Donald Vaccaro, the boss and business partner of Board of Education member Darnell Goldson, profited off school contracts by offering quick cash that a company needed for painting gigs in exchange for a percentage of the eventual city payments.
Then the city repaid Vaccaro directly out of government funds, rather than wait for the painting company to pay him back.
Through a little-known financial mechanism, RCN Capital, Vaccaro’s commercial lending firm, receives checks directly from the city. That payment from the city is for work that’s been done by contractors to whom RCN Capital fronts cash.
Netting over $300,000 last year, RCN Capital is currently the only company that has this special arrangement with the city, said Michael Fumiatti, New Haven’s purchasing agent.
RCN’s business — a form of payday lending for contractors — is technically known as “factoring.” Typically, factoring firms provide cash to small businesses that lack the assets or track record to qualify for a bank loan. Without financing, a growing business can end up with cash flow problems. That’s especially true for government contractors that often wait months for invoices to be processed.
To help small businesses pay the bills while waiting for government reimbursements, factoring firms buy up invoices for cash. They alert the agency they should be paid instead, and wait around while a higher interest rate accrues. The small business can pay its employees, while the factoring profits from a riskier investment.
That arrangement is exactly what RCN Capital, where Board of Ed member Goldson managed public relations as a day job, offered to Todd Howell’s NESAIM, LLC, a local business that competed for odd jobs within the schools. Goldson is also a partner with RCN’s owner on other business ventures.
Facing questions about whether those transactions constitute a conflict of interest, Goldson said he played no direct role by the time RCN made a deal with NESAIM. Goldson said he never used his elected position to influence NESAIM’s role in the school district; he said he has made a point of avoiding any conflicts of interest. Rather, he said he has worked hard to make contracting more transparent and to offer opportunities to minority businesses.
More broadly, the case of RCN and city contracting touches on questions of how New Haven school board decisions are made, and by whom; as well as questions of how best to create opportunities for minority-run small businesses to obtain government work.
Through an open bidding process, Howell has won at least five contracts from the Board of Education since 2015. He striped parking lots (up to $30,000), landscaped (up to $74,000), and provided on-call painting and welding (up to $75,000).
Three of those contracts were approved in 2016, while Goldson co-chaired the board’s Finance & Operations Committee. That panel reviews how the district allocates millions of dollars in services and capital improvements, before sending them to the full board for a vote.
Goldson’s committee didn’t vote on one deal: a $19,000 contract to pick up trash-filled dumpsters at Leeder Hill, for which Howell had submitted the lowest bid of three companies. That’s because the superintendent has the authority to approve contracts under $20,000, said Will Clark, the district’s chief operating officer.
When his school contracts were first approved, Howell tried to obtain his financing elsewhere, including from Riviera Finance, a factoring firm with 20 locations nationwide. But after running into problems, Howell made the switch over to RCN Capital last year, according to emails obtained by the Independent through the Connecticut Freedom of Information Act.
On Feb. 27, 2017, Howell’s lawyer, David Weiss, sent a verification agreement to Chris Neary, the city’s deputy corporation counsel. That’s a formal document that tells the city to pay the “factor” directly, rather than the contractor.
Based on rules in the Uniform Commercial Code that Connecticut adopted in 1959, the city pays RCN, not NESAIM. That system’s in place so that contractors aren’t paid twice, once up front by the factoring company and then again by the agency. But often, governments are confused about the transaction, said Bert Goldberg, the executive director of the International Factoring Association, a trade group with over 450 members. “They’re not used to seeing that,” he explained.
Neary wouldn’t approve the RCN payment agreement as originally submitted. He raised questions about the city’s liability. He suggested revising the wording to say that the invoice amounts were correct to the school board’s “best knowledge” and that other “claims and defenses” in NESAIM’s original contract might stop a payment to RCN.
Justin Murphy, RCN’s attorney, rejected the proposed changes. “I’m not sure this factoring arrangement can work,” he wrote in an email on March 6.
The same day, Howell emailed John Rose, Jr., the city’s corporation counsel. “Neary will not let these be signed,” he wrote, attaching six invoices, worth $12,540, for trash pickups at ESUMS, New Haven Academy, and Dr. Mayo Childhood School.
