Scoundrels: Chapter 4 “It’s Not My Loan”

Monday, January 23, 2017

 

View Larger +

Mayor Charles Lombardi, Maria Vallee and Richard Fossa meet in the mayor's office..

Each week, GoLocalProv will publish a chapter of the book Scoundrels: Defining Corruption Through Tales of Political Intrigue in Rhode Island, by Paul Caranci and Thomas Blacke. 

The book uses several infamous instances of political corruption in Rhode Island to try and define what has not been easily recognized, and has eluded traditional definition. 

The book looks at and categorizes various forms of corruption, including both active and passive practices, which have negative and deteriorating effects on the society as a whole. 

Buy the book by CLICKING HERE

Chapter 4 

"It's Not My Loan

As 2006 drew to a close, former North Providence Town Councilman Robert DiStefano decided to retire from his position as the Town’s Finance Director. He held the job for a number of years but, with the impending change of administration brought about by the November election of current Mayor A. Ralph Mollis as Rhode Island’s 27th Secretary of State, this apparently seemed like the right time to retire from town service. Rather than fill the position, newly elected Mayor Charles A. Lombardi left the post vacant, choosing instead to elevate DiStefano’s understudy, Maria Vallee, to the position in an acting capacity.

A relatively petite woman, Vallee had little problem exercising the authority afforded the finance director. According to one long-time town hall employee, the once sweet and disarming Vallee became a venomous object of trepidation creating apprehension and anxiety among fellow employees. It was no surprise then, that Vallee’s co-workers would vocally complain about Vallee’s perceived indiscretions.

During an impromptu meeting with Councilman Mansuet Guisti in June 2010, Councilman Frank Manfredi learned that several “women in the Town Hall” were complaining about a loan that Vallee received from the federal department of Housing and Urban Development (HUD) through a program administered by the Town. The program, intended to provide home repair loans for low-income families, was not meant for someone with a salary in the high $70 thousand range, and the others felt that she had inappropriately taken advantage of her position to obtain loan funds for which she was not qualified at the exclusion of other individuals that may have been in greater need. To make matters worse, some believed that other town hall employees were covering up her indiscretions by failing to record the loan in the land evidence records, as required under the program guidelines, and not enforcing the repayment policy resulting in a loan payment delinquency of several months.

Manfredi believed that the activity was potentially criminal and needed to be investigated. Just a month earlier, in May of 2010, three councilmen, including the council president, were indicted on bribery and conspiracy charges and resigned their council positions. If town hall were really a hotbed of political corruption, as many now believed, Manfredi was determined that the cleansing would start here and now. He brought his grievance to the full Town Council and asked that the Finance Committee, normally a four-member panel that he chaired, be authorized to conduct an investigation. The depleted four member council gave its unanimous approval to proceed. Despite the unanimous council support, cooperation from the Lombardi Administration was not forthcoming. A letter request for the production of documents was ignored as was a subsequent formal request under the state’s Access to Public Records Act (APRA). Formal subpoenas issued by the council finally netted thousands of pages of documents, many irrelevant and perhaps intended to consume hours of investigative time by the members of the part-time Finance Committee.

For three months Manfredi and his colleagues scoured through the documents trying to piece together the HUD loan puzzle. The information was very telling and helped make it clear to some of the council members why certain members of the Town Administration were reluctant to provide the documents. There was now every reason to believe that some of the activity related to Vallee's HUD loan violated HUD’s Program Rules and Regulations, RI Ethics Laws and potentially constituted criminal activity on the part of Vallee and other high ranking members of the Lombardi Administration. One would think that such evidence would be embraced and acted upon by the other council members and the Mayor, but that was not the case. As the Finance Committee members weeded through the boxes of documents a sense of clarity began to develop and the activities of the acting Finance Director started to fall into place. The Administration continued to stonewall and Councilman Giusti, who was now serving as the Council President, began to oppose the Committee’s efforts to obtain the facts.

The Finance Committee issued a subpoena to Maria Vallee to appear at a hearing to answer questions about her role in the HUD loan program, but she refused to appear thereby denying the Committee of her perspective. Manfredi, along with this book’s co-author, former Councilman Paul F. Caranci, spent over a hundred man hours researching, writing, and assembling documentation for a 140 page report describing in detail the irregularities in the Vallee HUD loan.

