EDITORIAL: It’s Time for an Out-of-State Special Prosecutor to be Appointed

Wednesday, September 30, 2015

EDITORIAL

The tens of thousands of pages of 38 Studios transcripts and exhibits that have been released - and coupled with facts previously reported by the media - they unveil a complete collapse of governmental oversight relating to the company, its approval, and management of the $75 million in loan guarantees.  The failure appeared not only in the legislative and executive branch, but equally in the quasi-independent RI EDC Board who approved the funding.

Legislature

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At best, the legislative process was duplicitous and at worst perversely corrupt.  One former Speaker of the House is now in federal prison. While his admitted crimes were not tied to 38 Studios, previous reporting unveils that insider Michael Corso had unfettered access to the Speaker. In fact, during the 38 Studios process the then-EDC Director Keith Stokes had to work through Corso to get the legislation introduced by the Speaker.

More recently, Speaker Fox’s closest ally — the powerful Chairman of House Finance Stephen Constantino — claims that his work to pass the legislation was a case of following orders.  Who were his two bosses in the building at the time? Speaker Fox and present-Speaker Nicholas Mattiello.

The legislature cannot credibly investigate this issue as the outcome cannot and will not be credible. Don’t forget to add in that sitting RI Attorney General Peter Kilmartin had previously been a member of the Fox-Mattiello leadership team,  In fact, Kilmartin voted for the enabling legislation that created the guarantee loan fund that provided the $75 million 38 Studios.

Governor

The Chief Executive was either a star-struck baseball fan who was manipulated by legislative leaders or something worse. Governor Donald Carcieri received a full briefing memo from Stokes including the draft legislation weeks before previously admitted. Moreover, despite concerns being raised by budget staff, Carcieri pushed forward. But, most damming is that financials for 38 Studios were fundamentally flawed and the company when RI invested in it still would need tens of millions in additional capital — a business leader of Carcieri’s experience should have been deeply concerned about such an investment.

Business Leaders

The RI EDC board was a who’s who of business leaders. It included the Chairman of the Board of Hasbro Al Verrecchia, the Vice Chairman of Gilbane Paul Choquette, and top executives from CVS and Lifespan to name just a few. This group represented the largest employers in the state and the biggest public, private and non-profit companies.
 

In reviewing the financial documents, it seems unfathomable that any of these leaders would invest their own money or their organization’s at a level of $75 million into a company so fragile.  At the time of the investment, 38 Studios could not make their next month’s payroll.  38 Studios’ level of financial risk was that of a small venture backed concern and not of a business worthy of $75 million. Moreover, it was clear that to be successful this company needed far more than $75 million.

Then, 38 Studios collapsed three years ago, and there has been no effort to investigate or to hold anyone accountable. More importantly, there has been no effort to start the process of restoring public confidence. 

No one knows if there was fraud and graft. No one can prove or disprove favoritism. There has been no independent review to determine if this was a monumental failure of government or if this was a multi-million dollar fraud scheme.

In order to determine the facts and if it is necessary for criminal or civil enforcement, it is time for an out-of-state special prosecutor to be appointed by the Attorney General. It might be worth $75 million to clean up Rhode Island once and for all.

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Related Slideshow: Donald Carcieri Transcript - Part 1

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