On March 7, Clark weighed in on the subject. But we don’t know what he wrote. The city has withheld the release of the contents of his email, citing the Freedom of Information Act’s exemption for attorney-client privilege. Clark declined to share a copy of the email.
RCN eventually relented. Murphy agreed to Neary’s proposed changes, and checks started going out a month later, on April 7.
In the city’s view, it doesn’t matter who’s paid, Fumiatti said. “We don’t care who you assign your payments to. As long as we get the work, we’re whole,” he said. And anyway, by law, he claimed, “we can’t deny them.”
In all, RCN Capital collected 27 payments from the city, totaling $300,357. Board of Education contracts made up roughly one-sixth of that sum.
According to invoices obtained through FOIA, the largest line-item was for repainting 30,000 square feet of walls at Domus Academy, a month after the district ended its eight-year relationship with the alternative middle school.
Vaccaro controls a network of companies in real estate, finance and entertainment. He’s best known as chief executive of TicketNetwork, a marketplace for resale tickets to concerts and sports games. As a destination for scalpers, the company had to pay a $1.4 million settlement to the Federal Trade Commission in 2014 for deceptive marketing practices.
Vacarro is also the majority stakeholder in Goldson Vaccaro Productions, LLC, a gospel music series in which Goldson also holds equity. Jackie James, the former Democratic Town Committee chairwoman who resigned as the city’s small-business chief after publicly disagreeing with the mayor’s budget, said at a press conference last June that she was hired to run its 19-city tour.
Once a high-profile player in Connecticut political circles, Vacarro saw his status dropped after a drunken outburst at a 2012 Oscar-viewing party ended with his arrest for a second-degree hate crime and other charges. At an event where the lieutenant governor, attorney general, and other top officials were in attendance, Vaccaro allegedly groped a woman and threatened with racial slurs a bouncer who interfered. In the aftermath, politicians said they planned to return any campaign contributions to charity; Vacarro, who received two years of special probation that cleared his record, took a month-long leave of absence to enter rehab.
Since then, Vaccaro publicly rebranded himself as a philanthropist, with the help of a New Haven powerbroker and Goldson ally, the Rev. Boise Kimber, who has developed working relationships with, among others, the governor and the mayors of New Haven and Bridgeport. With Kimber’s assistance, Vaccaro started Grace Church Websites, a TicketNetwork subsidiary that builds free web pages for houses of worship in poor areas. And he provided a $385,000 loan that a member of Kimber’s ministers’ association needed to complete a stalled church expansion in Hartford’s North End.
Kimber denied receiving payment from Vaccaro for the help with his business ventures.
“I acted as an advisor,” Kimber said, of Grace Church Websites. As president of the Connecticut State Missionary Baptist Convention and a national officer of the National Baptist Convention, “I know churches who didn’t have websites. I was able to contact the state presidents across the country to put out a letter and ask people did they need free websites.”
He also agreed to help Vaccaro find people to hire at his company, Kimber said. “I helped Darnell set up job fairs around the state. We did the job fairs at churches.” Vaccaro “donated to the building fund at our church,” Kimber added, but he was never personally paid for his efforts. Kimber’s church, First Calvary Baptist on Dixwell Avenue, is in the process of constructing a new building.
In recent years, Kimber, a politically active reverend, has played a visible role in Board of Education decisions while maintaining close political and business relationships with Vaccaro and Goldson. Goldson described Kimber as his “good friend” and Vaccaro’s “religious mentor.”
Kimber spoke up regularly at New Haven school board meetings, often far exceeding the three-minute time limit and refusing to sit down when asked. At first, he denounced then-Superintendent Garth Harries for low test scores and for not working with more local, minority-owned businesses.
When the body transitioned to a hybrid with two elected members, he became the driving force behind Goldson’s candidacy. Goldson proceeded to take up the cause of lambasting Harries at board meetings.
Goldson said Kimber has been helpful to him. “When I was in a bad place financially, when I was unemployed, Kimber was one of the few people who stood by me and was supportive,” he explained. “I’m always going to be supportive of that guy. It [has] nothing to do with contracts or anything else; he is a good friend. If what he comes to me with makes sense and doesn’t hurt anybody, then I’m more than willing to be supportive and listen to him. That’s a fact.”
