EXCLUSIVE: O’Neill Says Fox Lied About 38 Studios

Monday, June 10, 2013

Kate Nagle, GoLocalProv Contributor

 

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Questions surrounding the handling of 38 Studios continue to dominate discussions and debate over the state's economic strategy moving forward -- and former Majority Whip Representative Patrick O'Neill has called out Speaker of the House Gordon Fox as having had knowledge of the beleaguered deal prior to its approval.

"If you read what he said in the New York Times article, he's essentially defending his decision to support 38 Studios," said O'Neill. "I'm convinced that he did know that the $75 million was in fact going to be earmarked for 38 Studios, despite what he says."

"The original legislation was for $50 million, then it was bumped to $125 million -- exactly the amount needed for the EDC to finalize the deal once it was upped," O'Neill continued. "That seems too convenient that it happened to be the exact about given to 38 Studios by the EDC. I believe [Speaker] Fox did in fact know."

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O'Neill, who had been part of Speaker Fox' leadership team prior to splitting over differences on 38 Studios, was dismissed by Fox' spokesperson Larry Berman as making the issue political. "He's one of a handful of people who voted down all of the House economic proposals this week. He's got an axe to grind, he's just doing this for his own gain."

"Yes, the Speaker was aware that 38 Studios was interested in the [Job Creation Guarantee] program, as were a number of people, which we've said all along," said Berman. "But ultimately, as we know, it was the EDC who voted on the application put forth by 38 Studios."

Response to 38 Studios -- and Bond Obligation -- Called Into Question

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"I've got concerns as to how this has been handled," said O'Neill, regarding the General Assembly's recent investigation into 38 Studios. "It's the second week of June, and we've only heard from testimony from one expert, who turns out to have ties to investors in the deal?  There was supposed to be an investigation. What we've gotten is one presentation. I don't think that exactly qualifies."

"What we need to hear from are the citizens, the taxpayers. Everyone I hear from, my constituents, keep saying, "Don't pay back the bonds," said O'Neill, referring to the over $90 million in moral obligation bonds the state is grappling with whether to pay -- or default on.

O'Neill cited support by the General Assembly leadership, Chafee Administration, and General Treasurer's Office to start with paying back $2.5 million in this year's budget as potentially problematic.

"People are saying let's just pay the $2.5 million now...well, i think that's accepting responsibility. The fight is over once you've made that payment," said O'Neill. "I think what most people in the General Assembly are nervous about is being asked for a vote on this in coming weeks, and not having enough information."

Berman said that Fox had indicated that the state should considering paying the bond back. "The Finance Committee has being doing its due diligence in getting the necessary information on this," Berman said, "The $2.5 million would be part of this year's budget, and then would be approximately $12 million more each year after that," indicating that duration would be 7 years.

"If we don't put at least the $2.5 million in [the budget] this year, we'll be in default," said Berman.

O'Neill said he had concerns about the $2.5 million being in the budget -- but not on defaulting. "If this is part of the budget, well, it takes a lot of guts to vote against the budget."

However, if the state were to default, and potentially get sued by the insurers , O'Neill said he'd "welcome that."

"The insurers won't fool around," said O'Neill. "They'll depose people, they'll conduct an actual investigation into what happened. I'd for one welcome that."

EDC Front and Center in Debate

The Senate is slated to take up legislation this week to rename the EDC the "Rhode Island Commerce Corporation" - and the plan would require its board to adopt a mission statement as well as promulgate new regulations governing its programs.

The House however had voted to create a new Secretary of Commerce position that would take over the new Rhode Island Commerce Corporation -- and O'Neill pointed to the discrepancy between the chambers as an issue at the General Assembly

"There was no companion bill to the House in the Senate, which is highly unusual," said O'Neill. "I don't see there being support in the Senate for the House version. There's no agreement to the major bills of the session, and everyone's scrambling."

Speaking to the House leadership proposal, Berman pointed to the overwhelming majority that voted for it as in indicator for its potential success.

"The House passed a bold and aggressive plan to do away with the EDC, and yes, the Senate is not looking to go quite that far," said Berman, noting that if the Senate approved its version, then negotiations would take place between the chambers.

Regarding the indications from Governor Chafee that he would veto legislation creating a Secretary of Commerce, Berman pointed to the overwhelming support in members voting for its recent approval in the House. "We've certainly got the numbers to override a veto," claimed Berman.

O'Neill had proposed the formation of Governor's Office of Economic Policy Coordination to be placed within the Governor's office, and leaving the EDC intact.

"I'm not optimistic that my proposal would be considered as a stand-alone bill at this stage," said O'Neill, adding that he was contemplating having it put in as a budget article instead.

Sasse Speaks Out

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Gary Sasse, the former director of the Rhode Island Departments of Administration and Revenue, and currently Director of the Bryant Institute for Public Leadership at Bryant, is highly critical of the Secretary of Commerce proposal.

"The economic recovery in Rhode island is uneven as employment and personal income projections were revised downward by the Revenue Estimating Conference. During this period of relatively weak recovery from the recent recession I cannot think of anything less productive and energy draining then the debate between the State's Chief Executive and the General Assembly over the question of whether or not to create the Office of Secretary of Commerce," said Sasse.

He continued, "Even if the General Assembly enacted such legislation it would not result in any practical immediate accomplishments and could be problematic when Rhode Island is struggling to come out of a period of economic stagnation for the following reasons."

Sasse said, "A legislature cannot control the spirit and pace of implementation by a reluctant administration. The timing makes no sense because implementation will bump into the next election and not only take the bat out of this Governor's hand but also any newly elected chief executive."

"Best practice is to move away from a government and bureaucratic dominated system to one that operates as a partnership within a network of collaborative stakeholders," he added. "Debates over process take the oxygen out of the room when the General Assembly needs to be dealing with substantive reforms that can make the state more competitive--higher education, cost of doing business, workforce training, et cetera.  Arguing about process is an inside game that will not create economic security for one Rhode Islander and in this economic environment may be counter productive."

Sasse concluded that the proposed organization "span of control" would create challenges for the most adept manage, and that the House leadership has, "not, to my knowledge, demonstrated any measurable benefit from establishing the new agency."
 

 

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