Hartford - TicketNetwork of South Windsor announced Wednesday that it is giving up millions of dollars by pulling out of the state's First Five economic development program because of its chief executive's behavior.

Under the once-tentative but now canceled deal, the state would have provided the ticket reselling firm with a $1.45 million direct grant and a $4.5 million low-interest loan with $2.5 million in principal forgiveness.

The assistance package was announced in July as a means of assisting TicketNetwork with its acquisition of and move to a new headquarters. The company, founded in 2002, employed 292 last summer. The loan forgiveness part of the deal would have kicked in if TicketNetwork reached 492 employees within three years.

The firm's legal counsel, Andra Mazur, said Wednesday in a statement that due to the "personal incident" this week involving founder and president Donald Vaccaro, TicketNetwork will withdraw from First Five to preserve its future relationship with the state.

Vaccaro, 49, of Glastonbury was arrested on hate crime, threatening and breach of peace charges shortly after midnight Monday at an Academy Awards night fundraiser in Hartford.

Witnesses told police that the CEO groped women at the party and threatened a security guard who tried to escort him out, calling him a "black mother[expletive]" and later asking police why the "black mother[expletive]" wasn't arrested, too. TicketNetwork was a sponsor of the party.

Catherine Smith, commissioner of the state Department of Economic and Community Development, said Wednesday that the company's exit "seems appropriate given recent events."

"We hope the company will continue to grow jobs in our state, which was the driving force of their participation in the program all along," Smith said.

Gov. Dannel P. Malloy publicly scolded Vaccaro for his "boorish" behavior.

On Tuesday, Malloy directed top state officials to take a second look at TicketNetwork's assistance application, as the deal was not yet finalized.

But he stopped short that day of ordering TicketNetwork out of the program. Meanwhile, a public relations firm announced that Vaccaro would take an indefinite leave from the company and seek counseling for alcohol abuse.

A final round of talks with TicketNetwork were handled through Malloy's office.

"The governor made it clear that he was unhappy and that he wanted a full review of what had happened," Roy Occhiogrosso, the governor's senior adviser, said Wednesday. "And the company properly inferred that they needed to take some action on their own."

First Five is the Malloy administration's marquee jobs initiative. Launched in July, the program extends an array of tax credits, "forgivable" loans and grants to the first five chosen businesses in a year that commit to creating either 200 in-state jobs within two years, or 200 jobs and a $25 million investment within five years.

The three remaining First Five beneficiaries are Cigna, ESPN and NBC Sports. The legislature has since granted permission for up to 15 First Five companies through mid-2013.

Speaking with reporters Wednesday, Smith said her economic development staff does a thorough job of researching companies that apply for First Five assistance. She conceded, though, that she was unaware when initially reviewing TicketNetwork's application that Vaccaro faced a sexual harassment discrimination lawsuit from a former employee.

That employee claimed in court documents that Vaccaro "grinded himself" against her and other female employees at a company party and made comments about her breasts.

The woman withdrew her lawsuit the day after TicketNetwork was named a First Five company.

" I think the lesson I've learned is we're going to do a little bit more due diligence around the leadership of a company, if it's privately held," Smith said.

TicketNetwork is in the business of secondary-market ticket sales for sporting and entertainment events. Its software products power an online marketplace that matches up ticket buyers and sellers and collects fees from both parties.

An investigation by The Day last fall disproved the company's claim that its employees weren't taking physical possession of tickets. The investigation found that vendors had been sending volumes of tickets to a network of black mailboxes and properties that Vaccaro owned or controlled for the covert use of a side brokerage firm.

In its statement Wednesday, TicketNetwork said executives Doug Kruse and Jeff Scheman will run the company as co-CEOs during Vaccaro's leave of absence.

Smith said she is hopeful that the company will keep its headquarters in Connecticut despite the withdrawal of state assistance. TicketNetwork says it now employs more than 400 people.

"They are doing exactly what we wanted them to do, which is to really create a lot of great jobs in the state, and we hope they continue to do that," she said.

j.reindl@theday.com