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Where Has Kilmartin Been on 38 Studios, Corso, and Doyle?

Tuesday, September 01, 2015

Kate Nagle, GoLocal Contributor

Peter Kilmartin

The Office of Rhode Island Attorney General Peter Kilmartin continues to remain silent three years later on the ongoing 38 Studios lawsuit, as well as State Police investigation -- and others -- and some are questioning the role the AG has played to date, and can play moving forward.

"The lack of leadership on this issue from AG Kilmartin is glaring. One wonders how much of this is related to the fact that Kilmartin was a State House insider at about the time 38 Studios loan program was approved," said Rhode Island GOP Chair Brandon Bell. "In the 3 years since the spectacular collapse of this video game company our elected officials have responded to public outrage with a reluctant trickle of disclosures that can be best characterized as piecemeal, opaque and completely devoid of self-scrutiny."

The Office of the Attorney General weighed in only to say that the investigation is still currently taking place.

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"The investigation into 38 Studios is ongoing and active," said AG Public Information Officer Emily Martineau, when asked Monday what the Attorney General thought of a call by groups in Rhode Island for an outside, independent investigation.

Slides: See the Key Players in the 38 Studios Suit BELOW

"In direct response to the AG, in a campaign debate with Dawson Hodgson [last year,] Kilmartin claimed he was victim as a legislator," said Ken Block. former Moderate Party head and GOP candidate for Governor. "He says he was deceived as a legislator when he voted for 38 Studios - he said he didn't vote for 38...that victim status precludes him from being able to investigate 38 studios."

Block is one of several groups and individuals who are calling for the independent investigation in 38 Studios, in light of new information being made available with lawsuit documents soon to be release -- and John Marion with Common Cause of Rhode Island spoke to the development.

"The calls for an independent investigation seem to stem from the slow drip of details that have come out and that they don't always reconcile with what we've been told by our elected officials. People just don't trust that they know the whole story," said Marion. "Hopefully we will have a full reckoning (no pun intended) once the hundreds of pages of documents are made public."

Call for Independent Investigation Called "Political"

RI Taxpayers is another group calling for an independent investigation -- based on what they say is the conflicted role of the AG in this case .

"The role of Attorney General Peter Kilmartin in the aftermath of the 38 Studios debacle is a critical question. We just recently learned that an investigation carried out by the State Police, the scope of which is unknown, has been in the hands of Attorney General Kilmartin. How long has it been in his hands? Does he ever intend to act upon the results of the investigation? Additionally, it should be noted that Mr. Kilmartin spent twenty years in the General Assembly. It is entirely possible that he is resistant to any investigation that might compromise House members or leadership, many of whom he may still view as friends," said Larry Girouard with RI Taxpayers.

Girouard continued, "For these reasons, one of the actions that we, along with other good government groups, have called for is an investigation by someone outside of Rhode Island, assisted by the State Police, so that an unconflicted party can make a clear assessment of what happened."

Speaker of the House Nicholas Mattiello, however, said any independent investigation was unnecessary, and driven by olitical motives.

“An independent investigation has already been conducted, and is currently ongoing, on two fronts. The State Police have one of the best investigative units in the country and are currently reviewing the criminality of the case. Secondly, this also a civil matter and Max Wistow is one of the state’s best interrogators, working with a team of talented defense lawyers. I am pleased that with the unsealing of the records in the coming days, combined with the State Police investigation, the public will know exactly what went wrong in this terrible debacle," said Mattiello.

“The public needs to know all the facts in order to learn from the mistakes that were made so they are never repeated. I have full faith in the State Police and in the civil litigation. Unfortunately, the call for an independent investigation is a tool being used by some people to remain politically relevant."

The Chair of the Democratic party, Josephn McNamara, concurred.

"I can’t speak to why some folks have called for an independent investigation but certainly, there’s a great deal of public interest in this matter. As far as investigations are concerned, the Rhode Island State Police and other law enforcement agencies are really best trained and qualified to do that kind of work," said McNamara. "I fully expect – and hope – that the facts of what happened in this matter, when they took place and by who, will become apparent to all. I think it’s is a very positive development that Judge Silverstein has ordered the release of all these documents."

Former GOP chair Mark Smiley said he believed the lack of action was what was driving people to demand more accountability with an indepenent investigation.

"I believe it is warranted. It's clearly taken too long already. What is the hold up? A lack of resources? Is the State Police even the right organization to handle this type of investigation? They are a criminal investigation organization and so far, there haven't been many allegations of criminal wrongdoings in this case and nothing strong enough for the RI State Police to act upon," said Smiley.

"There may have been criminal wrongdoing in this case, but it may lay buried deep under layers of questionable ethics, something a criminal investigator may not recognize. AG Peter Kilmartin, being both the person who forced the legislation through as Majority Whip then AND the top law enforcement official of Rhode Island today, needs to step aside," said Smiley. "Bring in a special prosecutor, no other investigation will ever be trusted as being thorough enough."

