State watchdog criticizes Connecticut Port Authority, offers recommendations
The Connecticut Port Authority was already facing a public perception problem, having faced criticism and scrutiny from state lawmakers over past financial and personnel issues.
A new report issued by a state watchdog group, the State Contracting Standards Board, is unlikely to change that perception.
The board said it has identified issues and possible violations of state statute committed by the Connecticut Port Authority during its time working toward the redevelopment of State Pier in New London.
The Connecticut Port Authority and Office of Policy and Management both dispute some of the findings, and are at odds with the board on the question of whether the port authority even had the legal authority in 2020 to enter into a public-private partnership and sign the development agreement for State Pier.
The board released a report on Friday with a list of recommendations and concludes, among other things, that the port authority should adopt ethics and communications standards to limit any real or appearances of conflicts of interest.
That specific recommendation stems from the board’s examination of the circumstances surrounding a $523,000 success fee that was part of a $700,000 payment to Seabury Maritime Capital, a contractor hired by the port authority in 2018 to help find an operator — Gateway Terminal, which also operates New Haven's port — for State Pier.
Henry Juan, an employee of Seabury, was a port authority board member until about a month before Seabury was chosen by the port authority to conduct the work. Juan was present for discussions leading up to a vote to hire Seabury.
“While he abstained from the vote, he did not recuse himself and there are questions included in the report about whether or not he had any knowledge that would have changed or helped his company’s bid in that work,” said State Contracting Standards Board member Lauren Gautier, who authored the report.
Additionally, Seabury ultimately was paid a $523,000 success fee, which did not appear in the original solicitations for bids for the work but later was included in Seabury’s contract.
“Meanwhile other prospective bidders thought this wasn’t even an option,” Contracting Standards Board Chairman Lawrence Fox said. “It’s just terrible in terms of open, fair bidding. I mean, I can’t think of anything that’s less fair.”
The board also questioned if the success fee was even legal, since there is a state statute prohibiting so-called finders fees.
“One could make an argument a success fee is a finder’s fee by another name,” Fox said.
And while the port authority officials argue success fees are common in their industry, the Contracting Standards Board in its report said it “does not believe that they are appropriate for government contract work.”
The board discussed the report at a meeting Friday and renewed a commitment to work with the port authority to develop comprehensive procurement procedures. It already has compiled a draft manual in concert with the port authority.
The investigation taken up by the board was prompted by a 2020 complaint about the port authority's practices and focused on the authority's procurement procedures “and its accountability to the citizens of Connecticut” related to the State Pier development, a $235.5 million project that is well underway on the Thames River in New London.
Fox reiterated that the port authority, a quasi-public agency with two paid employees, is underfunded as is his own board. “There is an underinvestment by the state in the infrastructure for the agencies that have to do it (procurements) and there’s certainly an underinvestment by the state for the watchdogs that are supposed to watch it," he said. "What could possibly go wrong?"
State Sen. Cathy Osten, D-Sprague, co-chair of the Appropriations Committee, said she intends to restore the additional funding to the State Contracting Standards Board that was stripped from the budget by Gov. Ned Lamont last year. The board was to get about $450,000 to add staff. She said that will be a topic of discussion during the upcoming legislative session but the money was critical to helping provide oversight.
The report also calls into question whether state statute gives the port authority specific authority to execute public-private partnerships.
That might be a question for the state legislature, some members concluded, since the port authority argues the Harbor Development Agreement falls outside the parameters of the statute.
“The CPA is making infrastructure improvements to its own facility at the State Pier, with a portion of the capital funds coming from private sector partners,” the port authority asserts in a rebuttal to the report.
The port authority is no stranger to controversy and was heavily criticized following a whistleblower complaint and reports of financial misconduct under former Executive Director Evan Matthews and former authority board Chairman Scott Bates. The result was hearings, state oversight of the port authority and recent legislation that demands more reporting to the legislature as work at State Pier proceeds.
In a statement, port authority Executive Director John Henshaw, who was hired in 2020, and current authority board Chairman David Kooris responded to the report and questions from The Day.
"As a result of OPM's consultant's work in 2019 and early 2020, the CPA Board adopted several updated policies and procedures designed to address concerns raised in the multiple outside audits conducted at that time,” the statement reads. “The SCSB has identified additional general concerns and we continue to express our willingness to advance additional policy and procedure updates to our board pending detailed recommendations from them."
State Sen. Heather Somers, R-Groton, issued a statement critical of the port authority and said “there is zero excuse why a quasi-public entity cannot follow its own procedures.” She said the report raises questions and requires further investigation and legislative reform to ensure compliance and prevent any misuse of funds.
“As lawmakers, we have worked in a bipartisan fashion to craft and pass legislation to reform the authority, but this latest report proves we have more work to do,” Somers said, in part.
“This is more than just not following simple procedures. This is about a few individuals entrusted with millions of taxpayers' money, making crucial decisions which have long-term impact on our region and entire state. There is so much at stake ... that it is without question the public must have confidence the CPA is following procedure to the letter of the law. The report clearly shows this is not the case,” Somers said in a statement.
In response, the port authority issued a statement saying it disagrees with Somers’ characterization that the Contracting Standards Board’s report identified significant ongoing problems at the authority.
“The procurements that the SCSB was looking at happened years ago before our policies were updated," the statement reads.