Cloud over Rhode Island. State is booming as it commemorates 350th year, but corruption and scandal dull celebration luster

Most people at a recent 350th-anniversary celebration here were busy watching the white-wigged militiamen fire their muskets. But one elderly man, decked in a tweed suit and Dutch cap, stood on the edge of the statehouse lawn, shaking his cane at the city skyline. ``I'm tellin' ya, it's really amazing what goes on here,'' said the goateed Rhode Island native, Harold W. Aust. He pointed at one building after another, explaining how each is a tribute not only to the boom in construction -- but also to the pervasiveness of corruption.

Indeed, scandal and corruption have stolen the show in Rhode Island, just as they have throughout the state's 350-year history.

In the last few months, Providence -- long considered the organized-crime capital of New England -- has been the scene of a string of dramatic trials and investigations. The probes have tarnished the images of, among others, the state's highest judge, its largest bank, its most prestigious university, a US congressman, and the powerful Roman Catholic Church.

But many Rhode Island natives, including Gov. Edward D. DiPrete, say the spate of scandals misrepresents the mood and momentum of the state. To them, the scandals are largely a byproduct of the state's anticorruption purge.

``Those negative stories don't accurately portray the state,'' says Governor DiPrete, who (in 1984) became the state's first Republican governor in 16 years. ``I think you'd find that the rank and file of Rhode Island feel more optimistic about the state than they ever have before.'' He notes opinion polls showing that two-thirds of the state's residents ``feel good'' about living in Rhode Island -- twice as many as in 1984.

Rhode Island's crime and corruption certainly haven't hurt its economy. Its booming service industry has kept the unemployment rate hovering between 4 and 5 percent -- one of the lowest levels in the United States.

Some businesses are deterred by the prospect of payoffs and bribes. But there are signs that Rhode Island is becoming more attractive to outside firms. The state has reversed its population loss of the 1970s, and land in the Providence area is appreciating at the nation's fifth-fastest rate, as the city siphons investors from Boston's high real estate market.

Still, despite news of its robust economy, the state's reputation is hampered by its tales of crime and corruption:

The chief justice of the state's supreme court, Joseph A. Bevilacqua, is undergoing an impeachment inquiry for his alleged ties to organized crime.

Two former executive officers of the state's mortgage agency are being tried for the misuse of money intended for low-income families.

Fleet National Bank, the state's largest, has been indicted for fraud in the same case.

A female senior at Brown University and a prominent Providence insurance agent were indicted last month for participating in a prostitution ring.

And the list goes on. Three parish priests and the principal of a Catholic high school have been charged with sexually abusing children. Questions have been raised about the financial dealings of Rep. Fernand St. Germain (D).

Historians and politicians agree that corruption has persisted in Rhode Island for two reasons: the state's small size and the domination of a single political party.

``Rhode Island has the intimacy of a city-state,'' says Patrick T. Conley, a Providence lawyer who also teaches history at Providence College. The state is only 48 miles from top to bottom and 37 miles across -- smaller than the Great Salt Lake. ``That intimacy sometimes causes individuals to transgress the bounds of propriety,'' says Mr. Conley. ``Everybody knows each other, often since childhood. . . .''

Cronyism, corruption, and organized crime have also been nurtured by the long tradition of single-party domination.

The Democratic Party ``stood for the grinding machine to which everyone had to pay homage,'' says Arlene Violet, the Republican attorney general who has led the state's attack on corruption.

For many people, the current outbreak of scandals shows that their crusading attorney general is cracking down.

But last week, critic Alan Dershowitz ripped into Rhode Island's legal system when he released his new book, ``Reversal of Fortune.'' Mr. Dershowitz, attorney for socialite Claus von B"ulow in last year's celebrated trial, called the legal system an ``old boys' '' network that encourages lawyers to cut deals with judges and nurture connections.

Some are unfazed by yet another attack on the state's reputation. ``We've been the butt of national criticism for a long time,'' says Mr. Conley.

A very long time.

Ever since exiled religious leader Roger Williams settled here in 1636, explains Albert T. Klyberg of the Rhode Island Historical Society, outsiders have looked on the state with disdain. In the 1600s, when Rhode Island welcomed outcasts, heretics, and pirates, Puritans called the state a ``moral sewer'' and ``Rogue's Island.'' When political corruption ran rampant at the turn of the century, journalist Lincoln Steffens wrote an article about it called ``State for Sale.''

And while corruption continues, most Rhode Islanders would agree with Charles Damewood, a 16-year resident enjoying the festivities on the statehouse green. Says Mr. Damewood: ``It's necessary to make the corruption public. Then we can get rid of it.''