Scott MacKay Commentary: Why RI Can't Put 38 Studios In The Rear View Mirror

Mar 3, 2017

38 Studios is the Rhode Island scandal that just won’t go away. RIPR political analyst Scott MacKay wonders how the state can put this mess in the rear-view mirror.

So you thought the 38 Studios-Curt Schilling frittata was finally waning. The state was successful in settling lawsuits that clawed back more than $50 million of the ill-fated $75 million deal foisted up Rhode Island taxpayers by then-Gov. Donald Carcieri and General Assembly leaders. Law-enforcement leaders said they didn’t have enough for criminal actions against the perpetrators of this disaster.

Almost seven years have elapsed from the 2010 deal that led to the bankruptcy of the 38 Studios video game company. But the tortuous drip of document dumps and blame-laying isn’t over.

The latest disclosures came in a trove of state police criminal investigation reports on the failed video game firm run by former Red Sox pitcher Schilling. Much of the reports focused the role of Michael Corso, then a 41-year old Providence lawyer and young power broker who was adept at helping business owners win tax-saving incentives.

This path led directly to House Speaker Gordon Fox, who is now serving a federal prison sentence   for corruption unrelated to 38 Studios. But the documents and previous reporting makes it clear that Fox worked behind the scenes with Corso to push this deal through the General Assembly by withholding damning information from rank-and-file lawmakers.

The new documents show that the state police were probing whether Corso, who hasn’t been charged with anything, committed bank fraud in helping to steer taxpayer-backed loans to keep 38 Studios afloat. Fox declined to speak to law enforcement, taking his fifth amendment right against incriminating himself at the advice of his lawyer, William Murphy, a former House speaker and noted Rhode Island criminal lawyer.

This we know about Fox: He was desperate for money to maintain the lavish lifestyle that he and his husband enjoyed. Fancy foreign cars, flashy jewelry and an expensive home on Providence’s East Side were all a what he couldn’t afford on his small speaker’s salary and faltering law practice. We know this from details released by the U.S. Attorney’s office after Fox’s guilty plea on charges on raiding his campaign fund and taking a bribe from a Providence bar owner when Fox was a member of the city’s licensing commission.

Fox’s lawyer, Murphy’s reputation has been tarnished in the latest revelations from the state police investigation. Schilling, the baseball star not known for his candor, said that Murphy wanted to be hired as 38 Studios lobbyist. Murphy has called that insinuation ``absolute crap’’ and he is probably right. Murphy is a smart criminal lawyer whose legal ethics have never been called into question. And because of the state law requiring lawmakers to wait a year after leaving office to take on lobbying clients, Murphy couldn’t have been angling for an immediate client.

As for Carcieri, there is nothing that would indicate that he is guilty of anything beyond extremely bad judgment and arrogance. Republican Carcieri was about to leave office. He became governor  in 2003 and had pledged to be the jobs governor. But by the time he left eight years later, the recession had begun and the state was hemorrhaging jobs and investment. He perhaps saw the 38 Studios deal as a way to burnish his economic development skills on his way out of office. The strange thing is why Carcieri, a former banker, would ever agree to such a loan without Schilling coming up with more collateral and outside capital.

Then again, it’s always easier to make a bet with other people’s money, in this case the taxpayers. Hindsight is always easy, but there are lessons here.  Sunlight is once against the best disinfectant.  The secrecy and back room dealing on this issue came home to roost for the politicians.

Then the Statehouse crowd tried to sweep this mess under the thick carpets of the House and Senate chambers. What they should have known is that there would be a backlash. Back in the 1990s, the Assembly and then-Gov. Edward DiPrete were caught in the quicksand of the anything-goes regulatory environment that led directly to the credit union crisis. After the crash of the credit union insurer, the Assembly convened an investigative commission led by former Newport Rep. Jeff Teitz. This panel had staff, subpoena powers and questioned witnesses under oath. Its sessions were televised.

Nothing similar was done for 38 Studios. When she ran for governor, Gina Raimondo promised an independent investigation. But she never followed up.

38 Studios has helped fuel government cynicism. That’s because the Smith Hill crowd forgot an iron rule of politics: the cover-up is worse than the crime.

Scott MacKay’s commentary can be heard every Monday on Morning Edition at 6:45 and 8:45 and on All Things Considered at 5:44. You can also follow his political reporting and analysis at our `On Politics’ blog at RIPR.org