After Harries and members of the Harp administration began meeting with the reverend to discuss cooperating, Kimber switched sides, attacking board members who wanted to fire Harries.
Harries’ team in turn supported Kimber’s pitch to create a boys-only charter school, on which he never denied he’d be on the payroll. The Harp administration drew up plans, and Goldson took up the cause of advocating for the school. Then, without any approval, the Harries administration sped ahead and included the school in an official recruiting expo. After a school board member exposed the maneuver, Kimber’s proposal was derailed.
“I’ll be back,” the reverend vowed last spring.
Meanwhile, in his first year in office, Goldson became co-chair of the Board of Education’s Finance & Operations Committee, where he reviewed and approved all the district’s contracts — including several that went to Howell’s company and, indirectly, to his boss’s company. And like Kimber, he became a dependable ally of the mayor’s in the board’s drawn-out process of picking Carol Birks for superintendent, despite an outcry from parents and students.
Mayor Toni Harp invited Vaccaro’s and Goldson’s RCN, which stands for “Real Cash Now,” to take a central role in the city’s plans to drive jobs to the Elm City’s small businesses. The idea was to help find ways to enable minority contractors, who are often short on cash, to obtain city work. Harp invited both RCN and NESAIM, LLC, to participate in a roundtable. And RCN was a featured speaker at a December 2016 event to ready minority entrepreneurs to bid on parts of the $45 million construction of the Strong School expected to begin within two months.
“You submit to us an invoice, and we pay you within 48 hours so you can pay your vendors, and we [then] get paid by the city,” an RCN employee said at that event. “We provide immediate financing, so a contractor can pay his vendors.”
On Sept. 29, 2017, Harp received a $1,000 contribution from Vaccaro toward her reelection campaign.
In an interview with the Independent, Goldson argued that he did nothing wrong because he kept his distance from RCN over the past year.
“It was a non-issue at the beginning. I didn’t see there being any conflict,” Goldson said. “Even when I was at RCN, I was not involved in the loan piece of the organization. I don’t have that kind of influence.”
Goldson said that he was uninvolved in recruiting Howell to switch over to Vaccaro’s services. NESAIM and RCN were both invited to the mayor’s roundtable for minority contractors. Goldson was in attendance, but he said another RCN employee led the initial outreach.
Goldson didn’t attend later follow-up meetings with Howell where the factoring agreement’s terms were finalized, he added. That’s because Vaccaro took Goldson off RCN in late 2016, to give him more time to focus on Vaccaro’s TicketNetwork, he said.
“I’ve got so much on my plate, I don’t have any time to walk around the building to their shop to even deal with that,” he said. “[Howell] was there; I didn’t even know he was there.”
Goldson did talk up factoring to the New Haven Register last April, a month after Howell, who was featured in the article, became RCN’s client. In the article, Goldson is described as RCN’s public relations coordinator — a role that’s still on RCN’s website more than a year after Goldson said he transitioned away from RCN.
Goldson also said he once called someone in Executive Director Karen DuBois-Walton’s office at the Housing Authority of New Haven to help out his coworkers in tracking down a delayed payment for a NESAIM invoice. He showed some familiarity with Howell’s deal, saying that RCN wasn’t making much money off NESAIM’s invoices.
“They were making something like 2 percent on the loan, and there were like a couple hundred of thousand dollars in loans,” Goldson said. That would be at the low end of the industry standard of 1 to 5 percent, according to Goldberg.
Howell confirmed that RCN charged 2 percent interest for the first 30 days, a rate he called “reasonable.” After that, he said, the fees increased, by a schedule he didn’t have in front of him. Those extra charges added up when some invoices took up to five months to process.
Vaccaro could not be reached for comment at the South Windsor offices on Thursday and Friday.
“Here’s the problem: The guys managing RCN didn’t see it as a really productive product for them, so they didn’t really push it. It just didn’t make any money for them. Don was doing it out of the goodness of his heart,” Goldson explained. “I didn’t have the time to focus on it. I really wish I could have brought 10, 20 contractors in who could have set a critical mass that could have made it worthwhile for the people at RCN. But it didn’t happen.”
Goldson said he has long been an advocate for minority-owned small businesses, the “guys that weren’t part of the old boys’ network.” He said he believes they’re the city’s economic drivers. And he said he plans to continue fighting for them to get more work from the school district.
