2016-06-02 / Front Page

38 Studios Probe Stalled

By Tom Walsh

Jolted by an unusual mid-session leadership change, the Rhode Island House Oversight Committee, which had begun what seemed to be productive hearings on the 2012 38 Studios debacle, now appears to have run aground on the issue.

“It’s a little frustrating, and now we’re running out of time in this session,” said Rep. Lauren H. Carson, D-Newport, a member of the oversight panel.

Carson, serving her first term in the House, said the committee was “looking at a few things” that might help to close loopholes that were at least partly responsible for the failure of former Boston Red Sox pitcher Curt Schilling’s ill-fated video games enterprise.

Carson said disruption of the committee’s 38 Studios investigation was “the worse of my fears.”

The failure of 38 Studios in June, 2012, cost Rhode Island taxpayers more than $75 million—the amount of the loan guarantee that the Rhode Island Economic Development Corporation (EDC), now known as the Rhode Island Commerce Corporation, had awarded Schilling’s venture.

It also resulted in the resignation of former EDC Executive Director Keith Stokes, a Newport resident. Last March, Stokes agreed to pay $25,000 to settle federal Securities and Exchange Commission (SEC) fraud charges without admitting or denying allegations against him. In August, Stokes and others agreed to pay $12.5 million, collectively, to settle state charges against them.

The 38 Studios saga began with high-level Statehouse conversations about Schilling’s company in October, 2009.

The Oversight Committee has met numerous times over the past two years in its investigation of the 38 Studios affair. However, the panel’s probe seemed to falter when, this past March, Rep. Karen MacBeth, D-Cumberland, former House Oversight Committee chair, announced that she was leaving the Democratic Party to join the Republican Party. She later revealed her plans to challenge 1st District Democratic Congressman David Cicilline in November.

With MacBeth’s highly unorthodox move, House leaders removed her from the Oversight Committee and, subsequently, named Rep. Patricia Serpa, D-West Warwick, to become chair of the 14-member panel. The committee, with an official charge to “review the operation and efficiency of various state agencies, and fulfilling the legislature’s oversight role following implementation of separation of powers,” has just two Republican members.

“We have not met since the change of leadership,” Carson said. “I think that Rep. MacBeth was very interested in getting to the bottom of 38 Studios. But I guess she decided that other things were more important. She really was carrying most of the weight of the research. She had begun to draft legislation. Then she quit.”

Carson added, “I don’t know what the leadership intends to do now. I think this is a very hard issue for the voters. The committee had spent a lot of time on this and I would like to see a conclusion.”

Whether that will occur remains to be seen. As Newport This Week went to press, the House Oversight Committee did not have a meeting scheduled on the hearing calendar. When legislators adjourn in late June, further movement on 38 Studios in the Assembly may have to wait until next year.

“At this point I don’t want to discuss policy,” Carson said. “But in general we were looking at bonds and the entire decision process. That’s what I was concerned about. As a committee we were going from theory to legislation. We were right at that place.” She said that MacBeth’s decision to change parties – and the impact that decision had on the oversight panel’s work – was “unfortunate.”

Further, Carson said, “The public deserves a full hearing on this, without a doubt.”

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