AP News

RI oversight panel declined to probe 38 Studios


PROVIDENCE, R.I. (AP) — A Rhode Island lawmaker urged a legislative oversight panel to investigate the state's involvement with former Boston Red Sox pitcher Curt Schilling's failed video game company but was told the issue was too politically charged to review in an election year.

Legislative correspondence reviewed by The Associated Press shows that Sen. Dawson Hodgson in August twice asked Sen. James Sheehan to convene hearings into 38 Studios, which collapsed after receiving a $75 million loan guarantee from the state.

Sheehan, who leads the Senate's government oversight committee, responded that inquiries into 38 Studios could interfere with ongoing investigations into the debacle. He added that "conducting committee hearings at this time particularly during a politically charged campaign season could do more harm than good."

Hodgson, R-North Kingstown, said Wednesday that he believes his request was denied to shield Senate leaders from political fallout from the state's bad investment.

"The only thing you can conclude is that the General Assembly doesn't want the public looking at them," he said. "You walk around that building and it's like this never happened."

In his written response denying Hodgson's request, Sheehan, D-North Kingstown, said the governor's office and law enforcement agencies "have informed us that the proposal to hold hearings outside of law enforcement could be detrimental to their ongoing work, potentially hindering their efforts."

Chris Hunsinger, a spokeswoman for independent Gov. Lincoln Chafee, confirmed that law enforcement agencies have expressed concerns that additional reviews of 38 Studios might impede their investigations of the company. But, she said, "We never said 'don't hold oversight hearings.'"

Jim Martin, spokesman for the U.S. attorney's office, wouldn't comment on the 38 Studios situation specifically. But he added: "It is not this office's practice to request any entity to forego any kind of inquiry they may wish to undertake."

The state police, the state attorney general, the U.S. attorney in Rhode Island and the FBI are investigating the company, which laid off all its employees in May and filed for bankruptcy protection in June. The state lured 38 Studios from Massachusetts to Rhode Island with a $75 million loan guarantee approved by the state's Economic Development Corp. in 2010. Now that the company has collapsed, the state is likely on the hook for some $100 million.

State lawmakers who approved the loan guarantee program have said they didn't know 38 Studios would benefit from the incentive program.

Another legislative panel — a joint economic development committee co-chaired by Sheehan — is holding ongoing hearings into proposed changes to economic development policies to prevent similar situations in the future. Sheehan said there's still time for lawmakers to look at what went wrong.

"We'll do it when we do it," he said of the oversight hearings. "The investigations that are ongoing will help illuminate any wrongdoing. This was a bad public policy decision. Wouldn't it make sense to digest those (other investigations) first?"

A spokesman for Senate President Teresa Paiva Weed, a Democrat who was copied on the correspondence between Sheehan and Hodgson, said she supported Sheehan's decision.


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