The Connecticut Port Authority launched a public-private partnership tied to development of a major offshore wind-to-energy project without proper authority to do so, the State Contracting Standards Board concluded Friday.
The watchdog agency also concluded that the $523,000 “success” fee the Connecticut Port Authority paid to a consulting firm closely tied to a former member is eerily similar to the “finder’s fees” scandal that sent a former state treasurer to prison in 2001.
“This is just terrible in terms of open, fair bidding,” contracting board chairman Lawrence Fox said during Friday’s meeting, held via teleconference. “I can’t think of anything that is less fair.”
The port authority and Gov. Ned Lamont announced a deal in February 2020 to work with Eversource and its Denmark-based partner, Ørsted North America, to transform New London into the green energy capital of the Northeast. Wind turbine components assembled at the port would support an offshore wind-to-energy project ultimately capable of generating 4,000 megawatt hours of electricity.
The authority must seek fro m the state any project costs that exceed the private partners’ investment of $75 million, according to the port authority’s executive director, John Henshaw. The current overall cost estimate exceeds $220 million.
A state law permitting public-private partnerships had expired in January 2020, one month before the deal with Eversource and Ørsted North America had been executed. A 2021 statute would again allow public-private partnerships but only for the Department of Transportation.
More importantly, whenever such partnerships have been permitted, the legislature’s budget-writing committees have been required to conduct public hearings on the matter – which didn’t occur, the report states.
“There is no record that the CPA had the statutory authority to execute a public- private partnership after January 1, 2020,” it added.
In a written response attached to the report, the port authority contends it gained such powers when lawmakers established it in 2015 and ordered it to direct economic development at the state’s deep water ports.
And while the agreement with Eversource and Ørsted North America actually refers to a public-private partnership, the port authority added in its comments that “the phrase “’public-private partnership’ is widely used term and should not be taken to reference” the agreements regulated in state law.
The contracting board does not have authority to block the project and chiefly is limited to making recommendations to Lamont and the General Assembly.
The contracting board also voted Friday to ask Attorney General William Tong to clarify existing state law regarding “finder’s fees.”
The panel specifically is questioning whether the port authority violated that law when it paid $700,000 to Seabury Capital Group in May 2018 to help with the search for an operator of the state pier in New London. That search led to the hiring of Gateway Terminal, a firm that brought its wind farm partners – Eversource and Ørsted North America – into the picture.
That $700,000 payment included a $523,000 “success” or reward fee – and that happened three months after Henry Juan III of Greenwich, who was a managing director with Seabury, resigned from the authority board.
When the port authority initially sought a consulting group to help find a pier operator, it specified in an April 2018 amendment to the bid documents that no success fees would be paid.
Seabury received the contract in May and success fees were included, the report states.
“Why did the success fees come back into the contract?” asked contracting board member Lauren Gauthier, who outlined the report at Friday’s meeting.
“While they are not [called] ‘finder’s fees,’” she added, “they do ring similar.”
The General Assembly banned “finder’s fees” in statute following a scandal in the late 1990s that sent then-state Treasurer Paul Silvester to prison.
The West Hartford Republican was sentenced to 21 months after admitting he had accepted kickbacks, often referred to as “finder’s fees,” in exchange for steering investment of state-controlled pension funds.
Fox said afterward that contracting board members didn’t draw comparisons lightly.
“It sounds like what happened at port authority is a kind of finder’s fee by another name,” he said. “We don’t like this practice. We don’t think there’s a state benefit to this.”
“Should we receive a request for an opinion from the State Contracting Review Board, we will review it,” Tong’s spokeswoman, Elizabeth Benton, said Friday. “We have an open and active investigation into the Connecticut Port Authority and therefore cannot comment further.”
Should Tong conclude there was no violation of the finder’s fee statute, Fox added, the authority will ask the legislature to expand existing law to prohibit such “success fees” in the future.
David Kooris, who became chairman of the port authority’s board of directors in the summer of 2019 – one year after the Seabury contract was approved – said at Friday’s meeting that “the port authority very much appreciates the thoughtful review.”
Kooris also pledged that the authority would work with the contracting board and the legislature to further review these issues.
“We’ve got a lot to talk about in detail in the coming months,” he said.
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