The report was presented to, and accepted by, the Finance Committee in September 2010. Giusti, who was once an ally in the effort to uncover any wrongdoing in the granting of the loan, was now opposing the committee’s activities with increased regularity, at times working to discredit its content and conceal its findings. Despite his lack of cooperation, the report was accepted by the full Council and revealed the following:

  • A HUD loan was granted to a town employee by the town’s HUD Loan Committee. The Loan Committee was comprised of three town employees that included Rocco Gesualdi, Director of Administration, Maria Vallee, Acting Finance Director and Sherri Arlia. HUD regulations disqualify employees from eligibility in the program. They further disqualify any member of the Loan Committee from eligibility.
  • HUD Regulations reserve all funds for persons with aggregate annual household income of $58,550 or less. Maria Vallee earned in excess of $70,000 in her role as acting finance director. The Vallee’s reported combined family income was $125,000. The Vallee’s total household income exceeded the annual limit by a factor of more than two.
  • Vallee sought to circumvent the income limit guidelines by failing to include her name on the application pretending instead to present her husband as the sole applicant. Evidence existed however that the Committee had previously rejected applicants because their household income exceeded the guidelines suggesting that Vallee and the other Committee members were very familiar with the family income limitation requirement.
  • The loan granted to the Vallees exceeded HUD's guidelines. HUD regulations limit the size of home improvement fund loans to $12,500 per unit. Under special circumstances (which did not exist in this case) the committee may grant loans exceeding $12,500 per unit. No other loans granted by the North Providence Loan Committee exceeded the $12,500 cap. The Vallee loan exceeded the cap by a factor of more than three.
  • Checks written to pay contractors for work done on the Vallee home were signed by Maria Vallee despite the fact that she claimed to have recused herself from the process to feign avoidance of impropriety. In some cases the funds were provided to the vendors even before the loan was officially approved.
  • Maria Vallee directed the department that was in charge of collecting payments from loan recipients. The Vallee loan was at one-time 9 months delinquent in payments yet no action was taken by that department to collect the arrearage. Within two months of the start of the Finance Committee’s investigation, all past due payments were made by Maria Vallee in an apparent effort to conceal the delinquency and all the checks were signed by her, not her husband, despite her insistence that the loan was not hers. This latter justification was repeated many times throughout the course of the investigation by Lombardi’s Chief of Staff G. Richard Fossa.
  • Inspections of the work completed at the Vallee home were not performed by town officials in a timely manner despite the vendors having already been paid in full for their work. This is a clear violation of HUD guidelines, which requires that satisfactory inspections be performed prior to the contractor getting paid. In an apparent attempt to conceal this breach of HUD requirements, there was an attempt to backdate some of the inspection reports.
  • The lien on the Vallee property was not recorded until some 18 months after the loan was approved leaving HUD totally exposed for the repayment of their funds for that length of time and constituting a violation of the program guidelines.

 

The report recommended that the council invoke its powers under the Town Charter to place Maria Vallee and Sherri Arlia, a member of the HUD Loan Committee, on administrative leave until the HUD Office of Inspector  General (OIG) had an opportunity to complete its investigation of the program. The report concluded that no action needed to be taken against Rocco Gesualdi, the Mayor's former Director of Administration, since he had already left the employ of the town. The Committee voted to refer the report, with its recommendations, to the full council for action. The council, which now included three new members elected to replace the three members who resigned, accepted the report, but on a vote of 5-2, refused to take the recommended action opting instead to first let the federal investigation conclude, despite Manfredi's and Caranci's insistance that the two actions were not related and one should not prevent the other.

For their part, Maria Vallee and her husband Michael, who was officially listed on the HUD application as the recipient of the loan, lawyered up immediately upon being accused. Maria retained Anthony M. Traini while James Lepore represented Michael. Each lawyer had ties to Local 1033 of the RI Laborers Union that represents Town Hall employees. For her part, Maria Vallee contended that the loan was compliant with all federal guidelines since it was in her husband's name and his income alone did not exceed HUD's guidelines.

