Providence Loan Fallout: Delinquent Organization Received Cash From State Too

Providence Loan Fallout: Delinquent Organization Received Cash From State Too

The South Providence recycling company that is more than 90 days past-due on a $410,000 loan from the Providence Economic Development Partnership (PEDP) also received a $300,000 loan from the Rhode Island Economic Development Corporation’s Small Business Loan Fund, records show.

The for-profit Ecotope Environmental Services, Ltd. (formerly known as CleanScape, Inc.) that was run by the non-profit South Providence Development Corporation and the Urban League of Rhode Island is now in receivership and already has had some of its assets auctioned off, according to Joshua Teverow, the lawyer who represents the PEDP.

Teverow said the PEDP has filed a Proof of Claim with Superior Court, and is working with the Receiver and the SBLF, who is pari passu with the PEDP, to sell the business and the real estate.

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“We have received an offer from a buyer who would assume most of the PEDP loan balance, and we believe that transaction will come to fruition,” Teverow said.

Environmentally-Motivated Business

Ecotope Environmental Services is one of 11 companies the PEDP is actively seeking collection against for being at least 90 days past-due on what they owe. GoLocalProv reported Monday that 25 percent of all businesses that have received PEDP funds are delinquent on their loans. The total amount of loans awarded that are currently past due exceeds $3.3 million, but Teverow maintains that doesn’t mean the city is on the hook for the entire tab. He could not immediately disclose how much is owed in total by the delinquent companies.

In most cases, a PEDP loan is personally backed by the business owner, meaning the only way to get out from paying it back is to file for bankruptcy. In Ecotope’s case, the company is backed by the South Providence Development Corporation. Because there appears to be a buyer of the business, Teverow said he doesn’t believe the PEDP will have to seek collection against the nonprofit.

According to the company’s website, Ecotope’s mission was to “provide high quality waste reduction, shredding, landscaping and recycling services to businesses and institutions in the metropolitan Providence area and throughout Rhode Island [as well as] contribute to the economic, societal and environmental revitalization of South Providence.”

The company cleaned and maintained neglected lots in the state and worked on projects that included overseeing the design, construction, and maintenance of environmentally friendly landscapes for municipalities, private businesses and individual land or homeowners.

“Development of the company was motivated by the desire to create employment opportunities for the residents of the South Providence community,” the website says. “We have grown from a small concern to a thriving entity with over 30 employees. Most of our staff comes from our neighborhood and embodies our commitment to making a positive contribution to the quality of life in South Providence.”

Former Employee Rips Company

But there was very little commitment to the staff, according to community activist Anthony Sionni, who worked for the company for five years.

Sionni served as a union steward and was involved in negotiating the contract with the teamsters and the urban league. He claims it was clear the company was mismanaged for years.

“They always claimed that they were broke, there was a lot of problems there,” he said. “The presidents always got nice big salaries right up until they company closed.”

Sionni said there were multiple occasions where grievances had to be filed because the company wasn’t forwarding union dues to the teamsters. He claims the company clearly violated the terms of the contract with the union.

“The employees still have not been paid out there vacation time as required by law and under our teamster contract,” Sionni said. “I haven’t heard anything since they closed over six months ago. Some employees had money in a 401k as well.”

Company Had State Contract & Received ARRA Funds

The $710,000 in loan money between the city and state wasn’t the only source of funding for the company. Records show the company also received more than $70,000 in grant money from the American Recovery and Reinvestment Act in July, 2010.

Less than ten months later, the company went into receivership.

Shortly after going into receivership, the state severed ties with company, which has a master contract to collect recyclables at hundreds of state offices, including the University of Rhode Island.

Sionni claims the company always seemed to be receiving new funding, but that employees never understood where all the money went.

“It’s no surprise to me that the company got all these grants, but where did all the money go, that’s the big question,” Sionni said. “Many of the employees always questioned their finance. How could they be getting all these grants and still be broke? We had major recycling contracts with the state and city and federal government. The company also sold the cardboard and paper, so they were making money on both ends in contracting and then selling the paper and cardboard.”

Editor's Note: Efforts to reach former high-level employees at the company were unsuccessful.

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