The Libertarian Party of Rhode Island doesn't believe the state is obligated to repay the loan that it gave to bankrupt game developer 38 Studios; instead, Rhode Island should refuse to pay, the organization said yesterday.
"So-called 'moral obligation' bonds are neither moral, nor a legitimate financial obligation," said Mike Rollins, chairman of the Libertarian Party of Rhode Island, in a statement yesterday. "All such bonds deliberately bypass the official procedures for voter approval of government expenditures."
Kingdoms of Amalur: Reckoning (screenshot above) developer 38 Studios received a $75 million loan from the Rhode Island Economic Development Corp. in 2010. When the studio declared bankruptcy in mid-2012, it left Rhode Island taxpayers on the hook for the state-backed loan, to the tune of about $89 million. The state sued 38 Studios, along with a number of associated individuals and entities, in November 2012 for fraud, negligence and civil conspiracy.
The bankruptcy filing kicked off a heated debate in Rhode Island about whether the state should repay its loan debt. Gov. Lincoln Chafee, whose administration followed the one that handed out the loan, has repeatedly argued in favor of continuing to pay back the loan; other state legislators have suggested defaulting on the debt. According to Gov. Chafee and an independent study conducted earlier this year, failing to repay the 38 Studios bonds would likely have severe financial implications for Rhode Island, including a reduction in the state's credit rating to "junk bond" status.
"What they are is a major fraud upon the voters," said state Libertarian Party chair Rollins, speaking of moral obligation bonds. "Rhode Island can strike a major national blow against such deliberate fraud by totally refusing to ever pay for it!"
Occupy Providence will be holding a protest against the 38 Studios repayment plan from 4:15-5:30 p.m. ET this Thursday, May 29, at the Rhode Island State House. For more on the history of 38 Studios, check out our StoryStream.