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Fox dismisses any impropriety in work for GTECH

Oct 1, 2003, 3:34 am

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A week before state lawmakers voted to give GTECH an exclusive, 20-year lottery contract, the Providence law firm with which House Majority Leader Gordon D. Fox is associated was discussing its own proposed contract with GTECH.

A Providence Democrat, Fox ascended to the second-most powerful political position in the House this year.

On April 22, GTECH's top in-house lawyer had the first of several conversations with the principals in Ferrucci Russo PC -- where Fox works -- about a potential role for the small Pine Street law firm in the international lottery giant's $65-million move from West Greenwich to Providence.

Nothing had been finalized at the point the multimillion-dollar GTECH deal whizzed through the House and Senate a week later. The legislation cleared both chambers on April 30.

GTECH hired Ferrucci Russo three weeks later.

In a series of interviews this week in which he confirmed this sequence of dvents, GTECH spokesman Robert Vincent said Ferrucci Russo was hired to help GTECH win Providence City Council approval for a second major piece in its relocation package: an agreement that would provide the company with an estimated $8.3 million in property-tax breaks.

Vincent would not disclose how much the law firm has been paid or provide copies of its legal bills.

But he said the firm billed GTECH for 375 hours, including 40 hours of legal work that were attributed to Fox.

Most of Fox's time was spent in what Vincent described as "strategy discussions and meetings."

But, he said, the Ferrucci Russo billings indicate that Fox spent 2.4 hours, in the week before the House vote on the legislation setting terms for the 20-year lottery contract, in discussions about "what the proposal to us would be."

l Vincent said one such bill places Fox in a conference call during that time period with GTECH general counsel Marc Crisafulli.

Fox, in an interview this week, said the billings must be wrong.

While he acknowledged a role in formulating GTECH's sales pitch to the Providence City Council, Fox said, he had no business relationship with the company when he voted, on April 30, in favor of the GTECH deal.

Speaking of himself as he often does in the third person, he said: "Gordon Fox did no work pre-April 30, otherwise Gordon Fox would not have voted on April 30. That would have been the easy thing for me to do."

Of the GTECH contract his law firm landed a short time later, Fox said: "I wouldn't vote on any piece of legislation contingent upon me obtaining a contract and that's it. Nor would I vote on a piece of legislation contingent upon somebody coming to me saying we'll give you this contract if you vote this way.

"I have never comported myself that way. I never would. It's despicable, disgraceful behavior and that's it, in a nutshell . . . I would not do it."

"I am relying on the bill that was provided," said Vincent, when apprised of Fox's remarks.

While some of the facts remain in dispute, the incident illustrates, once again, the thin line that elected officials who are also lawyers walk when they represent clients who have business before the legislature or other arms of government over which they have power.

In 2001, then-House Speaker John B. Harwood abruptly withdrew as the private lawyer for a client with a case before the state Department of Environmental Management, after officials within the agency voiced concerns about how much sway he had over environmental policy and the DEM budget.

"As speaker of the House," said Harwood at the time, "I must not only refrain from unethical conduct, but I must adhere to ethical standards that assure my legislator colleagues and most importantly, the people of Rhode Island that my conduct, both at the State House and in my private practice, is acceptable."

But his law firm's long-standing role as legal counsel for the Lincoln Park greyhound racetrack provided the backdrop for the federal indictment last month of the former CEOs of the track and its British parent company, Wembley PLC.

Whenever he was asked about the potential for conflict, Harwood said he and his law partner, Daniel V. McKinnon, never discussed the firm's representation of the track and he steered clear of any discussions of gambling at the State House.

But the indictment accuses Lincoln Park Inc. and the two former CEOs of of scheming, in 2000 and 2001, to pay the law firm of McKinnon & Harwood up to $4.5 million -- described as a bonus -- to win approval for more video slots and squelch a proposed Narragansett Indian casino. The targets of the indictment have all pleaded innocent; neither Harwood nor McKinnon have been charged.

In an interview this week, Fox said, he still did not know enough about the internal workings of McKinnon & Harwood -- including their financial arrangement -- to take a position on the propriety of the House speaker's law firm representing a client with such a huge stake in the decisions made by the General Assembly.

In his own case, Fox said he relied on rulings the state Ethics Commission has issued in the past that led him to believe there was no barrier to an elected state official representing a client before a municipal agency such as the Providence City Council.

The principals in Ferrucci Russo -- Joseph P. Ferrucci and W. Mark Russo -- did not respond to inquiries this week. But Fox -- a former assistant city solicitor in Providence -- said he does work for the private clients of the firm as a lawyer serving "of counsel."

While this status is often given to older, semiretired partners of large law firms, Barron's law dictionary says "of counsel refers to an attorney who aids in the preparation of a case, but who is not the principal attorney of record for the case."

