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Moore: Time for a 38 Studios Special Counsel

Monday, June 05, 2017

 

Attorney General Peter Kilmartin

State leaders and political observers have, for more than five years, complained that the state needs to get over its ‘38 Studios paralysis’. If we ever want to get past it, the state legislature needs to empower a Special Counsel to lead an independent investigation into the fiasco.

Put another way, they say the general public should not simply view every public investment going forward as if it’s the next coming of the insane deal that guaranteed Rhode Island taxpayer money to support a harebrained idea to create a new video game creation company. And who knows, that paralysis may be very well preventing subsidies to the so-called Superman building, the Pawtucket Red Sox owners, and other would-be recipients of taxpayer largess.  

That’s a (relatively) fair assessment. It would be hard to come with a more insane idea than that envisioned by former Governor Donald Carcieri, former House Speaker Gordon Fox and his good friend Michael Corso. So every new project shouldn’t be viewed as if it would wind up becoming such a disaster.

Independent Investigation

But taxpayers cannot move on. How can they? They don’t believe the situation has been investigated adequately.  They don’t have a sense that the wrongdoers have been forced to suffer any comeuppance. Nor do Rhode Islanders believe that our leaders have learned any lessons. So it’s hard to imagine when, or if that day, when we finally get over our collective “38 Studios paralysis”, will ever come.

Unfortunately, the investigation conducted by the Rhode Island State Police has done little to achieve those ends. The investigation itself brought forward no charges against any of the folks who made this ill-fated deal happen. That means, in the eyes of the law, the folks who foisted this nonsense upon us, did nothing illegal. That might be true, but it’s hard to fathom.

To add insult to injury, the Rhode Island state police have failed to disseminate the information derived as a result of the investigation in a very annoying and ineffective way. It seems like whenever the state police have something to reveal, they do it in a classic Friday afternoon news dump, usually in the summer. The move is old, tired, and quite frankly, ridiculous.

Insult and Injury

Furthermore, the fact that the state police admittedly lost documents pertaining to the investigation as they were deemed “missing”. How can the investigative body charged with such a vital and important task bungle something so basic as retaining their evidence? That doesn’t exactly engender confidence from the general public.

Also, let’s face it: the fact that the Attorney General Peter Kilmartin voted for the legislation that paved the way for the 38 Studios funding scheme when he was still a legislator, and had, in that same legislative session, served as Majority Whip, (he wasn’t Majority Whip when the vote was taken, however) is problematic.

Don’t get me wrong: Kilmartin, by all accounts, is a politician who has always comported himself with the utmost integrity and has a solid reputation as a model police officer and prosecutor. However, the fact that Kilmartin voted to create a mechanism for the Economic Development Corporation to create a funding mechanism for 38 Studios suggests that we need an independent investigation.

Missing Documents and Links

On top of it all, the state police, for some reason, cannot even release the transcript of the interview with Kilmartin.

Look to the federal government to see a similar situation and how it is being handled more effectively than the 38 Studios saga. Robert Mueller, a former FBI Director, has been appointed as a Special Counsel to lead the investigation into the potential connections between the Donald Trump campaign for President and the Russian Government, in the lead up to last year’s Presidential election.

By appointing an individual with unquestionable integrity and well as distance from the issue, the Justice Department has taken action that will engender the confidence of the American People.

Another example would be the 911 Commission that looked into the breakdowns in US intelligence that preceded the devastating terrorist attacks on that day. In that case, the lessons learned, have helped prevent future attacks. That’s yet another benefit to a Special Counsel’s appointment. Rhode Island could learn how to prevent scandals like 38 Studios going forward.

What did we learn?

We are well past the time here in Rhode Island for the state legislature, or Governor Gina Raimondo (who was always a critic of the proposal and has said she supported a special investigation in the past) to convene a Special Counsel to lead an independent investigation into the 38 Studios debacle so that we can learn all the facts and the lessons surrounding the devastation caused by that travesty.

Only then will we truly be able to move forward.

Russell J. Moore has worked on both sides of the desk in Rhode Island media, both for newspapers and on political campaigns. Send him email at [email protected]. Follow him on twitter @russmoore713.

 

Related Slideshow: 20 Amazing Facts About 38 Studios Debacle Unveiled in RISP Documents

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1)

State Police Did Few In-Person Interviews

Most of the interviews conducted by the Rhode Island State Police were conducted via phone. 

According to leading defense attorneys in Rhode Island, this is very unusual. 

Key interviews that were held via phone included Governor Don Carcieri, one of the interviews with House Finance Chair Steven Costantino, and former Speaker of the House Bill Murphy.

