Moore: 38 Studios Investigation Shows Legislators Lack Courage

Monday, March 06, 2017


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Nicholas Mattiello

Most of the outrage I’ve heard surrounding the fruitless investigation conducted by the Rhode Island State Police into the 38 Studios fiasco centers around the general lack of aggressiveness that permeated the investigation.

That’s a legitimate complaint for sure.

As GoLocal reported earlier last week, the state police didn’t get around to interviewing the law firms and massive international banks like Wells Fargo or Barclays, who were part and parcel to the deal and have paid more than $60 million combined to settle the civil lawsuit filed by the state.

Further, most of the interviews conducted by the state police were done over the phone.

And when the state police Colonel conducting the interview of House Speaker Nicholas Mattiello began his questioning, he explicitly told the Speaker that neither he, nor anyone else in the state legislature, was a target of the investigation! What exactly was the point?

An unaggressive investigation 

Let’s call this investigation what it was--a complete whitewash. It’s almost as if the state police were told to look around, but make sure not to find anything.

The documents reveal more than this. What’s most surprising about the investigation is how the legislators interviewed by the state police talk about how they knew nothing about the loan program almost as if they didn’t want to know anything.

For some reason, and I’ve never understood this, the lion-share of Rhode Island’s state legislators seem to think that going along to get along is not only a good thing, it’s the right thing.

As an example, here’s what current House Speaker Nicholas Mattiello said about the loan program when he was House Majority Leader--that’s the number 2 man in the House of Representatives, for anyone who isn’t aware, when he was asked about whether he had any knowledge of the program’s purpose and intent.

"I wasn't going to question the Speaker"

"(Steven Costantino) was having his own discussions with the Speaker that I was absolutely cut off of. So I - I mean, I was the Majority Leader, I wasn't going to question the Speaker as to what he was doing, and -- I mean, if they want to have a private conversation and, and exclude me, I'm just not part of that conversation and -- and, you know that's how things work," Mattiello told the state police.

It’s easy to pick on Mattiello--let’s just leave it at that.

But what’s interesting is that although most of the other state legislators didn’t put it as starkly as Mattiello, “...I wasn’t going to question the Speaker as to what he was doing…”, despite he was the number 2 man in the House, that’s the prevailing attitude at the statehouse. The legislators, for some reason, think that they can’t, and shouldn’t question the Speaker of the House--despite the fact that doing so would be the right thing to do for the people of Rhode Island.

There’s a blind obedience to authority permeating our statehouse, and that’s a massive cause of the problems we face.

"you know how things work"

It’s the job of a legislator to ask tough questions about everything. When there’s not enough information provided, legislators should vote against the measure based on that alone. The attitude shouldn’t be ‘well the House Speaker wants this and I’ve got to know my place’.

Legislators aren’t sent up the statehouse to get along with one another and have a good time. They’re supposed to be there to do the right thing.

And when a legislator does do his job, he gets called “negative”.

That’s how Representative Samuel Azzinaro viewed House Majority Leader Bob Watson, who so presciently warned legislators against voting for the ill-fated loan guaranty that became the 38 Studios debacle.

“This is probably the scariest vote you can cast because a decade from now this could be a scandal all over The Providence Journal,” Watson warned on that fateful day in 2010.

"something didn't seem right"

Azzinaro explained to investigators why he, and i presume, most others, ignored Watson’s prophetic advice, in his interview with the state police.

"You know, the only thing that I can remember of that night really was Bob Watson who was the minority leader at the time, getting up and not mentioning 38 Studios, but just saying that something didn't seem right. And it was, you know, I used to sit behind him...and because he was negative about everything, but so, you don't -- you don't really pay too much attention to it when somebody's negative all the time,” said Azzinaro.

"But it seemed like he knew something was cooking."

If it seemed like he knew something was cooking, why didn’t Azzinaro vote against the legislation? The reason: he didn’t want to irritate House Leadership.

The time has long passed for voters to begin paying more attention to the goings on at the statehouse and demand more independence from their legislators. We need people to ask tough questions and to vote against legislation that doesn’t benefit everyone in Rhode Island.  

We need more Bob Watsons and fewer Nicholas Mattiellos.

Only that, no some reform like the master lever, or the line-item veto, is truly what will get us a better state government.

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Russell Moore has worked on both sides of the desk in Rhode Island media, both for newspapers and for 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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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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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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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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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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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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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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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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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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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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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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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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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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“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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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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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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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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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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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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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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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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