News Column

R.I. State Police looking to talk to legislators about 38 Studios vote

June 19, 2014

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



June 19--PROVIDENCE, R.I. -- Shortly after noon on Wednesday, House Speaker Nicholas A. Mattiello put his House colleagues on notice that the Rhode Island State Police want to talk to them about their May 2010 votes on the loan-guaranty legislation that resulted in the 38 Studios debacle.

His 12:08 p.m. email said:

"Dear Colleagues: I have been contacted by the Rhode Island State Police and have been informed that they would like to ask questions of every member, past and present, who participated in the voting of the Job Creation Guarantee [sic] Program (2010-H 8158) on May 25, 2010.

"They have requested cell numbers. I will be providing the cell numbers of all who participated in the vote, unless I receive an objection from you by this afternoon at 4 p.m."

Hours later, a Senate spokesman confirmed that State Police Supt. Steven G. O'Donnell had also "reached out to the senate president and advised that the state police would be contacting members of the Senate as part of their investigation. The senate president thanked the state police for the work they are doing. The Senate will assist in any way they can."

In response to a Providence Journal inquiry about this new sign of activity, O'Donnell initially emailed this response: "Our investigation is ongoing and I can't discuss anything more than that."

But the state police later sent a statement from O'Donnell titled "38 Studios clarification" that said: "This request was intended to ensure that any legislator, who has relevant information regarding the 2010 vote on the 'Job Creation Guarantee Program,' provides that information to investigators.

"The investigation of this loan, being conducted by the State Police and the Attorney General, remains active and ongoing. It is important to recognize that the goal of this request is to ensure that anyone with information, who has not been previously contacted, has the opportunity to present it. No member of the legislature is suspected of wrongdoing simply because of their vote."

State lawmakers just approved a new state budget that includes $12.3 million in taxpayer dollars for the next payment to the investors who bought the $75 million in state-backed bonds that financed ex-Red Sox player Curt Schilling's now bankrupt video-game company, 38 Studios.

When contacted, Mattiello issued this statement: "I am fully cooperating with the state police, and I am happy to assist them. I thank the state police for the thoroughness of their investigation."

When asked when and how he was contacted, Mattiello said through a spokesman that O'Donnell contacted him on Tuesday by phone.

"Colonel O'Donnell called me yesterday and requested the phone numbers of all the members in order to contact them. I voluntarily informed the colonel that I would make myself available to him and the state police at any time."

Asked if he or any other House leaders had been subpoenaed to testify or produce records, his spokesman, Larry Berman, said, "No."

In the aftermath of the failed state investment, rank-and-file lawmakers have complained bitterly that they had no idea so much of the $125 million in loan guarantees they approved in May 2010 would go to Schilling's high-risk and under-capitalized video-game venture.

As for the loan-guaranty program, $75 million went to 38 Studios; only three other companies got state-backed loans totaling $6.5 million before the legislature torpedoed the loan program in 2013. They were NuLabel Technologies, $1.5 million; The Corporate Marketplace, $4 million, and eNow, $1 million.

Documents that have come to light in recent months indicate that former House Speakers Gordon D. Fox and William G. Murphy had contact with the company as far back as fall 2009. They also indicate that lawyer and tax broker Michael Corso, a Fox ally, stood to make millions of dollars from a 38 Studios move from Maynard, Mass., to Providence from a series of contracts he lined up with the company.

The company's collapse into bankruptcy left Rhode Island taxpayers on the hook for about $89 million in principal and interest on the "moral obligation bonds," paying interest rates of up to 7.75 percent, that the state's economic development agency sold to raise money for 38 Studios.

Federal authorities bowed out of the criminal investigation of 38 Studios almost two years ago. But state police say they are still investigating.

The current attorney general, former state Rep. Peter Kilmartin, was one of the lawmakers who voted in 2010 for the loan-guaranty legislation that helped launch 38 Studios. His spokeswoman, Amy Kempe, said he has assigned "an experienced white-collar prosecutor to assist the state police in their investigation," but has seen no reason to distance himself because "there is no conflict."

"He was not aware that 38 Studios would benefit from the loan guaranty program," she said of Kilmartin's 2010 vote.

It is not clear if the state police interviewed Kilmartin. But O'Donnell in his statement said: "I am aware that the Attorney General, as a former representative, voted on this legislation. I remain satisfied that he has no conflict in this case, based upon his role as a legislator, and I have full confidence in the professionalism of the career prosecutors he has assigned to this investigation."

___

(c)2014 The Providence Journal (Providence, R.I.)

Visit The Providence Journal (Providence, R.I.) at www.projo.com

Distributed by MCT Information Services


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Providence Journal (RI)


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters