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Editorial: Sunlight on 38 Studios

Former Supreme Court Justice Louis Brandeis once remarked that “sunlight is said to be the best of disinfectants,” and Rhode Island is certainly in need of care as the wound that is the 38 Studios debacle remains open. The state lent $75 million to the now bankrupt video game company led by former Red Sox star Curt Schilling and is now on the hook for about $90 million, including interest payments. The embarrassing incident has overshadowed state efforts to increase employment and undermined Rhode Islanders’ trust in government. As the bill has now come due, it seems likely to remain a thorn in the side of recovery efforts for years to come.

Rhode Islanders deserve to understand how such an ill-fated choice, which Governor Lincoln Chafee ’75 P’14 P’17 described to the New York Times as “just the worst investment that’s ever been made … in the history of Rhode Island,” came to pass. State Senator Dawson Hodgson (R-North Kingstown) has called for an independent commission to investigate the incident, alleging that the House and Senate Oversight Committees have dragged their feet. Many of those charged with investigating the case, including Rhode Island Attorney General Peter Kilmartin and House Speaker Gordon Fox, voted for the 38 Studios measure that was backed by then-Governor Donald Carcieri ’65. It is unreasonable to expect these parties to investigate the matter with due diligence when they are so personally involved.

Though Hodgson’s efforts are likely politically motivated — he is rumored to be exploring a run for attorney general — a commission is still the correct move for the state. As we approach next fall’s gubernatorial race, it would behoove candidates to demonstrate leadership through supporting an independent investigation, as the deal still remains politically toxic. Last week’s WPRI poll reported that 57 percent of respondents believe Rhode Island is moving in the wrong direction, and the race remains very much in play, with Providence Mayor Angel Taveras, Rhode Island General Treasurer Gina Raimondo and Cranston Mayor Allan Fung likely candidates with significant backing. Taveras, a Democrat who was chosen by the highest percentage of voters as the candidate most likely to improve the economy, recently let a campaign treasurer go because of his reported ties to Schilling. A spokesman for Fung, a Republican, told GoLocalProv that the mayor “would have opposed the (38 studios) deal.”

But it is Democrat Raimondo who may have an opening on this issue, given that she opposed the 38 Studios deal as far back as July 2010. Raimondo told the corporation’s executive director in an email that she would “proceed very carefully on this,” because “the fact that many have looked at it and passed is a red flag.” While Raimondo’s prescient statements give her an advantage, we hope that all candidates will support an independent investigation so the state can continue to move forward. These candidates have demonstrated varying degrees of investment in standing against the deal, but in order to ensure the issue gets the attention it deserves and the resolution it needs, they must state their commitments to seeing an investigation through. To his credit, Chafee — who publicly opposed the deal — is “generally supportive” of the idea as “long as it does not interfere with the state’s ability to recoup money in the current litigation,” according to his spokesperson.

In dealing with this debacle, Rhode Island officials should look to the state’s conduct after the collapse of the Rhode Island Share and Deposit Indemnity Corporation in 1991, which closed 45 banks and credit unions. Then-Governor Bruce Sundlun asked for a report from Brown President Vartan Gregorian, entitled “Carved in Sand,” and appointed a nine-member commission to look into the crisis. Such a history demonstrates not only that there is a more acceptable solution available, but also that financial scandals are possible in the future without a full reckoning of the reasons behind the 38 Studios collapse. While the damage has already been done, Rhode Island officials can potentially forestall future calamities by supporting an independent investigation to determine what went wrong.

 

Editorials are written by The Herald’s editorial page board: its editor, Rachel Occhiogrosso, and its members, Daniel Jeon, Hannah Loewentheil and Thomas Nath. Send comments to editorials@browndailyherald.com.

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