s Better Government Association has scored state laws that promote integrity, accountability, and government transparency. In 50-state rankings, Rhode Island ranked second twice and first in 2013—largely because of reforms reported in SECRETS & SCANDALS.

Each week, GoLocalProv will be running a chapter from SECRETS & SCANDALS: Reforming Rhode Island, 1986-2006, which chronicles major government reforms that took place during H. Philip West's years as executive director of Common Cause of Rhode Island. The book is available from the local bookstores found HERE.

Part One: DiPrete, RISDIC

Chapter Four: A Costly Election - 1990

Nineteen-ninety was shaping up as an expensive election year. Bruce G. Sundlun, a retired business mogul, had run twice against Gov. DiPrete and lost both times. In the campaign of 1986, Sundlun spent $1.39 million, much of it his own money. In 1988, when the governor was already weakened by scandal, Sundlun burned through nearly $2.39 million but fell short by a whisker-thin margin. He declared that his third try in 1990 would be the lucky one, but three other Democrats also prepared to challenge the vulnerable incumbent. DiPrete kept raising vast amounts of money for his campaign, mostly from vendors who wanted state business. As well as being legal, corporate contributions were easy to disguise and even if he lost, DiPrete could convert any unused campaign funds for personal use. Through three elections, expenditures skyrocketed. In 1984, 1986, and 1988, DiPrete and his challengers had spent three times as much as his predecessor, J. Joseph Garrahy, and those who ran against him had paid out in four election cycles—1976, 1978, 1980, and 1982.

Because delegates to the 1986 Constitutional Convention recognized the strong tie between campaign costs and corruption, they had proposed campaign finance reform as part of their ballot question on ethics. Voters approved a constitutional amendment that directed the General Assembly to establish a
system of voluntary public financing for candidates who agreed to limit their campaign spending.  In 1987 lawmakers passed legislation that DiPrete signed into law, but in 1988, neither DiPrete nor Sundlun participated in the matching funds program.

In January 1990, I wrote to five candidates rumored to be running for governor—DiPrete, Sundlun, former Lt. Gov. Richard A. Licht, Warwick Mayor Francis X. Flaherty, and Providence Mayor Joseph R. Paolino Jr.—urging them to enter the matching-funds program established under the 1987 Campaign
Finance Law. Participants in the program were to submit an affidavit with their candidacy papers in June. By pledging to spend no more than $1.5 million, candidates who won their primaries could receive up to $750,000 in public matching funds. The law allowed candidates who faced primary opponents to spend an additional $500,000 and still take the full amount of matching funds for the general election in November.

Two Democrats—Richard Licht and Francis Flaherty—immediately promised to participate. Sundlun announced to the press that he would accept the voluntary spending limits and matching funds if all the other candidates would do the same. DiPrete’s chief of staff, Arthur Markos, replied that the governor would put the matching funds into the budget he would submit to the General Assembly, adding that DiPrete was leaning toward participating in the program.

Joseph Paolino became the Democrats’ wild card. He replied that he was concerned about the drag of public matching funds on the budget.  Paolino had immense personal wealth, and rumors flew that he would spend whatever it took to win the primary and the general election.

I wrote again, urging the candidates to accept the program’s voluntary spending limits and to start negotiations. Licht suspended his campaign in March, and meetings finally began in May. Top campaign staff found their way to our tiny Common Cause office. No one asked if these two small rooms were all our organization had.

The governor’s cousin, former Cranston Mayor James DiPrete, greeted me as if we were old friends. I assumed he knew of our complaint, but neither of us brought it up. Sundlun’s campaign sent two lawyers, Flaherty’s one. Thomas “Tad” Devine, a young lawyer who represented the Paolino campaign, whispered to me that he had helped run the presidential campaign of Michael Dukakis.

Metal folding chairs clanked into place around our collapsible tables, and the long-shot negotiations began with a round of position statements. Frank Cenerini, a chunky lawyer, spoke for the Flaherty campaign. “Mayor Flaherty is committed,” he declared. “We hope all the other candidates will do this for the sake of the people.”

Next Tad Devine held forth on Paolino’s behalf. He spoke of three Democrats with different degrees of name recognition facing off in what could be a contentious primary. Meanwhile, the Republican incumbent would get a free ride until November.

“Not quite,” grumbled Alan Gelfuso, a lawyer with the DiPrete campaign. “It’s not a free ride to have three Democrats taking whacks at you. They’re free to say anything they think you’ve ever done wrong, whether or not they have any facts to back their claims.”

Their sparring always remained civil, and within an hour, the players agreed to meet again with position papers on campaign expenditures. All agreed on the need to rein in spending, but none seemed confident that the matching-funds program would work. They agreed not to characterize each other’s positions or argue these issues in the press.

