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38 Studios: A cluster of ineptitude, or a collusion of charlatans?

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Last week, the long awaited “document dump” in regard to the 38 Studios debacle was revealed. Slogging through these depositions is not an adventure of the faint hearted.

Besides the legalese and elusive answering of those deposed on the record, one can not come away with any clarity of culpability to anyone except former Speaker of the House and current inmate (on unrelated charges) Gordon Fox, and opportunistic attorney Michael Corso.

These depositions have been recorded mandatorily as a result of civil actions, not prosecutorial pursuits. The fact that no criminal actions have been pursued in the courts is a matter of frustration for most Rhode Islanders.

The burden of paying back the moral obligation bonds related to Curt Schilling’s erstwhile company is an ongoing assault to the sensibilities of Ocean State taxpayers who continue to pay for the mistakes of their government. Though the question remains, was this catastrophe a result of a collusion of charlatans who committed a fraud upon the citizens of our state? Or, was this misery a stunning example of a cluster of ineptitude?

If it is the former, then what safeguards can be enacted to bring prevent future bad actors from manipulating our trust and how can those perpetrators who violated their oaths be brought to justice?

If it is the latter, should we change the very processes of how government works to ensure a disaster like this never occurs again? Also, if gross ineptitude reigns supreme on Smith Hill, then our elected officials need not seek another term and the electorate should make that disgust clear to them.

As early as 2009, Fox – then majority leader in the House – and attorney Michael Corso were apparently laying the foundation for a publicly-backed deal to accommodate Green Monster Games (later renamed 38 Studios) from Maynard, Mass., to come to Rhode Island. According to his deposition, then Speaker of the House William Murphy had an impromptu meeting at the end of a workday. Present were Fox and 38 Studios executive Thomas Zaccagnino, who invited him to tour Curt Schilling’s struggling video game company in the Bay State.

In the fall of that year, the speaker did indeed tour the company. On another trip over our northern border, Murphy met with Schilling and the Speaker of the Massachusetts House. That meeting was revealed in a Providence Journal article by Katherine Gregg. This article was incidentally, ominously tagged “Exhibit 666” by the court.

As Murphy is currently Gordon Fox’s lawyer, he is bound by attorney/client privilege. Therefore, he could not elaborate on the key relationship between Fox and Corso that could have shed light on perhaps some unlawful maneuvering. Were these meetings casual in nature or part of a burgeoning scheme?

Following these meetings, in March of 2010, Gov. Donald Carcieri attended an event at Curt Schilling’s house. The governor was apparently beguiled by the master of the split-finger fastball and his enchanting memorabilia. Apparently unaware of the groundwork already laid by Fox, Corso and Zaccagnino, the governor believed he had stumbled upon an employment program for Rhode Island – that if the former pitcher brought his company to the Ocean State, he would bring with him the possibility of up to 500 new jobs. Additionally, Carcieri thought we might establish Rhode Island as a new hub of video game development.

Carcieri’s presumptions were wildly aspiring, yet most probably not in any way deceitful. Considering 2010 was his last year in office, perhaps he was thinking of his legacy. Nevertheless, he was on board.

According to former Economic Development Corporation (EDC) Executive Director Keith Stokes’ remarks in his deposition, a bombshell request from House Finance Chairman Steven Costantino was communicated to him in the same month as the governor’s trip to Schilling’s house.

Costantino asked Stokes to raise the total amount of a proposed business loan program from $50 million to $125 million to accommodate 38 Studios. Stokes’ initial reaction was that the EDC “had never had that kind of authority.” The director had appropriate trepidation in that a video game company had limited collateral and virtually no “hard assets.” Yet, after a meeting on the subject, Stokes felt enlivened that the once-marginalized EDC was now being respected enough to handle such a large loan program. His new paradigm was ill placed. Costantino was obviously concerned with securing the money for Schilling and his service fees. While apparently Stokes had no malicious intent, he may have fallen prey to a sense of self-importance.

The beyond ridiculous idea that a former Major League Baseball player with no prior business experience and little concrete business assets should be endorsed by the taxpayers of Rhode Island to the tune of a $75 million surety was easily sold to the members of the General Assembly. Or was it? The question of nefarious intent or utter incompetence is the question of the vote regarding the bill that enabled the 38 Studios loan to come to fruition.

Most members of the House claim that they had been misled into thinking that the loan program suggested would dole out many smaller loans for business development to many businesses. However, Republican Reps. Laurence Ehrhardt from North Kingstown and Robert Watson from East Greenwich questioned the speed with which the legislation was railroaded through and the overall lack of scrutiny of how the money would be distributed. Sans these two conscientious objectors, the legislators either voted in an ill-informed fashion, or were too preoccupied with other concerns or contemplating their navels to do their due diligence. Or they were swayed by Corso, Costantino and Fox.

To her credit, according to her deposition, current Gov. Gina Raimondo did attempt to advise Stokes of the impending folly.

“I did. I wrote an email to Keith Stokes suggesting that, in my opinion, it was a high risk venture, and if I could, since I had expertise in investing, if I could be of any help, I was here to help,” she is quoted.

If Raimondo had been the governor at the time one could conclude she would not have signed the bill into law. Of course, her veto may have likely been overridden, although if she had presided as chairwoman over the erstwhile EDC, maybe the legislation would not have made to the House floor.

In conclusion, the challenge of determining whether the 38 Studios debacle is a result of ineptitude or underhanded scheming is not easily resolved. With key players invoking their Fifth Amendment rights against self-incrimination along with the attorney/client privilege barrier protecting Fox and Murphy, we may never see the evolution of this cataclysm clearly. What we can likely deduce is that the reason we Rhode Islanders are in this situation is a combination of the ineptitude of the legislators on Smith Hill and the avarice of Schilling, Fox, Costantino and Corso.

At least, justice and criminal liability may have a chance of being realized. Col. Steven O’Donnell of the Rhode Island State Police is reviewing the documents. Current Speaker Mattiello has ordered House Oversight to examine the depositions as well. If the Speaker strengthens Chairwoman Karen MacBeth with subpoena power, than maybe we can gain a clearer perception of who is culpable and who failed their office.

Maybe with the advent of the new Commerce Department replacing the EDC and the hope of the nine-month-old Raimondo administration, our government will act more pragmatically in the future.

Similarly, perhaps Mattiello and the members of the Assembly have learned a valuable lesson and will show better prudence and not again fall prey to the charlatans.

Comments

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  • Justanidiot

    A necessary gamble.

    Thursday, October 1, 2015 Report this

  • falina

    Mattiello was involved too, let's not forget. He was Fox's right-hand man and privy to everything.....

    Tuesday, October 6, 2015 Report this

  • Wuggly

    Government should not have been involved. If 38 Studios was going to be a success private investors would have been all over it.

    Saturday, October 10, 2015 Report this