STATE OF RHODE ISLAND
BEFORE THE RHODE ISLAND ETHICS COMMISSION

In re: Gordon D. Fox Complaint Nos. 2003-6, 2003-7
INFORMAL RESOLUTION AND SETTLEMENT

The Respondent, Gordon D. Fox, and the Rhode Island Ethics Commission hereby agree to a resolution of the above-referenced matters as follows:

A. Findings of Fact and Admissions

  1. The Respondent is, and was at all times relevant to the above-captioned Complaint, a member and Majority Leader of the Rhode Island House of Representatives. The Respondent was originally elected to the House of Representatives in November 1992 and has served as Majority Leader since January 2003.
  2. In his private capacity, the Respondent is an attorney, admitted in 1991 to practice law in the State of Rhode Island. Since January 2003, and at all times relevant to the above-captioned Complaints, the Respondent has worked as an attorney associated with the law firm of Ferrucci Russo P.C., Providence, RI. The equity owners and officers of Ferrucci Russo P.C. are attorneys W. Mark Russo and Joseph P. Ferrucci. Pursuant to the terms of his association with Ferrucci Russo P.C., the Respondent receives an annual stipend of seventy-five thousand ($75,000) dollars, payable in weekly installments. This stipend is a flat rate, not adjusted for client development, hours billed or results achieved.
  3. GTECH Corporation is a large, publicly traded corporation headquartered in West Greenwich, Rhode Island, that has for many years, among other things, operated the Rhode Island lottery. In late 2002, GTECH began considering selling its West Greenwich property and moving its headquarters elsewhere in Rhode Island or southern Massachusetts. In early 2003, GTECH representatives began relocation discussions with representatives of the Governor’s office, the Rhode Island Economic Development Corporation (EDC), Senate President William Irons and House Speaker William Murphy.
  4. By late March 2003, GTECH was still undecided as to whether to relocate its headquarters to Massachusetts or to stay in Rhode Island. The EDC and Governor’s office became more aggressive in attempting to keep GTECH in Rhode Island, including an offer by the Governor to fly to Frankfurt, Germany to attend a meeting of the GTECH Board of Directors. This campaigning by the State ultimately led GTECH to develop and consider a feasible option for remaining in Rhode Island.
  5. On the morning of April 5, 2003, GTECH officials met with several Rhode Island officials in the Governor’s office. Among those present were Governor Donald Carcieri, Speaker William Murphy, Senate President William Irons, and representatives of Rhode Island’s federal congressional delegation. The Respondent was not in attendance. At this time, GTECH had retained attorney James J. Skeffington of Edwards & Angell, L.L.P. as outside counsel to assist in this matter. At this meeting, GTECH proposed relocating its headquarters to Parcel 9 in Providence, entering into a twenty-year master contract with the Rhode Island Lottery Commission and supporting the development of a downtown hotel. This meeting resulting in an agreement between the Governor and GTECH to negotiate an agreement consistent with GTECH’s proposal.
  6. The lead negotiators between GTECH and the State were Mark A. Crisafulli, GTECH Senior Vice President and General Counsel, and Michael McMahon, Executive Director of the EDC. Also involved in the negotiations were members of the Carcieri administration, Speaker Murphy and President Irons, and the finance and legal staffs of both chambers. The Respondent was not involved in these negotiations. Because GTECH would ultimately be seeking property tax relief for its new Providence headquarters, Carol Grant, Chief of Operations for the City of Providence, was also involved.
  7. As a result of these negotiations, on April 9, 2003 a Memorandum of Understanding was entered into among the State of Rhode Island, the ECD, the City of Providence and GTECH. In brief, the Memorandum of Understanding called for the following actions: (1) Introduction of legislation, supported by the Governor, Speaker of the House and Senate President, authorizing the Rhode Island Lottery Commission to enter into a twenty-year Master Contract with GTECH to become the exclusive provider and processor of Rhode Island’s Video Lottery Central Communications Systems and Online Games; (2) payment by GTECH to the State of $12,500,000; (3) GTECH’s development and construction of a new corporate headquarters in the City of Providence and a new manufacturing facility in the Town of West Warwick; (4) GTECH’s investment, by the end of 2008, of one hundred million ($100,000,000) dollars toward the construction and development of the new headquarters and manufacturing facility and to replace or upgrade its hardware and software assets deployed in fulfilling its business operations under the Master Contract; (5) GTECH’s receipt of sales and use tax exemptions on taxable property used in the development and construction of the new GTECH headquarters and manufacturing facility; (6) GTECH’s full-time employment, beginning in 2008, of 1,000 persons; and (7) good faith negotiations among GTECH, the City of Providence and the Town of West Warwick regarding long-term tax stabilization.