Three additional meetings produced no progress. Only Flaherty signed papers to accept the spending limits and draw down matching funds. The Sundlun and DiPrete strategists said their candidates would participate if all the others publicly pledged to do so. Tad Devine insisted that Paolino lacked name recognition and would have no way of catching up with the better-known frontrunners.

After they left for the last time, I sat alone in our office, wondering if I could have done anything else to force the issue. These campaign insiders reminded me of professional football coaches, knowing each other’s strengths and weaknesses. Still early in the game, they were following their playbooks, not looking for ways to improvise.

I drafted a release to tell the press that our effort to hold down campaign costs had failed. I expressed our concern that a financial arms race would push spending millions of dollars above the record five million dollars that DiPrete and Sundlun spent in 1988. “Everyone loses,” I wrote, “when high public office is, in effect, auctioned off to the highest bidder.”

Candidates filed their required campaign finance reports with the Board of Elections on July 16. Four months before the election, Paolino had already spent $1.2 million, a threshold no campaign in the state’s history had crossed until 1984. Tad Devine, his lawyer, insisted that Paolino had been forced to spend at record rates for broadcast and cable television.

Mayor Frank Flaherty, who had spent only $320,000, convened a press conference outside the Board of Elections to blast Paolino and Sundlun for spending “like drunken sailors” and for refusing to accept any reasonable limits. Over the noise of passing traffic, he sounded most angry that Paolino was accepting campaign contributions from workers in Providence city government. “When he ran for mayor of Providence,” Flaherty shouted, “Joe Paolino stated he would not accept contributions from city employees and city vendors. Evidently it’s okay to take money from these sources now that he’s running for governor.”

The Democrats’ three-way race toward the primary became a brawl. With polls that showed Paolino trailing Sundlun, Tad Devine launched a blitzkrieg of television ads. By the middle of August, Paolino’s expenditures surged to $2.5 million, shattering all previous primary expenditure records and demolishing every statewide record apart from the $2.6 million DiPrete had spent by the end of his most recent battle against Sundlun.7 By the September 11 primary, Paolino had burned through $3.2 million. When the votes were finally tallied the young Providence mayor ranked a distant third out of three, with only 27.4 percent of the vote. Providence Journal reporter Scott MacKay calculated that Paolino’s losing effort cost him $69.45 for each vote. Sundlun won the primary
with 40.5 percent and pressed on to battle DiPrete for the third time.

DiPrete launched his fall campaign with a speech at the Old State House on Benefit Street. He told supporters it was time to limit the influence of personal wealth and special interests upon the electoral process. He blamed his Democratic opponents for ignoring voluntary spending limits that had been established in the 1987 Campaign Finance Law, not mentioning that he had also refused to comply.

The beleaguered incumbent then promised to ban all contributions from state vendors or contractors. If re-elected, he would lower individual contribution limits from $2,000 to $1,000 and prohibit campaign contributions from corporations and labor unions. Moreover, he would stop wealthy candidates from loaning money to their own campaigns and end the conversion of campaign funds for personal use. DiPrete told backers that as governor he would also double the time before government officials could return as lobbyists from one year to two. He listed other reforms that Common Cause had pushed without success and without his help throughout his tenure as governor.

Russell Garland, a Providence Journal reporter who covered the kick-off, showed DiPrete’s list to Bruce Sundlun, who roared with laughter. “Is this man crazy?” the Democrat scoffed. “He’s trying to run away from his record. This deathbed conversion serves only one useful purpose. It gives the voters of Rhode Island another chance to see the difference between what politicians say and
what they do.”

DiPrete’s righteous gambit prompted news reporters to remind readers of his record. The Journal’s M. Charles Bakst obliged, recounting the story of DiPrete’s founding a $1,000 Club in 1985; donors who reached that threshold got to dine with the governor every three months. Bakst also resurrected a 1986 story about DiPrete’s campaign picking up the tab for a $9,000 family vacation in Las Vegas and a 1987 report of DiPrete’s scuttling legislation that would have eased public access to records of campaign contributions and state contracts.

DiPrete’s eleventh-hour conversion came too late, however. On November 6, 1990, Sundlun routed him by a nearly 3 to 1 margin. 

When all the figures were tallied, spending in the 1990 gubernatorial race far surpassed all previous Rhode Island records. The $10.4 million spent in primary and general election campaigns doubled the previous record of $5.2 million that DiPrete and Sundlun had set only two years earlier.  In comparison with governors’ races across the country, Rhode Island’s gubernatorial spending—on a per capita calculation—ranked second only to Alaska’s. Sundlun won a two-year term in a tiny state where his longest drive to meet voters might take forty-five minutes. By contrast, the same year Walter J. Hickel won a four-yearterm in sparsely populated Alaska, which had more than five hundred times Rhode Island’s landmass and where candidates flew countless miles to towns accessible only from the air. Yet no one could explain why campaign costs in Rhode Island and Alaska should be comparable. Equally to the point, Sundlun spent over four million dollars to serve two years as governor of Rhode Island, while in neighboring Massachusetts William Weld spent less than that to win a four-year term, despite the fact that the Bay State had five times as many voters spread across three media markets, including Boston.

