Jan. 27, 2005 - PROVIDENCE -- Documents made public this week by the Department of Administration do not contain a current accounting of the total amount owed by James Procaccianti and related companies from unpaid loans left over from the state's credit union crisis, according to a Journal review.

Procaccianti is president of The Procaccianti Group, which is planning to buy the state-owned Westin Providence for $95.5 million, and build a $50-million hotel tower next to it. The Rhode Island Convention Center Authority, which oversees the Westin, was expected to vote today on a purchase-and-sale agreement with The Procaccianti Group. The vote has been delayed until the authority works out the final details of the contract, according to James McCarvill, the authority's executive director.

As the authority ironed out the contract, a spokesman for James Procaccianti said yesterday that Procaccianti would agree to pay $2.7 million to settle a lawsuit the state filed against him in 1994 after he defaulted on a $3-million loan.

The loan was one of 10 unpaid loans related to Procaccianti and left over from the credit union crisis of the early 1990s, according to the state.

Procaccianti would also agree to pay interest on the loan over the next 15 years, according to the spokesman. It's unclear how much the total amount of the settlement would be. State documents estimate that with interest, expenses and late fees, the outstanding amount is $6.59 million.

Procaccianti's spokesman declined to release additional details.

The state, however, has not reached a settlement agreement with Procaccianti, according to Jeff Neal, a spokesman for Governor Carcieri.

"The Department of Administration has been in discussions with Mr. Procaccianti and his representatives regarding a possible resolution. The terms that you're talking about have been discussed," said Neal. "There is no agreement until there is an agreement."

Procaccianti, and Procaccianti-related entities, had $14.75 million in loans outstanding from the credit union crisis in 1994, according to records of the Depositors Economic Protection Corporation, which was charged with cleaning up the financial mess.

But other DEPCO records, released this week by the state at The Journal's request, contain no current breakdown of Procaccianti-related loans that are still outstanding, loans that have been collected, or collateral that has been sold to pay down the loans.

The Convention Center Authority may call an emergency meeting to vote on a purchase-and-sale contract with The Procaccianti Group in the next few weeks, said McCarvill. If it doesn't, the board will wait until its Feb. 24 meeting, he said.

Procaccianti told the House and Senate Finance Committees, during hearings this week about the proposed sale of the Westin, that his business entities were current on their loans at the time the privately insured credit unions were closed.

The state, however, said that Procaccianti and Procaccianti-related entities stopped paying on the loans after the closures.

DEPCO's former executive director, John McJennett III, said this week that no settlement was ever reached and that debts are still outstanding -- adding up to about $25 million, including interest.

The Journal asked earlier this month that public records detailing the outstanding loans, the amounts of the loans, the collateral on the loans, and how much the state received from selling land serving as collateral on those loans, and a final accounting of DEPCO's collection actions, be released. The documents released by the Department of Administration were contained in one cardboard box and a large number of manila folders. The records provide a piecemeal look at the state's collection efforts.

Although the folders were labeled with the names of various Procaccianti entities, their contents ranged from original promissory notes for loans signed by James Procaccianti to spreadsheets listing accrued interest and late charges on loans.

Personal financial information such as Social Security numbers, income figures, and street addresses was withheld by the state based on restrictions in the state's public access law, according to Marilyn Shannon McConaghy, chief legal officer for the Department of Administration. She was responsible for leading a team that reviewed the records and made them public.

One memo, from 1996, shows that the DEPCO asset management committee decided it would stop trying to collect about $4.5 million worth of outstanding loans related to Procaccianti, in the "interest of containing . . . costs," according to the documents.

The records also indicate that the majority of the collateral attached to all the loans was "foreclosed or sold" between 1991 and 1993. According to the documents, about $3 million was collected and applied to Procaccianti-related outstanding loans.

The records also show that in some cases, the state decided not to pursue a foreclosure on a property securing a loan since there were other mortgages on the property. Those loans had to be paid before the state of Rhode Island could collect and the price of the property wasn't enough to pay back all the loans, according to the records.

In another case, according to the documents, three pieces of property in Providence used to secure one Procaccianti-related loan were released by the state after they were condemned by the city and razed. Ownership was transferred to the City of Providence Redevelopment Authority in 1993.

In 1994, the state sued Procaccianti, and his father, Armand, who died in 1995, for defaulting on a $3-million loan. The state is suing to recover about $2.9 million and the case is pending in Superior Court. Procaccianti has offered to settle with the state and yesterday he and his lawyer were working with the state to reach an agreement, according to a spokesman for Procaccianti.

"The goal is to be done as quickly as possible," said David Preston, a spokesman for Procaccianti.

But the state has made no formal settlement offer, said Neal of the governor's office.

"Certainly, I know the Department of Administration has not seen any kind of formal offer of settlement from Mr. Procaccianti," said Neal.

Procaccianti testified at the State House that the companies were current on all loans from Marquette Credit Union, when the state took over 45 credit unions and banks in the early 1990s. However, the closure of the credit unions meant that Marquette couldn't continue to pay out the rest of the money it agreed to loan to Procaccianti-related entities, according to Procaccianti. That caused the companies significant harm, he said.

The company was left with "buildings that were incomplete," Procaccianti testified.

Procaccianti said that a study done by a financial company hired by Procaccianti in the early 1990s shows that if the collateral related to the loans had been liquidated in a timely fashion the total would have added up to $1 million more than the outstanding loan amounts.

"We've told this story to over a hundred lenders in the past 14 years and after we're done telling the story that we're telling you, they almost laugh at it," said Procaccianti during an interview at his company's corporate headquarters in Cranston in December.

The Procaccianti Group, which is privately held, currently owns or manages the Ocean Rose Inn in Narragansett, the Radisson Hotel in Providence, a Comfort Inn in Warwick, and the Holiday Inn in downtown Providence -- just blocks from the Westin. Overall, the company manages or owns 23 hotels across the country, and also manages the Waterside Convention Center in Norfolk, Va.

According to Procaccianti, the company is "very close to a $1 billion company."

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