Augusta’s mayor, his two hats, and $400,000 (continued)
	Easy money from the government Just say the magic word: "Call center to bring 300 jobs to Augusta," trumpeted the Bangor Daily News on December 24, 2003 — a welcome Christmas gift to the beleaguered workers of the capital-city area. One after another, big employers — Kirshner’s, Sanmina-SCI, Microdyne, American Tissue, Ames, Pomerleau’s Furniture, and others — had recently closed up or, in the case of Central Maine Power and Adelphia, downsized. At a press conference the previous day at the Central Maine Commerce Center — owned by real-estate company Harper’s Development — Governor John Baldacci and Augusta Mayor William Dowling, who also is Harper’s chief operating officer, formally announced that Access Worldwide Communications was setting up a telemarketing branch of its TelAc Teleservices Group at the huge building off Civic Center Drive, formerly the SCI electronics plant. Access Worldwide additionally operates call centers in Virginia, Florida, Maryland, and New York — employing, the company said, 1300 people. The Christmas spirit went both ways. Officials described how the state and city governments together were giving Access a $400,000 telephone switch and how the state was donating $242,500 worth of employee training — not to mention the usual state and local tax concessions that many big corporations take advantage of in Maine. Some of these are described in a state document written for Access as "the effective elimination of personal property tax on machinery and equipment and the reimbursement of qualified employees’ state income tax withholdings." The state government calculated its intended contributions to Access as $851,000 over 12 years, approximately equaling the investment in "machinery and equipment" Access claimed to be making in Maine (once the telephone switch is subtracted from a list of its investments that Access supplied to the state). Add in the $356,000 actually spent from the grant for the switch and the state is contributing $1.2 million to Access. In exchange, Access provided jobs. But how many? The company, which handles telephone calls for pharmaceutical giants like Pfizer and telecommunications companies such as Sprint, had in fact stated in correspondence with the city and state that it could hire as many as 350 workers, a large number for a single employer in Central Maine (although it would pay the vast majority of them around $9 an hour or $19,000 a year, a poor salary even for Maine). But the number of Access workers has shifted. In a Kennebec Journal article in May 2004, after the call center had begun operation, Augusta economic development chief Michael Duguay said, "My guess is that there may be up to 200 people by the end of this year." Access provided this figure, he said later. Access officials refused to tell the Phoenix the number employed at present in Augusta, but a lower-level manager who responded when this reporter knocked on the call-center door said 135 people were there. Before Access higher-ups shut off communication with the Phoenix, Ted Jordan, its Virginia-based chief information officer, admitted that the switch obtained with government funds could not handle the calls of 300 or more workers, although he said it could be upgraded. Reflecting on the number employed, Duguay said he feels "covered" by the fact that the call center has at least 40 people, the minimum for the company to qualify for the state and city grant for the $400,000 switch. When asked about the 300-plus-employees claims that were used to promote the company for government assistance, Duguay responded, "That’s the governor speaking." But in fact, Duguay had used the number 300 in a written pitch to state officials to secure the grant, as city files show. Attempting to explain the discrepancy, he said, "I only convey what people tell me." Another number has some fog surrounding it. The grant was for up to $400,000, but the city actually paid $356,000 for the telephone switch. The equipment came from the Rockwell FirstPoint corporation and is called an automatic call distributor (ACD). Did the city get a good deal for this sort of switch? "Do I know what it costs? No," Duguay answered. Access quoted the Rockwell price, he said, and provided prices for alternate switches. Access convinced the city and state that it had to have this particular Rockwell Spectrum ACD switch because it needed it to be compatible with telephone equipment in the company’s other call centers and because Access already had software licenses for it. Accepting these arguments, the state did not require competitive bidding. Augusta’s finance director, Ralph St. Pierre, said his role in checking out the value of the switch was limited: "I verified that Access received the stuff and that they accepted it." But Orman Whitcomb, the state economic development official who signed off on the $400,000 grant, passed the buck back to the city, saying it was the city’s responsibility to make sure the switch was purchased at a "reasonable cost." Perhaps the price was right, but the state did not listen to its own experts in verifying it. "It’s a ridiculous price . . . it’s pretty expensive," given the number of people Access has in Augusta, said David Rodrigue, the official in charge of telephone services for all state agencies. (When he spoke, he had been told Access probably employed about 80 workers, a number provided by Duguay.) And if Access already had licenses for the software, why would this piece of equipment cost so much, Rodrigue wondered. Other questions about Access Other numbers related to Access Worldwide also present problems. Its publicly available financial statements reveal a struggling company. Over the past 10 years its stock has nose-dived, dipping as low as 61 cents a share in 2004. Its revenues have gotten worse over a four-year period. In 2001, it suffered a $37-million loss. In 2004, it lost $1.4 million. It has a $3.9 million negative net worth. In the company’s cautionary notes to financial data reported to the federal Securities and Exchange Commission, Access says much of its business comes from a few companies, and it would suffer big damage if it lost a single big client in this highly competitive industry. In addition to a dramatically shrinking workforce — dropping from 1300 to 700 by the end of 2004 — it has had some difficulties with banks, its reports to the SEC reveal. The company recently announced its intention to open a call center in the Philippines. Apparently, the $9 an hour it pays telephone agents in this country is not low enough. Seemingly related to this announcement was another that a prominent Filipino businessman, Alfonso S. Yuchengco III, had joined its board. He is the scion of a Filipino family with widespread industrial and financial interests. Alfonso Yuchengco — apparently his father — is a "telecom taipan" or tycoon, who recently was advised to stay out of the United States to avoid being served with a subpoena in a US antitrust investigation, according to the Philippine Daily Inquirer. In its annual March 30, 2004,10-K filing with the SEC, intended to keep potential investors up to date on its activities, Access bragged, "As part of the development of our communication center in Maine, we are budgeted to invest more than $400,000 for a Rockwell Spectrum Automatic Call Distributor." But at this reporting date the city had already voted to accept the money from the state for the Rockwell switch and give it to Harper’s for free use by Access. Should the governor have so strongly supported such a company? Asked if the governor had second thoughts about Access, Baldacci’s spokesman only replied that there is "a lot of stuff here that we can’t confirm." What may count with some Maine politicians is not so much that good jobs are solidly provided, but that the politicians can say they are providing them. — Lance Tapley

