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Chafee stands firm against Schilling accusations

PBN FILE PHOTO/RUPERT WHITELEY
GOV. LINCOLN D. CHAFEE responded Tuesday to comments made by 38 Studios founder Curt Schilling, who accused the governor of torpedoing efforts by the beleaguered video game developer to find new sources of capital.
Posted 5/29/12

PROVIDENCE – Gov. Lincoln D. Chafee Tuesday rejected 38 Studios LLC founder Curt Schilling’s suggestion that the governor sabotaged the beleaguered video game company and drove potential investors away with public comments about its potential demise.

“Investors are not going to be scared away by a governor’s comments,” Chafee said at his daily afternoon news conference to address 38 Studios and the state’s $75 million loan guarantee to the company, which laid off its entire workforce last week.

“I wanted to return the investment to the taxpayers of Rhode Island – I know the tens of millions of dollars we have on the hook,” Chafee said. “Of course I wanted it to succeed, but I had to be honest in my dealings with taxpayers and tell them what was going on the best of my ability.”

In an interview with The Providence Journal, Schilling said Chafee’s revelations that the company was burning through $4 million a month and would not release its next game until June 2013 had derailed a tentative agreement for $35 million in private investment.

While not going so far as to say the investment did not exist, Chafee indicated that he had seen no proof of such interest from investors and that an unnamed “industry analyst” had told him that the company faced long odds on finding new capital.

38 Studios, which was two weeks late on paying a $1.1 million loan guarantee fee due May 1, remains in default for failing to notify the state of mass layoffs, Chafee said, despite sending a letter attempting to cure the issue last Friday.

38 Studios has applied for $14.1 million in state film tax credits, which Schilling said he had hoped to use to pay the guarantee fee. Chafee said he does not want any further taxpayer dollars to go into the teetering company and his administration has declined to issue any credits.

While disputing Schilling’s account of why 38 Studios failed, Chafee defended his administration’s oversight of the company. He said the R.I. Economic Development Corporation had monitored the company’s progress and it had been meeting all benchmarks right until the default, although he declined to provide any specifics, citing company confidentiality.

Chafee was not the only person skeptical of Schilling’s version of events. In his Fortune.com e-newsletter, Dan Primack asked “Who scared off private investors in 2007 and 2008, when Schilling was seeking $30 million (and then more) to get the company launched?”

Primack echoed the point that Chafee made, saying that it was unlikely that investors would be spooked by his public remarks. “Professional investors can do their own fiscal due diligence,” he said.

Asked when the EDC first realized 38 Studios was in trouble, EDC Finance Director Earl Queenan was advised not to answer by EDC legal counsel David M. Gilden.

Chafee said the state could begin a forensic audit of 38 Studios’ financial records as early as Wednesday.

Chafee has asked for resignations from each member of the EDC board of directors who voted for the 38 Studios loan guarantee and on Wednesday the governor said Providence Performing Arts Center President L.J. “Lynn” Singleton had submitted his resignation.

Chafee spokeswoman Christine Hunsinger said the governor has not been able to reach board member Stephen Lane, founder of Ximedica, about his future on the board.

3 comments on this story | Add your comment
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Jim_Donahue

I rarely have anything good to say about Chafee but he was on point looking out for the taxpayers on this one.

Carcieiri, Fox, Weed and Stokes need to be called on the carpet for this one.

Tuesday, May 29, 2012 | Report this
prguynow@yahoo.com

I wonder if any state officials quietly bought the bonds issued to fund this taxpayer backed fiasco...

Wednesday, May 30, 2012 | Report this
JonGentry

Another debacle for Rhode Island taxpayers! The State, namely Governor Carcieri encouraged, cajoled and badgered the Economic Development Corporation into loaning Curt Shilling and Company $75 million to finance a “bright idea” a fledging electronics game company. Was this based on Mr. Shilling’s business skills or his skills as a pitcher? Or perhaps it was based on the fact he is a Republican and one of Carcieri’s cronies. And keep in mind this was all done in the waning days of his administration. Whatever the reason, we (taxpayers) were sold a bill of goods that now we are responsible. And if things couldn’t be worse Shilling and company tried to get an $8 million tax credit for their business because its “film related”. The whole thing is nothing more than a scam. What recourse do we have, if any? Looks like none at this point particularly with the company firing its CEO and laying off its employees, many whom I presume are also Rhode Islanders.

Unfortunately, in Rhode Island politics remains politics and there always is a scapegoat and in this case, it’s Keith Stokes. Keith is a decent individual whose heart and soul has gone into making this state a better place. Instead he is humiliated and has to take the fall and by stating it was a “mutual” understanding between he and the Governor that he should resign. What a shame we are losing a man of his talents and reputation. It’s not like we have hundreds of qualified candidates waiting in the wings. Remember the other short-lived Director of Economic Development that Carcieri hired only to embarrass herself within days of starting the job.

From the get-go, this was a bad idea and the fact that it was done and passed onto the next administration is inexcusable. Should we really have expected anything better? After all, we had 8 long years of incompetency and ethically corrupt so it should come as no surprise that he would end his term the same way. Just notice how he is avoiding the media and public. In this time of financial crises you would think he would have to common decency to acknowledge his mistakes and face the problem head on. Instead he is playing Pontius Pilot and looking for the coward’s way out. I sincerely hope the Attorney General and United States Attorney, District of Rhode Island investigate and those responsible are held accountable for their actions instead of the taxpayer.

Wednesday, May 30, 2012 | Report this
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