PROVIDENCE – A state lawmaker in 2010 decided against submitting an amendment to cap the amount of money that could go toward any one company through the Jobs Creation Guarantee Program because he was told it would conflict with plans of then-Gov. Donald L. Carcieri.
The program was subsequently approved, and later that year $75 million was loaned to 38 Studios LLC. The video game company went bankrupt two years later, leaving Rhode Islanders on the hook to pay back millions.
Larry Ehrhardt, who at the time was a Republican representing North Kingstown, felt “betrayed,” according to an R.I. State Police summary of interviews conducted as part of their investigation, released on Friday.
“Ehrhardt stated that because he was a fellow Republican, he did not want to jeopardize anything GOP Gov. Carcieri was working on, so he decided not to submit his amendment,” according to a new tranche of documents related to the state’s failed investment into 38 Studios.
The botched deal, which has haunted Rhode Island for more than five years, has been the subject of numerous lawsuits and investigations, including one done by the state police. The investigation ended last year with no charges.
With each release of documents, however, it becomes increasingly clear state lawmakers passed legislation primarily so the R.I. Economic Development Corp., now known as R.I. Commerce Corp., could lend millions of dollars to the now-defunct company. It was owned by Curt Schilling, a former Boston Red Sox pitcher.
Ehrhardt told investigators he’d planned to submit an amendment that would have capped the maximum amount the state could lend to any one company to $10 million. But after a conversation with Stokes, he decided against it.
“Shortly before [submitting the amendment], he was called off the House floor by a House page,” according to an investigative report. “When he exited, he was approached by Keith Stokes, who wanted to talk to him about this intended amendment to the bill. Stokes told Ehrhardt that his amendment would conflict with the projects the Governor’s Office was working on.”
The General Assembly voted overwhelmingly in support of $125 million for the loan-guarantee program.
The new documents also reveal a new interview with Steven Costantino, who was then chair of the powerful House Finance Committee. His committee was responsible for vetting and approving the so-called Jobs Creation Guarantee Program.
Costantino, who had met with 38 Studios executives prior to the legislation, knew they were interested in state money, but insisted he didn’t know the money in the loan-guarantee program was earmarked for the video game company.
He largely laid blame on the EDC for the decision to approve $75 million from the program for 38 Studios.
“I never had a sense that any one company that was looking for this absolutely had it,” he told investigators. “You rely on EDC to do their due diligence.”
The documents reaffirmed Michael Corso, a lawyer who helped 38 Studios navigate the Rhode Island political scene, was largely the subject of the police investigation. No charges were ever brought against Corso.
In explaining why they released the newest batch of documents related to the investigation, state police provided the following explanation:
“The agency recently discovered a digital recording of a third interview with one of the principals in the investigation that had not previously been transcribed or release,” according to a press release.
Other documents released included a timeline of events, and emails and handwritten notes taken by detectives during the investigation. State police said such records are typically kept confidential, but because of the “continued public interest in the 38 Studios investigation, the Rhode Island State Police has decided to release the documents in its sole possession.”
For full access to the new records, readers can visit the state police website here.
Eli Sherman is a PBN staff writer. Email him at Sherman@PBN.com, or follow him on Twitter @Eli_Sherman.
