Christopher Peak Photo
Darnell Goldson.
The school board president’s former employer, RCN Capital, once fronted more than $500,000 to a school contractor while it waited to collect payments for the invoices. A new lawsuit alleges that the city never settled close to half those bills.
RCN Capital, a commercial lending company, is suing the city, claiming that it never paid almost $200,000 of the invoices that RCN had bought from Todd Howell’s NESAIM, LLC, a local business that welded steel, repainted walls, removed trash and plowed snow for the city.
The suit, filed in state Superior Court, is over an unconventional deal RCN entered into with the city, a deal that raised red flags from the start.
As evidence, RCN submitted 15 invoices with the complaint, some dating back as far as August 2016. It claimed that, in not paying for them, the city had breached its contracts and negligently misrepresented its obligations.
RCN became the legal owner of those invoices through a little-known financial mechanism called “factoring.” In the process, which works like a variant of payday lending, commercial lenders provide up-front cash to small businesses that usually can’t qualify for traditional bank loans.
Typically, that happens by buying up invoices for cash. The factoring firms alert an agency they should be paid instead of the contractor, and they wait around while interest accrues. Ideally, the small business can pay its employees, while the factoring firm profits from a riskier investment.
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The city’s set-up with RCN, which stands for “Real Cash Now,” led to controversy about potential conflicts of interest.
That’s because Darnell Goldson, one of the board’s two elected members, previously worked as a public relations coordinator for RCN, which is owned by Hartford-area entrepreneur Donald Vaccaro. Goldson still works for Vaccaro at another of his businesses, TicketNetwork, a ticket reseller for sports games, music concerts and other live events.
Goldson has said Vaccaro took him off RCN in late 2016 (though he did make public comments on the company’s behalf in this 2017 article).
Goldson said that he did not know about the lawsuit, which names the Board of Education as a defendant. He said that he will seek an ethics opinion from the city about the matter. He said that he believes he has not violated any rules because he is no longer on RCN’s payroll.
“I’m not concerned. I haven’t done anything for RCN,” he said. “I don’t work for them. I don’t get a check from them. I’m not an employee of theirs.
“I’ll tell you where the wall is: where the paycheck is,” he added. “The paycheck is on the [TicketNetwork] side. That’s who I get paid to work for, and that’s where my boss is. I’m so busy with the work. Last month, I spent maybe three or four days in Connecticut, because I was traveling to lobby. I don’t have any time for RCN.”
Goldson did say that he connected RCN to the city’s lawyers as they tried to pursue payments, but he said that he has otherwise been uninvolved.
“All I did was provide them with the telephone number. Somebody picked up the telephone, they talked and they set up a meeting I didn’t attend. I don’t know what happened,” he said. “It’s just a collegial thing. I used to work for them, so I helped them find the right person to talk to.”
He added, “If they didn’t get paid, they have the right to sue.”
Goldson said that he thought that factoring could have helped more local entrepreneurs get started by getting cash more quickly for work they’ve begun. But he said that RCN has since largely cut out that portion of its business to focus on real estate loans.
“I think everybody was always confused about factoring, and it was frustrating because I thought there was a real opportunity there to get some of the smaller contractors a way to maintain their payroll while waiting for their invoices to come through,” he said. “It wasn’t about the money. I think Don [Vaccaro] was trying to build up his philanthropic portfolio. And it was frustrating that we couldn’t get the RCN people to really commit to it because they just didn’t see the margins.”
(At the same time, within City Hall, Mayor Toni Harp was asking RCN Capital to take a central role in helping small businesses obtain enough cash to take on municipal jobs. She invited both RCN and NESAIM, LLC, to participate in a roundtable. And her administration featured RCN as a presenter at an event to ready minority contractors to bid on pieces of Strong School’s $45 million construction. A year later, Harp received a $1,000 contribution from Vaccaro toward her reelection campaign.)
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Vaccaro, RCN Capital’s CEO.
In the current lawsuit, RCN Capital claims that it checked with the city before it bought up invoices from NESAIM LLC, verifying each invoice’s authenticity and acknowledging their assignment.
It claims that, each time, the city filled out “Verification, Acknowledgement and Acceptance Agreements,” a formal document that commits to paying the factor directly, rather than the contractor. Those agreements said that the work had been completed “without qualification or reservation by the Customer” and that the invoice amounts were “correct, valid and will be paid in full.”
As RCN argues in the complaint, that meant that it had no further obligations, leaving only the “City of New Haven’s duty to issue payment.”
City lawyers held off from signing those documents for a month and a half, as they worried about the city’s potential liability, according to emails the Independent previously obtained through a Connecticut Freedom of Information Act request.
In total, RCN Capital collected 27 payments from the city, totaling more than $300,000. The lawsuit alleges that city owes another $200,000.
In at least two cases, the lawsuit alleges, that may be because the city had already started processing payments to NESAIM, LLC, before it signed agreements with RCN Capital.
The city’s attorneys, which were served papers in late May, have not yet filed a reply in court.
Earlier this year, in response to a Freedom of Information Act request, the city told the Independent that it couldn’t find records of any payments to RCN Capital since at least December 2017, the cut-off date that the Independent set for the search.
“According to [the] Finance Dept., that entity is not a vendor under the City financial system and there is no record of payments to such party,” Kathleen Foster, the city’s senior assistant corporation counsel, who manages public-records requests, wrote in January.
Matthew Gunter, the South Windsor-based attorney who filed the lawsuit for RCN Capital, declined to comment on the case.