Mayor Lombardi went out of his way, according to sources within Town Hall, to conceal any evidence of Vallee's involvement in the transaction. He held at least two meetings with staffers who, according to some of those in attendance, were essentially sessions on how to best protect Vallee from prosecution. In addition he attended a meeting of several Administration members with Frank Manfredi and Manny Giusti ostensibly to answer questions about the loan program. However, Vallee was excluded from the meeting and those in attendance provided few answers. Town Solicitor Anthony Gallone, who had requested the services of a court stenographer to record and transcribe the proceedings, tempered any answers that were forthcoming according to some of those present.

After completing an investigation based in part on a review of all the information that Manfredi and Caranci provided to the council, Michael Tondra of the state Office of Housing and Community Development, the state agency that administers the federal money on 

The front and rear view of the house owned by Vallee who was accused of improperly taking a HUD loan for which she was not eligible. Vallee, in a plea deal with federal investigators, agreed to pay a substantial penalty for her actions.

HUD's behalf, closed down the federal loan program in North Providence. He ordered Vallee and other employees who received a HUD loan in violation of program guide lines to immediately return all of the money they received. In his report, Tondra observed, “several government employees have received housing rehabilitation loans in the past, in at least one instance, a local employee (a reference to Maria Vallee) who directly exercises responsibilities with regard to the Community Development Block Grant Program (CDBG), received loan assistance. In this instance, the town has indicated the individual recused themselves from any discussion related to the loan. No formal documentation of the recusal was available. At no time has the town requested exception from conflict of interest provisions for any individual...Provision of assistance to government employees, particularly those who exercise functions or responsibilities with respect to CDBG activities, and/or those with whom they have family/business ties, without written exception, violates CDBG conflict of interest provisions. Recusal alone, even if documented appropriately, is insufficient to comply with this requirement.” The agency's report was delivered to the town in early August and Mayor Lombardi announced that the town was “preparing a corrective action plan in response to the Office of Housing and Community Development's recent investigation of the HUD program.”

In addition to the findings already noted, the Office of Housing and Community Development's report reviewed many inconsistencies within the town records on the eligibility of loan recipients. It identified several instances of conflict of interest and gave the town 30 days to submit documents verifying the eligibility of 29 loan recipients. It also found that Maria Vallee had written checks to herself.

Lombardi took the opportunity to announce that he might place the program under the direction of Tri-Town, a community action program that helps low income residents of North Providence and Johnston but claimed the program was still running, a claim that contradicted the HUD OIG report and the facts. Despite the many legal problems and the discontinuation of the program that left many low income residents without the type of emergency help afforded by the Community Development Block Grant Program, the Mayor continued to protect Vallee and defend her actions still refusing to consider taking any disciplinary action against her.

Council President Giusti, for his part, opposed any disciplinary hearings at the council level saying that he preferred that the outside agencies, the RI Ethics Commission and HUD, conduct their own investigations. As if to borrow from the talking points of Mayor Lombardi, he noted, “I just think we should be done with it. Once it's in the hands of the authorities, we should be done with it.” Giusti also contended that Manfredi and Caranci would expose the town to legal action if the character of two employees were discussed at public meetings. In fact, Manfredi and Caranci were seeking executive sessions for that purpose and that is the lawful forum in which to discuss personnel matters. The council, however, sided with Giusti thereby preventing the council from discussing the matter. Those council members apparently failed to understand Manfredi’s and Caranci’s contention that the North Providence Town Charter grants the council its own legal authority and responsibility to take action when misconduct by town personnel is identified.

Neither Manfredi nor Caranci ran for reelection in 2010 and each left the council in January 2011 when their terms expired. Their departure signaled the end of the Council’s investigation into local corruption in North Providence. Fortunately, the work of federal and state authorities continued. On July 9, 2013, a complaint was filed in federal district court by the US Attorney seeking damages, civil penalties, and recovery of wrongfully paid monies, from Maria Vallee under the False Claims Act based upon false claims and statements made by “Vallee acting in deliberate ignorance of the truth or falsity of the information in order to obtain payment of HUD Community Block Grant (CDBG) funds…” The complaint noted Maria Vallee intentionally violated the terms of the HUD program guidelines to enrich herself since at all material times, Vallee “had access to and was presumed to be familiar with the rules and regulations governing the CDBG program, and any failure on her part to know the application of the program guidelines to her loan application was in deliberate ignorance of the truth or falsity of the information that was available to her." The complaint also cited Vallee’s inappropriate use of the funds for cosmetic improvements to her home that also breached the program guidelines.