  8. The terms of the April 9, 2003 Memorandum of Understanding included a provision that GTECH’s obligations thereunder only became binding upon GTECH if all of the obligations of the State and EDC, including passage of the legislation and execution of the Master Contract, were fulfilled by May 2, 2003.
  9. On April 10, 2003, Senate Bill 1011, "An Act enabling the Rhode Island Lottery Commission to enter into a master contract with GTech," was introduced by Senators Irons, Montalbano, Algiere, Ruggerio and Celona and referred to the Senate Finance Committee. The Act, in general terms, authorized the Rhode Island Lottery Commission to enter into a twenty-year Master Contract with GTECH that would amend the terms and conditions of existing agreements between the Lottery Commission and GTECH, and that would contain terms consistent with those outlined in the Memorandum of Understanding.
  10. Following the execution of the Memorandum of Understanding, representatives of the City of Providence began negotiating with GTECH to arrive at a tax stabilization agreement. Working for the City on this agreement were Carol Grant, Chief of Operations; Joseph Fernandez, City Solicitor; and Scott Spear, outside counsel retained by the City. Working for GTECH were Marc Crisafulli, GTECH Senior Vice President and General Counsel and James Skeffington, outside counsel retained by GTECH. It was understood that the draft agreement, once completed, would go to the Providence City Council for approval.
  11. On April 14, 2003, the Providence City Council passed a "Resolution Requesting the City Council President to formulate a “GTECH Proposal Oversight Commission,” to review any proposed tax stabilization agreement between GTECH and the City. On this same date, the Council voted to retain the services of R. Kelly Sheridan as outside counsel for the purpose of reviewing any and all communications, documents and/or transmittals relative to GTECH’s proposal.
  12. On April 21, 2003, GTECH hosted a reception at its corporate headquarters for the American Legislative Exchange Council (ALEC). On its website, ALEC describes its mission “to advance the Jeffersonian principles of free markets, limited government, federalism and individual liberty among America's state legislators...” The Respondent, who was invited along with all other Rhode Island legislators, was in attendance.
  13. Over one hundred Rhode Island business leaders and representatives of several business law firms were also invited to attend the ALEC reception.
  14. Attorney W. Mark Russo, principal attorney and President of Ferrucci Russo P.C., attended the ALEC reception. At the reception, Russo spoke with GTECH’s General Counsel, Marc Crisafulli. Russo and Crisafulli were familiar with one another through their former law firms. Crisafulli was also familiar with Russo’s partner, Joseph P. Ferrucci, from when Crisafulli and Ferrucci were both associates at a large, Providence law firm. Russo inquired regarding whether Ferrucci Russo P.C. could be of legal assistance to GTECH relative to GTECH’s move to Providence. Crisafulli was not informed that the Respondent was in any way associated with Ferrucci Russo P.C., nor was Crisafulli even aware at this time that the Respondent was an attorney. Crisafulli invited Russo and Ferrucci to come to GTECH the next morning to discuss the matter further.
  15. The next morning, on April 22, 2003, Russo and Ferrucci met with Crisafulli at GTECH headquarters to discuss GTECH’s retention of Ferrucci Russo P.C. Again, Crisafulli was not informed that the Respondent was in any way associated with Ferrucci Russo P.C., nor was Crisafulli even aware at this time that the Respondent was an attorney. Following a meeting of approximately 20 minutes, Crisafulli informed Russo and Ferrucci that the law firm was hired to represent GTECH relative to issues surrounding GTECH’s move into the City of Providence. Later correspondence from Ferrucci Russo P.C. to GTECH describes April 22, 2003 as the “date of our engagement.”
  16. Later that day, on April 22, 2003, Russo, Ferrucci and Crisafulli had a teleconference to discuss legal strategy going forward. This teleconference lasted under one hour. The Respondent did not participate.
  17. A legal bill prepared by Mark Russo for GTECH in early June 2003 for the time period of April 22, 2003 through May 2003 contains references to legal work performed on April 22, 2003 by Russo, Ferrucci and the Respondent. This bill was prepared entirely by Mark Russo and his secretary, without the submission of time sheets by the Respondent and without the Respondent’s knowledge.
  18. This bill indicates that on April 22, 2003, Russo and Ferrucci each billed 4.2 hours attributed to three items:

(1) the meeting with Crisafulli at GTECH;

(2) a conference between attorneys Russo, Ferrucci and Fox [the Respondent] regarding relocation options and strategies; and

(3) a teleconference with Marc Crisafulli.

19. The April 22nd billing lists 2.4 hours for work performed by the Respondent attributed to two items:

(1) a conference between attorneys Russo, Ferrucci and Fox [the Respondent] regarding relocation options and strategies; and

(2) a teleconference with Marc Crisafulli.

20. Notwithstanding an indication to the contrary on the legal bill, the Respondent in fact did not participate in the April 22, 2003 conference call with Marc Crisafulli. This has been confirmed by the Respondent, Crisafulli, Ferrucci and Russo. Russo describes this as a billing error. Accordingly, the 2.4 hours attributed to the Respondent on April 22nd must be reduced by the length of the teleconference, which was an hour or less.

21. Regarding the remaining legal services noted in the bill as having been performed by the Respondent, “Conference with Firm Attorney (J.P. Ferrucci) and Firm Attorney (W. Mark Russo) regarding relocation options and strategies,” this portion of the bill is also inaccurate. The Respondent did not submit any time sheets relative to this notation nor was he aware of any time being billed. Rather, Russo created this billing entry later from his own memory without consulting with the Respondent. Russo has explained that this entry was meant to memorialize the Respondent’s participation in several, general discussions among attorneys at the firm regarding GTECH issues over the entire billing period (April 22 through the end of May).

22. Given these billing issues, GTECH has formally requested that Ferrucci Russo P.C. review its billing and provide GTECH with an explanation as to any billing errors.

23. On April 22, 2003, House Bill 6351, "An Act enabling the Rhode Island Lottery Commission to enter into a master contract with GTECH," was introduced in the House by Representatives Watson, Costantino, Landroche, Montanaro and Almeida and referred to the House Finance Committee. This bill was substantially similar to the previously introduced Senate bill.

24. The House Finance Committee met on April 24, 2003 to hear testimony on, and consider, House Bill 6351. The Respondent was not a member of this committee, and neither testified nor participated in the hearing in any way. Following the hearing, the committee voted to recommend passage.

25. The Senate Finance Committee met on April 29, 2003 to hear testimony on, and to consider, Senate Bill 1011. The Respondent neither testified nor participated in the hearing in any way. Following the hearing, the committee voted to recommend passage.

26. On April 30, 2003, both bills passed the House and Senate. In the House, the Respondent participated in the floor discussion of House Bill 6351. The Respondent seconded motions to pass both bills, and voted in the affirmative for passage of both bills. House Bill 6351 passed in the House with a vote of 62-1, with Representative Wasylyk voting in the negative. Senate Bill 1011 passed in the House with a vote of 61-1, with Representative Wasylyk voting in the negative.

27. Senate Bill 1011 passed in the Senate with a vote of 35-1, with Senator Raptakis voting in the negative. House Bill 6351 passed in the Senate with a unanimous vote of 31-0.

28. Governor Carcieri signed Senate Bill 1011 into law on May 2, 2003. According to Marc Crisafulli, who made the decision to retain Ferrucci Russo P.C., if the GTECH legislation had failed, then GTECH would have scrapped its plans to move to Providence and the specific work that Ferrucci Russo had been engaged to provide would no longer have been required.

29. On May 12, 2003, pursuant to the authority granted by the GTECH legislation, the Rhode Island Lottery Commission and GTECH entered into the previously negotiated Master Contract.

