38 Studios: The More We Learn the Worse it Gets
Tuesday, July 31, 2012
Rhode Island Economic Development Corporation (RIEDC) e-mails released to the media last week confirm what has become all too apparent: that there was no basis other than wishful thinking to give Curt Schilling’s now-bankrupt 38 Studios a $75 million loan.
EDC staffers point out in the e-mails that they have more relevant information about companies they make $10,000 loans to than they do about 38 Studios and are skeptical of the rosy assumptions in 38 Studios’ business plan. Although these concerns reportedly were not shared with the EDC Board, that does not let them off the hook; the savvy business people on the Board must have known that the specific indicators necessary to monitor this kind of risk were simply nowhere in evidence.
The more one learns the more one concludes that these Gov. Donald Carcieri appointees simply bowed to the then-Governor’s wishes and gave him what he wanted -- despite any misgivings they may have had. The legislative leadership also went along for the ride by failing to conduct anywhere near the level of due diligence required for a decision of this magnitude. They also ensured the decision did not receive the necessary public scrutiny by rushing through the $75 million appropriation without specifying that it was a loan for 38 Studios.
This speculative bet on the success of a video game company unable to attract any private investment was more like taking state money to Foxwoods and hoping for the best, than a hard-headed and informed economic development decision.
There is a place for much smaller state loans to "start-ups" and other small businesses that demonstrate they can attract private investors; provide realistic business plans; and show the potential for creating good jobs. But start-ups are by definition risky, which is a reason for funding diverse companies and not placing all of our eggs in one basket.
Much more importantly, it is time to get back to the fundamental things government can and must do to improve the economy: repairing and upgrading our infrastructure; improving our public schools; upgrading our existing workforce through addressing adult literacy and better targeted training programs; and pruning away unnecessary and burdensome regulations.
Given that Rhode Island continues to have one of the highest unemployment rates in the nation and can ill afford avoidable and completely foreseeable mistakes, it is important that the 38 Studios debacle serves as a ‘teaching’ moment. Let’s get back to basics and do the important things that are in the broad public interest and will benefit all of our entrepreneurs, existing businesses and the workers of today and tomorrow. That is the only path to lasting and sustainable prosperity.
Rob Horowitz is a strategic and communications consultant who provides general consulting, public relations, direct mail services and polling for national and state issue organizations, various non-profits and elected officials and candidates. He is an Adjunct Professor of Political Science at the University of Rhode Island.
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Comments:
Swamp Yankee
5:51pm on Tuesday, July 31, 2012
I'm sure we'd all love to hear from Carcieri on this?
Seems to me that Chafee's been vindicated and then some. Schilling may be upset that Chafee didn't assist in his efforts to dupe investors - including state tax payers - into thinking an additional investment in his struggling company was a wise investment, but as a RI taxpayer I'm pleased the Governor was open about the state of the company.
Can you imagine the scandal if Schilling HAD convinced Chafee to remain silent or actively assist in defrauding investors and taxpayers, allowing the additional tax credits and private investment to move forward under false pretenses?
More investigation needs to be done on the connection between Speaker Fox and Corso on this matter. I find it difficult to believe that the most powerful person in the state (the Speaker - NOT the Governor) could allow a bill appropriating $125 million to pass, with $75 million going to one company in a deal brokered by his close associate Corso, without any knowledge.
He's either lying or incompetent. His choice.
Fabiano Terrenni
8:49pm on Tuesday, July 31, 2012
"The legislative leadership also went along for the ride by failing to conduct anywhere near the level of due diligence required for a decision of this magnitude."
Yet Fox's Leg Counsel, John Flynn, who was making $118K at the time was recently appointed a Magistrate at $139,000 per year.
Fox didn't run this by Flynn? If not why not? If so, what was Flynn's advice?
One more time, who negotiated and authorized Stokes' $$64K "severance package" AFTER he had already resigned?
Will someone please answer these questions...