Governor Carcieri called for Sen. Stephen D. Alves to step aside as chairman of the Senate Finance Committee yesterday, reacting to reports that the FBI is investigating the West Warwick Democrat for allegedly killing tax-incentive legislation for a Pennsylvania trucking company.

Carcieri said that he was troubled by a story in The Sunday Journal regarding Alves’ opposition in June to a bill that would have provided “project status” to A. Duie Pyle, exempting the company from paying some $300,000 in state sales tax on materials for a new $9-million distribution facility in Johnston. In return, the company vowed to create 120 well-paying jobs.

The FBI is investigating allegations that Alves killed the legislation because he was angry with Johnston Mayor Joseph Polisena for not investing $29 million in pension funds with Alves, a stockbroker. The probe is part of a larger investigation of State House corruption, dubbed Operation Dollar Bill.

Carcieri’s comments echoed Monday’s call by Republican state chairman Giovanni Cicione that Alves should relinquish his chairmanship until “this FBI cloud ... is resolved.” Also yesterday the head of the citizen reform group Operation Clean Government urged Alves to step down.

“It’s very, very upsetting,” said Carcieri in an interview. “I have no idea where the federal investigation is going ... but to apparently play politics when we’re trying so hard to bring companies like this into Rhode Island is very, very disturbing.”

Carcieri said that he would like to hear from Alves, who has remained silent so far, why he opposed the Duie Pyle project status legislation but not two others that passed.

“I’m not sure why he’s not weighing in,” Carcieri said. “The House says that the problem [with the legislation] was with the Senate. I’d like to know, what was the problem? I want an answer, because this is an important economic development tool.”

Alves, who recently left his job at UBS Financial Services, said Monday that he won’t step down, but declined further comment.

Two people who tried to rally late support for the tax incentive, Sen. Christopher Maselli, D-Johnston, and Duie Pyle lobbyist Jeffrey Britt, told The Journal that Alves opposed the measure. Britt said that Alves also expressed anger to him that Johnston had not steered its pension-fund business to Alves.

Carcieri criticized the General Assembly for passing a law last year requiring the legislature to approve tax incentives proposed by the state Economic Development Corporation, saying that it should remain an executive function “to take the politics out of it.”

“They said, ‘We need oversight,’ and now here we are, with their fingers back in the pie,” Carcieri said.

Speaker William J . Murphy, D-West Warwick, on Monday defended the legislature’s prerogative to oversee state tax breaks, adding that he was unaware of the issues with Duie Pyle during the session.

“I didn’t know Duie Pyle from Gomer Pyle,” Murphy said.

Arthur Barton, president of Operation Clean Government, said that Alves needs to step aside because of the cloud hanging over the Senate, a cloud that extends to Senate President Joseph A. Montalbano, D-North Providence, who is also under investigation by the FBI regarding his title work for banks. Montalbano recently paid a $12,000 ethics fine for failing to disclose his title work for the Town of West Warwick, involving land adjacent to the site of the proposed Narragansett Indian casino.

According to people familiar with the investigation, representatives of Citizens Bank, where Montalbano has done title work, were called before the grand jury during the summer. Citizens has declined comment, other than to say that the bank is cooperating.

Montalbano, who has denied any wrongdoing, has not responded to questions this week about whether Alves should step aside.

“The Senate president is going to reserve comment at this time,” said his spokesman, Greg Pare.

Carcieri lamented that the cloud cast over the state by Operation Dollar Bill makes it harder to attract business. The governor has discussed his hope with U.S. Attorney Robert Clark Corrente that the 3½-year investigation “will come to a conclusion, one way or another, sooner rather than later.”

“They’ve got to do their jobs, and they’re professionals and I don’t want to second-guess them,” Carcieri said. “But I think it’s important for us to get to the point where if they’re going to indict, they indict. Otherwise, if nobody’s done anything wrong, let’s move on.”

mstanton@projo.com