Updated February 27 at 4:27pm

Deconstruction of 38 Studios debacle intensifies

By Patrick Anderson
PBN Staff Writer

Efforts to understand how a mistake as large as Rhode Island’s loan to 38 Studios LLC could happen are intensifying in the courtroom and on Smith Hill nearly a year and a half after the video game company collapsed. More

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FOCUS: Law Review

Deconstruction of 38 Studios debacle intensifies

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Efforts to understand how a mistake as large as Rhode Island’s loan to 38 Studios LLC could happen are intensifying in the courtroom and on Smith Hill nearly a year and a half after the video game company collapsed.

Gov. Lincoln D. Chafee’s controversial decision to sue former executives, state employees, lawyers and the global finance companies involved in the deal, seen by many as a long shot, has at least survived defendants’ numerous motions to dismiss.

The evidence and testimony presented in the case has gradually added new detail and context to the troubling chain of decisions that led the R.I. Economic Development Corporation to approve an investment in 38 Studios doomed from the start.

Now the federal bankruptcy trustee in the case wants to use $150,000 in assets seized from the remains of 38 Studios to investigate what appears to be a similar case against architects of the deal. (The EDC is negotiating protections for any current state employees.)

And before anything is decided in court, the post-mortem will resume in the General Assembly, where legislative oversight hearings into what went wrong began over the summer.

So far, the House Oversight Committee has mostly gone over old ground, with a roundup of emails between participants in the deal showing efforts to speed it through state approval with little analysis or underwriting scrutiny.

The question is whether, with the lawsuit still raging, lawmakers will be able to find anyone willing to provide live testimony to advance understanding of the issue in a meaningful way.

“The civil suit has put a damper on our ability to get witnesses,” said Rep. Michael J. Marcello, D-Scituate, chairman of the House Oversight Committee. “We will be asking for voluntary cooperation from key people, including past [EDC board] members. They were the ones that approved the program so it is important we hear from them.”

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