Gallogly warned Carcieri about 38 Studios but he didn’t share concerns

PROVIDENCE – Former Gov. Donald L. Carcieri deflected a number of red flags raised by a high-ranking cabinet member about the proposed financing deal subsequently approved for the now-bankrupt video game company 38 Studios LLC founded by former Boston Red Sox pitcher Curt Schilling.

The governor chose not to share the concerns with the R.I. Economic Development Corp. board, which approved a $75 million bond issue the next day, guaranteeing a loan for 38 Studios, which has since defaulted, footing Rhode Island taxpayers with the bill.

Rosemary Booth Gallogly, the state’s then-director of administration, sent a memo to Carcieri dated July 14, 2010, saying she would like to share her concerns about the deal, which “should be weighted at the board meeting,” according to the memo.

“The company is ‘pre-revenues’ and success of this venture is highly dependent upon the success of the first game which [Curt Schilling] has invested,” she wrote. “If this game fails, the business plan for the subsequent chapters is unlikely to be realized.”

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Gallogly cited a number of other reasons why the investment didn’t quite seem right for Rhode Island, even writing “Although I admit I am not an expert in venture capital or video gaming industries, I do believe I have experience in looking out for the taxpayers best interests.”

The memo came out as one of thousands of documents unsealed in Superior Court on Thursday pertaining to the state’s 38 Studios lawsuit. Carcieri, who was deposed last year, agreed that Gallogly was probably the person with the most experience and expertise in matters relating to public finance of all of his cabinet members, but said she wasn’t privy to the same level of information as those who ultimately made the decision.

“She had no input, she had no advantage [sic] of the board meetings, and all the information, but I had a conversation and she … sent me – you know – a note voicing her concerns.”

Carcieri said he had asked for Gallogly’s opinion of the deal because “he respected her judgement,” but ultimately decided against providing her concerns to the board because “all of the issues she was raising were issues that had already been raised or would have been raised in the course of the board meeting.”

He further defended his decision with a question, asking “You think 12 people would make a decision and say, ‘Oh, let’s do this, it’s a dumb deal, but let’s do it?’ ” he said. “I mean, they made a decision based on a lot of information, and that’s all I’m saying.”

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