INVESTIGATION - Questions Emerge About State’s Due Diligence on Soccer Stadium
GoLocalProv News Team and Josh Fenton
INVESTIGATION - Questions Emerge About State’s Due Diligence on Soccer Stadium
The man behind the proposed minor league Pawtucket soccer stadium is Brett Johnson and his Fortuitous Partners.
The firm RI Commerce hired was CSL International -- a firm that has worked on all sides of sports stadium proposals across the country in the past. CSL was generating a lot of business by conducting studies of minor league soccer proposals -- working on an evaluation of a soccer stadium in Washington, DC, a proposed team in Knoxville, and in multiple other markets. Soccer is big business for the consulting company.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTPresently, the viability of the project is in question. GoLocal has visited the site multiple times over the past few weeks and construction activities have slowed to a crawl.
Now, Johnson and his team are admitting that work crews are being removed from the project.
Michael Raia in an email to GoLocal on Wednesday night wrote, "In analyzing the work completed at the site to this stage and the amount of private funding already allocated to construction, this is an appropriate time to demobilize certain components of the construction while others continue."
Board members of the Commerce Corporation believed the CSL report that was presented to them -- as they were voting to provide tens of millions of state subsidies -- was due diligence and an independent review of the risks of the project.
The CSL report said that Johnson had significant development expertise but subsequently, it was unveiled that the claim was not true. It was not the consultant that identified the false claim -- it was later uncovered in a series of media reports.
“You have to rely on them but not blindly. I had questions for them (CSL) but they are the experts and the board is a group of volunteers part-time and don’t have the time to delve into the background of these developers and we count on the experts,” said Mike McNally, a long-time member of the Commerce Corporation board.
"CSL had a good reputation in the sports field, and we reasonably depended on their opinion and expertise and I would say I think they let us down," added McNally.
McNally served as the President & CEO of Skanska USA — a multi-billion construction global company and far and away had the most construction experience on the Commerce board.
McNally was originally named to the Commerce Corporation board by former Governor Gina Raimondo, and was knocked off his seat in recent months by Governor Dan McKee.
And, Karl Wadensten, a long-time member of the Commerce board, said he too was told that CSL’s report was a due diligence evaluation.
“I saw it as a due diligence report,” said Wadensten.
“It was presented an evaluation of the state of the project and the industry — a second-tier industry, minor league soccer,” he added. "That is how it was presented to us.”
Another person raising questions about CSL's report is Steve Griffin.
For Griffin, who is emerging as one of the top watchdogs in the sports industry, has repeatedly raised questions about the financial viability of the proposed soccer project.
Griffin, who was one of the founding partners with Gina Raimondo in Point Judith Capital, has been at the forefront of two federal investigations — the U.S. Justice Department’s investigation into the operation of Global Premier Soccer and the U.S. Security and Exchange Commission’s investigation into Bell Bank Park.
Griffin says CSL’s review n Rhode Island has glaring flaws and false information.
“The CLS report issued to Commerce Rhode Island included material errors and omitted key diligence items that likely would have impacted a reader’s opinion of Fortuitous Partners and the Tidewater project," said Griffin. In the summer of 2022, the Commerce board approved the tens of millions of state funding for the project on a 6-5 vote with McKee casting the deciding vote.
There appear to be inconsistencies with the CSL documents’ claims.
The lead partner for CSL on the Rhode Island contract, Jay Lenhardt, who signed contracts, has repeatedly refused to respond to questions over the past several weeks.
GoLocal has requested comment from multiple CSL executives including Joel Feldman— none have responded to repeated questions about the firm's work and specifically assertions made in their report to Commerce which are false.
As Commerce board members stated, the CSL report was a critical document in the due diligence package provided to them for review.
According to RI Commerce documents, CSL has been paid $84,858.71
Specifically, the 10-page CSL document claims, "The scope of this analysis included a review of the following:
• Project costs and value-engineering;
• Public-private partnerships for recent USL stadiums;
• Stadium financial projections; and,
• Ownership’s experience and capabilities."
A number of key claims reported by CSL in support of the viability of Johnson’s proposal are simply false or widely misleading.
