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RI’s Consultant on 38 Studios Has Big Democratic Ties

Monday, May 19, 2014


A consultant hired by the state of Rhode Island to determine whether or not to pay back the debt on the failed 38 Studios bonds has given thousands of dollars to top statewide Democratic candidates in Massachusetts, a GoLocal investigation has revealed.

SJ Advisors' Linda Port, who testified earlier in May that defaulting the bonds on the bankrupt 38 Studios would reduce Rhode Island's bond rating to junk status, has given over $2,500 in contributions to prominent Democratic candidates in the Commonwealth including Governor Deval Patrick and Attorney General Martha Coakley while serving as an attorney with Mintz Levin and Greenberg Traurig, according to contribution records. 

The debate as to whether to pay back the bonds -- or not -- has top Democrats Governor Lincoln Chafee and gubernatorial candidates Clay Pell, Gina Raimondo, Angel Taveras lined up on the side of paying them, and GOP candidates for Governor Allan Fung and Ken Block among those strongly opposed.

"The Democrats are in power, and they were in power for the 38 Studios deal," said veteran political pollster Victor Profughi. "And the opposition party will jump on any issue they can. It's politics -- and I'm not using that in the negative sense, it's just what it is."

State's Choice of Advisors

SJ Advisors was chosen out of a field of three proposals, after a prior request for proposal yielded no bidders.

"The Department analyzed all three substantive proposals received. In addition to the proposal review, Department of Administration staff conducted several phone interviews with all those who submitted substantive proposals," said Alison Rogers with the Department of Administration. "SJ Advisors was identified as having the best qualifications and experience to conduct the work among those who submitted substantive proposals. In addition, SJ Advisors had recently served as a financial advisor for Bryant University."

SJ Advisors' Port noted that that since joining SJ Advisors this year, besides the RI 38 studios analysis she has had a "college client," and had not met Governor Chafee or Department of Administration Director Richard Licht prior to working on 38 Studios.

Profughi thought that the role of politics, and the ultimate impact of the dissent between parties on paying back -- or not paying back the bonds -- would be negligible.

To pay or not to pay -- sides are lining up on each side of the debate, and on both sides of the aisle.

"Clearly, the Republicans are trying to make this a political issue -- and again, I don't us that term negatively. It's an issue that ought to be of concern, but does that translate to actually being of concern -- remember that voters will have to remember long enough to November," said Profughi. "I don't know a lot about who the bidders were to make a determination on SJ Advisors and their advice. If they were familiar with Rhode Island, that can cut both ways."

Port noted that the two advisors were of different political parties.  "The Principal and Senior Vice President of SJ Advisors, who prepared this report, are of different political parties and political considerations do not influence their professional activities," said Port. 

Port's bio includes having previously been partner at Mintz Levin, where Licht's former Chief of Staff as Lieutenant Governor, David Lieter, is the head of ML Strategies, Mintz Levin's consulting subsidiary.

Looking Forward

The scheduled bond payment is in Governor Chafee's FY15 budget. Where will the General Assembly come down on the issue?

While Governor Chafee and a number of elected officials as well as candidates have weighed in on whether or not to pay back the bonds, the Speaker of the House has yet to take a position.

"Speaker Mattiello is in the process of gathering information that will help him, as well as all of the House members, to formulate a fact-based decision on the bond repayment," said Larry Berman, spokesperson for Speaker Mattiello. "He is reviewing the report submitted by SJ Advisors and the testimony that has been submitted to both the House Finance and Oversight committees."

Berman continued, "Since the bond repayment is included in Governor Chafee's budget proposal, the vote would be taken as part of the budget that will be considered by the House in the coming weeks. In the meantime, the House Finance and Oversight committees are still conducting their work on this issue. The major factor [Mattiello] is considering is the potential impact on future state and local bond proposals."

Former SEC lawyer and Forbes contributor Edward Siedle, who conducted an investigation last fall into General Treasurer Gina Raimondo's management of the state's pension fund, had expressed interest in conducting the 38 studios analysis, but the Department of Administration's Rogers said Siedle's proposal "failed to address the Workplan and Approach/Methodology sections.

Siedle said he questioned the motivation for paying back the bonds.