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2)

Carcieri Not Asked About Fox, Costantino or Corso

Carcieri was not asked in his interview with RISP about any discussions with then-Speaker Gordon Fox, House Finance Chair Steve Costantino or with any others associated with the deal.

Carcieri was not asked about Mike Corso who was the subject of the investigation.

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3)

Peter Kilmartin’s Interview NOT Released - or Not Conducted

Speaker of the House Gordon Fox’s interview was not released on Thursday. 

Nor was former House Whip and now Attorney General Peter Kilmartin. He voted for the funding scheme for 38 Studios. It is unclear if he was interviewed.

In recent months, Governor Gina Raimondo has said that Kilmartin should not have conducted the investigation.

Nor was Mike Corso's interview - who was, for some period of time, the subject of the investigation.

Some of these interview documents may be tied to the Grand Jury.

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4)

Former RI Speaker Murphy Was Also Pitching Schilling to the Massachusetts Speaker

Former 38 Studios Board member Tom Zacagnino told RI State Police that he remembered Speaker Murphy "introducing Schilling to the Massachusetts Speaker of the House and stated that Murphy did not get compensated for this introduction. Zaccagnino beleives that Murphy did this only because of Curt Schilling’s star power.”

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5)

Zacagnino and Corso Went to Buff Chace for a Loan

Providence developer Buff Chace was approached by 38 Studios’s Tom Zaccagnino and Mike Corso for a bridge loan. “Zaccagnino and Corso went to Buff Chase/Cornish Associates/Zach Darrow in an attempt to secure a bridge loan until the anticipated tax credits were issued. they did not approve the loan.”

Chace owns much of the development on Westminster Street and is now redeveloping the Providence Journal building in partnership with a Boston development group. And, he is helping to lead the redevelopment of the Superman Building.

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6)

Corso Gets the Money from Movie Producer Brandt Andersen

According to the State Police interview with Tom Zacagnino, he and Corso approached movie producer Brandt Andersen after Buff Chace rejected their request for a bridge loan.

Andersen was the movie producer on Lone Survivor and dozens of other movies. He worked on movies with Gary Marshall, Martin Scorsese and Peter Berg. He and Corso were involved in productions together including, Lay the Favorite.

Andersen lent the two over $1.1 million.

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7)

Raimondo Refused to Call for a New Investigation

When asked on Thursday if Governor Gina Raimondo would ask for an independent investgation, her office issued the following statement:

Governor Raimondo opposed 38 Studios from the start and believes Rhode Islanders deserve a full accounting of all that is known about how the deal occurred. The Governor commends the Rhode Island State Police for releasing all non-grand jury records from the 38 Studios investigation. These documents tell only a portion of the story about the investigation – we still don’t know what the grand jury heard and saw. That is why the Governor has petitioned the court for the release of the grand jury records.

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8)

One Staffer Was Removed From EDC Review Team When He Asked Questions About 38 Studios

RI Economic Development Corporation supervisor Mike Saul took Sean Esten off the team for asking too many tough financial questions. 

“It was Mike Saul specifically was the one who kind of started excluding me. But there was other people within the organization, like, Fred Hashway was deeply involved in a lot of the  - negotiation of this and the - the discussion on this. They stopped communicating with me regarding it,” Esten told the State Police. 

According to his 48-page interview, he raised numerous concerns about the viability and the size of the project.

Today, Esten works for Bank of America.

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9)

State Police Consistently Misspelled Governor Lincoln Chafee’s Name

Former Governor Lincoln Chafee’s name was often spelled with two f’s — Chaffee.

38 Studios founder Curt Schilling's name was often misspelled too - it appeared "Kurt" and "Shilling" in multiple references.

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10)

Hasbro Chair Verrecchia Not Asked About His Company's Relationship with EA

As GoLocal reported in September of 2015:

In 2007, Hasbro signed a major partnership agreement with Electronic Arts (EA) — an agreement that would help transform the Rhode Island toy company from a product-based manufacturing company to an interactive and entertainment focused multi-billion business. The deal has been worth hundreds of millions for the two companies. The CEO of Hasbro at the time was Al Verrecchia.

EA is the same company that had a major partnership and investment in 38 Studios. In a document released by Judge Michael Silverstein, a May 2010 memo was included that outlined the multi-million deal between EA and 38 Studios for the funding of $50 million and royalty structure that could exceed $100 million.  The EA agreement was material to the state of Rhode Island’s financing. Of course, the state’s financing of $75 million to 38 Studios was a de facto a stabilizing force to EA. 

In the 36-page interview with Verrecchia, then the Chair of the Board of Hasbro (both at the time of the vote to approve 38 Studios funding and at the date of the RSIP interview), was not asked any questions about the Hasbro relationship with EA and then EA’s agreement with 38 Studios. 