WHO WAS WATCHING THE HENHOUSE?

If city attorney Langsdorf did not vet the $400,000 deal between the state and the city, who did? Did anyone scrutinize with a legal eye the grant contract between the city and state? Benjamin Lund, the Lewiston lawyer brought in by the city in Langsdorf’s stead to prepare some documents in the affair, including the language of the letter of credit from Harper’s partners, did not look at the contract, he said.

"I’d basically say no" — no attorney signed off for the city, recalled Michael Duguay.

It also turns out, according to Orman Whitcomb, the state’s community development director, that no attorney for the state specifically reviewed the contract that turned the money over to the city. In the end, the money amounted to $356,000 in actual payments for the switch and its software.

If an attorney had looked at the contract, perhaps she or he would have noticed this clause:

"No State or Local elected official . . . shall, directly or indirectly, have any financial interest in any property to be included in, or any contract for property, materials, equipment, or services to be furnished or used in connection with the construction or operation of the Project."

When asked to comment on the fact that no lawyer for the city had vetted the contract while there was an apparent conflict of interest involving Mayor Dowling, Kim Davis, a city councilor, said: "In simple terms, it sounds unethical . . . Maybe the council needs to be more vigilant."

She added: "I assumed all the legal issues had been dealt with. I didn’t know that [the contract] hadn’t been reviewed."

The feds hadn’t reviewed it either. The field office director of the Department of Housing and Urban Development, Loren Cole, said his department did not regularly review contracts the state signs to distribute HUD’s block grants, but he expressed great interest in the dual role of Mayor and Harper’s chief operating officer Dowling. Soon after an initial conversation with this reporter, Cole called back to say — with New England HUD spokesperson Kristine Foye also on the line — "HUD will be looking into the awarding of this grant."

(In a seemingly bizarre turn of events, Cole "very unexpectedly and quickly" retired from HUD on April 4, said Foye, and taking over for him was William Burney, former Augusta mayor and, as the city’s school board chairman, an official who is dependent on Dowling. Cole said he retired simply because he had spent 34 years at HUD. Foye said the review will be run out of Boston and Manchester offices, and Burney will have nothing to do with it. She said a review of all Maine block grants is scheduled for April through June, and "we will look more closely at this project." HUD will examine the state’s distribution of grant money "to make sure they are doing what is required to ensure their grantees are in compliance with all regulations.")

