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By KATHERINE GREGG
Journal State House Bureau
PROVIDENCE, R.I. -- As Governor Chafee's nominee for state labor director, former Lt. Gov. Charles J. Fogarty faces questions about how he ended up with a federal tax lien against his home in Harmony.
The story started to emerge on Tuesday, when the Chafee administration made public, in response to a request from The Journal, the financial statement and questionnaire that Fogarty submitted to the Senate in advance of his Senate confirmation hearing on Wednesday.
In these documents, Democrat Fogarty acknowledged that he was late paying penalties and interest to the IRS on his early withdrawal in 2007 and 2008 of the contributions he initially made, during his years as lieutenant governor, to a state-sponsored 457B tax-deferred compensation account.
While he has belatedly made those payments, Fogarty acknowledges, he still owes roughly $5,000 in federal taxes for 2009.
If confirmed as the state's new labor director by his one-time colleagues in the state Senate, Fogarty will replace Sandra Powell, who Chafee has chosen for a new position in state government: director of the Department of Human Services. (Along the way, the Senate Labor Committee, chaired by his brother Paul Fogarty, will hold a hearing on the nomination. His brother and "significant other,'' state Sen. Maryellen Goodwin, are expected to recuse themselves from consideration of his nomination.)
In his $130,152-a-year new role, Fogarty will be in charge of a state department that handles hundreds of millions of dollars in jobless benefits and work force training programs.
In response to questions in the Senate questionnaire, Fogarty said that all of his state and local taxes are current, but that he is still working his way through an IRS payment plan that is supposed to end in May "for payment of balance of 2009 taxes due."
In the interview and his filing with the Senate, Fogarty said the current federal tax lien on his property -- and an earlier one that has already been lifted -- stem from his failure to pay early withdrawal penalties and interest on his withdrawal of money from his "deferred compensation/IRA.''
Fogarty, 55, is unwilling to say how much he withdrew. He said that that is "a personal matter,'' but he contributed a "significant amount every year'' to this tax-deferred savings account, so when he needed more money than he was making, after leaving the state House, as a part-time teacher at Johnson & Wales University, this was the account he was forced to tap.
He said he knew he would be required to pay an early-withdrawal penalty, but "I wasn't able to pay the penalty at the time I paid my taxes.''
But, he said, he worked out a payment plan with the IRS before Chafee became governor and the prospect of a job with the new administration was even on the horizon.
His filing states he completed payment of $7,837 in penalties and interest in May 2009, and that first lien was lifted in August 2009, and completed payment of another $7,482 in April 2010, and is "awaiting lien discharge.''
This is not the first time Fogarty has had a financial problem.
As a candidate in 1998, Fogarty had to scramble to save his home from going on the auction block after missing nearly five months of payments on his mortgage.
His situation came to light after a Johnston law firm placed a legal notice in the newspaper stating that the terms of Fogarty's mortgage had been broken, and his home would be put up for auction on Jan. 6.
The following day, Fogarty made the payment in full, with his then chief of staff Rick McAuliffe Jr., explaining: "He's been busy since he announced his candidacy in March. He focused on the race full-time, and he fell behind on his mortgage.''
Chafee spokesman Michael Trainor said Fogarty disclosed his tax situation to the governor when they first talked about the potential for a job in the new Chafee administration, and the governor did not believe it should disqualify Fogarty.
Trainor said: "We see Charlie Fogarty as another reflection of what many in Rhode Island have been going through in this historically weak economy. Many people have been forced to tap their retirement accounts,'' and "we are satisfied'' that he "stepped up to the plate'' and made "suitable arrangements'' with the IRS to payoff the debt.
Asked what Fogarty's personal financial situation says about his ability to run an $833.6 million state and federally financed department, with 519 budgeted employees, Trainor said: "We are confident that Charlie is surrounded by an extremely capable staff.''
He said Chafee chose Fogarty because he is an "extremely intelligent person'' known for his strengths in the policy arena, and because Chafee "wants people in his cabinet who understand how government works.''
In his last job, Fogarty was policy director for lobbyist McAuliffe's Mayforth Group, a public relations and government consulting firm that counts Local 51 of the plumbers and pipefitters union, and Local 17, sheet metal workers union among its clients.
Fogarty represented Glocester and Burrillville in the state Senate for eight years, before he ran for lieutenant governor in 1998 and defeated the incumbent Republican, Bernard Jackvony. He was reelected four years later, and has been out of office since he waged --- and narrowly lost -- his 2006 bid to unseat then Republican Gov. Donald Carcieri.
Fogarty came closer than some expected, losing by about 8,000 votes out of some 380,000 cast.