30. With the issues surrounding the Master Contract settled, GTECH’s focus turned to the City of Providence for negotiation of a tax stabilization ordinance. For this issue, Ferrucci Russo P.C. took the lead as GTECH’s outside counsel. Beginning on May 1, 2003, the Respondent began performing legal services for GTECH as a Ferrucci Russo attorney.

31. On May 5, 2003 there was a meeting of the City of Providence GTECH Proposal Oversight Commission. Prior to the meeting, GTECH’s Marc Crisafulli met with Joseph Ferrucci and Mark Russo at Ferrucci Russo’s downtown offices. As they left the law offices to walk to the meeting at City Hall they were met by the Respondent, Gordon Fox, who joined them on the walk to City Hall. Crisafulli recognized the Respondent as Majority Leader of the House of Representatives, but did not yet know that Respondent was an attorney for Ferrucci Russo. In fact, Crisafulli has stated under oath that he was unsure, at the time, why the Respondent was with them. It was not until the meeting of the GTECH oversight Commission that Crisafulli came to understand that the Respondent was associated with Ferrucci Russo and was acting on behalf of GTECH.

32. In May and June 2003, Ferrucci Russo attorneys, including the Respondent, represented GTECH before the Providence City Council and its subcommittees relative to a proposed tax stabilization ordinance. On July 2, 2003, the Providence City Council passed “An Ordinance Establishing a Tax Stabilization Plan and related Tax Stabilization Agreement for GTECH Corporate Headquarters, As Amended.”

33. The enactment of the Tax Stabilization Ordinance brought to a close the principal focus of the legal work for which Ferrucci Russo was retained by GTECH. Although GTECH’s move to Providence will require further legal assistance in areas such as permitting, labor and developer negotiation, GTECH has not to date provided Ferrucci Russo with any further assignments.

B. Travel of the Case

  1. Ethics Commission Complaint No. 2003-6 was filed on October 10, 2003 by Patricia Morgan. Ethics Commission Complaint No. 2003-7 was filed on October 20, 2003 by Robert P. Arruda and Beverly M. Clay in their capacities as officers of Operation Clean Government.
  2. The Complaints allege that the Respondent, Gordon D. Fox, a member of the Rhode Island House of Representatives (hereinafter, "House"), a state elected position, and current House Majority Leader, participated in a vote of the House on April 30, 2003 to pass legislation that would financially impact GTECH Corporation. The Complaints further allege that at the time of said vote of the House, GTECH Corporation had an attorney/client relationship with the Respondent and/or the Ferrucci Russo P.C. Finally, the Complaints allege that the Respondent failed to file a Statement of Conflict of Interest pertaining to the aforedescribed conflict of interest.
  3. For the purposes of this Informal Resolution and Settlement, Complaint Nos. 2003-6 and 2003-7 are consolidated into a single action identified by both Complaint numbers.
  4. On October 28, 2003 and November 14, 2003, the Ethics Commission initially determined that the facts alleged in the Complaints, if true, were sufficient to constitute knowing and willful violations of the Code of Ethics, and a full investigation was authorized. Pursuant to this authorization, the prosecution undertook an extensive investigation into the allegations of the Complaints. The Prosecution team interviewed multiple witnesses, obtained sworn testimony via affidavit and deposition and made use of the Commission’s subpoena authority. Commission investigators sought, obtained and reviewed hundreds of pages of relevant documents and hours of audio and video tape recordings.
  5. Following this investigation, the relevant results of which are detailed above and admitted by the Respondent, the parties have agreed to resolve the Complaints consistent with the terms outlined below.