Fox said he and Ferrucci Russo have an arrangement "where they would give me a flat stipend per month and that's it, so whether they [get] millions of dollars worth of cases or not, Gordon doesn't get it.

"It's not like I have an arrangement where if I bring you in this work, I get a percentage or I get a bonus or something of that nature," he said.

Landing GTECH as a client would be a coup for any law firm. Last year, the company netted $23.1 million from its Rhode Island lottery contracts alone.

This spring, GTECH was on the verge of moving its 920 employees from West Greenwich to Norton, Mass.

To keep the company, Governor Carcieri, Senate President William V. Irons and House Speaker William J. Murphy rallied behind legislation that would give GTECH an exclusive 20-year contract to run the state's traditional and video-lottery system -- if the company agreed to build its new corporate headquarters in Providence. Estimates were the higher fee the state agreed to pay GTECH would cost the state $87.2 million over the span of the extended contract.

As part of that April deal, GTECH was also promised a series of property-tax breaks on its new $65-million corporate headquarters. GTECH would get $8.3 million in city tax breaks over the next 20 years. The deal also gave GTECH a lower tax rate than other commercial taxpayers in the city, and exempted the company from regular property-tax increases.

This tax-stabilization agreement was one of the 12 major components of the April 9 "memorandum of understanding" among GTECH, the city of Providence and the state.

If both the tax and lottery deals didn't get approved, GTECH made it clear it would move to Massachusetts.

The GTECH legislation moved swiftly through the House and Senate, approved by both houses on April 30 -- just three weeks after it was introduced.

Fox not only voted for the legislation authorizing the 20-year lottery deal, but stood to second it as well.

GTECH spokesman Vincent said the talks that began about a week earlier with Ferrucci Russo evolved from a chance meeting between GTECH's general counsel, Crisafulli, and Ferrucci, who had been his "mentor" when the two worked at one of the big Providence law firms in the early 1990s.

Vincent said the two men have "maintained a fairly close relationship" since.

After running into each other "at a meeting or reception somewhere," Vincent said, "Marc Crisafulli and GTECH sought them out." While Edwards & Angell lawyer James Skeffington had been "the lead attorney on the project," Vincent said, "the project team made the decision to seek out another firm to represent us before the City Council."

Vincent said Ferrucci Russo "proposed to us a number of phases." One was to present and pitch the tax-stabilization agreement to the Providence City Council, for which they were hired.

The other was "to have them represent us going forward on construction matters . . . That is really one of their specialities, construction law and litigation," Vincent said. "And there are things we will need to do with labor -- pacts that need to be negotiated; project labor agreements."

Vincent said GTECH has not yet decided who it will hire for that phase.

He said the discussions with Ferrucci Russo began on April 22 and extended into May. On May 13, the law firm submitted a proposal for its services. On May 22, GTECH awarded the firm a letter of engagement.

Asked to describe majority leader Fox's role, Vincent said, "he participated in meetings, both internal to the firm and external, on our behalf, that discussed both the legalities and the strategy of negotiating the tax-stabilization agreement, and participated in meetings with City Council people, as well as other city representatives."

Expanding on that explanation, Fox said: "My role in that would have been researching tax-stabilization agreements that had been entered into by the city. Doing some preliminary, but helpful research into the ordinance -- what requirements you have to meet to get a tax stabilization [agreement] and helping Marc put together his presentation before the City Council to obtain a tax stabilization agreement."

Vincent said the law firm was allowed to bill for the hours it logged in preparation for submitting its proposal to GTECH, and the billings for Fox's time began April 24. Fox said he did no work on the GTECH project until after his vote.

Vincent said Crisafulli's first recollection of an dvent "where Gordon was present was a meeting with City Council people on May 2," but he could not rule out the earlier contact reflected on the law firm's own billing.

Asked whether GTECH had any qualms about negotiating to hire the House majority leader's law firm while GTECH had major legislation pending before the General Assembly, Vincent said, the company dealt almost exclusively in the House with the Speaker Murphy.

He also said: "They were two completely unrelated activities -- one that related to our tax-stabilization agreement in Providence; the other was probably one of the most prominent public activities going on in the state. I really see them as two separate and distinct activities, unrelated to one another."

In an interview yesterday, GTECH president and chief executive officer W. Bruce Turner also said the 20-year lottery contract and the city tax agreement "were on two different tracks."

With only one vote against the GTECH deal in the House, he also called it "illogical" to think the hiring of Ferrucci Russo had anything to do with the bill's success.

But that said, Turner said, he was unaware GTECH had, in effect, hired the House majority leader: "I am disappointed that linkage was there." "When that decision was made to hire that firm, I was not involved."

Had he known of Fox's involvement with the law firm, Turner said: "I am sure we would have talked about it."

At the very least, Turner said, Fox could have recused himself from voting on the GTECH package. "It sounds like under the circumstances that might have been the right thing to do, on his part."

Providence Journal

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