Sundlun reminded reporters that he had bankrolled his own campaign and owed nothing to special interests. He pledged to force state vendors and contractors to disclose their political donations, reiterating his campaign’s central attack on DiPrete. He insisted that nobody would ever buy influence in return for a political contribution.

Money had fueled DiPrete’s relentless political machine, a system in which vendors, architects, and engineers all understood that massive campaign contributions were the price of influence and power. For all the apparent wrongdoing catalogued in our ethics complaint, we had barely scratched the surface of DiPrete’s pay-to-play corruption.

Ironically, while money flowed in torrents to political candidates, our branch of Common Cause was going broke, and I was going under. As I fell behind on basic tasks, checks vanished amid piles of papers. An elderly donor phoned to ask why we had not cashed his check. I flipped through a dozen checks I needed to deposit but could not find his. I apologized and asked him to send another.

He agreed but asked if he should stop payment on the first check. 

“I don’t think you need to,” I said. “I remember seeing it, and I’ll probably find it again. I promise not to cash it.”

He sent a second check, and I lost that one, too.

“Don’t you want my money?” he asked on another call.

“We do,” I pleaded. “We’d be lost without your support.” Clearly, I could not both manage the office and lobby effectively at the State House.

On the twentieth anniversary of Common Cause, nineteen people attended our 1990 annual meeting in a lovely church hall on the East Side of Providence. There we honored Natalie Joslin, who had worked with other activists in 1970 to organize the Rhode Island office of Common Cause. Several days after the event Joslin appeared at our shabby office, where wastebaskets overflowed and the linoleum floor was gritty. “Looks like you need help,” she said. “I could spend two days a week helping to build membership and financial support. I have a pretty good Rolodex.”

Joslin had recently retired and sold an executive outplacement business she had built from scratch after a painful divorce. She seemed to know every CEO and CFO in Rhode Island. She set out to build membership and financial support for Common Cause, and her energy buoyed me. She organized phone
banks to raise money. She loved to open the mail, often whooping with delight when a generous check arrived. Her cheerful telephone voice hid a steely determination to raise money for new computers, a photocopier, a second phone line, and a part-time secretary.

One day, with me in the leather passenger seat of her Jaguar, Joslin spedsouthbound on I-95 to introduce me to Henry and Peggy Sharpe. He was the retired president of Brown and Sharpe, once Rhode Island’s world-famous maker of precision measuring instruments. “Hank’s fixing johnny cakes,” Joslin said, cheerfully. “They’ve been a Rhode Island tradition since colonial times.”

She slowed on a narrow road through a forest of oak and pine. Her final turn took us down through the woods to a glass-walled house on a private pond. Canada geese splashed down noisily as we poured maple syrup onto tiny cornmeal pancakes. The Sharpes listened as Joslin explained her return to Common Cause. “We’re really doing something about corruption,” she said. “Back when the constitutional convention started the ball rolling, I was too busy with my business. But now I’m making time, and I hope you will, too.”

Joslin began to outline the Common Cause agenda and asked me to fill in the details.

“I’m not asking you for money,” she said.

“Yet,” Henry Sharpe interjected dryly.

“Yet,” she agreed. “We need your advice first. I’d like to invite you and a few other people for a conversation at the office over sandwiches and coffee.”

Over the next several months, she formed what she called an advisory council. No one seemed bothered by our drab office or folding metal chairs. Each time the group met, I gave an update from the State House and answered questions.

The most outspoken member was Gus Hebb, president of American Steel and Aluminum. “I’d like to stop bidding jobs in Rhode Island,” he declared bitterly. “With DiPrete as governor, they want money before they’ll even look at your proposal. It’s a shakedown, a goddamn racket. I can’t imagine how I was stupid enough to vote for him the first time he ran. I don’t believe there’s a hell, but if it exists, I’d want to send him there.”

I yearned to tell Gus Hebb that we had filed an ethics complaint against the governor two years earlier. DiPrete had run the state through an entire two-year term and had probably shaken down scores of business leaders. There was still no finding of probable cause, and I was sworn to silence under the possibility of a ten thousand dollar fine.

Only days before DiPrete lost the election, events slipped forever beyond his control. On November 1, state auditors reported to Atty. Gen. James E. O’Neil that the books of Heritage Loan and Investment Co., a Federal Hill bank that belonged to Joseph Mollicone Jr., lacked basic documentation for millions of dollars worth of loans. O’Neil, a former federal prosecutor, immediately called Mollicone to his office and confronted him about a shortfall that investigators
thought might top thirteen million dollars. O’Neil launched a grand jury investigation but failed to order Mollicone’s arrest.