"Pay fraudulent debts to Wall Street and let Wall Street to manage the pension in secrecy. Who's running RI? The people or Wall Street?" asked Siedle. 


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.

Prev Next


Allan Fung

Republican candidate for Governor

“I am repeating my opposition to the 38 Studios loan guaranty and to the use of taxpayer dollars to repay those moral obligation bonds.”

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Ken Block

Republican candidate for Governor

“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...As long as there are serious legal questions still to be decided, we need to stop the repayment process."

Prev Next



John Simmons, executive director of the Rhode Island Public Expenditure Council

“We’re not going to punish anybody but ourselves if we don’t pay."

Prev Next


Greater Providence Chamber of Commerce

Laurie White, President of Chamber of Commerce

“I think it’s important that action occur quickly. Our view is that economic development in Rhode Island has to be the main event. … We need a very dramatic, aggressive effort to change the path that we’re on.”

Prev Next


Gina Raimondo

Democratic candidate for Governor

“Despite my frustration with everything surrounding this transaction, I believe it is in the best long-term interest of the state and all taxpayers to repay these bonds."

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Clay Pell

Democratic candidate for Governor

“Clay does not believe Rhode Island should default on its moral obligation bonds when they come due. 38 Studios was a terrible mistake — and another example of why we need to change the culture of politics in Rhode Island"-Devin Driscol.

Prev Next


Angel Taveras

Democratic candidate for Governor

“While I share the frustration of many Rhode Islanders, I believe that not paying back 38 Studios bondholders would have a detrimental impact on the state’s bond rating that would far outweigh any short-term benefit we might gain. We cannot afford to default on our obligations.”

Prev Next


Lincoln Chafee

Governor of Rhode Island

“The candidates who can’t understand these two obvious truths are unfit to be Governor. The consequences of default would place Rhode Island as one of the lowest state bond ratings in the nation, and the industry would reduce Rhode Island to ‘junk bond’ status. We have been told in no uncertain terms that the reaction to not paying our debt obligations will be severe and have an adverse impact on Rhode Island. In addition, failure to honor our obligations could have harmful effects on the pending lawsuit.”

Prev Next


Mike Stenhouse, CEO of RI Center for Freedom and Prosperity

"It's not just about not paying off bondholders.  Bondholders are adults, they knew the risk.  It's not just a question of the credit agencies.  It's a question of what would payment crowd out, what reforms could we achieve with that money, such as sales tax reform, which would enable us to create jobs."

Prev Next


Mike Riley

2012 Republican candidate for the 2nd Congressional District of Rhode Island.

"If we had a real Governor, he would stand up for the Taxpayers and the State of Rhode Island and stand up against threats by rating agencies."

Prev Next


Professor Ed Mazze

Professor of business at University of Rhode Island

"Even though this is a moral obligation in terms of the way the financial deal is set up I still feel the state has an obligation to the bondholders, to make good on their payments."


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Hard to imagine that ANYTHING in this state of any significance is NOT politically connected in some way or another. Its just not coincidence when the democrats get the good end of the stick ALL the time.

Comment #1 by David Beagle on 2014 05 19

Of course!..did anyone really expect a fair report? This is how they play they game...Democrats and consulting firm scratch each others backs and money is exchanged, It's the ole.."i'll give you the money business", and then the consultant gives the people of RI the business with some BS report they expect you to believe.It's all lies,crap and monkey business!

Comment #2 by LENNY BRUCE on 2014 05 19

Yeah, it's a good thing that our Republican governor at the time tried to warn us about how bad this deal was and urged everyone not to get involved. If only we had listened to the wise Republican in charge of the state at the time that issued those dire warnings. Here's an idea, why don't we ask the former governor what we should do here? I'd love to get his opinion on it. Since he pushed to get us into this deal, he should help get us out of it.

Comment #3 by Phil Paulson on 2014 05 19

Of course the people in power are going to hire a "consultant" who will tell them what they want to hear. The report will "prove" their position that we must, rather than letting the purchase insurance policy pay off the bondholders, stick the taxpayers with the bill.

That's because the big bad rating agencies are, gasp, going to issue an opinion that our credit ratings should be lowered! And they're going to use horrible words like "junk status!"