Augusta city officials defend Dowling and the deal, although City Manager Bridgeo responded, "Sure," when asked if Dowling had an indirect benefit because his company would prosper in part because of this $400,000 grant from the government, which allowed it to obtain a sizable tenant. According to Harper’s, Access will pay about $140,000 a year to lease 15,000 square feet of space for five years — or $700,000 total.

Bridgeo added, "I can understand why they think that," of people suspicious that Dowling could not separate his two roles.

But the city manager, who volunteered that he used to teach governmental ethics, asserted, "the mayor has no executive authority" under Augusta’s council-manager form of government (though the mayor is elected directly by the voters, unlike in Portland where the mayor is chosen by the council from its members). While Bridgeo said he "can’t ignore the fact that the mayor has a day job," he said he has looked as hard as he could "to make sure there is no inappropriate gain."

St. Pierre, the city finance director, and Duguay, the development director, both said that because Dowling was not an owner of Harper’s, they believed he did not benefit from the deal involving the switch, and therefore the contract with the state was not violated.

The state’s man who signed the contract, Whitcomb, also contended that Dowling "directly or indirectly didn’t benefit." He said he had had very little contact with Dowling in connection with the grant, though he admitted Dowling gave him a tour of the Central Maine Commerce Center.

Dowling, whose office at the entrance to Harper’s big building is next to Access/TelAc’s, denied any conflict of interest: "I don’t have both hats on at the same time." A small man in his mid-fifties and a former state Bureau of Motor Vehicles official, he sees his mayoral job as "volunteer" work. In his third three-year term, he receives only $2400 a year as a city official. By contrast, his Harper’s position pays $60,000 a year, he said. He manages the company’s day-to-day operations. He said he has no ownership interest in the company and received no bonus or promotion for his part in the Access deal.

He admitted, however, that bringing a tenant to the Harper’s building would enhance his status within the company.

"But I do lots of other things," he protested. The Access deal was "just one thing" he did for the company. He worked on it, he said, for the "economic benefit of those jobs."

Mattson, the youthful, affable president of Harper’s, confirmed that Dowling had no equity in the company. He maintained that the deal for the telephone switch was done because "Access said the only reason [it was] coming to Maine is that switch."

"I do understand the perception" of Dowling’s conflict of interest, he conceded, adding, "Maybe the city should tighten those things up."

He also maintained that the switch has "no value for me." Eagerly, he said, "I will sign a document right now giving that switch to someone." But he admitted that with the switch his company obtained Access in a five-year lease for the space.

SOME GRUMBLINGS HAD BEEN HEARD

Dowling’s business connections have not been without critics in Augusta. This past winter, he nominated Gary Peachey, president of Peachey Builders, a Harper’s Development former business partner and its contractor on all big projects, to the city’s economic development commission, which oversees Duguay’s activities. Peachey is also chairman of the Augusta Board of Trade, a group of the city’s most influential business people who hold private meetings to promote commercial development.

Publicly objecting to the nomination was Councilor Davis, who also is a Republican state representative, along with a couple of former city councilors. They reflected the feeling of some people that Augusta’s boom in regional shopping malls is threatening the city’s residential quality of life. They questioned unbridled commercial development in the name of jobs.

"Citizens are not feeling real confident in the way the city is being administered," said Davis. Explaining her opposition to Peachey’s appointment, she added: "There was talk by residents that there could be a conflict of interest because [Peachey] worked for Harper’s as a contractor and now he’s selected by the mayor to be on the Augusta Economic Development Commission."

In the end, the council approved the Peachey nomination, with Davis casting the sole negative vote.

The mayor has never hidden his twin roles. But if he felt he needed to remove himself from the city council’s discussion of the gift to Harper’s because of conflict of interest, why didn’t he previously remove himself from discussions with city officials on this subject?

The defense of Dowling by the city manager and other city officials could be viewed as a perception of him through a biased light, since as mayor he is in a sense their boss, but they as well as Dowling himself give the strong impression that they believe the word "jobs" justifies a multitude of things including conflict of interest. Their attitude gives credence to the idea that, in Maine, this is business as usual — at least, for some people.

Lance Tapley can be reached at ltapley@prexar.com