PROVIDENCE, R.I. (WPRI) – A yearslong criminal investigation uncovered evidence that Gov. Dan McKee "personally and directly intervened" to steer a multimillion-dollar state contract to a brand-new consulting firm with high-level political ties, but no charges will be filed in connection with the case.

The investigation into the ILO Group contract – led by R.I. Attorney General Peter Neronha and the R.I. State Police – ended with a report made public on Tuesday, along with reams of supporting documents. They launched the probe in the fall of 2021 after Target 12 revealed the unusual process that led to the contract being awarded. The investigation's scope eventually included interviews with more than 25 people, court-authorized search warrants and more.

ILO was incorporated the same week McKee took office, and its principal owners were working for a close confidant of the governor's, Michael Magee Jr., as they landed the contract. Documents showed ILO’s managing partner, Julia Rafal-Baer, also played a role in designing the work that was later awarded to her firm.

"Governor McKee intentionally and against the findings of an independent state review team steered a lucrative, federally-funded state contract to a company formed for that purpose by Magee's close associate, Rafal-Bear," wrote Neronha along with his top aides.

Investigators zeroed in on the fact that Rafal-Baer used Magee's firm, Chiefs for Change, to pay $15,000 a month to the prominent political consulting firm SKDK to assist McKee with his communications, both in his official role as governor and early in his campaign for a full term.

McKee announced SKDK as his campaign consultant in April 2021 -- while ILO was trying to secure its contract -- and the firm was still working for him as late as the following February, his campaign manager told 12 News at the time. McKee later replaced SKDK with a different firm.

Prosecutors examined whether officials including McKee had violated bribery or campaign-finance statutes in connection with ILO. Yet despite "close relationships between the players involved," they could not prove that McKee awarded the contract to ILO as a quid pro quo for the assistance from SKDK, which was never paid for most of its work on his campaign.

Neronha said he found "cloudy and contradictory" evidence about whether the actions of McKee and his associates reached the level of criminality, and said such murky evidence "rarely if ever justifies a prosecution, and seldom leads to a successful one."

Neronha and R.I. State Police Col. Darnell Weaver have scheduled a news conference for Wednesday to field questions about the investigation and their decision not to press charges.

The governor – who has now been cleared of any criminal wrongdoing – refused to be interviewed by investigators, according to the report. Tony Silva, McKee’s chief of staff at the time the contract was awarded, and Tony Afonso, his current chief of staff, both also refused to be interviewed. Rafal-Baer refused to be interviewed, as well. Magee agreed to be interviewed regarding SKDK but not about ILO.

Governor calls investigation 'unfortunate'

McKee's office said he has no public events on Tuesday or Wednesday, and also cancelled a scheduled interview Wednesday on WPRI 12. However, the governor insisted in a written statement that the investigation "confirms what we've been saying for years."

"No wrongdoing took place and our priority has and will always be delivering for the people of Rhode Island," McKee said. "It's unfortunate that so much time and taxpayer dollars were wasted on an effort that was always going to come up empty, but now it's important that we all move forward and continue focusing on the issues that are impacting Rhode Islanders every day."

The attorney general's investigation was at one point joined by the Rhode Island U.S. Attorney’s Office and the FBI, which typically conduct such probes using a secret grand jury inquiry. The new report is silent on the information gathered by federal investigators, but suggests they spent more than a year examining the matter.

"As a matter of general principal and longstanding practice, the Department of Justice does not comment upon matters that it does not litigate or charge," Jim Martin, a spokesperson for the U.S. attorney, said in a statement.

Detectives obtained an email message that Rafal-Baer sent in March 2021 in which she told a colleague, "It's a fixed RFP but luckily I know the person it's fixed for [winky face emoji]." (RFP is short for "request for proposals," the state's process for awarding competitive contracts.)

She sent the email at the same time the state publicly posted the RFP on its website for potential bidders to submit proposals to do the work, according to police.

"This email shows that potential fraud or manipulation of the competitive bidding occurred at the outset of the process," State Police Sgt. Michael Brock wrote in his agency's summary of its ILO investigation. "It calls into question the legitimacy of the process that followed."

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Rafal-Baer wrote the email to a fellow consultant named David Irwin, who initially responded to the email, "Wonderful." When interviewed by state police, Irwin said he didn't think much about the email at the time. In retrospect, however, he agreed it came across as "nefarious."

"A hundred percent," he said in an interview transcribed by state police. "It's the reason why we stopped doing work with her."