Glytch
According to the CSL report, Johnson "is or has been an owner" of a company called Glytch, an esports firm. GoLocal previously uncovered that Johnson never made an investment in the company.
Johnson, at one point, made the claim that he was the lead investor and sent out a national press release, but that claim was not true. Johnson finally admitted the claim was false after repeated questions from GoLocal.
"The report referenced Brett Johnson’s investment in an esports stadium developer, Glytch, when, in fact, Johnson never invested in Glytch. The report also referenced the success of Johnson’s other USL soccer club, Phoenix Rising, however, the club was actively raising additional capital to fund losses when the CSL report was issued," said Griffin.
"3,000 Multifamily Units"
Another claim in the CSL report and critical to the project being approved by the state centers around the housing component.
When Johnson and his team were selected to construct the project, he and his team were selected in part due to the integrated 200 new housing units that are to be developed as part of an overall opportunity zone.
According to CSL’s report to Commerce RI, Johnson previously developed “3,000 multifamily units.” CSL refused to respond to questions about this claim.
But again, the claim appears to false. There is no indication that he has any experience in developing housing projects.
“Johnson has never tackled anything of the magnitude of the Tidewater Landing project – never built a full-scale soccer stadium, or led the development of a major housing and commercial project,” according to the Boston Globe.
Financial Viability
CSL writes in another section that "Fortuitous has prepared financial operating projections for the stadium that serves as the basis for qualifying for a $31.5 million bank loan as a portion of the private funding contributions towards the stadium project.
Fortuitous’ financial projections also serve as the basis for estimating the future net new tax benefits that could be generated to the State of Rhode Island through the on-going operations of the stadium and team.
Griffin tells GoLocal that "Fortuitous' own financial projections show that they can't meet debt service."
Much of the financial modeling that CSL developed has been blocked out to the media and the public, making independent reviews impossible.
Commerce Defends Report
“CSL was hired to conduct a review of Tidewater Stadium cost, funding, and financial projections. They were not hired to do a background check,” said Matthew Touchette, Director of Public Affairs Rhode Island Commerce Corporation.
But the contract between RI Commerce and CSL specifically states:
Criteria utilized in order to evaluate proposal responses may include, but is not limited to, the following:
a. Proposed use(s )/tenant;
b. Estimated events and attendance;
c. Projected financial operating performance;
d. Estimated McCoy Stadium improvement/new facility project costs;
e. Anticipated operational management plan;
f. Proposed funding plan and require red public sector participation;
g. Proposed lease terms and length of commitment;
h. Estimated economic and fiscal impacts to the State and City;
I Impact of project on local populations and adjacent neighborhoods;
j. Identified community and economic development activities; and,
k. Other criteria, as identified. Evaluate capacity and experience of Development Team
CSL Failed to Evaluate the Experience of the Development Team
The CSL report also seemed to add material from Johnson's website regardless if the information was true or relevant. CSL was specifically contracted to "evaluate capacity and experience of the development team."
In one section of CSL's report, the consultants added in bios for Johnson without any review or independent evaluation.
Griffin says CSL failed to conduct a proper evaluation. "The CSL report also failed to disclose litigation involving several portfolio companies with ties to Johnson and Benevolent Partners,” said Griffin.
Brett Johnson is the Founder and Principal Owner of Fortuitous. Mr. Johnson has a demonstrated track record of success across many disciplines, including real estate development, private equity, venture capital and as President and CEO of global public and private companies with hundreds of millions of dollars in sales.
Brett Johnson is the founder and CEO of Benevolent Capital. Benevolent has investments in professional sports, real estate, private equity, venture capital and more. Mr. Johnson is, or has been, an owner/investor in Ipswich Town Football Club, Phoenix Rising FC, FC Helsingor, FC Tucson, USL Rhode Island, TerraCycle, Athletic Brewing, Oura Ring, Damon Motorcycles, Thrasio, NYC Office Suites, Octagon Partners, Glytch, and ArcherDX.
A number of the claims are false or exaggerated.
Ultimately, Griffin says, “The CSL report failed to provide Commerce Rhode Island board members with an accurate portrayal of Johnson’s background, relevant experience, and the performance of his prior investments.”