Though the government’s charges might have amounted to a criminal indictment, the US Attorney, after substantial discussions and negotiations with the Vallees’ attorneys, settled for a single count civil complaint that required the payment of “triple the amount of single damages of $47,895 plus civil penalties of $5,500 to $11,000 for each false claim submitted, as permitted by law, the cost of the action, plus interest…”

In the end, the federal action was settled with the entry of a consent judgment that required Vallee to admit to violating the False Claims Act by presenting false claims for payment or approval to an agent of the United States, and ordered her to pay $78,292.50 for her part in the HUD loan scandal in addition to having reimbursed the town $47,895, the amount of the original loan.

 

 With the federal charges resolved, the Rhode Island Ethics Commission was free to address Vallee’s serious breach of Rhode Island’s Ethics laws. Acknowledging the “totality of circumstances,” RI Ethics Commission staff attorney Jason Gramitt reported that 47 year old Vallee agreed to pay an $8,000 fine for recklessly disregarding state ethics standards by improperly receiving an illegal federal loan geared for families of low and moderate income. Vallee also acknowledged her violation of relevant state laws.

Vallee’s admission of wrongdoing and her violation of federal and state law left many North Providence residents expecting her resignation or dismissal from her town hall job. In June 2011, just hours before the RI Ethics Commission had found probable cause for numerous alleged ethical and statutory violations Vallee stepped down from her role as Acting Finance Director and returned to her job as town controller, still a substantial position within the town’s finance department. Vallee’s action prevented the Ethics Commission from removing her from her job since the Commission has the authority under law to remove an employee only from the job that was held at the time the violation occurred. Because of the job change the Commission was essentially prevented from removing Vallee from her position. Any decision for disciplinary action would now be left in the hands of Mayor Lombardi.

In a move that shocked many, Mayor Lombardi refused to fire Vallee. He described her violations as “lapses in an otherwise ‘stellar’ performance" and pointed out that "these lapses did not result in any criminal prosecution. ‘I think she suffered enough,’ Lombardi said.”

A private citizen’s attempt to have Vallee removed from office citing a provision of the Town Charter failed when the Town’s Personnel Board ruled that the petition was not timely filed. The Town Council again steadfastly refused to take a position on the citizen’s actions.

The refusal of the Mayor coupled with the refusal of the new Town Council to act in accordance with their powers under the Town Charter, essentially allowed an arguably corrupt individual to remain in a position of high authority within the town government administration. That is the precise impact that Councilmen Manfredi and Caranci anticipated and feared when they argued for strong and immediate council action in response to the Vallee corruption.

It would be unfortunate enough if the story ended here, but it does not. On November 19, 2015, Justin Cambio, the Town’s new Finance Director hired by Lombardi in the fall of 2013 to fill the void left by Vallee, was arrested on felony charges after allegedly post betting at Twin River Casino in Lincoln, RI. Post betting is a form of cheating whereby the gambler adds to his earnings by placing more chips on a winning bet prior to being paid. Despite surveillance tape evidence at Twin River showing that Cambio’s cheating was, according to State Police Maj. Joe Philbin, “very obvious,” Lombardi again refused to immediately fire the Finance Director. Instead, the Mayor placed Cambio on administrative leave allowing Cambio to collect on his vacation and personal time. Incredibly, Maria Vallee was once again elevated to the position of Acting Finance Director. Essentially, Lombardi replaced a person who was alleged to have been cheating in a casino on his own personal time using his own personal money with a person who accepted responsibility for inappropriately taking government money while on the job and using her position to do it. Lombardi's Chief of Staff told NBC 10 in response to their inquiry that the administration stands by the decision. According to the news station, Fossa said, "(Vallee) may have been ill advised or made a mistake, but she was never delinquent on that loan, as soon as they inquired about it, she settled," said Fossa. When asked by the reporter “if the people of North Providence could trust Vallee with their money, Fossa replied, ‘I would back her 100 percent.’ " Even at this juncture, the administration modifies the extent of Vallee’s wrongdoing by attempting to rewrite very recent history. The facts show that Vallee was in fact very delinquent with her loan payments as noted earlier in this chapter.

