Scott MacKay Commentary: 38 Studios Documents Cast Another Pall Over RI Government

Sep 25, 2015

The 38 Studios lawsuit disclosures have once again cast a cloud over the Rhode Island Statehouse. RIPR political analyst Scott MacKay wonders when Rhode Islanders will finally be fed up enough to bring change to Smith Hill.

Even if you have lived through the Ocean State credit union crisis in the 1990s, the Ed Diprete governorship and both of Buddy Cianci’s reigns as mayor, the 38 Studios legal documents dropped on the public last week can lead to only one conclusion: You thought you’ve seen it all. You haven’t.

Wonder why Rhode Islanders are so cynical about their government and business elites? Well how about a House Speaker, Gordon Fox, and a Senate President, Teresa Paiva Weed, who either withheld information from rank-and-file lawmakers or looked the other way as they slipped the $75 million Curt Schilling deal through the Statehouse in the waning hours of the 2010 General Assembly session?

Then there is a governor, Donald Carcieri, who appears to be little more than a mindless cheerleader for the dream that was former Boston Red Sox pitcher Schilling’s video game company.

The state’s Economic Development Corporation, made up largely of top business leaders, rubber-stamped the 38 Studios fiasco and approved putting $75 million of taxpayer money on the line in an endeavor so risky that even the venture capital class wouldn’t bite.

The most stomach-turning revelation in the thousands of pages of court records is the role played by Fox, who is now serving a three-year sentence in federal prison for a bribery and corruption conviction not related to 38 Studios. It turns out that then-majority leader Fox was involved in shaping the deal nearly a year before the plan became public.

Fox’s and his ally, the lawyer and tax-credit entrepreneur Michael Corso, were working behind the scenes to push the state subsidy to 38 Studios. Corso ended up with $2 million for his role and a small stake in the company.

Because Fox and Corso both took the Fifth Amendment to avoid incriminating themselves during the legal proceedings, it is not possible to know precisely what happened. But what we now know about Fox should frost all Rhode Islanders and hopefully give the state police some avenues for their ongoing probe.

Fox was desperate for money to maintain the lavish lifestyle that he and his husband enjoyed. Fancy cars, dinners at fine Providence restaurants, flashy jewelry and an expensive East Side home were all part of the life that he couldn’t support from the modest salary he earned from being speaker and his marginal law practice. We know this from details released by the U.S. Attorney’s office after Fox’s guilty plea.

As far as the EDC goes, it is sad that some of the state’s top business leaders, including the corporation’s vice-chairman, Alfred Verrecchia, the well-regarded CEO of the giant toy maker Hasbro, seemed asleep at the switch. He and others on the board accepted the flimsy arguments for this disaster put forward by consultants, lawyers  and so-called financial experts who stood to cash in on the transaction.

It seems like no one in this mix was smart enough to ask  Massachusetts economic development officials or then-Gov. Deval Patrick why the Bay State wasn’t pulling out the stops to keep the World Series hero’s company in its Maynard location. Just what do all of those well-paid Smith Hill legal counsels and policy mavens do all day?

In retrospect, the arrogance of Carcieri and the EDC is a bitter pill for taxpayers in a state with big financial challenges. Carcieri wouldn’t let a former U.S. senator and candidate for governor, Lincoln Chafee, speak publicly to the EDC to outline his objections. You may not like Chafee, but in this case he was 100 percent right.

Keith Stokes, the EDC director at the time, didn’t have the business or video game experience to run this effort. But when Chafee tried to replace him, Paiva Weed stepped in to save the job of Stokes, her Newport neighbor and longtime friend.

There was also a lack of skepticism from many elements of the Rhode Island media, albeit not here at Rhode Island Public Radio. https://wrnipoliticsblog.wordpress.com/2010/07/30/rhode-islands-multi-million-dollar-baseball-legend-giveaway/

We all have to take a deep breath and understand that this lawsuit is not a fact-finding commission, such as the state embarked on after the credit union mess. And the lawsuit documents should not be used as a vessel for a witch-hunt or drawing conclusions about every aspect of a complicated case.

What is at stake is money. This is about the state’s effort to claw back some of the many millions frittered away on this fiasco. So far, the state’s lawyer Max Wistow, has gotten back about $17 million in settlements with law firms and individuals that helped foist this mess on the rest of us. Pending are claims on other deep-pocketed defendants, especially Wells Fargo.

As is always the case, Rhode Island’s top politicians say it is time to move on. Gov. Gina Raimondo says we must learn from mistakes and not be "afraid to take action on economic development." House Speaker Nick Mattiello says the House will review the court documents and conduct oversight hearings.

That’s fine, but it’s time to move beyond the press releases.

We’ll believe the governor and speaker when theyu sher in real change. They could start with no more slippery end runs of the state constitutional provision that gives only the voters the power to borrow large sums of money. This would mean no more moral obligation bonds for pet projects. Voters usually approve bonds for worthwhile things,  such as road repairs or the $125 million bond approved in the last election for the new engineering school at the University of Rhode Island. Voters should be the check on such initiatives as 38 Studios and other projects the politicians claim are `game-.changers.'

Then Raimondo and Mattiello could decide they are going to run the government openly. When the governor decides to give one of the speaker’s allies, as she did with with former state representative Don Lally, a cushy state job, she should first get clearance from the state Ethics Commission. And when the governor hires a former Democratic political operative, such as David Barricelli, to a job at the Department of Labor and Training, make it public. Why hide the hiring a qualified candidate?

The governor puts out a press release every time she reads to a third grade class, so why not publicly announce the hiring of Barricelli?

Yes, Rhode Island must put this fiasco in our collective rear-view mirror. But that begins with the politicians, not the voters.

Scott MacKay’s commentary can be heard every Monday on Morning Edition at 6:40 and 8:40am, and on All Things Considered at 5:44pm. You can also follow his political reporting and analysis at our On Politics blog at RIPR.org