Ongoing Investigations

While the 38 Studios lawsuit and investigation continues, the Attorney General's office played only a supporting role in the prosecution of Gordon Fox, as the FBI took the lead on the investigation -- and two years after announcing indictments in the case of Dan Doyle at the Institute for International Sport, has yet to take action.

"Regarding the International Institute, the State is and has been ready to go to trial," said Martineau. "It is going through normal court procedures."

Marion noted what he saw as some wins from the office, but said he would hope that the office would be doing more to root out corruption.

"The Attorney General's office has prosecuted, or assisted in the prosecution of, several very high profile corruption cases including Chief Whiting, Representative Almeida, and Speaker Fox," said Marion. "Of course would love to see the Attorney General, and all those responsible for enforcing our integrity laws, be more aggressive in pursuing and prosecuting corruption."

Related Slideshow: SLIDES: The Players in the 38 Studios Saga

Don Carcieri

The two term RI Governor first elected in 2002 and then again in 2006 -- and was at the helm of the state when he first met Curt Schilling at a fundraiser in March 2010. The meeting is part of the focus of questions of how and when the wheels were put in motion to lure Schilling's 38 Studios to RI.

The Carcieri administration announced the proposed $75 million 38 Studios deal in June 2010 -- and in November 2010, just prior to the election, the EDC (which Carcieri as Governor chaired) announced the issuance of $75 million in taxable revenue -- i.e. moral obligation -- bonds. Carcieri is not listed at a defendant in the state's suit, based on immunity, but was deposed in 2014, which could be part of the upcoming document release.

Bill Murphy

Questions pertaining to the role of the former RI Speaker of the House -- and when he first introduced key players in the 38 Studios deal in 2010 - remain at the center of attention.

The former Speaker continues to wield unparalleled influence as a lobbyist and behind-the-scenes king maker. While he last served as the state's most powerful elected official until 2010, Murphy's ability to exert control at the State House was evidenced by backing now-Speaker Mattiello when the battle to replace Gordon Fox took place. Murphy's lobbying clients range from the corrections officers to payday lending to Twin River.

Gordon Fox

The former Speaker of the House, who is currently serving a prison term for using campaign funds for personal expenses and accepting a bribe, is inextricably tied to, and at the center of, the 38 Studios deal -- stemming in part from his close personal ties to former Speaker Bill Murphy and tax credit lawyer Michael Corso.

More of his role in the ill-fated deal is expected to emerge as documents are released in the coming weeks, as to what he knew when, and his role in driving the deal through -- and who else know. Fox, like Carcieri, has immunity in the state lawsuit.

Michael Corso

The relationship between Former Speaker Gordon Fox and Michael Corso goes back to the early days of both their professional and political careers in the late 1990's after each graduated from New England law schools. Corso joined developer Buff Chace's Cornish Associates - and Fox and Corso both claim to be the author of Rhode Island's Historic Tax Credit Legislation -- which proved to be the ultimate down fall of 38 Studios.

In March of 2010, Tom Zaccagnino and Schilling met with then-Speaker Fox and former EDC director Keith Stokes in Corso’s downtown law office. Despite the meeting taking place after the legislative deadline, just a few weeks later the loan guarantee legislation was submitted by Fox's leadership team and in May the bill was pushed through the legislature. 38 Studios would receive $75 million in loan guarantees. Following the 38 Studios fallout, Corso's Sakonnet Capital Partners, Reel Capital LLC, and Tax Incentive Partners have all removed his name from the sites. Their offices are all located in the same building as Fox's husband's former salon location - 155 Chestnut Street.

Peter Kilmartin

The Attorney General, who was in the House of Representatives at the time of the 38 Studios deal, acknowledges that the current state police investigation is "ongoing and active" -- three years after the company went bankrupt, and five years since the original deal.

While his office maintains the neutrality of his position, others question is role in the process. "AG Peter Kilmartin, being both the person who forced the legislation through as Majority Whip then AND the top law enforcement official of Rhode Island today, needs to step aside," said former RI GOP chair Mark Smiley. "Bring in a special prosecutor, no other investigation will ever be trusted as being thorough enough."

Nicholas Mattielllo

Mattiello ascended to the role of Speaker following the resignation of former Speaker Gordon Fox -- who had been in power at the time of the 38 Studios deal.

He has said that he believes the investigatory power lies in the "state police and the courts" -- not the General Assembly.

"I have had to be patient throughout this process because I have said all along that the best approach is for the Superior Court to unseal the documents and for the State Police to continue its investigation. I have tremendous faith in our State Police as the appropriate agency to pursue criminal activity," said Mattiello. "The General Assembly is legislative in nature. While my focus since becoming Speaker last year has been on passing good budgets that encourage a strong economy, the combined efforts of the State Police and the courts will allow us to uncover the facts to learn from the past and never repeat the mistakes that were made."