Rafal-Baer also expressed concern about the optics of the deal with SKDK, warning that one proposed version of their contract would "look like a gift." She urged him to "be sure there is nothing sketchy or illegal in this."

ILO's attorney, former Rhode Island U.S. Attorney Robert Corrente, argued the report was a vindication of his client.

"The attorney general’s report confirmed what we have maintained from the outset: there was absolutely no wrongdoing by ILO Group or any of its personnel," he said in a statement. "We are pleased that this matter has concluded, and ILO Group looks forward to continuing its work supporting public education nationwide."

Corrente declined to answer follow-up questions from Target 12.

John Marion, executive director of the good-government group Common Cause Rhode Island, characterized the ILO report as "damning."

"While the AG ultimately concluded that a prosecution of Governor McKee under the state’s bribery statute would not likely be successful, no Rhode Islander should feel good about what they read in this report," Marion said in a statement. "State contracts should be awarded to vendors who provide the best service to the people of the state, not to the politically connected."

Marion also said he disagreed with Neronha's decision not to charge the governor or his associates under the state's Code of Ethics, which deals with issues of public corruption.

"The attorney general is not the state’s prosecutor under that law, the staff of the Rhode Island Ethics Commission serves in that role," Marion said. "The attorney general’s legal analysis is incomplete because it only focuses on part of the Code of Ethics. In the coming days Common Cause Rhode Island will look at whether Governor McKee may have violated other applicable sections of the Code of Ethics." 

Spokespersons said House Speaker Joe Shekarchi and Senate President Dominick Ruggerio will respond to the ILO investigation once Neronha and Weaver hold their news conference.

'Who made the final decision?'

The report and accompanying documents offer a series of new revelations about what McKee and those around him were doing behind the scenes as the ILO contract was being awarded, which happened just after McKee took office in the spring of 2021.

Tom McCarthy, a senior state official at the time who was on the review panel for the contract, told investigators he felt pressured to choose ILO. He alleged that Afonso told him not to embarrass McKee by picking the "wrong firm."

Jim Thorsen, director of the R.I. Department of Administration at the time, contacted McKee on May 7 to tell him that the state’s purchasing team had completed its evaluation and planned to recommend awarding the consulting contract to WestEd, a firm with more experience in Rhode Island, which had also offered to do the work for far less money than ILO.

McKee responded via text, asking, “Who made the final decision? I would like to speak to whoever made the final decision ..........”

Thorsen told the governor he would drop a copy of the final bid evaluation off for McKee at the governor's Cumberland home the following day, according to state police. After receiving it, McKee texted Thorsen to tell him the decision was flawed, and he instructed Thorsen “not to send out any notices to the vendors regarding the award,” investigators said.

“When asked whether Governor McKee influenced the procurement process, Thorsen initially wavered in his response, but eventually acknowledged that Governor McKee did personally influence the contract award process,” wrote Brock, the state police report's author.

North Providence Mayor Charles Lombardi, a Democrat and longtime McKee ally, served on the team tasked with choosing an education consultant for the state. It was the first time he'd ever served on a state-level RFP panel, and state police said he told them he was "disappointed and sorry to have agreed to be on the committee."

According to investigators, Lombardi said he "has no memory of anyone telling him who to vote for," and that he tried asking McKee about the deal after news broke about the irregularities.

"Lombardi stated that McKee did not say much ... McKee answered Lombardi's question without answering it," Brock wrote in a report summarizing the mayor's interview.

"Lombardi advised that with what he knows now, the RFP could have been fixed," Brock added. "Lombardi also stated that with how well he knows McKee, the thought of the RFP being fixed is hard to digest."

After calling oversight hearings on the ILO scandal, state lawmakers enacted a law tightening rules around how the state procures consulting contracts.

The decision not to file charges against the governor or any of his associates quickly drew criticism, including from Senate Minority Leader Jessica de la Cruz, R-North Smithfield.

"I think this really further highlights the importance of having an Office of Inspector General, an independent office, because I don't think we can realistically expect Democrats to perform effective oversight on Democrats," she told 12 News. McKee and Neronha are both Democrats.

Neronha defended the decision not to charge anyone, arguing the "evidentiary trail here was complicated, and understanding its threads and weaving them into apparent truth took considerable time."

"But we are comfortable with the ultimate conclusion," he wrote in the report, highlighting that it's still true that the governor steered the contract to Rafal-Baer and that Magee arranged to have SKDK provide work to the governor free of charge.

"That said, the evidence does not establish beyond a reasonable doubt that the former was in exchange for the latter," he wrote.

Lauren Brill contributed to this report.