Goldson’s boss is suing City for lack of cash advance payments
The school council president’s former employer, RCN Capital, once lent more than $ 500,000 to a school contractor while waiting to collect payments on bills. A new lawsuit claims the city never paid nearly half of those bills.
RCN Capital, a commercial lending firm, is suing the city, claiming it never paid nearly $ 200,000 of the bills that RCN bought from Todd Howell’s NESAIM, LLC, a local company that welded steel, repainted walls, removed trash and snow plowed the city.
The lawsuit, which has been filed in the State Superior Court, concerns an unconventional deal that RCN made with the city, a deal who have raised red flags from the start.
As evidence RCN submitted 15 invoices with the complaint, some of them until August 2016. She claimed the city had breached its contracts by failing to pay and negligently misperformed its obligations.
RCN became the legal owner of these invoices through a little-known financial mechanism Called “factoring”. In this process, which works like a variant of the payday loan, commercial lenders provide cash upfront to small businesses who typically cannot qualify for traditional bank loans.
Usually this is done by buying bills for cash. The factoring firms advise an agency that they should be paid instead of the contractor and wait for interest to be accrued. Ideally, the small business can pay its employees while the factoring company benefits from a riskier investment.
The founding of the city with RCN, which stands for “Real Cash Now”, led to Controversy over potential conflicts of interest.
That’s because Darnell Goldson, one of the two board members elected, previously worked as the PR coordinator for RCN, owned by Hartford entrepreneur Donald Vaccaro. Goldson still works for Vaccaro at another of his companies, TicketNetwork, a ticket reseller for sports games, music concerts and other live events.
Goldson said Vaccaro pulled him off RCN in late 2016 (even though he made public comments on behalf of the company on this 2017 article).
Goldson said he was unaware of the lawsuit listing the Department of Education as a defendant. He said he would seek an ethical opinion from the city on the matter. He said that he believes he has not broken any rules since he is no longer on the RCN payroll.
“I’m not worried. I haven’t done anything for RCN, ”he said. “I don’t work for them. I don’t get a check from them. I am not an employee of theirs.
“I’ll tell you where the wall is: where the paycheck is,” he added. “The paycheck is on that [TicketNetwork] Page. That’s what I’m paid for, and that’s where my boss is. I am so busy with work. I spent maybe three or four days in Connecticut last month traveling to the lobby. I don’t have time for RCN. “
Goldson said he linked RCN with the city’s lawyers when they tried to track payments, but he said he was otherwise not involved.
“I just gave them the phone number. Someone picked up the phone, they talked, and they set up a meeting that I didn’t attend. I don’t know what happened, ”he said. “It’s just a collegial thing. I worked for them, so I helped them find the right contact person. “
He added, “If they are not paid, they have the right to sue.”
Goldson said he believed factoring could have helped more local business owners get paid for the jobs they started, faster. However, he said that RCN has since largely ceased that part of its business to focus on real estate lending.
“I think everyone was always confused about factoring and it was frustrating because I thought there was a real chance there was to give some of the smaller contractors a way to keep their payroll up while they wait for their bills to come in” , he said. “It wasn’t about the money. I think don [Vaccaro] tried to build his philanthropic portfolio. And it was frustrating that we couldn’t get the RCN people to really stand up because they just didn’t see any limits. “
(At the same time, City Hall Mayor Toni Harp asked RCN Capital to play a pivotal role in helping small businesses get enough money for city jobs. She invited both RCN and NESAIM, LLC to participate in a round table RCN was a moderator in their administration an event to get minority entrepreneurs ready to bid on pieces of The $ 45 million build of the Strong School. A year later, Harp received a $ 1,000 contribution from Vaccaro towards her re-election campaign.)
In the current lawsuit, RCN Capital claims that prior to purchasing invoices from NESAIM LLC, it checked with the city to verify the authenticity of each invoice and confirm its assignment.
She claims that each time the city filled out “Verification, Confirmation, and Acceptance Agreements,” a formal document that pledges to pay the factor directly, not the contractor. These agreements stated that the work was carried out “without restriction or reservation by the client” and that the invoice amounts were “correct, valid and paid in full”.
As RCN argues in the complaint, this meant that it had no further obligations and only “the city of New Haven’s obligation to pay” remained.
City lawyers held off signing these documents for a month and a half because they were concerned about the city’s potential liability, according to emails previously sent to the Independent through a request under the Connecticut Freedom of Information Act had received.
In total, RCN Capital has collected 27 payments from the city totaling more than $ 300,000. The lawsuit alleges the city owes an additional $ 200,000.
In at least two cases, the lawsuit alleges that the city had already begun processing payments to NESAIM, LLC before signing agreements with RCN Capital.
The city’s lawyers, who were served papers in late May, have not yet filed a response in court.
Earlier this year, in response to a Freedom of Information Act request, the city announced to the Independent that it had not been able to find a record of payments to RCN Capital since at least December 2017, the deadline the Independent had set for the search.
“According to [the] Treasury Department, this entity is not a seller under the city’s financial system and there is no record of payments to any such party, ”wrote Kathleen Foster, the city’s chief assistant corporate attorney who manages public record inquiries, in January.
Matthew Gunter, the South Windsor-based attorney who filed the lawsuit on behalf of RCN Capital, declined to comment on the case.
Now has anyone really figured out why factoring is necessary? NO, it is necessary because the debtor, in this case, the City of New Haven and the Board of Education cannot or will not pay their bills on time. Simple as that, RCN knew the city was destroying small, minority and women-run businesses by simply not paying them. The contractor has to pay invoices, employees and materials. The city does NOT have any terms of payment in its contracts, which is a violation of the contract terms of the Department of Consumer Protection in CT. After asking the question and ending up with one of the ring conductors, purchasing agent Michael Fumiatti, his answer was simple: we strive to pay our bikks in 45 days but we don’t guarantee it. Two decades ago a growing concern about small, minority and female contractors who weren’t paid on time ended when he said we’d look. Nothing has happened !!! The contractor had an invoice 150 days late and so the first factoring company canceled because the city was not honoring its own contracts. Two months ago, RCN finally received a payment 455 days late for an invoice that was one year old. None of you could survive that long without getting paid. Also, no interest may be charged to a community, as you cannot tax the people. Factoring is the only way to keep a business going when the city isn’t paying. Neither of us want to use it, we have no choice, we have to fight to get the job, fight to do the job, and then fight for months to try to get paid. NOW you know why there are so few small construction companies in CT and New Haven. I really hope that this makes it into the discussion, because this is the real problem, besides supply control, bid rigging, preferential treatment and yes, racial and gender discrimination. As a city building contractor, I have heard the N word in town hall and during public works more than the whole miniseries of Roots. The sad part is that a lot of great contractors have left town, closed their businesses, or are no longer involved in the town.