Schilling’s 38 Studios Deal Hatched Earlier than Disclosed
Tuesday, May 22, 2012
Former Red Sox star Curt Schilling began discussing moving his video game company to Rhode Island as early as December 2009, roughly three months before former Governor Don Carcieri attended a private fundraiser at his Medfield, Mass. home, according to minutes from an Economic Development Corporation (EDC) board meeting held in June 2010.
During the June 14 meeting, Schilling thanked the EDC for “its interest in this project over the last six months,” and pitched board members on 38 Studios, the company that would ultimately receive a $75 million loan guarantee in exchange for Schilling promising to create 450 direct jobs and 1,113 indirect jobs.
Last week, less than two years after that meeting, the EDC acknowledged that Schilling’s company had defaulted on a $1.125 million payment due to the EDC. 38 Studios ended up making the payment last Friday, but was unable to pay its employees.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTOn Monday, the EDC held its second meeting in less than a week to discuss the future of 38 Studios and Governor Chafee said Schilling’s company has been forced to lay off employees. The EDC took no action in regards to providing any more assistance to the company. Chafee has said he is against offering more taxpayer funds, but has left the window open to Schilling receiving tax credits.
“It’s Sort of a Blur”
But Schilling’s comments from the June meeting call into question the generally accepted timeframe in which the state began considering bringing 38 Studios to the Ocean State. Multiple media outlets have reported that Schilling and Governor Carcieri met on March 6, 2010 during a fundraiser. On Sunday, The Providence Journal reported that former EDC executive director Keith Stokes met with Schilling for the first time on March 16 of that year and the two met again less than a week later.
By May, the General Assembly had voted in favor of expanding the state’s Job Creation Guaranty Program by $75 million (from $50 million to $125 million), precisely the amount of money Schilling was seeking. Despite objections from several elected officials and candidates—including Chafee— the EDC voted 8-1 in favor awarding the $75 million to 38 Studios.
For State Representative Laurence Ehrhardt, the timeframe simply doesn’t add up.
“It’s sort of like a blur with the people moving so fast,” Ehrhardt said Monday. “You’ve certainly got [House Speaker Gordon] Fox, Carcieri and Stokes knowing about it. As you know, nothing happens in that building without the involvement of that leadership.”
Ehrhardt continued: “As a legislator and with my responsibility to the public, I feel very wronged that we were not briefed as to what was going on with the transaction that obviously must have been [in the works.]”
The ‘Let’s Make a Deal’ State
Ehrhardt is one of several legislators who now claim they were completely unaware that the expansion of the loan fund would end up benefiting only one company. During the same June 2010 EDC meeting, Stokes told board members that the corporation was already considering expanding the fund before 38 Studios came calling and that the legislation was not passed by the General Assembly simply to satisfy the company.
But Schilling first hinted that other states were offering certain types of incentives as early as March of that year. In an interview published on Boston.com on March 23, Schilling said several states were attempting to recruit 38 Studios away from Massachusetts, including Rhode Island.
“We have all the things any state in the country would want right now," Schilling told Boston.com. "We're hearing from states that don't have programs talking about putting programs in place for us."
According to Dr. Edward Mazze, Distinguished University Professor of Business Administration at the University of Rhode Island, Rhode Island has become the destination point for out-of-state businesses seeking to finance highly questionable and risky deals using government funds in recent years.
Mazze said that based on his experience in assisting companies in making location decisions, Economic Development Corporations generally do little more than send information that is on their web page.
“Nothing happens until an official intercedes or promises to bring the company's inquiry to a higher level executive,” Mazze said. “Without a good due diligence system, and controls in place, Rhode Island will continue to be known as the ‘Let's Make a Deal’ state.”
For that reason, Rep. Ehrhardt said he will continue to call for more oversight over the EDC. He said the 38 Studios deal has only his enhanced his skepticism regarding the deals happening on Smith Hill and predicted that he will be much more likely to vote against similar legislation in the future.
“I think I’ll be pushing that red button a lot more unless I’m completely sure,” he said.
Dan McGowan can be reached at [email protected]
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