Rowland Friend Could Get Tax Break

By JON LENDER And DAVE ALTIMARI
Courant Staff Writers

January 21 2005

An obscure bill approved during the chaotic final minutes of last year's legislative session could get a friend of former Gov. John G. Rowland off the hook for at least part of $70,000 in back taxes to the city of Waterbury.

The bill, now a state law, was tailored to the needs of Joaquim "Jack" Sousa, a Rowland friend and political fund-raiser who runs a Waterbury-based driving school that enjoys a lucrative, no-bid state deal to provide retraining for drivers with multiple violations, say officials familiar with the situation.

Another retroactive tax break for a gubernatorial pal figured in Rowland's guilty plea to a federal corruption charge last month. That charge was based in part on Rowland's promising to support retroactive tax relief for a charter air company whose owners provided him with free flights to Las Vegas and other destinations.

There are no charges filed relating to Sousa's tax break, and Sousa says he never discussed the matter with Rowland. But Sousa did do political favors for the ex-governor, in the form of three campaign fund-raisers.

About eight years ago, Sousa entered a no-bid arrangement with the commissioner of the state Department of Motor Vehicles, a Rowland appointee, that made Sousa's driving school the largest single provider of mandatory driver retraining for repeat traffic offenders.

The tax break bill allowed Sousa to reduce tax liability for his school's vehicles.

The exact circumstances of the bill's approval, shortly before the midnight adjournment of 2004 legislative business last May 5, are murky.

But Waterbury Mayor Michael J. Jarjura recalls that he became concerned a few days before last year's adjournment, when he received a phone call from Sousa's lobbyist, Armando Paolino, an active Waterbury-area Republican.

"He calls and says we're attempting to do something up at the legislature that would mitigate the amount of money that Jack Sousa owes the city of Waterbury," Jarjura said.

He said Paolino told him several Waterbury lawmakers "were asking, `Where's the mayor on this?'"

What Paolino was calling about, Jarjura said, was a proposed amendment to a bill that would allow business owners to pay property taxes on a company's motor vehicles in the towns where employees garage them overnight - generally towns with lower tax rates than the city in which the company is based.

Paolino's amendment was to make the tax relief retroactive.

"I said the mayor is absolutely opposed on this because it would cost the city of Waterbury tens of thousands of dollars [by] making it retroactive," Jarjura said.

But the bill, and the amendment, passed anyway.

The nine-word amendment said that the bill providing local tax relief to companies such as Sousa's would be "effective from passage and applicable to any assessment year."

The final five words have become the basis for a claim by Sousa's lawyer that he should be relieved of at least a substantial part of more than $70,000 in taxes he owes from the past two years, said Charles E. Oman III, a lawyer working for the city's corporation counsel office.

"We do not concede that," Oman added.

Oman said that the claim of retroactivity by Sousa's attorney, Thomas Porzio of Waterbury, came up in discussions toward a possible settlement of a pending lawsuit filed in 2002 by Sousa's driving school company against Waterbury to appeal its tax bill.

Sousa said Thursday night there was no impropriety or special favor to him in the passage of the bill and amendment. He said he did not talk to Rowland about it. "We handled this with the utmost integrity," he said. But he said he left the details to Paolino - who he said represented himself and other companies he would not name on the same issue.

Sousa also said that his lawyer and the city have reached a "verbal agreement" on the back-taxes issue that has not yet been reduced to writing, adding that "they are working on it as we speak." He would not discuss the amount he has agreed to pay other than to say it is "substantial." He also said that in the settlement, he will be paying Waterbury tax on vehicles that he said he has already paid in other towns where he maintains branches of his driving school. He would not say which towns.

"We pay our taxes on our cars where they were housed and garaged," he said. "We felt it was unfair that we would have to pay taxes in two towns or cities on the same vehicles."

The issue Sousa described was actually the source of a long-running controversy among municipal tax officials, who argued over whether vehicles should be taxed in the communities where the companies that owned them were based or in the communities where the drivers kept them. The intent of the original tax bill - minus Paolino's amendment - was to resolve that question.

But Jarjura said Paolino's amendment went beyond the intent of the bill. It offered a potential benefit to Sousa and a few others who had been fighting Waterbury over their company vehicle fleets in recent years. That fight had carried to the state Supreme Court, in a case involving Waterbury-based Dinto Electric.

Dinto claimed it should pay much of its motor vehicle fleet tax bill in surrounding towns, and won its case at the Superior Court level. Waterbury appealed and Oman said he won his case at the state Supreme Court several months before the late-night bill was passed.

Dinto and other company owners, including Sousa, signed agreements that they would pay their back tax bills if the city won at the Supreme Court. Dinto and at least one other signer did pay their taxes after that decision. Dinto actually paid in both Waterbury and the surrounding towns, making its owner "the most honorable of them all," Jarjura said.

But Sousa fought the tax levy, claiming that the retroactive provision, added May 4 to the bill that passed May 5 in the last minutes of the session, changes the circumstances, Oman said.

Legislative insiders use the term "rats" to describe bills and amendments that slip through late at night in the hectic pre-adjournment confusion and that benefit a select few.

"I hate to use that word," Jarjura said. But he described what he termed the "Armando Paolino amendment" as one of those "very particular bills that benefit only a few."

"It doesn't pass the smell test," Jarjura said. "It's suspicious."