Reform Groups Demand RI General Assembly Members Take Position on 38 Studios
Wednesday, October 07, 2015
The Rhode Center for Freedom & Prosperity, WatchdogRI, RI Taxpayers, Operation Clean Government and Occupy Providence released a joint statement on Tuesday.
What Rhode Island voters need and demand is accountability and the full story of how the scam went down. We want to know how this bad deal managed to sail through every existing check and balance in our government, so that we can implement reforms to prevent future failures.
To get the answers to these questions, two investigatory paths must be pursued. First, the Governor must initiate a truly independent investigation into potential criminal activity and how Rhode Island government's process failed to protect the taxpayer. Second, legislative Oversight Committee hearings must reconvene with the support of leadership, and with subpoena powers as necessary, in order to determine if any political manipulation or ethical wrongdoing occurred.
The good government groups behind www.Investigate38StudiosNow.org now ask every sitting Rhode Island legislator to take a stand and go on the record in support, or not, of each of these paths.
The two questions being posed to legislators are:
Do you SUPPORT or NOT SUPPORT publicly open and unfettered legislative Oversight Committee hearings - now - including the granting of all subpoena powers requested by said committees, that will look into potential manipulation of the political and governmental process that led to the 38 Studios affair?
Do you SUPPORT or NOT SUPPORT a call to the Governor to appoint an outside, independent investigator - now - with subpoena powers to produce to a report on any potential criminal or ethical wrongdoing with regard to the 38 Studios affair?
The groups said Tuesday "about two dozen lawmakers" have already responded with their positions.
Related Slideshow: Seven 38 Studios Facts You Would Not Believe
Here are the seven facts that you would not (want to) beleive about the 38 Studios deal.
Meetings Started a Year Before When We Were Told
The first story was that Governor Carcieri went to a fundraiser for a WWII Veteran’s event at Curt Schilling’s home and that served as the spark to a meeting between Keith Stokes and the 38 Studios officials to try and lure the company from Massachusetts to Rhode Island.
Then, it was disclosed that meeting Speaker Fox had had meetings earlier in the spring through his relationship with his close friend Mike Corso.
In the documents released Thursday, 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.
If Not for RI, 38 Studios Would Have Closed Within 1 Month
If RIEDC had turned down the deal in July 2010, documents released showed that 38 Studios would likely have missed making payroll the next month.
In a July 7 email from Rick Wester to Tom Zaccagnino, he wrote, “The latest would be the August 15th payroll at this point. I’m having doubts we can get through the 30th."
The RIEDC board approved the $75 million in bonds on July 26.
The Original 38 Studios Deal Was Small and Inexpensive
An internal email at 38 Studios dated February 18, 2010 outlines a Rhode Island staffing plan starting at 10 employees in 2010 and increasing to 40 in the future.
However, RIEDC mandated a high staffing level and thus a high burn rate.
For 38 Studios to receive its last payment the RIEDC agreement required staffing to elevate to 450 headcount.
38 Studios Knew RI Money Was Not Enough to Fund the Company
An email exchange between top 38 Studio leadership and Mike Corso, confidant to Speaker Gordon Fox, in preparation to meeting with the RIEDC Board led by Governor Don Carcieri showed that 38 Studios wanted to keep certain financial realities under wraps.
Tom Zaccagnino wrote to CEO Jen MacLEan, CFO Rick Webster, and Corso, “I really don’t think we should highlight the fact we might be undercapitalized…won’t go over well with staff or board."
Two and a half weeks earlier EDC Board gave preliminary approval and on July 26, the RIEDC Board gives final approval to the $75 million.
Style Over Substance
In October of 2010, RIEDC was preparing a public relations strategy because “the Gubernatorial candidates have politicized the 38 Studios deal.”
The Strategy document outlined the key messages, and the need to “accelerate development of an in-depth Providence Journal story, including offer of access to Board members. The Providence Journal team will be Andy Smith, Paul Grimaldi and Business Editor John Kostrzewa — we will push for Neil Dowling’s inclusion.”
At the same time as EDC was rolling out its PR strategy to sell to the public value of the 38 Studios deal, 38 Studios internal documents showed that the company was tittering on financial collapse. In fact, a demand for payment from Speaker Fox’s confidant for a $500,000 payment could not be met because it would cripple payroll.
An October 27 internal memo from CEO Jen MacLean to Schilling, Zaccagnino, CFO Rick Wester, and COO Bill Thomas said, “After running payroll, we have less than $500K in our Maynard accounts. We simply can’t pay Mike before the bonds close, no matter how much he might wish otherwise.”
The Deal Was Done Before Anyone Could Imagine
How deep were top EDC staff in on the deal to fund 38 Studios?
In an April 12 (2010) memo from RIEDC’s Michael Saul to Mike Corso and RIEDC’s attorney Rob Stolzman, he proposes “Determine whether any local institutions (RISD endowment, RI Foundation, Hasbro, Brown endowment, State Pension fund, etc) would commit to purchase a share of bond issue.” This is just one of ten “to do’s.”
EDC’s top staff were strategizing on how to sell the bonds, months before the bill ever hit the House floor for consideration.
This April 12 strategy session was supposedly just a little over a month after Governor Don Carcieri and Curt Schilling met and two months before the loan guarantee program is signed into law.
Did Rhode Island Pay for Improvements at Corso's Bar
In one email in May 2011, Mike Corso alerted top 38 Studio officials of over $600,000 in change orders to the build out of the Empire Street 38 Studios’ offices.
The change orders Corso pushed for increased the cost of contractor Nappa Constructions’ project cost from $10.9 million to $11.6 million. As GoLocal reported in 2014:
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."
"I'm changing everything on job -- these were all no bids. Nappa construction picked Rossi Electric. I realize the job can't be done the way it's designed," said Rossi. "The money was getting kicked back in the form of goods and services to Corso and Fox. I said I'm not doing this. I knew I was getting set up for jail with this. I went out on sick leave, I was done."