NEW: $3 Bar Lawyer’s Complaint Ruled in Board of Licenses Harris’ Favor

Tuesday, July 21, 2015

 

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Johanna Harris

The Ethics Commission has ruled in favor of former Board of Licenses Chair Johanna Harris, following a complaint filed by former $3 Bar lawyer Peter Petrarca, according to Harris.

Harris, who still currently serves on the Board, provided the following statement on Tuesday:

"Today, the Rhode Island Ethics Commission dismissed Peter Petrarca's complaint against me, ruling that I did not violate the Code of Ethics and imposing no penalty.

In March 2014, when I had been on the Providence Licensing Board for only six weeks, the City's Human Resources Department asked me to address an urgent personnel matter. In response, I provided executive coaching to a senior manager during the month of April 2014. My one-time professional services were performed on an emergency basis for less than $5,000 in compliance with City’s rules for a no-bid contract. Apart from my position on the Licensing Board, I have no continuing contractual relationship with the Human Resources Department or any other City department.

To find a violation of the Code of Ethics, the Commission must show that the conduct under scrutiny was “knowing and willful.” Ruling that my acceptance of the no-bid contract was not a knowing and willful violation of the Code, the Commission noted that I had voluntarily reported my contract twice to the Commission."

Petrarca, which reached on Tuesday, said he "had no comment." 

"We thought there was a violation, clearly the Ethics Commission thought otherwise," said Petrarca. 

Original Complaint

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Petrarca had filed the complaint back in August while Harris was Chair.

"Harris has been doing doing HR work for the city of Providence, which wasn't fully disclosed," said Petrarca in August.  "According to email records, she began the work in March, and billed for the work in May.  The terms of the contract weren't made available to the public at the time, and this hasn't been disclosed, which is an ethics violation." 

Petrarca said that the complaint wasn't filed on behalf of any clients.  "This was filed by me, in my capacity as a lawyer," said Petrarca. 

The Commission ultimately ruled in favor of Harris.

"Last September, Mr. Petrarca brought suit in Superior Court to bar me from deciding his clients’ cases on the grounds that I would be biased by the mere fact of his ethics complaint. In October, Justice Brian Van Couyghen denied Mr. Petrarca's motion for a preliminary injunction, and in March of this year, Mr. Petrarca's lawsuit was dismissed in its entirety," said Harris in a statement on Tuesday.  "In the year that I’ve spent defending myself against the ethics complaint, I’ve learned a lot about the Ethics commission. In the coming year, I plan to write about what I’ve learned."

 

Related Slideshow: Providence Sues Corporate Giants - See the Defendants and Charges

From defective ignitions to discriminatory mortgages, Providence is on a mission to expose corporate wrongdoing. Below are some of the defendants in a series of lawsuits and the allegations made by the city. 

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General Motors

Lawsuit Date: Pending 

Description: Providence plans to sue General Motors over defective ignition switches that its attorneys say have diminished the re-sale value of its fleet of vehicles. The lawsuit could be the first filed by a government entity against GM over the ignition problems, according to The National Law Journal. The planned lawsuit came to light in a July 28 court filing by law firm Motley Rice. A city spokesman said the lawsuit itself has yet to be filed. 

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Santander

Lawsuit Date: May 29, 2014

Description: “The lawsuit alleges that since 2009 Santander has deliberately reduced its lending in the city’s minority neighborhoods while actively expanding its business in predominantly white neighborhoods. Santander gained a substantial share of the city’s mortgage lending market in 2009 when it completed its purchase of Sovereign Bank.” - City of Providence press announcement

Read the complaint.

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Wall Street Defendants

A lawsuit filed April 18 alleges fraudulent trading and other violations of federal securities laws by a number of Wall Street companies. Defendants include: the New York Stock Exchange, Nasdaq Stock Market, Bank of America, Barclays, Goldman Sachs, JP Morgan Chase, Morgan Stanley, and Charles Schwab.

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Wall Street Wrongdoing

“This case arises out of a scheme and wrongful course of business whereby the Exchange Defendants, together with a defendant class of the brokerage firms entrusted to fairly and honestly transact the purchase and sale of securities on behalf of their clients (the “Brokerage Firm Defendants”) and a defendant class of sophisticated high frequency trading (or “HFT”) firms (the “HFT Defendants”) employed devices, contrivances, manipulations and artifices to defraud in a manner that was designed to and did manipulate the U.S. securities markets and the trading of equities on those markets, diverting billions of dollars annually from buyers and sellers of securities to themselves.” – Complaint filed in U.S. District Court, Southern District of New York, April 18, 2014 

Read the complaint

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Kickbacks

The defendants engaged in two forms of kickbacks, the lawsuit alleges.

Electronic front-running: “in exchange for kickback payments, the HFT [High Frequency Trader] Defendants are provided early notice of investors’ intentions to transact by being shown initial bids and offers placed on exchanges and other trading venues by their brokers, and then race those bona fide securities investors to the other securities exchanges, transact in the desired securities at better prices, and then go back and transact with the unwitting initial investors to the their financial detriment”

Rebate arbitrage: “where the HFT and Brokerage Firm Defendants obtain kickback payments from the securities exchanges without providing the liquidity that the kickback scheme was purportedly designed to entice”

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Illicit Billions

The lawsuit alleges that the Wall Street firms have made billions in illicit profits by a scheme called “slow-market arbitrage” in which some traders are shown changes in the price of a stock on one exchange, and pick off orders sitting on other exchanges, before those exchanges are able to react and replace their own bid/offer quotes accordingly.” The lawsuit states that the “practices are repeated to generate billions of dollars more a year in illicit profits than front-running and rebate arbitrage combined.”

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Spoofing the Market

Another deceptive and manipulative practice is known as “spoofing,” in which high-frequency traders “send out orders with corresponding cancellations, often at the opening or closing of the stock market, in order to manipulate the market price of a security and/or induce a particular market reaction,” according to the complaint. 

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False Orders

Another violation involves “laying” in which high-frequency traders “send out waves of false orders intended to give the impression that the market for shares of a particular security at that moment is deep in order to take advantage of the market’s reaction to the layering of orders,” the complaint states. 

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Market Manipulation

“In an effort to enrich themselves through these manipulative tactics, illicit kickback payments, and insider trading proceeds, Defendants wrongfully misappropriated material non-public information about Plaintiff’s and the Plaintiff Class’s further intentions to trade (both as to amount and price), tipped one another as to those intentions, and otherwise distorted and manipulated the pricing of their securities in violation of §10(b) of the Exchange Act and Rule 10b-5. All Defendants are sued as primary participants in the wrongful and illegal conduct and scheme charged herein, as each engaged in the manipulative acts and deceptive practices detailed herein.” – first count in April 18 complaint

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$611M Securities Trades

In federal court filings, Providence identified millions of shares worth hundreds of millions of dollars that had been affected by illegal trading practices. Below is a breakdown:

Period under Scrutiny: 2009 to 2014

Total Shares: 26 million (securities transactions)

Total Dollar Value of Shares: $611 million

Source: Providence’s Plaintiff Declaration, April 18, 2014 

 
 

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