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RI's 38 Studios investment an issue in election

By David Klepper
Associated Press / September 7, 2012
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PROVIDENCE, R.I.—Rhode Island lawmakers argue they never knew the state would give a $75 million loan guarantee to Curt Schilling's now-defunct video game company -- but that may not stop voters from blaming them anyway.

Incumbents and challengers alike tell The Associated Press that they're fielding questions from voters about why the state approved such a sizeable investment in 38 Studios when it struggles with deficits, high unemployment and cities on the verge on insolvency. The company helmed by the former Red Sox pitcher filed for bankruptcy in June, potentially leaving the state on the hook for some $100 million.

"If I don't bring it up, other people bring it up. Everyone is infuriated," said Mark Binder, an independent candidate in Providence who said his own disappointment with the state's failed investment prompted him to challenge House Speaker Gordon Fox. "There's this game going on in Rhode Island right now called `pass the blame on 38 Studios.'"

Voters are right to question the state's involvement in the company, according to Fox, whose role in the deal has been criticized by Binder. Fox said the episode shows the state needs to review its economic development incentives.

"Anytime the state is on the hook, anytime there's a failure, it is right to question it," said Fox, D-Providence. "The public has a right to question it and I question it myself."

It's too soon to say whether the fallout from 38 Studios will change the makeup of the General Assembly following Tuesday's primary and the Nov. 6 general election. While lawmakers approved the program that ultimately benefited Schilling's company, it was the state's Economic Development Corp. that gave the loan guarantee to 38 Studios.

The loan guarantee legislation that passed in 2010 allowed the EDC to back up to $125 million in loans and made no mention of 38 Studios. Since current Gov. Lincoln Chafee took office last year, the EDC has adopted a new policy that caps the amount that any company can receive in loan guarantees at $10 million.

"38 Studios was never mentioned when we voted," said Sen. Michael Pinga, D-West Warwick, who said he doesn't think 38 Studios will hurt his re-election bid. "I tell them (votes) that it was portrayed to us as $75 million that would help small businesses, not one business."

Some challengers say the failed investment shows that lawmakers haven't devised good economic development strategies, or that they didn't do their homework before approving the loan guarantee program.

"People read in the paper about 38 Studios and think `we elect these people and expect they will lead and ask tough questions,'" said Laura Pisaturo, a Democrat running for the state Senate against long-time Sen. Michael McCaffrey, D-Warwick. "There are a lot of small businesses struggling and when they see these sweetheart deals it hurts."

Like Pinga, McCaffrey said when the General Assembly authorized the loan guarantee program he assumed it would benefit "lots of small businesses."

Voter Brad Leddy of Providence said it's hard to know who was responsible for the deal. The majority of EDC board members who approved the guarantee have since stepped down. Former EDC director Keith Stokes resigned as 38 Studios' troubles mounted. Republican Gov. Don Carcieri, who was a strong proponent of the deal, left office last year.

Leddy said lawmakers who were part of the deal shouldn't be re-elected. But he's not optimistic that that will happen, or that a big shakeup at the Statehouse will even help.

"The people that gave them (38 Studios) the money should be blamed," he said. "But I don't expect anything to change."

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