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Scott MacKay Commentary: Time To Let Lawyers, Not Pols, Pursue 38 Studios

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The gloomy cloud of the 38 Studios debacle still hangs over Rhode Island. RIPR political analyst Scott MacKay parses the latest General Assembly probe...

  

The gloomy cloud of the 38 Studios debacle still hangs over Rhode Island. RIPR political analyst  Scott MacKay parses the latest General Assembly probe of the failed video game company.

So the Smith Hill gang is holding a new round of hearings into the failure of 38 Studios, the infamous deal that made our state’s politicians a national laughingstock and left the taxpayers responsible for about $100 million in bon guarantees given to Red Sox pitcher Curt Schilling’s company before it went bankrupt.

House Oversight Committee Karen MacBeth, D-Cumberland has convened hearings to try to get to the bottom of just how this deal was conceived in the back rooms of the Statehouse and the second-floor office of then Gov. Don Carcieri.

So far, MacBeth has called for a state police review of the circumstances surrounding tax credit arranger Michael Corso role in persuading former House Speaker Gordon Fox to push the Schilling subsidy. A school principal, there is nothing in her background that would even remotely suggest that she has the expertise to probe this complicated mess. She isn’t a lawyer, former prosecutor or white-collar crime investigator.

It’s difficult for Statehouse pols to avoid the limelight, even when they shouldn’t. It is as if they all think like Oscar Wilde, who said famously, ``the only way to get rid of temptation is to yield to it.’’

MacBeth also says she wants to interview  Schilling, the World Series hero who was not deposed during the state’s long-running lawsuit against the law firms and financial advisers who foisted 38 Studios on hard-pressed taxpayers.

What is MacBeth going to uncover that the state police and the lawsuit depositions haven’t?

The state lawsuit run by veteran trial lawyer Max Wistow is by far the best chance Rhode Island has to right the 38 Studios wrongs and recover money for state coffers. So far, settlements with two local law firms who worked on the deal have harvested about $17 million. Pending are suits against two financial services giants, Wells Fargo and First Southwest, that potentially could recover many millions more.

The last thing Wistow and his legal team need is Statehouse meddling. More hearings and the media attention they will inevitably draw will not help matters in this realm. They may even hurt, as lawyers for the defendants use the Statehouse hoopla to request even more continuances and delays in a case that should be ready for trial by next spring.

The other aspect here is what the principals in this matter, who are lawyered up, are going to say to MacBeth’s committee that they haven’t already revealed under questioning in the civil suit, which has generated thousands of pages of testimony.

What we now know about this Rhode Island shuffle is that it was a two-step. The first was the behind-the-scenes work of Corso, Fox and former House Finance Committee Chairman Steve Costantino to slip millions in bond guarantees into the state budget in the darkness of the waning hours of the 2010 session.

The second dance was for Carcieri to convince the Economic Development Corporation board to hand over $75 million of the $125 million job-development initiative to one company, 38 Studios. Fox is currently in federal prison after pleading guilty to corruption not related to the video game company. He obviously isn’t going to cooperate on a probe that could only get him in more trouble and sprout more blemishes on his disgraceful reputation.

Unlike Fox, there is no evidence that Carcieri’s motives were similar to the greedy Fox. Rather, the self-styed businessman governor may be guilty of hubris, pushing a deal he hoped would burnish his failed job-development legacy over the prescient objections of Rosemary Booth Gallogly, the state’s longtime budget guru, and others in the state’s political swirl, such as Lincoln Chafee, Gina Raimondo and Ken Block.

For all those who wring their hands over the lack of a two-party system at the Statehouse to keep things honest, we give you the two pols who did this deal –Conservative Republican Carcieri and Fox, a liberal Democrat.

At the core of the state lawsuit is the allegation that the state’s financial advisors pulled the wool over the EDC board and engaged in fraud. The case hasn’t gone to trial, but the depositions in the case are damning, especially given that two law firms, Moses, Alfonso Ryan, and Adler Pollock & Sheehan, have caved in and settled.

There has, of course, been no shortage of Smith Hill grandstanding and blame-laying. It’s a bit late for an independent Statehouse probe, given that five years have passed since the deal went down.

What would be smart is for the legislature to come up with solutions that could avert another 38 Studios. A great start would be to stop end-running the Constitutional requirement that voters approve large bond issues. If the politicians can’t convince the voters that a state-financed project is a good one, then it doesn’t get done.

Another would be to change the Swiss Cheese lobbying laws that allow the Corsos of the world to flout the disclosure provisions with scant punishment. The current maximum $2,000 fine for a violation means nothing to someone who made $2 million off 38 Studios.

And, for better or worse, there is no way in our legal system to punish someone for stupidity, or even cupidity. Fox is getting his comeuppance in prison and Carcieri can barely show his face publicly in Rhode Island. That may be all the justice the taxpayers will ever get, so let’s focus on the money.

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

Lawmakers may be doing more harm than good with latest 38 Studios probe.
Lawmakers may be doing more harm than good with latest 38 Studios probe.