Cicilline, Costantino defend Capco loan

PROVIDENCE, R.I. (WPRI) - Two powerful Rhode Island Democrats are defending their support two years ago for government assistance to politically connected Capco Steel even though the company has defaulted on a loan guaranteed by the R.I. Economic Development Corporation.

Congressman David Cicilline and former House Finance Committee Chairman Steve Costantino helped Capco secure federal and state dollars in 2010, and within months used the company as a prop in their political campaigns for Congress and mayor of Providence, respectively. Cicilline won, while Costantino lost and is now part of Gov. Lincoln Chafee's cabinet.

Cicilline used Capco Steel's workers and its CEO in a mid-2010 campaign commercial months after his administration provided it with stimulus money. Costantino received the endorsement of Capco's CEO and outlined his jobs plan at an event at its headquarters that June, soon after he sponsored a new loan-guarantee program that benefited Capco first.

The quasi-public EDC had to begin making payments to cover the Capco loan this past February "when the company began experiencing financial difficulty," EDC spokeswoman Judy Chong disclosed Monday. Capco had a $4.6 million outstanding loan guarantee with the EDC as of June 30, she said.

Costantino told Target 12 he used Capco as a location for his campaign event because it was in his district and his grandfather worked at the same building when it was the Nickerson File Co. "Capco's part of Rhode Island," Costantino said Wednesday at the State House. "I used it more as an icon than anything else."

In a statement to Target 12, Cicilline praised Capco as an example of a manufacturer that has persevered despite "unfair competition" from the trading practices of other countries.

"The Caparco family built and grew a business in Rhode Island that has provided good jobs and workforce training for their employees," Cicilline said. "Mike and Pat Caparco worked incredibly hard to support the community with a particular focus on hiring residents from the local neighborhood. ... I am proud to have their support."

That support has been significant. The Caparcos donated $13,600 to Cicilline during his campaigns for mayor and Congress and gave $15,000 to a joint fundraising committee formed by Cicilline and the Democratic Congressional Campaign Committee, according to records reviewed by Target 12.

Over the years the Caparcos also contributed smaller amounts to Costantino, former Gov. Donald Carcieri, former Treasurer Frank Caprio, Providence Mayor Angel Taveras, former Providence Mayor Joe Paolino, Lt. Gov. Elizabeth Roberts, Congressman Jim Langevin and U.S. Sen. Sheldon Whitehouse, records show.

Their company's Acorn Street facility was the backdrop for a major political event in March 2010 where Carcieri signed the expanded EDC loan program into law and announced Capco would be its first beneficiary. Costantino co-sponsored the bill and attended the bill-signing along with Cicilline, former Treasurer Frank Caprio and other officials.

"You couldn't make a better decision, a better investment, in a better company," Cicilline said at the announcement.

Two months before, Cicilline had used federal stimulus money to create Jobs Now! Providence, a temporary program offering subsidized jobs to low-income residents, and was joined by Costantino at its January launch. Capco Steel was among the Jobs Now! beneficiaries, with the program picking up half the cost of wages for 14 employees.

Cicilline visited Capco that June to talk with workers there about the program. By August, CEO Caparco was appearing on Rhode Islanders' TV screens in a campaign commercial for Cicilline with the same title as the stimulus program: "Jobs Now." Caparco told voters: "This is what we need in Congress, somebody who gets things done."

On Thursday, Republican Brendan Doherty criticized Cicilline for allowing "the appearance of corruption" in Providence's loan programs during his tenure as mayor. "Government fails us all when it provides special treatment to the well-connected and leaves the average taxpayer to foot the bill," Doherty said.

Carcieri has remained in seclusion in recent months as 38 Studios, Curt Schilling's video game company, unraveled less than two years after receiving a $75 million loan guarantee through a new program championed by Carcieri and Costantino, among others. The problems with 38 Studios and now Capco are causing new scrutiny of taxpayer loan guarantees.

State Sen. James Sheehan, co-chairman of the Joint Committee on Economic Development, questioned why the EDC made a loan guarantee to a steel-fabricating company in 2010 considering the deep downturn in the housing and construction sectors in recent years.

Costantino said responsibility for granting the guarantee to Capco rested with the executive branch, not lawmakers. "We just authorized a program," he said. describing himself as "very disappointed" about Capco's problems. "I think everybody thought this was a strong Rhode Island company, and it's a sad situation."

"At the time we were set with a set of situations that companies needed tools, everyone was saying Rhode Island wasn't business-friendly at the time, there are other states that had the same tools - we just rely on the government to monitor the tools that they ask us to pass," he said.

Ted Nesi ( tnesi@wpri.com ) covers politics and the economy for WPRI.com and writes the Nesi's Notes blog. Follow him on Twitter: @tednesi

Tim White ( twhite@wpri.com ) is the Target 12 investigative reporter for WPRI 12 and Fox Providence. Follow him on Twitter: @white_tim