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Mayor of bankrupt Central Falls, RI, resigns, set to plead guilty to corruption

The mayor of Central Falls, R.I. -- a city that made news in recent years over its bankruptcy and teacher firings -- resigned on Wednesday and has agreed to plead guilty to corruption charges of accepting gifts in exchange for a city contract, federal prosecutors said. 

Charles Moreau had been under investigation since 2009 when he told NBC10 in Rhode Island that he gave lucrative contracts to board up abandoned homes to a friend without anyone else bidding.

The friend charged $14,000 to $16,000 for each home, NBC10 reported, when local contractors said it should only cost about $5,000 per home.


The friend, Michael Bouthillette, was also charged and has agreed to plead guilty, prosecutors said. He was also a donor to Moreau's campaign.

Central Falls is one of the most financially troubled cities in the country.

It did, however, take a big step toward exiting bankruptcy earlier this month when a judge signed off on a plan that balances the impoverished city's budget for the next five years by hiking taxes, cutting employees and pensions and revising labor contracts.

The case has garnered attention for its treatment of the city's bondholders, who remain unscathed while pensioners took a huge hit, in contrast with some other recent U.S. municipal bankruptcies.

The quick resolution of Central Falls' bankruptcy, filed in August 2011, may be one for the record books.

"In my limited knowledge, this case is the fastest case in the history of Chapter 9 ... to go from filing to confirmation. It's a record time and a record efficiency," Judge Frank Bailey said from the bench. "I think that this is an example for not only Rhode Island but maybe the nation on how to run a Chapter 9."

Central Falls and several other local governments across the United States have sought refuge in bankruptcy court in recent years as sinking revenue in the wake of the economic recession, escalating pension costs and big debt loads have stretched their budgets to the brink.

Central Falls entered bankruptcy with revenues of about $16 million and a structural deficit of more than $6 million. 

The mayor and city council members were rendered powerless under state receivership and bankruptcy. The city was also forced to shutter its only community center and temporarily close its library before reopening it under nonprofit management.

Many of the city's 133 retirees are still angry over how they were treated. Their already modest annual pensions, which averaged $26,700 before the bankruptcy, were slashed by up to 55 percent.

The city also made headlines in late 2010 when all teachers at Central Falls High School were fired over poor student scores.

They were later rehired after reaching a deal with the school district.

Reuters and The Associated Press contributed to this report.