News Column

GOP gubernatorial candidate Block says: Do not pay 38 Studios bonds

May 12, 2014

By Katherine Gregg, The Providence Journal, R.I.



May 12--PROVIDENCE, R.I. -- Republican candidate for Governor Ken Block isurging Rhode Island'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, at the start of a week in which a consultant hired by the Chafee administration will be going from one legislative forum to another urging payment.

"38 Studios was a bad deal and a bad investment from the very beginning and now Rhode Island taxpayers are being asked to take the hit for bondholders who should have known better.," said Block, a software engineer. "Taxpayers are essentially being asked to assume all the risk, even though bondholders should have known the state might never stand behind the bonds given the controversial nature of what happened in 2010...Three of the four gubernatorial candidates in 2010 were against this deal from the beginning."

He continued: "As long as there are serious legal questions still to be decided, we need to stop the repayment process. Just last week, we heard new revelations about lobbying irregularities around 38 Studios and the State Police have launched an investigation into that."

In actuality, the State Police advised Secretary of State A. Ralph Mollis that his inquiry inw who -- if anyone- lobbied for the state-backed loan guarantee is "administrative in nature,' and is within the power of the secretary of state's office to investigate.

Block's comments came there days after the Friday release of an analysis by the Minnesota-based SJ Advisors. The report warned that Rhode Island's current and future bonds will likely be downgraded to "junk bond" status, raising borrowing costs and hurting the state's reputation if the state does not pay the investors who bought the $75 million in state backed bonds that financed retired Red Sox pitcher Curt Schilling's now-bankrupt video-game company.

Said Block: "The threats coming from Wall Street insiders of dire consequences for the state if they fail to make good on the 38 Studios bond is an attempt to shift the risk of that investment onto the state's taxpayers instead of where it belongs--with the people who bought the bonds. The Chafee administration is suing the major players in the doomed loan deal, including Schilling and the former head of the state's economic development agency for misleading the state.

Said Block: "The state has the opportunity to send a strong message that these particular bonds are not the same as other bonds issued by the state due to the irregularities of the deal.

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Source: Providence Journal (RI)