Only time will tell what Lombardi will ultimately decide on the Cambio matter. In the meantime, North Providence residents are again left to ponder the question of how committed their government leaders are to the sound ethical standards required for the sound government administration of their tax dollars. The apparent selective enforcement of good government rules; the 50% tolerance, rather than no tolerance, of illegal behavior within the highest ranks of town government, sends a clear message to those who would consider taking part in illegal activity both on and off the job in North Providence.  That message: Corruption of any kind will not be tolerated unless you are a friend or supporter of people in power. Clearly that is not the right message to send.

The active circumstantial political corruption on the part of Maria Vallee, indeed her failure to live up to the fiduciary responsibilities of her position, had a potentially significant negative impact to untold North Providence residents. It belittled a process and diminished citizen confidence in the political system. Just as egregious is the passive circumstantial corruption of many other town officials. Their refusal to acknowledge the infractions of law and the breaches of ethics as well as their refusal to do all that was possible to terminate Vallee’s employment, fan the fires of those who would paint all politicians with the broad brush of corruption. Taken together, the active and passive actions of government leaders toward corruption tend to diminish property values, drive up taxes and reduce the overall quality of life in a small town.

 

View Larger +

Paul Caranci

Paul F. Caranci is a historian and serves on the board of directors for the RI Heritage Hall of Fame. He is a cofounder of, and consultant to The Municipal Heritage Group and the author of five published books including two produced by The History Press. North Providence: A History & The People Who Shaped It (2012) and The Hanging & Redemption of John Gordon: The True Story of Rhode Island’s Last Execution (2013) that was selected by The Providence Journal as one of the top five non-fiction books of 2013. Paul served for eight years as Rhode Island’s Deputy Secretary of State and for almost seventeen years as a councilman in his hometown of North Providence. He is married to his high school sweetheart, Margie. They have two adult children, Heather and Matthew, and four grandsons, Matthew Jr., Jacob, Vincent and Casey.

View Larger +

Thomas Blacke

Thomas Blacke has devoted his life to marketing, media and public relations and currently runs his own marketing, PR and security consulting firm. He has worked on many high level political campaigns, served as a lobbyist, and has held leadership positions in the local Democrat Party. Thom is also a professional magician and escape artist who holds multiple Guinness® World Records for escape artistry with ten world records in all. Blacke is the Editor/Publisher of an international magazine and the co-creator of a TV reality show. This is his seventh book.

 

Related Slideshow: Rhode Island’s History of Political Corruption

View Larger +
Prev Next

Buddy Cianci

Vincent A. "Buddy" Cianci resigned as Providence Mayor in 1984 after pleading nolo contendere to charges of assaulting a Bristol man with a lit cigarette, ashtray, and fireplace log. Cianci believed the man to be involved in an affair with his wife. 

Cianci did not serve time in prison, but received a 5-year suspended sentence. He was replaced by Joseph R. Paolino, Jr. in a special election. 

View Larger +
Prev Next

Joseph Bevilacqua

Joseph Bevilacqua was RI Speaker of the House from 1969 to 1975, and was appointed as Chief Justice of the State Supreme Court in 1976.  It was alleged that Bevilacqua had connections to organized crime throughout his political career.  

According to a 1989 article that appeared in The New York Times at the time of his death:

The series of events that finally brought Mr. Bevilacqua down began at the end of 1984... stating that reporters and state police officers had observed Mr. Bevilacqua repeatedly visiting the homes of underworld figures.

The state police alleged that Mr. Bevilacqua had also visited a Smithfield motel, owned by men linked to gambling and drugs...

View Larger +
Prev Next

Thomas Fay

Thomas Fay, the successor to Bevilacqua as Chief Justice of the Supreme Court, resigned in 1993, and was later found guilty on three misdemeanor counts of directing arbitration work to a partner in his real estate firm, Lincoln Center Properties.  

