RIRRC Chairman and developer A. Austin Ferland / Journal file photo

A preliminary audit of Rhode Island’s $70-million trash agency has found signs of mismanagement, cronyism and possible corruption, from inflated land deals near the Central Landfill in Johnston to questionable charitable donations to handling of pension funds.

Among the beneficiaries of agency largess, says the audit released yesterday, was the extended family of former Johnston Mayor William R. Macera, who sold land to the Rhode Island Resource Recovery Corporation for $8 million while the mayor was supporting the agency’s controversial efforts to develop an industrial park near the landfill.

Macera, who left office last year, personally profited from a $2-million deal in 2002, when Resource Recovery bought family land that was encumbered by wetlands and of dubious value to the agency, the report says.

In recent interviews with The Journal, which has also been looking into the land deals, the Maceras have denied any inappropriate conduct, and say that the state paid a fair price for their land.

In one deal illustrating the nest of entanglements that auditors sought to unravel, the agency’s former executive director, Sherry Mulhearn, is related by marriage to the sellers — the Maceras. Another relative by marriage works at the law firm that handled the closing. The title attorney was the son of John St. Sauveur, a Resource Recovery commissioner. And the agency’s appraiser had done business with Resource Recovery Chairman A. Austin Ferland’s real-estate company.

Ferland, a prominent Rhode Island developer and president of the Ferland Corp., has served as the agency’s chairman and chief executive since 1996. He and Mulhearn, who joined the agency in 1996 and left last year, have not responded to several requests from The Journal for comment in recent weeks.

Last night, a lawyer for Mulhearn disputed that she is related through marriage to William Macera. In an e-mail to The Journal, Anthony M. Traini said that the relationship is “remote” at best — Mulhearn’s husband’s uncle’s wife is a sister of Bill Macera’s father.

“Even if Sherry Mulhearn and William Macera were somehow related by virtue of this familial structure, such a relationship does not fall within the purview of [Rhode Island ethics law],” wrote Traini.

Traini also noted that Christopher Mulhearn, a lawyer at the firm that handled the closing for the William Macera property, is Sherry Mulhearn’s husband’s second cousin — again, not a relationship that falls within the scope of ethics law. Furthermore, Christopher Mulhearn had no involvement or financial stake in the firm’s handling of the matter, said Traini.

“There’s some smoke here — is there fire?” said Governor Carcieri. “It looks like there’s a lot more that needs to be done . . . We’re going to dig deeper and farther.”

At minimum, Carcieri said, the audit thus far has shown that Resource Recovery “has been mismanaged for years.” At worst, he said, the agency was another breeding ground of corruption and criminality, as Rhode Islanders have witnessed in recent years at the state’s dominant workers’ compensation insurer (Beacon Mutual), the state’s dominant health insurer (Blue Cross & Blue Shield of Rhode Island) and a Providence hospital (Roger Williams Medical Center).

Among the audit’s other findings: more than $42 million in construction projects, including Resource Recovery’s headquarters, tipping station, Recovermat facility, Eco-Depot and methane-extraction power plant, are located in the path of the landfill’s future expansion, and will have to be torn down and rebuilt elsewhere over the next seven years. More than $18 million of that construction has occurred since 2000, when leaders should have known that the buildings would not be able to remain beyond 2015.

In January, Carcieri ordered a team of state and private auditors to conduct a 45-day preliminary audit following concerns raised last November by Resource Recovery’s new executive director, Michael O’Connell. Based on yesterday’s results, the governor has ordered a full-scale forensic audit to get to the bottom of those issues and more that have surfaced in recent weeks — including allegations of “employee theft,” other possible crimes, payments for services not rendered or of questionable value, potential state ethics violations and violations of procurement procedures.

The audit refers to numerous “irregularities and appearances of impropriety” involving certain current and former commissioners and employees. At the same time, the report cautions that its findings are incomplete, and that some commissioners may have approved questionable deals without knowing all the facts.

The governor sent copies of the preliminary audit to the U.S. Attorney in Providence, the Rhode Island attorney general and the Rhode Island State Police.

“We have continued to receive new information daily,” said H. Chris Der Vartanian, chief of the state Bureau of Audits, who spearheaded the review.

Much of the 33-page report delves into $21.4 million in land acquisitions near the Central Landfill from 2000 to 2005. Some of the land was for an industrial park. Some was for no clear purpose. Some of the land was bought for prices higher than the market value, ranging from $476,000 to $829,000 an acre. Other land was purchased within market value, but without apparent consideration of environmental problems, access issues or wetland restrictions that limit its use and value.

In some cases, Resource Recovery failed to perform the necessary due diligence. For example, the agency purchased 10 acres in 2003 for $1.3 million, only to discover afterward that portions of the property contained buried construction waste that the agency is now responsible for cleaning up.

The audit says that the agency failed to explore the cheaper option of taking the property by eminent domain. And Carcieri, at a news conference, said that such purchases are required by law to be approved by the governor, but never were.