Verrecchia didn’t recuse himself from the vote and voted for the funding scheme.

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11)

Verrecchia Says Staff and Lawyers Misled the Board

When asked if the staff and RI Economic Development Corporation's attorney Rob Stolzman mislead the board, Verrechia said yes.

“Yeah, then I’d think we’d been misled," said Verrechia.

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12)

Steve Nappa Tied to 38 Studios, Corso’s Tazza Caffe -- and Rehabbed Fox’s Husband’s Hair Salon in Corso’s Building

In one of his two interviews with RISP, Nappa outlines his selection to lead the construction at 38 Studios’ office space, his relationship with Mike Corso and work on Tazza Caffe, and the construction in another Corso building, which was the home to Corso’s close associate Gordon Fox’s husbands’s hair salon.

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13)

“Velvet Mafia” Named

As part of his interview with the RISP Steve Nappa names Congressman David Cicilline, former Speaker Gordon Fox, former House Finance Chair Steven Costantino and Mike Corso “as all members of the nicknamed group ‘Velvet Mafia.’”

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14)

Former Speaker Murphy Refused to Answer Questions

Former Speaker of the House Bill Murphy told RISP that he missed the vote on 38 Studios as well as nearly every other vote in May of 2010 and that he would not answer any other questions as he served as Gordon Fox’s attorney.

In documents released relating to the civil case in 2015, GoLocal unveiled:

In the documents released in September of 2015, Bill Murphy attested to how he sat in on a meeting with Corso, Fox and Curt Schilling while he was still Speaker.

But now, emails starting in July of 2009 between Corso and 38 Studios’ Tom Zaccagnino show the wheels were put in motion even earlier than we thought.

Murphy’s interview for the criminal investigation was conducted by phone.

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15)

Rep. Carnevale Hoped Law Enforcement Got “to the Bottom of It'”

RISP asked former State Representative John Carnevale, “Do you think anybody benefited personally from this...?”

Carnevale told the State Police, “I don’t know, but if they did, I hope the State Police or the other - other - the feds, whoever investigated can come down, you know, to the bottom of it…”

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16)

Former House Finance Chair Costantino’s Lawyer was Former House Majority Leader George Caroulo

While Speaker Gordon Fox was represented by former Speaker Bill Murphy, former House Finance Chair Costantino is/was during the State Police interviews by former House Majority Leader George Caroulo. 

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17)

Senate Claimed to Defer to the House

According to the State Police Investigative Report, the Senate claimed it deferred to the House. “They (Senators) all stated that the Jobs Creation Guarantee Program bill was a House bill, so they were not involved in any debate regarding its’s passage.”

Senate President Teresa Paiva Weed said she knew the bill was to benefit 38 Studios, but claimed she did not tell any other member of the Senate.

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18)

Carcieri’s Staff Stopped GOP Legislator from Capping Loan Program 

GOP Representative Larry Ehrhardt tried to cap the amount any one company could receive, but Governor Carcieri’s legislative staffer and Keith Stokes of Economic Development caught his attention and convinced him not to submit the legislation as it would adversely impact a transaction that EDC was trying to close. 

Erhhardt said that they never mentioned 38 Studios. Then-State Representative John Loughlin who ran for Congress that same year, also told the State Police that he thought that is Ehrhardt had submitted his amendment it might have passed and 38 Studios deal would have died.

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19)

Companies Who Paid More than $60 million Not Interviewed

Local law firms and national finance companies settled with the State of Rhode Island for more than $60 million, including global finance powers Wells Fargo Securities and Barclays Capital who paid the state $25.625 million. 

But, it appears that no one from those companies were interviewed as a part of the criminal investigation.

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20)

No Charge for Tazza Installation

In May of 2014, GoLocal reported:

A former subcontractor for 38 Studios is alleging that his firm was ordered to work on former Speaker of the House Gordon Fox's business colleague Michael Corso's bar as part of their contract - and has produced what he says is documentation to prove it.

Project manager Michael Rossi with SyNet, Inc. has revealed a budget for work which he says shows at $25,000 line item for work to be done at Corso's Tazza Cafe in 2011 -- under a job order for the failed 38 Studios.

Warwick-based SyNet bills itself as "the premier design-build low voltage contractor of structured cabling, access control, surveillance and audio visual systems in the Northeast."

Rossi said that he went to the State Police with the information at the time it happened.  "Nothing was done with it," said Rossi. "They're setting up to defend themselves with information they had 2-3 years ago."

Rhode Island State Police Colonel Steven O'Donnell told GoLocal on Wednesday that there has been an "ongoing investigation by the state police into Michael Corso."  When asked for further details, O'Donnell said, "With the investigation, I can't comment further on the matter at this time."

 
 

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