Two former employees of the R.I. Economic Development Corporation on Monday formally objected to a proposed settlement in the long-running 38 Studios civil case, noting that a law passed by the legislature in the beginning of the year that made making individual settlements easier is unconstitutional under Rhode Island's state constitution.
Cumberland, Rhode Island Mayor Dan McKee showed a flair for the dramatic this week when he brought a letter to the race for lieutenant governor, according to the Providence Journal. Mollis showed up at the State House to personally hand-deliver a letter to his democratic primary opponent, current Secretary of State A. Ralph Mollis.
The state of Rhode Island has settled with one of the law firms it sued as part of the lawsuit against 38 Studios and other principles for a failed $75 million loan deal. The law firm, Moses Afonso Ryan, has admitted no wrong-doing, but has agreed to pay $4.4 million to the state because it wants to put the matter behind them. The settlement agreement was filed with Superior Court Judge Michael Silverstein on Friday. A hearing on the matter will take place July 7.
Rhode Island Secretary of State Ralph Mollis has sent letters to individuals involved in the 38 Studios deal to retroactively register as lobbyists and appear before a July 1 hearing. The hearing will determine if those who lobbied on behalf of 38 Studios to get a $75 million loan violated state law when they failed to register with the Secretary of State's office back in 2010.
You can probably chalk this up to "positioning in a political year against a tough opponent," but Republican attorney general candidate Dawson Hodgson says it is time for the incumbent Rhode Island Attorney General Peter Kilmartin to admit that he may be a "potential witness" in the state police’s 38 Studios investigation that he needs to "stand aside" because "the appearance of a conflict of interest … is just too strong."
Rhode Island state police have indicated that they plan to interview lawmakers who voted on the job creation program that ultimately led to Curt Schilling's now-bankrupt company receiving a $75 million state-backed loan, according to a Boston Herald report.
The Rhode Island House passed the $8.7-billion budget early Friday morning after a lengthy and contentious floor debate. The majority of arguments were about allocating a little over $12 million to make a payment on the bonds that funded the $75 million loan to now bankrupt developer 38 Studios. Despite the lengthy debate that kept lawmakers in the chamber after midnight, the budget passed by a vote of 63-12. The budget bill will now go to the Senate for what is expected to be quick approval.
The Rhode Island House is close to voting on an $8.7 billion budget plan that cuts corporate and estate tax, gets rid of the toll on the Sakonnet Bridge (a four-lane bridge spanning the Sakonnet River in eastern Rhode Island), and allocates millions to make the next payment on the 38 Studios bond debt.
Cranston, Rhode Island Mayor and GOP gubernatorial candidate Allan Fung is urging state lawmakers in Providence to pass two bills to prohibit the state from making payment on the failed 38 Studios investment.
During a State House press conference earlier in the week, Fung said that no payments should be made until there is a "thorough investigation" of the issue, including an allegation by one-time GOP congressional candidate Michael Riley that insider trading occurred.
Jon Brien was surprised when Steven Costantino, the chairman of the Rhode Island House Finance Committee asked him on the House floor to if he wanted to co-sponsor a big jobs bill in 2010. Brien, who was a state representative at the time, was on the outs with leadership after voting against House Majority Leader Gordon D. Fox in the mid-session election of a new speaker that year. He was on talk radio often, lambasting House Democratic leaders and their allies for alleged "political shenanigans."
House Speaker Nicholas Mattiello received a letter from Rhode Island business organizations urging the General Assembly to budget taxpayer money to repay the roughly $90 million owed to bond holders in the 38 Studios deal. The letter was signed by ten organizations, including a number of chambers of commerce and business groups.
At a recent State House rally, a small group of protesters urged lawmakers and the Governor not to bail out 38 Studios.
"It’s a scam. It’s a rip-off. We shouldn’t pay it back," said one protestor - as reported by the Providence Journal.
According to this GoLocal Providence report, the legal battle against 38 Studios has already cost the state $840,000 in legal fees and related costs, and could cost taxpayers "millions" by the time it comes to a close. Only a fraction of the total amount ($156,000) has gone to the firm representing the state, Wistow & Barylick, Inc.
The fallout from the $75 million loan given to 38 Studios is continuing to be a hot-button issue in the state of Rhode Island. In the race for Rhode Island Attorney General, one candidate is using the deal in his attack ads against incumbent Attorney General Peter Kilmartin. In a new 60 second attack ad airing on radio in the state, Republican state senator and attorney general candidate Dawson Hodgson's campaign highlights Peter Kilmartin’s 2010 vote for the legislation that allowed the 38 Studios loan guarantee.
