The cost of corruption

William Felkner Contributor
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What is the cost of corruption in government? For Rhode Island’s Central Falls, the smallest and most densely populated city in the nation, the cost of corruption was so great that it put the city into bankruptcy. And one reporter got it all on video.

In January, Jim Hummel, a local journalist who creates online video exposés on government waste and corruption, produced a story involving Mayor Charles Moreau of Central Falls, Rhode Island, and a furnace Moreau had installed in his home at a deeply discounted rate (paid for with cash). The contractor for the job was a campaign contributor and coincidently the city’s preferred service provider for boarding up abandoned homes — of which there are many.

Unfortunately, his rates for boarding up those houses are three times the going rate. But because Moreau used his “emergency powers,” competitive bidding was not required. The added cost of this service was passed on to the homeowner as a lien, further encumbering the city’s failing housing market.

But the cost of corruption didn’t end there. In February, Hummel exposed Moreau for selling a city-owned property assessed at $335,000 to a political ally for $1.

Also in February, he reported that an auto repairman who happens to sit on the city council received the lion’s share of the city’s auto repair business through another no-bid contract.

Another story came in April, when Hummel reported that the city’s police chief had retired, collected his $56,000 worth of unused sick time, and immediately signed a 5-year contract to continue his job. He now collects $48,000 from his pension and $72,000 from his salary.

May brought us the story of a political power play involving Representative Patrick Kennedy and Senator Jack Reed apparently helping the mayor remove the board of directors for the city’s detention center and replace them with a board conducive to an employee union. The facility now has a lower prisoner population and higher labor costs, and in July it reneged on a $250,000 payment to the city.

In June we learned how the mayor has been directing education funds allocated to repair aging school buildings. The contracted price of $587,000 ballooned to $1.2 million and the work was performed on an empty building the superintendent didn’t even want repaired.

Hummel also interviewed the state’s attorney general, who claimed it was improper for him to investigate the matter because the mayor was his friend.

This one mayor has added unnecessary costs to the housing market, reduced city revenue through property sales, increased the cost of the city’s auto repairs, increased the police department budget, increased labor costs to the city’s detention center, and wasted education funds. And that’s just what one Internet non-profit investigative journalist could uncover since January.

The city did file for bankruptcy, and in July the state appointed a receiver to take control. He immediately changed the locks at City Hall and relieved Mayor Moreau of his duties.

Last month, the mayor announced that he would challenge in court the statute creating the state receiver, but he is doing so in an indirect way. He made political appointments to the Central Falls Housing Authority and The Wyatt Detention Center and thus forced the city to go to court and block him. So, in effect, this latest move gives him “standing’” and forces the judge to address the aspect of the law that the mayor wants to challenge — once again using the system (and tax dollars) to his benefit.

Mayor Moreau is currently being investigated by the Rhode Island State Police and the FBI. Sometimes the bad guys get what they deserve, but they usually leave a large wake of carnage behind and a long, painful road to recovery. Hopefully, Central Falls will become fiscally sound before Moreau is released from prison or, worse yet, reelected.

Bill Felkner is the founder of the Ocean State Policy Research Institute, Rhode Island’s free market think tank.