The scandal prompted Catherine Smith, commissioner of the state Department of Economic and Community Development, to promise a better job vetting privately held businesses seeking state money. Publicly traded companies already are subject to federal regulation and are watched by investor analysts.

"Certainly, after this occasion, if we do another deal with a privately-held company, I think you'd probably see us do a little bit more due diligence around both the CEO and potentially other members of the board," she said.

Vaccaro, of Glastonbury, was arrested at a party Monday in Hartford. He is accused of hurling a racial insult at a bouncer who said Vaccaro had been making unwanted advances to a woman. The arrest warrant says his speech was slightly slurred, leading the officer to believe he was "mildly intoxicated."

He said in a statement Monday that the incident was "unfortunate" and that the comments did not reflect his values. He said he was seeking counseling and treatment for alcohol abuse. He said would take an indefinite leave of absence and be replaced by the company's management team.

Vaccaro faced harassment accusations in 2010 when a female employee sued TicketNetwork in Hartford Superior Court, claiming "continuous, severe, pervasive, insulting and offensive remarks." In her sexual harassment discrimination complaint, she also said Vaccaro touched her inappropriately at a Halloween office party.

TicketNetwork denied the accusations. The lawsuit was withdrawn with the two sides agreeing to discuss the matter.

Malloy, who has condemned Vaccaro's behavior as "boorish," said Tuesday that he had ordered his lawyer and two commissioners to examine the loan arrangement with TicketNetwork.

The governor's "First Five" program was established to consolidate state tax credits to draw the first five businesses investing $25 million in Connecticut and creating 200 jobs over five years. TicketNetwork was the third company to win incentives, announcing last summer up to $7.75 million in loans in exchange for keeping 292 jobs, creating at least 200 full-time jobs in two years and possibly up to 600 over the next 10 years.

The loans had not yet been issued to TicketNetwork, but the company's withdrawal leaves ESPN, Cigna and NBC Sports as the only three participants in the governor's signature economic development program.

Republican state Sen. Andrew Roraback of Goshen said lawmakers were under pressure to enact Malloy's marquee economic development bill. He said he opposed it because it rewards large companies that meet the state's criteria rather than applying rules for all companies to meet.

"This is an example why we run the risk of experiencing buyer's remorse when we don't have rules that everyone can take advantage of," he said.

Before his arrest, Vaccaro said states had dangled incentives to lure the company away and that Connecticut's tax package made a big difference in keeping TicketNetwork in the state.

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Associated Press reporter Susan Haigh contributed to this report.