38 Studios: Legislators Push to Sue Bond Ratings Agencies
Saturday, June 07, 2014
A legislative proposal to sue the 38 Studios bond ratings agencies has been put forth by Representative Spencer Dickinson, as the Rhode Island House of Representatives prepares to vote on a budget that contains $12.1 million for paying back the debt on the failed video game company's bonds.
"This bill makes it clear we have the intent and ability to sue for damages even if we don't default this year, for intimidation and extortion from the bond ratings agencies," said Dickinson, who noted that in order to introduce the bill after the filing deadline, approval was needed by the Speaker of the House -- which Speaker Nicholas Mattiello granted.
“Representative Dickinson asked for permission to file a bill after the deadline and Speaker Mattiello granted his request. He has not reviewed the details of it at this time," said Larry Berman, spokesperson for Speaker Mattiello.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTRepresentative Mike Chippendale, the Secretary of the House Oversight Committee who has been investigating 38 Studios, said he was supportive of the measure.
"I believe the bond ratings agencies have overstepped in their aggressive position towards Rhode Island regarding the moral obligation bonds," said Chippendale. "I've had issues along the way, and I think suing them is a viable option."
Following Suit?
House Minority Leader Brian Newberry pointed to examples of other states that have sued over the influence -- and impact -- of bond ratings agencies' decisions.
"The State of Connecticut successfully sued the same Wall Street ratings agencies for improper practices relative to Connecticut’s bond rating. CalPERS, the California state pension system, has also sued those ratings agencies," said Newberry.
Newberry said that he believed the flag should have been raised in Rhode Island sooner. "Just before last year's budget vote, Moody's put us on credit watch prior to the vote to paying back the initial $2.5 million. They did something that was clearly a threat. A "watch"? Excuse me, at that point, something should have been said," said Newberry.
"My whole point on the ratings agencies might be esoteric -- you can't explain it in sound bites. It's complex, and takes time to digest, and the average citizen is busy," said Newberry. "It's become obvious to me the moral obligation industry is a scam, and Rhode Island is being pressured. Other states have sued, Rhode Island should not be fearful of doing the same."
"The courts in California recently approved the lawsuit and its moving forward," said Dickinson. "These agencies have something to worry about."
Dickinson's legislative proposal outlines "cause of action for improper influence on state actions by credit agencies" in its two pages.
Section 42-155-3 (a) states, "No credit rating agency shall determine, adjust, or lower the credit or bond rating of the state of Rhode Island, any state agency or municipality or any political subdivision thereof, or threaten to do so, by using reasons other than generally accepted market factors and other generally accepted practices, for the purposes of attempting to intimidate or otherwise influence state action."
"If they want to rate our so-called "end run around the Constitution" i.e. moral obligation bonds as junk bonds, that's fine. Hopefully we'll never go down this road again," said Dickinson. "If they want to use that as a basis for our general obligation bonds, that's a problem."
Dickinson said he expects the legislation, currently with the General Assembly legislative counsel, to be introduced shortly. "It doesn't mean it has time for a hearing, but if we do select to default, that bill may prove handy," said Dickinson.
Budget Vote Looming
Representative Karen MacBeth, Chairwoman of the House Oversight Committee, said that she was "in agreement" with Dickinson's proposal.
"[Dickinson] said if they downgraded us, we could sue, which I'm in agreement with," said MacBeth. "No matter what, people still want answers. Even if [the bond payment] is in the budget, someone has to be held accountable."
As for the payment Dickinson said he believed the issue was far from settled.
"The leadership has a position, and part of that they believe they have the votes to pass budget with the bailout," said Dickinson. "I don't think those votes are there. If we sit down and go through the list of members, I believe that it is up on the air. The votes aren't counted, and there are a lot of people on the fence."
Related Slideshow: Who Wants to Pay and Who Wants to Default on the 38 Studios’ Bonds
GoLocalProv showcases which Rhode Island politicians and organizations want to pay or default on the 38 Studios' Bonds.
Related Articles
- LISTEN: RI’s Consultant on 38 Studios Has Big Democratic Ties
- Russ Moore: Ignore the Rating Agency’s 38 Studios Extortion
- RI’s Consultant on 38 Studios Has Big Democratic Ties
- Rob Horowitz: Let’s Not Make the Bad 38 Studios Situation Even Worse
- NEW: Speaker Mattiello in Favor of Paying Back 38 Studios Bonds
- Arthur Schaper: Game Over on 38 Studios
- Mayor Allan Fung Challenges Governor Chafee on 38 Studios
- Chafee Blasts Critics Pushing for Default on 38 Studios Bonds
- Roach: 38 Studios Loan Debate at Heart of RI Gubernatorial Race
- Who Wants to Pay and Who Wants to Default on the 38 Studios’ Bonds
- Protesters Oppose 38 Studios Bailout, Demand Accountability
- West Warwick Fix and 38 Studios Bond Payment?
- 38 Studios: RI Financial Advisor’s Lawyer Gave Thousands in Political Donations to Elected Officials
- LISTEN: State Legal Fees for 38 Studios Near $1M
- NEW: Treasurer Candidate Almonte Calls on Legislature to Act on 38 Studios Now
- LISTEN: Chippendale Blasts Criminal Investigation of Corso and 38 Studios
- Chippendale Blasts Criminal Investigation of Corso and 38 Studios
- LISTEN 38 Studios: Should the SEC Investigate?
- State Legal Fees for 38 Studios Near $1M
- Does RI Have a Moral Obligation on 38 Studios?
- 38 Studios: Should the SEC Investigate?
- 38 Studios Legal Fees
- NEW: 38 Studios’ SJ Advisors Have Ties To Licht
