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38 Studios loan wasn't 'micromanaged' because state faced other problems, says governor

Rhode Island Governor Lincoln Chafee was "reluctant to micromanage" the state's investment in now-defunct developer 38 Studios, saying the state had its hands full with other problems at the time, according to a recent New York Times feature.

The state's main reason for pushing ahead with funding for former Red Sox pitcher Curt Schilling's studio was to create more jobs. The deal between Schilling and the state started in 2010 under then-governor Don Carcieri, and was already underway when Chafee took office.

"They were telling us we could have unemployment of 13 or 14 percent!" Democratic House speaker Gordon D. Fox said. "And you've got a population saying: ‘OK, lookit, we need something to happen now. We need jobs now.' And OK, what is government's role in that?"

Chafee spoke out against funding Schilling's company in July 2010, while he was still a candidate for the governor's office, accusing Schilling of painting the red onto his famous bloody sock.

"I just remember his own teammates didn't like him," Chafee said in an interview after the governor election. "They thought he was a bit of a salesman. I remember one of his teammates said he painted his sock, the bloody sock, he painted it. I don't know if I trust Curt Schilling."

The New York Times reports Chafee told them he did "everything [he] could" to keep 38 Studios from going under, but that he did not make any "consequential changes" to the Economic Development Corporation board, which was overseeing the studio's funding, until after it was defunct.

Chafee told The Times that he left corporation executive director Keith Stokes to monitor the deal because he was a "longtime friend" of the president of the state Senate and removing him would have negative political ramifications. Between September 2010 and May 2012 the board held 63 meetings but never discussed 38 Studios' financial status, according to a report by the Providence Journal. The New York Times says the board though one of IBM's consulting arms was monitoring the investment, but in reality 38 Studios and not the state were paying IBM.

The company shared no reports on the studio's progress with the board, and Chafee did not "despute the suggestion" that more could have been done to keep an eye on 38 Studios, according to the Times. Chafee said Rhode Island had a full plate at the time, dealing with a $450 million budget shortfall, the aftermath of Hurricane Irene, a town going bankrupt and a "battle" to reform the state's pension system as just a few items he was facing at the time.

"I had so many reservations about this being a bad deal, that I was reluctant to micromanage, to have it be ‘Chafee screwing this up,' " he said "And don't forget, we had our hands full in this state."

Earlier this month AP reported Rhode Island legislators are considering having the state default on its debt inherited from 38 Studios' closing. The studio closed last June and declared bankruptcy shortly after missing payments to the state and laying off its entire staff.

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