Another day, another dozen stories coming out of Rhode Island about 38 Studios and how it is affecting several political races this year. The most prominent story today (from the Providence Journal) highlights the revelation that Michael Corso, the Rhode Island lawyer, tax-credit broker, and long-time friend of former House Speaker Gordon D.
Four former top executives at 38 Studios are fighting in federal court to keep more than a half-million documents tied to the bankrupt video-game company 38 Studios. The former executives are being sued in state court by the EDC and the state of Rhode Island. Company founder Curt Schilling, former CEO Jennifer MacLean, former CFO Richard Wester, and 38 Studios board director Thomas Zaccagnino claim that "privileged communications between 38 Studios and its attorneys had been released to the [R.I.
Former Rhode Island State Treasurer Frank Caprio (D) is calling on the Gov. Chafee's administration to cancel the state’s new financial advisor contract with a company the state is apparently suing in connection with the $75 million 38 Studios loan deal.
A new two-year contract had been awarded to First Southwest this week, but this deal has not been formally signed according to a spokeswoman for current State Treasurer Gina Raimondo - who is also running for governor. Caprio is running for his old job this year.
Former Rhode Island House Speaker Gordon Fox said on Tuesday in court (through his attorney) that he was resisting a court order to comply with a subpoena in the state’s 38 Studios lawsuit. His attorney argued on Tuesday that providing the information requested from the state could put him in legal jeopardy.
A top board member of 38 Studios urged company executives in 2010 not to highlight its shaky financial condition when it was negotiating with Rhode Island leaders for a $75 million loan guarantee, according to newly released court documents in the ongoing lawsuit between the state of Rhode Island and various individuals related to the deal.
Cranston, Rhode Island Mayor Allan Fung has challenged Governor Chafee to answer "three important questions" related to his stance that the state must avoid defaulting on the bonds that financed 38 Studios. Fung, who is a Republican candidate for Governor, is skeptical that defaulting on future debt payments will damage the state's reputation and ability to secure credit for future endeavors. He put the following questions to Chafee:
Even as an analyst appointed by Rhode Island Gov. Lincoln Chafee prepared to brief lawmakers on its findings about what would happen if the state fails to make payment on the 38 Studios loan debt, the Governor is taking his case to the public airways. Speaking to WPRI, Chafee reiterated his position on defaulting on the 38 Studios loan deal bonds.
Rhode Island Republican Gubernatorial candidate Ken Block is telling the state's legislative leaders to "reject calls to repay the 38 Studios bonds."
"The latest version of the debate is once again boiling down to who deserves to be protected—38 Studios bondholders or the taxpayers of Rhode Island," Block said Monday.
An independent analyst who looked at the Rhode Island 38 Studios loan repayment plan said that defaulting on the debt related to the $75 million loan plus other penalties and interest would damage Rhode Island's bond rating to junk status and could harm the state's overall business climate.
The report from Minnesota-based SJ Advisors said that defaulting on the loan would bring increased borrowing costs and harm to the state's reputation, and could lead to a "contagion effect impacting other Rhode Island issuers and even taint the business environment."
Defendants in the EDC's lawsuit against 38 Studios say that Rhode Island Governor Lincoln Chafee's office has continually delayed the production of documents needed to mount a proper defense and have asked a judge to order them turned over.
Lawyers for the defendants call these documents critical to their cases and say they are needed to go forward with the depositions. They want Judge Michael Silverstein to order them produced by May 23. Governor Chafee's office has not yet filed a response.
Richard Licht, director of the R.I. Department of Administration for Gov. Lincoln Chafee, said that he met with Michael Corso twice to talk about getting 38 Studios tax credits. Corso is an attorney who signed a $300,000 contract with Curt Schilling's game development company to lobby government officials in the state.
As expected the failed 38 Studios loan deal is a major issue in Rhode Island's election campaigns and primary challenges. Even as the Secretary of State is making headlines this week for launching an investigation into possible lobbying violations by 38 Studios, critics of Secretary of State A. Ralph Mollis and Attorney General Peter Kilmartin on Tuesday jumped on the news by pointing out that both politicians dropped the ball during the loan deal approval timeframe.