INVESTIGATION: Money Ties PPAC, Board Members to Projo Insiders

Several top board members for the Providence Performing Arts Center have deep financial ties to the Providence Journal, which receives about half a million dollars in advertising revenue from the arts nonprofit, GoLocalProv has learned.

PPAC lists as one of its board members Scott Connolly, the senior vice president for sales and marketing at the Providence Journal. He is the second-highest ranked executive in the advertising division.

Connolly is not the only board member with financial ties to the Providence Journal.

The chair of the board is Joe Walsh, a top lobbyist who represents the Rhode Island Daily Newspaper Association at the Statehouse. Walsh has been leading a battle against proposed new legislation that would lift the requirement that state legal notices go in designated papers of record, like the Providence Journal. Walsh earned $30,000 during the last legislative session as a lobbyist for the newspaper association, according to filings with the Secretary of State.

Walsh also sits on the board of directors for one of PPAC’s three subsidiary for-profit organizations, Professional Facilities Management. PPAC has refused to disclose whether its staff or board members have any ownership stakes in the businesses.

A third board member, Mark Ryan, is a former executive vice president for the Providence Journal Company and also worked as the company’s legal counsel and senior corporate attorney. Ryan is currently a principal at Moses Afonso Ryan. Online records show that Ryan was a board member at the same time that he held his position at the Journal. As of 2010, he was an investor in stock with the owner of the Providence Journal, the A.H. Belo Corporation, according to filings with the state ethics commission.

PPAC is a top advertiser with the Providence Journal. In 2013, PPAC generated over $450,000 in ad revenues for the Providence Journal, according to an internal sales document obtained by GoLocalProv. As ad revenue at the Providence Journal has declined—from $137 million in 2005 to $41 million in 2013—that amount represents a more significant share of the paper’s overall ad revenues that it once might have. Online archives for the Journal show PPAC is a consistent advertiser, placing at least 224 ads in the paper since 2011, with 43 in the last six months—not counting any Web advertising.

‘Not exactly kosher’

Connolly has held an executive sales position at the Providence Journal over the course of that decade. From 2005 to 2009 he was a vice president for sales and marketing. In 2009, he entered his current position as senior vice president. Connolly has been on PPAC’s board at least since early 2012, online records show.

Connolly’s dual positions could be a potential ethical issue, according to Stephen Shepard, the founding dean emeritus of the CUNY Graduate School of Journalism. But, he said, it might be more of a problem for PPAC than the Journal. “It’s really more of a governance question than a journalism ethics question,” said Shepard, a former editor-in-chief at BusinessWeek.

Shepard said Connolly should not be receiving any benefits from the organization on whose board he serves because it could potentially compromise his independent judgment. “From a governance question, it’s not exactly kosher,” Shepard said.

Connolly did not respond to a request for comment.

PPAC won’t release documents

A conflict of interest does not necessarily disqualify a person from sitting on the board of directors for a nonprofit as long as that conflict is fully disclosed to fellow board members, according to Toni Boucher, the director of the Commonfund Institute, which specializes in research and education on the best practices in the nonprofit sector, including investment practices and governance.

“To avoid the reputation of self-dealing the board members should disclose everything—their outside income, their outside employment, and their relationship with the nonprofit,” Boucher said.

A board member with a financial relationship between his nonprofit and his business should also abstain from any votes, Boucher noted.

GoLocalProv requested the PPAC board meeting minutes for the past three years. PPAC declined to provide those, along with any conflict of interest disclosure forms that Connolly and any other board members might have submitted. PPAC officials, through a spokesperson, also declined comment.

IRS ramps up scrutiny

Boucher said the nonprofit community remains divided over whether it is acceptable to have board members serving with conflicts of interest. But, she added, the IRS has become increasingly concerned about the issue, asking nonprofits to disclose information and compensation and potential conflicts in the annual Form 990s they must file to maintain their tax-exempt status.

According to its latest available Form 990, PPAC does have a written policy on conflicts of interest that directors and top staff are annually required to fill out. But PPAC is not required to identify those potential conflicts on the form.

A recent ethics report issued by the Commonfund Institute warns that nonprofits must be particularly vigilant about conflicts that involve the purchase of goods or services.

“The purchase of goods or services by nonproﬁts from board members or their companies raises special concerns about the real beneﬁciary of such transactions—the nonproﬁt or the board member. The IRS Good Governance guidelines caution that ‘in particular, the duty of loyalty requires a director to avoid conﬂicts of interest that are detrimental to the charity.’ Regular reviews should be made to assure that joint ventures, investments and management consulting arrangements of the nonproﬁt reﬂect reasonable investments or payments and further the mission of the nonproﬁt without creating a prohibited private or excessive beneﬁt,” Boucher writes in the report.

When there would be a journalism ethics issue

The question of whether there is a conflict of interest for the Providence Journal hinges on a different set of circumstances, according to experts in media ethics.

“There are certain lines that people in the news world right up and including the news editor are not supposed to cross,” said Dan Kennedy, an assistant professor of journalism at Northeastern University. But, those rules do not apply to newspaper executives and it is not uncommon for a publisher or other executive to sit on the boards for civic or community organizations—positions that might be inappropriate for those who work on the news side, Kennedy said.

The outside affiliations of an ad sales executive would only become problematic if the executive tries to influence what happens on the news side, according to John Pantalone, the chair of the Journalism Department at the Harrington School of Communication and Media at the University of Rhode Island. “Editorial people strongly resist any pressure that comes from ad people, either to write something or to not writing something,” Pantalone said.

“That’s a classic conflict of interest at newspapers and news sites that rely on advertising,” Pantalone said.

GoLocalProv reached out to John Hill, the president of the Providence Newspaper Guild, but he did not immediately respond to a message seeking comment.

Fox recused himself from pro-PPAC vote

This is not the first time questions have been raised about potential conflicts of interest involving PPAC board members. In 2012, the state expanded the film tax credit program to encompass theaters. As written, the law was neutral—no theater was specified. But, in fact, because the credits were reserved for venues with only 1,500 seats or more, just two were eligible: PPAC and the Veterans Auditorium, which is controlled by a subsidiary business of PPAC, as GoLocalProv reported in 2012.

The credit expansion was buried in one of the articles for the annual state budget, which is developed by the Rhode Island House of Representatives. At the time, House Speaker Gordon Fox was also a board member for PPAC. A spokesman told GoLocalProv that Fox has recused himself from the floor vote on the article.

Fox resigned as House Speaker last month. Although he is no longer identified as House Speaker, Fox’s name remains on the list of board members on PPAC’s Web site.

Stephen Beale can be reached at [email protected] Follow him on Twitter @bealenews

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