C. Conclusions of Law

  1. The Respondent, a member of the Rhode Island House of Representatives, a state elected position, was at all relevant times subject to the Code of Ethics in Government.
  2. Ferrucci Russo P.C. was retained by GTECH Corporation on April 22, 2003 to provide GTECH with legal services relative to issues surrounding GTECH’s relocation of its headquarters to the City of Providence. The Respondent knew or should have known of the existence of this legal and business relationship.
  3. The Respondent was a business associate of Ferrucci Russo P.C. This business association existed on April 30, 2003, on which date the Respondent participated in House discussion and vote relative to the passage of House Bill 6351 and Senate Bill 1011.
  4. The legal work for which Ferrucci Russo P.C. was retained was dependent upon the passage of the GTECH legislation. Accordingly, it was reasonably foreseeable that the Respondent’s business associate, Ferrucci Russo P.C., would derive a monetary gain by reason of the Respondent’s official action in the Rhode Island House of Representatives on April 30, 2003. For these reasons, the Respondent had an interest that was in substantial conflict with the proper discharge of his duties in the public interest, in violation of R.I. Gen. Laws § 36-14-5(a).

D. Mitigating Factors

In mitigation of the conduct detailed above, and without in any way depreciating his responsibility for this situation, the Respondent points to the following factors which warrant the informal resolution and settlement of this matter:

  1. The Respondent did not know that his business associates, Mr. Ferrucci and Mr. Russo, had or were likely to secure a business relationship with GTECH prior to the time that legislation involving GTECH came before the House for vote on April 30, 2003, although he should have known this was a significant possibility.
  2. The Respondent did not perform any work as an attorney for GTECH Corp. prior to the House vote on April 30, 2003, although he believes there may have been sporadic, informal references to the pending GTECH project. In particular, the Respondent was not part of a telephone conference with GTECH’s counsel on April 22, 2003.
  3. The Respondent did not submit any time sheets to Ferrucci Russo P.C. regarding GTECH Corp. for the time prior to the House vote on April 30, 2003, and he was unaware that Ferrucci Russo P.C. later billed GTECH Corp. for time attributed to the Respondent for April 22, 2003.
  4. The Respondent has since learned that Ferrucci Russo P.C. did bill GTECH Corp. for 2.4 hours of his time on April 22, 2003. This was an error. The Respondent further understands that this billing was created by Ferrucci Russo P.C. later on in May 2003, that this billing was apparently an effort by Ferrucci Russo P.C. to “recapture” time expended approximately a month earlier, and that the 2.4 hour entry erroneously attributed to the Respondent may have been an effort to estimate a total for a number of informal conversations occurring during the early stages of Ferrucci Russo P.C.’s relationship with GTECH Corp.
  5. The Respondent is not an employee of Ferrucci Russo P.C. He is an independent contractor who received a fixed compensation for his work. Consequently, he did not gain any additional benefit from the time Ferrucci Russo P.C. apparently billed GTECH Corp.
  6. The Respondent’s association with Ferrucci Russo P.C. began in January 2003, four months prior to the events at issue. In that interval, Mr. Fox had not put in place a procedure which would inform him efficiently of prospective business of Ferrucci Russo P.C. in order that he and Ferrucci Russo P.C. might identify any actual or potential conflict with the Respondent’s legislative responsibilities.
  7. The Respondent has had no prior complaints filed against him during his tenure as a legislator.
  8. The Respondent, through counsel, went to the Commission shortly after the complaints were filed and sought to resolve them through the admission of responsibility he makes here. Since that time, he has cooperated fully with the Commission.
  9. The Respondent believes that whatever business relationship Ferrucci Russo P.C. had developed with GTECH prior to April 30, 2003, it did not affect the House vote taken that date, or his activities as a legislator.
  10. The Respondent is terminating his relationship with Ferrucci Russo P.C. in order to ensure that his legal practice does not create a conflict with his legislative duties and that he be in a position to maintain full control over the nature of the legal business which he accepts.

E. Settlement

Pursuant to the above Findings of Fact, Conclusions of Law and Mitigating Factors, the Prosecution and the Respondent agree, pursuant to R.I. Gen. Laws § 36-14-13(d), to the imposition by the Commission and to payment by the Respondent of a civil penalty of Ten Thousand ($10,000) Dollars. The above terms represent the full and complete Informal Resolution and Settlement for Complaint Nos. 2003-6 and 2003-7.

Jason Gramitt, Commission Prosecutor

Gordon D. Fox, Respondent

Lise J. Gescheidt, Counsel for Respondent

John A. MacFadyen, Counsel for Respondent

Note: The Commission accepted the settlement and imposed a $10,000 civil penalty. (January 20, 2004)