RI Governor Stumbles Over Privilege in Probe of 38 Studios Boondoggle

PROVIDENCE, R.I. (CN) – Five years after bankruptcy capsized the video game company started by former Red Sox pitcher Curt Schilling, a judge’s restraining order has thrown a wrench in Rhode Island’s effort to get answers on the pricey boondoggle.

Back in 2010, the Ocean State put together a $75 million financing package to lure Schilling’s 38 Studios from Massachusetts.

It took just two years, however, for the company to go bankrupt.

The Rhode Island State Police and state Attorney General Peter Kilmartin spent four years investigating the project, but concluded in 2016 that no criminal violations occurred.

Gov. Gina Raimondo announced this past February meanwhile that she would carry on the torch. After a series of multimillion settlements with the architects of the deal failed to make taxpayers whole, the Democratic Raimondo pledged to seek the release of documents from the state grand jury investigation.

The announcement drew swift reprisal from Attorney General Kilmartin, a fellow Democrat who was a state lawmaker when the General Assembly approved the legislation that allowed the Economic Development Corporation loan guarantee for 38 Studios.

Though a Superior Court judge denied Raimondo’s petition for the grand jury records in May, state lawmakers passed legislation that would make all of the state’s investigatory records public.

Before the governor could sign the legislation last week, however, Kilmartin sued for an injunction.

“The legislation purports to require the production of privileged correspondence,” Kilmartin’s June 30 complaint says.

Kilmartin wants the Providence Superior Court to find “that the governor cannot vitiate the attorney general’s privileges by ordering the release of the privileged correspondence.”

“The harm to the state outweighs any potential harm to the defendants,” the complaint concludes.

A judge signed off on Kilmartin’s restraining order that same afternoon.

The governor’s office has not returned a request for comment.

As Raimondo and the state lawmakers continue their push for transparency, Wells Fargo and the economic development agency involved in the 38 Studios deal still face a U.S. Securities and Exchange Commission complaint that accuses them of making misleading statements about bonds used to fund the deal.

A settlement between the SEC and the economic development agency is reportedly pending.

Two former Rhode Island economic development executives, Keith Stokes and James Saul, reached settlements that did not require any admission to aiding in the fraud.

While the grand jury records remain out of reach, the state police purported to have turned over the nonprivileged documents in their possession in March.

State lawmakers voiced outrage in May, however, when the police announced that they had uncovered another box of documents.

The state police’s production has not included any transcripts of interviews with any state senators, 36 representatives or Kilmartin.

Kilmartin and the police’s investigation did not find criminal wrongdoing, but they did slam Rhode Island officials for inadequate due diligence and a lack of transparency during the legislative process to set aside funding.

Raimondo is appealing the denial of her petition by Presiding Justice Alice Gibney. The judge’s ruling said Raimondo “has not met her burden of demonstrating that the need for disclosure outweighs the need for secrecy.”

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