Gina Raimondo

While the bulk of the 38 Studios developments took place prior to Raimondo taking office, she was still ordered deposed back in 2014, which could surface in the upcoming release of court documents.

Meanwhile, Raimondo -- and the state -- continue to use First Southwest, a defendant in the state's law suit.

"The architect of Governor Gina Raimondo’s truck toll infrastructure plan is the same firm that the State of Rhode Island is presently in litigation against for its role in the state’s loss of over $100 million in the 38 Studios collapse."

Lincoln Chafee

The Governor of RI from 2011 through 2015 was originally opposed to the $75 million 38 Studios deal back in 2010, blasted critics for trying to default on the loans in RI, and ultimately was blamed by Sony for 38 Studios failure.

Chafee was also blamed by other parties in the state's lawsuit -- and was deposed by the court, which should be released by the court along with tens of thousands of documents in the coming days.

Max Wistow

In June 2012, Governor Lincoln Chafee hired lawyer Max Wistow to investigate the 38 Studios deal - and the 17-count suit included RICO, fraud and negligence and also accused Wells Fargo of earning nearly $500,000 in hidden commissions from 38 Studios at the same time that Wells Fargo owed fiduciary duties to the EDC Board to disclose all negative material information concerning 38 Studios’ business plan and financial projections, including the shortfall.

Michael Silverstein

The Superior Court Judge, who appointed retired Supreme Court Judge Frank Williams mediator of the state's 38 Studios lawsuit back in May, made the move on Friday August 28 to declare that documents were to be unsealed in the case, no later than ten days after his determination.

The Rhode Island world -- and beyond - awaits the content of then tens of pages of files to see how lawyers on both sides couched the collapse and demise of the former gaming company, leaving Rhode Island taxpayers to pay off the moral obligation bonds.

Keith Stokes

The former EDC Executive Director who oversaw the maturation of the 38 Studios deal in 2010 and was named in the state's lawsuit, reached a settlement with the state along with J. Michael Saul and Adler Pollack and Sheehan on August 9, 2015.

In December 2014, the Commerce Corporation, after considering the extent of the defendants’ insurance coverage, had made a demand of the four defendants above that they settle for $12.5 million, which was ultimately the agreed upon result.

J. Michael Saul

The former EDC Deputy Director was one of the recent parties that settled with the state in August for $12.5 million.

Adler, Pollock & Sheehan

The law firm of Adler, Pollack, and Sheehan was among the group along with Stokes and Saul who settled in August 2015. In 2013, the four had responded to the suit, placing the blame of the collapse of 38 Studios on then-Governor Lincoln Chafee for actions -- and inactions.

Moses Afonso Ryan

One of the RI law firms sued by Rhode Island's economic development agency over the failed $75 million 38 Studios deal, Moses and Afonso was the first defendant to agree to settle in June 2014 -- for $4.4 million.

First Southwest

The state, in its pending lawsuit against its financial advisor, alleged the folllowing:

In a sweeping set of allegations made by the state against First Southwest, the 38 Studios lawsuit blistered the firm for failing to protect the state’s interest and for knowingly making false statements.

In the suit, the State of Rhode Island asserted, "First Southwest knew or should have known that the April 1 Projections did not include those guaranty fees and, therefore, overstated 38 Studios’ projected cash flows by those amounts.”

Wells Fargo

One of the remaining defendants in the state's lawuit.

In 2012, GoLocal's Dan McGowan reported that, "Wells Fargo refuses to comment on accusations that it “secretly” received nearly $500,000 from Curt Schilling’s failed video game company at the same time that it was supposed to sell $75 million in bonds to investors on behalf of the Rhode Island Economic Development Corporation (EDC)."

Barclays

One of the remaining defendants in the state's lawuit.

Star Indemnity

One of the remaining defendants in the state's lawuit.

Thomas Zaccagnino

One of the remaining defendants in the state's lawuit, he was 38 Studios former lead director.

Jennifer MacLean

One of the remaining defendants in the state's lawuit, she was former SVP of Business Development for 38 Studios.

Richard Wester

One of the remaining defendants in the state's lawuit, he was the former 38 Studios CFO.

Curt Schilling

The former Red Sox pitcher who created the ill-fated video game company 38 Studios, is one of the remaining defendants in the state's lawsuit -- and had been an ongoing advocate for the release of more information to the public

When the states' lawyers wanted to unseal only specific pages of the suit back in May, Schilling said, "I am hoping and anticipating that if/when anything is made public, that everything is made public, so the public - and the press - can finally know what happened and why."

With the release of documents expected shortly, more information will soon be coming to light -- tens of thousands pages of it.

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