From the 1950s until the 1980s, Joe Mollicone’s father had owned and operated a Federal Hill bank whose most prominent customer was Raymond L.S. Patriarca, the godfather of organized crime in New England. Patriarca managed his empire from the Coin-O-Matic Distributing Company, a short distance down Atwells Avenue. Mafia informant Vincent Teresa had testified that the elder Mollicone was in Patriarca’s pocket and that he “coughed up ready cash” whenever necessary. Mob associates jokingly called the banker “Puppydog.”

After his father’s death in 1986, Joe Mollicone Jr. took over the family bank, renaming it Heritage Loan and Investment Corp. Few believed that the younger Mollicone could cut his father’s ties to Patriarca. Mollicone enjoyed a life of luxury and dabbled in businesses around Providence, particularly real estate.

He reveled in the swirl of money, power, and politics. For example, in 1984, when Mayor Vincent A. “Buddy” Cianci Jr. went through a contentious divorce, Mollicone paid the mayor $345,000 for his elegant house on Blackstone Boulevard.  The banker always gave generously to high-profile politicians, regardless of their principles, parties, or rivalries. In 1990, he contributed to the
campaigns of Edward DiPrete, Joseph Paolino, and Cianci. Top banking and business executives flew as Mollicone’s guests on expensive trips. “I did very, very well this year,” he would say. “I’d like to share my wealth, my good fortune, with my friends.” A year before auditors sounded the alarm on Heritage Loan and Investment, the state Department of Employment Security leased a loft building from Mollicone for one million dollars a year for ten years, roughly double what the agency had paid previously. Mollicone’s partners in the lease included Rodney M. Brusini, Gov. DiPrete’s trusted fundraiser, and Henry W. Fazzano, his latest chief of staff.

On November 8, two days after the election, Joe Mollicone quietly vanished. Five days later, Atty. Gen. O’Neil announced with chagrin that Joseph Mollicone III had driven his father to Logan Airport for a flight to New Jersey.  From there, the fugitive banker’s trail went cold.

As speculation spread about Mollicone’s disappearance and the financial chaos at Heritage, those in the know drained their accounts. The bank’s private insurer—the Rhode Island Share and Deposit Indemnity Corporation, known by its acronym, RISDIC—rushed in $6.6 million to cover withdrawals. On November 18, with millions missing and Mollicone gone, DiPrete ordered the bank to be closed. He announced that no more transactions would be allowed, acknowledging “the inconvenience and hardship this may cause for Heritage’s depositors.”

As holiday lights went up on Federal Hill, few imagined that Joe Mollicone’s embezzlement would suck all the reserves out of RISDIC and bring its collapse. DiPrete had known since 1985 that the state’s private credit union insurance system was vulnerable, but he had done little to prevent the disaster now bearing down on ordinary citizens like a runaway train. No alarm sounded to warn that the worst financial scandal in Rhode Island’s modern history had begun. 

©2014 H. Philip West Jr.

 

H. Philip West Jr. served from 1988 to 2006 as executive director of Common Cause Rhode Island. SECRETS & SCANDALS: Reforming Rhode Island, 1986-2006, chronicles major government reforms during those years.
He helped organize coalitions that led in passage of dozens of ethics and open government laws and five major amendments to the Rhode Island Constitution, including the 2004 Separation of Powers Amendment.
West hosted many delegations from the U.S. State Department’s International Visitor Leadership Program that came to learn about ethics and separation of powers. In 2000, he addressed a conference on government ethics laws in Tver, Russia. After retiring from Common Cause, he taught Ethics in Public Administration to graduate students at the University of Rhode Island.

Previously, West served as pastor of United Methodist churches and ran a settlement house on the Bowery in New York City. He helped with the delivery of medicines to victims of the South African-sponsored civil war in Mozambique and later assisted people displaced by Liberia’s civil war. He has been involved in developing affordable housing, day care centers, and other community services in New York, Connecticut, and Rhode Island.

West graduated, Phi Beta Kappa, from Hamilton College in Clinton, N.Y., received his masters degree from Union Theological Seminary in New York City, and published biblical research he completed at Cambridge University in England. In 2007, he received an honorary Doctor of Laws degree from Rhode Island College.

Since 1965 he has been married to Anne Grant, an Emmy Award-winning writer, a nonprofit executive, and retired United Methodist pastor. They live in Providence and have two grown sons, including cover illustrator Lars Grant-West. 

Note that this online format omits notes which fill 92 pages in the printed book.

Related Articles

• Secrets and Scandals - Reforming Rhode Island 1986-2006, Chapter One
• Secrets and Scandals - Reforming Rhode Island 1986-2006, Chapter Two
• Secrets and Scandals - Reforming Rhode Island 1986-2006, Chapter Three

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