What's really happening here is that the folks in power don't want further investigation into insider thieving that has been going on related to that nice pile of bond money. They are protecting their own and protecting the future of more "moral" obligation bonds and the opportunities they offer for the insiders and their cronies.

Comment #4 by Art West on 2014 05 19

Hey Phil Paulson, Trying to Blame a former republican in this otherwise bluest of blue states is a little silly, don't you think? But that's ok, Paul, keep voting for democrats.

Comment #5 by joe pregiato on 2014 05 19

another great curve ball delivered by the Schill

Comment #6 by Howard Miller on 2014 05 19

Profughi said Democrats were in power when the deal went down?? We need to remind him Carcieri was not only Governor, he appointed the EDC Board that approved the deal. Also recall Carcieri apparently met Schilling at a party where the Don was impressed by the latter spouting right-wing ideology against government interference in free markets, of course blatant hypocrisy.

But Fox and cronies in the Democratic legisalture also enabled this. As usual, bipartisan blame, the real parties are not R and D but insiders and outsiders. And the insiders pick the consultants.

That said, the Republican candidates for Governor are to be thanked for taking their stand against bailing out the bondholders.

Comment #7 by barry schiller on 2014 05 19

The RI dems shopped around to find a consultant who would agree with their views and not shame (or indict) any of them or their buddies who pocket the $$ from the 38 Studios con job. What a shock!

Comment #8 by Katy Sloop on 2014 05 19


Well said.

The point remains that an insurance policy was purchased and is in place that can pay off the bondholders.

Why then, are some insisting that taxpayers (who did not vote to approve this bond) pick up the tab, when insurance is place? Saying that rating agencies will issue an opinion to lower our credit ratings is a bogus argument because ratings are an opinion, and investors do their own analysis of any bond investment.

The probable answer is that the insiders were diverting some of the bond monies (as in the Tazze Caffe scandal) and they are trying hard to lessen further investigation into wrongdoing. I think Carcieri was star struck and used very bad judgment, while the Democrat leaders who eagerly executed on that bad judgment have committed the actual fraud and pocket lining.

Comment #9 by Art West on 2014 05 19

""I commend the RIEDC Board for its EXTENSIVE DUE DILIGENCE and for taking this significant step to bring jobs to Rhode Island," Don Carcieri said the night the agency approved the loan to Carcieri's fellow small government conservative Republican Curt Schilling.


Rhode Island's director of revenue said she "was not in favor" of the 38 Studios deal and and expressed those concerns DIRECTLY to then-Gov. Don Carcieri.
Gov. Carcieri still won't face taxpayers despite the stunning implosion of the $75 million loan guarantee he got them to give Curt Schilling's video game company,

Comment #10 by Sammy Arizona on 2014 05 19

Mensa candidate Sammy-boy sticks his thummbs in his eyes and forgets who ran the House and Senate. Good little Sammy, a USEFUL idiot.
Noe the dumbos will ensure the junk "moral obligation" bond buyers get "triple A" treatment for their money, (and, to be fair, that which they spent on lobbyists like Joe Walsh and Bubba Goldberg. ) It's a small club, and the poor SOBs who have to pay for it all, the taxpayers, are on the outside looking in.
A "moral obligation" bond from the Rouges Island political hacks???? Who in their right minds.......

Comment #11 by G Godot on 2014 05 19

Don't forget, it's the BOND INDUSTRY which thinks it's a really good idea that these bonds be paid back, or else the BOND INDUSTRY (who else) will PUNISH the taxpayers. Just a mite self serving.

Comment #12 by G Godot on 2014 05 19

Joe, I'm saying there's enough guilt to go around, but golocalprov is infested with people that have to blame Dems for every problem on the planet. I'm just pointing out that when this poor deal went down, there was no bigger cheerleader than the former governor. To blame it all on the Dems is disingenuous at best and complete bullshit at worst.

Comment #13 by Phil Paulson on 2014 05 20


Comment #14 by LENNY BRUCE on 2014 05 20

Never a dull moment in Rhode Island.

Comment #15 by Marie Dawn Christie on 2014 05 20

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