Fay was also alleged to use court employees, offices, and other resources for the purposes of the real estate firm.  Fay, along with court administrator and former Speaker of the House, Matthew "Mattie" Smith were alleged to have used court secretaries to conduct business for Lincoln, for which Fay and Smith were business partners. 

Fay was fined $3,000 and placed on one year probation. He could have been sentenced for up to three years in prison. 

View Larger +
Prev Next

Brian J. Sarault

Former Pawtucket Mayor Brian J. Sarault was sentenced in 1992 to more than 5 years in prison, after pleading guilty to a charge of racketeering.  

Sarault was arrested by state police and FBI agents at Pawtucket City Hall in 1991, who alleged that the mayor had attempted to extort $3,000 from former RI State Rep. Robert Weygand as a kickback from awarding city contracts.

Weygand, after alerting federal authorities to the extortion attempt, wore a concealed recording device to a meeting where he delivered $1,750 to Sarault.

View Larger +
Prev Next

Edward DiPrete

Edward DiPrete became the first Rhode Island Governor to be serve time in prison after pleading guilty in 1998 to multiple charges of corruption.

He admitted to accepting bribes and extorting money from contractors, and accepted a plea bargain which included a one-year prison sentence.

DiPrete served as Governor from 1985-1991, losing his 1990 re-election campaign to Bruce Sundlun.

View Larger +
Prev Next

Plunder Dome

Cianci was forced to resign from the Mayor’s office a second time in 2002 after being convicted on one several charges levied against him in the scandal popularly known as “Operation Plunder Dome.” 

The one guilty charge—racketeering conspiracy--led to a five-year sentence in federal prison. Cianci was acquitted on all other charges, which included bribery, extortion, and mail fraud.

While it was alleged that City Hall had been soliciting bribes since Cianci’s 1991 return to office, much of the case revolved around a video showing a Cianci aide, Frank Corrente, accepting a $1,000 bribe from businessman Antonio Freitas. Freitas had also recorded more than 100 conversations with city officials.

Operation Plunder Dome began in 1998, and became public when the FBI executed a search warrant of City Hall in April 1999. 

Cianci Aide Frank Corrente, Tax Board Chairman Joseph Pannone, Tax Board Vice Chairman David C. Ead, Deputy tax assessor Rosemary Glancy were among the nine individuals convicted in the scandal. 

View Larger +
Prev Next

N. Providence Councilmen

Three North Providence City Councilmen were convicted in 2011 on charges relating to a scheme to extort bribes in exchange for favorable council votes. In all, the councilmen sought more than $100,000 in bribes.

Councilmen Raimond A. Zambarano, Joseph Burchfield, and Raymond L. Douglas III were sentenced to prison terms of 71 months, 64 months, and 78 months, respectively. 

View Larger +
Prev Next

Charles Moreau

Central Falls Mayor Charles Moreau resigned in 2012 before pleading guilty to federal corruption charges. 

Moreau admitted that he had give contractor Michael Bouthillette a no-bid contract to board up vacant homes in exchange for having a boiler installed in his home. 

He was freed from prison in February 2014, less than one year into a 24 month prison term, after his original sentence was vacated in exchange for a guilty plea on a bribery charge.  He was credited with tim served, placed on three years probation, and given 300 hours of community service.

View Larger +
Prev Next

Joe Almeida

State Representative Joseph S. Almeida was arrested and charged on February 10, 2015 for allegedly misappropriating $6,122.03 in campaign contributions for his personal use. Following his arrest, he resigned his position as House Democratic Whip, but remains a member of the Rhode Island General Assembly.

View Larger +
Prev Next

Gordon Fox

The Rhode Island State Police and FBI raided and sealed off the State House office of Speaker of the House Gordon Fox on March 21--marking the first time an office in the building has ever been raided. 

Fox pled guilty to 3 criminal counts on March 3, 2015 - accepting a bribe, wire fraud, and filing a false tax return. The plea deal reached with the US Attorney's office calls for 3 years in federal prison, but Fox will be officially sentenced on June 11.

 
 

Enjoy this post? Share it with others.

 
 

Sign Up for the Daily Eblast

I want to follow on Twitter

I want to Like on Facebook

X

Stay Connected — Free
Daily Email