The chairman of Rhode Island’s House of Representatives oversight committee said he doesn’t want any public hearings on the state’s $75 million loan guarantee to 38 Studios to interfere with a State Police investigation.
“We’re just getting our feet wet,” said Rep. Michael Marcello, D-Scituate, who assumed the chairmanship this month.
State taxpayers are on the hook for more than $110 million, interest included, after 38 Studios, the video-game company of former Boston Red Sox pitcher Curt Schilling, filed for Chapter 7 bankruptcy last summer. The Rhode Island Economic Development Commission guaranteed the loan with the state’s moral obligation.
“Part of the problem is that there’s a civil suit filed and the State Police investigation is still open,” Marcello said in an interview. “We’re traveling a kind of tricky wicket. We certainly don’t want to jeopardize the State Police investigation.”
The EDC sued Schilling among others in November, seeking damages for losses related to the debacle.
"We are continuing on with our criminal investigation, and what the State House does is independent of us," said a State Police spokesman.
The state Senate also plans hearings, and Marcello envisions the two chambers coordinating their efforts.
“At this point we don’t know the scope of the hearings or how they would compare with what the House plans,” Greg Pare, the press secretary for Senate President M. Teresa Paiva Weed, D-Newport, said Thursday.
Given concerns about compromising a criminal investigation over how the money was spent, committee hearings could focus instead on the operations of the EDC. The demise of 38 Studios triggered widespread resignations on the agency’s board, including that of executive director Keith Stokes.
Mineola, N.Y., attorney and St. John’s University law professor Anthony Sabino said lawmakers and police being at cross-purposes are common.
“That is a general concern and the State Police has a right to be concerned, even though Mr. Marcello is certainly doing his job. Mr. Marcello might want to defer the meetings until a later date, when he might have a comprehensive and illustrative report from the State Police,” he said.
“Otherwise, say, if ‘John Smith’ in fact appears before Mr. Marcello’s committee, I’d advise that client to take the Fifth.”
Gov. Lincoln Chafee last week requested $2.5 million to replenish the 38 Studios capital reserve fund. He said Rhode Island would fund the annual debt service on the balance of the outstanding debt.
“We tried the get-rich-quick approach by giving $75 million to a retired baseball player with zero business experience. We cannot make such panic-driven decisions again,” Chafee said.
Also included as defendants in the EDC suit were Stokes, bond sale placement agents Wells Fargo Securities LLC and Barclays Capital Inc., Rhode Island financial advisor First Southwest Co., and insurer Starr Indemnity and Liability Co.