“I worked hard to try to figure out a legal way to break the ceiling for these minority contractors. I think everybody knows that; I told everybody that’s what I was doing,” he said. “All that money is leaving the city. I felt it was important to start trying to stem that exodus of dollars out of New Haven.”
Goldson also argued that he’s been responsible for cleaning up the school board’s contracting process, making sure it is “open and fair.” When he joined the board, Goldson said, he observed several tricks meant to avoid oversight, like approving contracts months after work began and renewing extensions to avoid competitive bidding.
“It hasn’t been as easy as I hoped it would be, but we’ve made some incremental changes,” Goldson said. “Todd was one of those guys that got one more contract that he wouldn’t have gotten if we hadn’t had a more open process.” He went on, “It’s kind of disappointing to me that I was not able to help more contractors, to tell you the truth.”
Goldson also questioned why there is talk of a conflict of interest now.
“If their biggest take on me is that I used to work for an organization that provided loans to a contractor for the Board of Education, then go ahead and take your shot. I’ll be proud of that,” Goldson said. “That was two years ago, and I know why it’s coming up now. Because Ed Joyner is transitioning off of the presidency, and they’re trying to destroy the character of anyone who might be a leader on the board.
“I’ve been in politics for a long time,” he continued. “I’m not beholden to anyone in the school system; I do what I think is right for the students. The people who are spreading that stuff are the people who have the real conflicts, and they’re trying to deflect.”
Meanwhile, Todd Howell has closed down his shop, saying the “nickel-and-dime contracts” he was getting from the city couldn’t sustain a business. It didn’t help that the city’s payments typically take 45 days to process, according to Fumiatti, while fees to the factoring firm racked up.
“The city’s system is trying to destroy small business,” Howell said. “I’ve gotten sick over it; I’ve had health issues over it. My first factoring company quits. Then, on the second, Chris Neary doesn’t want it to go through. For 45 days, I’ve got nothing. A small business can’t operate on that.”
That outcome prompts another question: Is the city’s 16-year-old Small Contractor Development program doing enough to help minority entrepreneurs take on bigger jobs?
Howell’s precarious finances, which he attributed in part to school officials not allowing him to max out his contracted amount, made him a candidate for factoring. His troubles with money landed him in court multiple times, including a 2008 criminal conviction for tax avoidance that got him sentenced to four years of probation. And in the last two years, Howell faced three more lawsuits filed against NESAIM for unpaid debts.
A Seattle company who loaned him four vehicles, a lawn mower, ladders, power tools and other equipment said he’d stopped making payments on his five-year lease, leaving a $93,915 balance. HEDCO Inc., a Hartford economic development arm, came after Howell for not paying back a $150,000 loan (at 3 percent interest) and a $25,000 loan (at 5.5 percent interest). And his landlord at an auto garage at 281 Chapel St. tried to evict NESAIM for failing to pay its $1,400 rent.
Despite those financial challenges, Howell was able to get money from RCN Capital, because factoring firms make a different calculation than banks do. They’re not interested in the credit-worthiness of a business-owner like Howell, but in the dependability of the agency paying him. After the work’s been completed and an invoice submitted, it’s simply a matter of time until the city comes through with a payment.
That’s a pretty safe investment, said Matt Nemerson, the city’s economic development administrator. “Smaller companies with tighter margins have less business and make less money. It’s important to always look at any program that extends short-term credit to make sure they’re not taking away the profits that a company needs to grow and get more contracts,” he said. “What’s the actual risk that a lender is exposing themselves to? If that’s guaranteed, then the money should be pretty cheap. That higher interest rate and cost of capital should only be when there’s an actual risk.”
Nemerson said Vaccaro’s philanthropy earns him the benefit of the doubt that he’s charging a fair rate. “There’s no reason not to believe he’s not paying it forward,” he said.
But, Nemerson added, factoring firms still charge a premium for handing over cash that no one else will. “Money’s a commodity. There’s nothing magic about it,” he said. “That’s part of capitalism.”
Ideally, the city should have a relationship with a nonprofit consortium of banks who’d make riskier loans available at lower interest rates. And contracts set aside for minority-owned small businesses should include some with higher profit margins than construction gigs like painting walls or installing sheetrock, he added.