Former Finance Chair Gallison Pleading Guilty To Federal Fraud Charges

Jan 23, 2017

US Attorney Peter Neronha, center, details the charges against Gallison.
Credit Ian Donnis / RIPR

Ray Gallison, the Bristol Democrat who formerly chaired the powerful House Finance Committee, has agreed to plead guilty to nine federal charges of mail fraud, wire fraud, aggravated identity theft, and filing false tax returns, investigators announced Monday.

US Attorney Peter Neronha said the common thread is how Gallison was taking money -- a total of about $660,000 -- from other people, for his own benefit.

"Mr. Gallison was essentially, as alleged, stealing from wherever he could," Neronha said. "Didn’t matter if the person was deceased, it didn’t matter if it was public money that he needed to shift around to meet his purposes, it didn’t matter if it was someone who was disabled and he was the sole trustee."

Gallison, a 16-year lawmaker, abruptly resigned last May in the face of a wide-ranging law enforcement investigation. 

Prosecutors say that according to signed court documents, "Gallison will admit to wide-ranging fraudulent and deceptive conduct to steal private money and hide his misuse of public money, and covering his tracks while doing so. Gallison will admit to the theft of funds from the estate of a deceased individual to which he was appointed executor; theft of funds from a Special Needs Trust established to protect the long-term welfare of a disabled individual to which he was appointed trustee; providing false information on tax documents, including vastly inflating the number of students assisted by a non-profit organization funded by public money while failing to disclose amounts paid by that organization to him; and failure to pay taxes on income derived from his criminal actions."

Gallison before he resigned his seat in May 2016.
Credit Ian Donnis/File Photo / RIPR

Gallison could face a sentence of more than two years in prison. The sentence could be much longer, and Gallison could also face significant fines, according to the plea agreement he signed.

Gallison rose to the role of House Finance chairman after Nicholas Mattiello became speaker in 2014.

Last year, the FBI seized about $810,000 in assets under Gallison's control, some of which belonged to the estate of a friend, Ray Medley, who died in 2012. Medley had hired Gallison to handle the liquidation of his estate. Prosecutors say Gallison will admit that he fraudulently used Medley's name and Social Security number to execute part of the estate.

Another part of the case involves the filing of a false tax document for Alternative Education Programming, a nonprofit group that received legislative grants during the course of Gallison's involvement with the group. He was previously listed as AEP's assistant director.

Prosecutors say the false tax document listed almost $78,000 in tuition and related expenses for 47 students, from July 2012 to June 2013. In fact, authorities say, Gallision paid only $3,137 to assist two students during that year. They also say Gallison defrauded a disabled person's special needs trust by writing an $8,900 check that he deposited into the AEP account.

Also involved in the investigation were the FBI, the attorney general's office, State Police, and the IRS.

During a news conference detailing the charges, Neronha and Attorney General Peter Kilmartin expressed frustration about the persistence of wrongdoing by elected officials in Rhode Island.

One former rep, John Carnevale, pleaded not guilty earlier this month to charges of perjury and filing false documents. Another, Peter Palumbo, pleaded not guilty earlier this month to charges of embezzlement and filing a false document. Both men are Democrats.

Neronha said it was wrong for some in Rhode Island to downplay crimes by public officials that don't directly involve government activity. Former House speaker Gordon Fox - now in prison for corruption -- made that argument when a string of reps got arrested during his tenure as speaker.

Asked if the Gallison case is a matter of public corruption, Neronha said, "To me, whenever a public official raises his right hand, or her right hand, and takes an oath to serve the people, that means they should be of good character in their public and private life. I don't draw that distinction. I think it's a false choice that we have to make when we make that distinction. There are those of us in public office who don't have a personal capacity -- we're always acting in our official capacity. And frankly, it shouldn't be that difficult to act with character in all walks of your life, public and private."

"It is at least ironic -- at least ironic -- that someone who engages in this level of financial fraud is the House finance chair," Neronha continued. "I mean, if that isn't setting up alarm bells to folks, it ought to." 

The US attorney expressed frustration that prosecuting cases involving public officials takes time away from efforts to raise awareness about the dangers of opioids and other pressing issues.

Like Neronha, Attorney General Peter Kilmartin vowed that prosecutors will remain vigilant in looking at cases of public wrongdoing. Kilmartin, a 20-year former state rep, also said the vast majority of public officials are decent and honest.

"Ray Gallison was greedy, pure and simple," Kilmartin said. "He stole from his clients, people who considered him a trusted attorney and a trusted friend. That greed caught up with him."

Kilmartin said repeated prosecutions of public officials should help reduce public cynicism about Rhode Island politics.

"Don't let the likes of Ray Gallison and Gordon Fox and others tarnish your opinion of public service, or the many honorable men and women who choose to enter it," Kilmartin added.

Neronha said that of about $660,000 in theft by Gallison, $515,000 was in the form of stock certificates that have been recovered and will be returned to the appropriate estate. He said Gallison has agreed to pay $100,000 at or before sentencing, and that prosecutors will go after the remaining $60,000.

Asked if sees a need for other steps to deter wrongdoing by public officials, Neronha said in part, "It's really on all of us -- the public, law enforcement, frankly, fellow public officials -- to make it clear that that kind of conduct, the kind of conduct we've talked about far too often, is conduct that folks view with approbation." 

John Marion, executive director of the good government group Common Cause of Rhode Island, said his organization has sent a letter to the state Ethics Commission, requesting an audit of the financial disclosure statements of all state lawmakers. Common Cause is also requesting the state Board of Elections to perform an audit for the campaign accounts of state legislators.

"Rhode Island can no longer afford to wait for law enforcement to step in and clean up the mess after the public trust has been betrayed,” Marion said. “The people of Rhode Island deserve to know that legislators are obeying the law before it rises to a criminal offense and people suffer.”

Speaker Mattiello reacted to the charges with this statement: “I commend U.S. Attorney Neronha and Attorney General Kilmartin for their diligent work in identifying, investigating and rooting out illegal behavior.  Elected officials must be held to the highest standard.  When they cross the line, they should be investigated and prosecuted.”

As far as Marion's request for audits, a spokesman said, "Speaker Mattiello believes the Ethics Commission should do whatever it deems to be appropriate."

Greg Pare, spokesman for Senate President Teresa Paiva Weed, said, "The Senate president supports full disclosure and accountability. Both of these boards are independent and have authority to conduct audits as they deem necessary."

In a statement, Governor Gina Raimondo said, “Rhode Islanders deserve to have faith in their government and trust that their elected leaders will never use their public position to enrich themselves. Today’s disappointing news puts that faith at risk and requires all of us in public service to reaffirm our commitment to the public trust. No one should enter public service in pursuit of personal gain.”

This report has been updated.