Furthermore, Resource Recovery leaders pursued an industrial park without doing an economic feasibility study first. Because of the inflated prices that the agency paid for land, it stands to lose millions, even with the influx of such recent tenants as Federal Express and the A. Duie Pyle trucking company. The audit says the agency strayed from its mission of overseeing the state’s trash collection and recycling, and that buying the land without a clear plan actually made things worse for the host community of Johnston by taking property off the tax rolls.

Some of that property belonged to the mayor at the time, William Macera.

In 1999, the audit notes, Macera wrote an “Open Letter to the People of Johnston” supporting the industrial park, which was a controversial local issue.

The following year, Resource Recovery bought 36 acres of land for the proposed park off Shun Pike, near the new interchange off Interstate 295, from the mayor’s cousin, Gerald Macera, and other relatives. While that price was consistent with comparable prices for the area, at $163,000 an acre, the audit says that it didn’t factor in the presence of an old family dump, which renders seven acres useless, or the estimated $1-million cost to cap it to comply with state environmental regulations.

Gerald Macera told The Journal last week that the agency paid a reasonable price for the land, given its prime location, and that the presence of the dump and potential cleanup costs were factored into the purchase price.

While Gerald and Bill Macera are close, Bill Macera’s wife, Maureen, told The Journal yesterday that the two are merely cousins, and that her husband has “no fiduciary relationship to Jerry.”

Two years later, in 2002, Resource Recovery bought 67 acres from William Macera, his wife, his sister and his brother-in-law, for $2 million. This land, farther down Shun Pike, was not in the proposed industrial park. The audit says that the property, which was encumbered by wetlands, was “ostensibly” purchased for the value of cover material — but that an engineering report Sherry Mulhearn received before the sale said that the land was unsuitable for that purpose.

That land now sits “vacant and unused,” and Resource Recovery has no plans for the property other than to use it as a buffer for the adjacent landfill.

Maureen Macera, who is the Woonsocket superintendent of schools, disputed the audit’s findings. She said that cover material can be taken from the land, and that not all of the property is wetlands. She pointed to a permit that the family received from the state Department of Environmental Management in the 1990s to build bridge crossings to access the land.

“That property had been in the family for a long time, and we had listed it for sale in 1998 because we didn’t want to keep paying taxes on it,” she said. “Just because Bill becomes the mayor doesn’t mean he leaves his civil rights at the door.”

The report also notes potential conflicts involving Ferland. It says that the sellers of two properties to Resource Recovery had done business with a Ferland associate, and that Resource Recovery used an appraiser who had done business with Ferland’s real-estate company.

In several instances, the audit says, title insurance was secured through Pilgrim Title Insurance Co., which is partially owned by Jeffrey A. St. Sauveur, whose father, John, served as a Resource Recovery commissioner.

The audit identifies John St. Sauveur as “a current or former vice-president” at Pilgrim, and says that Resource Recovery minutes are “silent” as to whether St. Sauveur disclosed this relationship to the board. Resource Recovery records do not indicate that Pilgrim was hired through competitive bidding, the audit says.

John St. Sauveur told The Journal yesterday that he was a “contractor” for Pilgrim, for about two years, but could not recall when. He worked on marketing, he said, and did no work connected to Resource Recovery, nor was he aware that his son’s firm had been hired for title work on land acquisitions there.

Jeffrey St. Sauveur did not respond to requests for comment.

The report also questions a potential conflict involving John St. Sauveur and Van Liew Trust, the investment adviser for some $100 million in Resource Recovery funds until last year. St. Sauveur had an ownership interest in Van Liew and “relationships” with Van Liew and its affiliates, the audit says. On three occasions between 1996 and 2004, the audit says, the selection process for various money-management services “appeared to be designed to skew the selection toward Van Liew and resulted in Van Liew prevailing over money-center banks and other major financial institutions.”

John St. Sauveur, who resigned from Resource Recovery last summer after being confronted by O’Connell about Van Liew, said that he always recused himself from any discussions regarding Van Liew.

Yesterday’s audit also questioned the propriety of a quasi-public corporation spending more than $2 million in recent years on charitable contributions and sponsorships, many for groups with no direct ties to Resource Recovery’s mission. A quarter of the money was spent on marketing, advertising and promotion — a questionable use of money, the audit said, for an agency that has a monopoly on Rhode Island’s trash and recycling business. In some, unspecified cases, current and former commissioners and employees of Resource Recovery benefited through the receipt of tickets to sporting events and participation in golf tournaments and gala dinners and events.

O’Connell said yesterday that he has halted that practice.

Carcieri said that he fears the problems uncovered by yesterday’s audit represent ``just the tip of the iceberg.”

“It’s something we see time and again in Rhode Island, these entities that become islands unto themselves . . . get sloppy and feel that they’re not accountable to anyone but themselves,” said Carcieri. “But they have to be accountable to the citizens of Rhode Island. We’re going to get to the bottom of what transpired here.”

Carcieri praised O’Connell, who took over last January and quickly clashed with commissioners, for steering the agency back on course. And next Monday, the governor vowed to send the Senate his nominees for a new board. Ferland will not be among them.

“Under my watch,” O’Connell vowed, “RIRRC will be run in the best interests of Rhode Island taxpayers.”

mstanton@projo.com