MacBeth readies new round of 38 Studios hearings

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PROVIDENCE, R.I. (WPRI) – 38 Studios will soon be center stage at the State House once again.

House Oversight Committee Chairwoman Karen MacBeth said Monday she is finalizing plans for a new round of hearings on 38 Studios to start later this month, following the recent release of nearly 40,000 pages of previously sealed court documents relating to the failed deal.

“We have to put things in place so this doesn’t happen again,” MacBeth, D-Cumberland, told WPRI.com.

MacBeth said she’s been conferring with House Speaker Nicholas Mattiello and Richard Raspallo, his chief legal counsel and close adviser, about the dates and subjects of the oversight hearings, with an eye on holding one this month and one in November. More could follow, she said.

The top issue MacBeth said she wants to scrutinize is how the state uses taxpayer-backed bonds, particularly the so-called moral-obligation bonds that wound up being used to back the $75 million loan for 38 Studios. The company’s collapse left taxpayers on the hook to pay off those bonds, to the tune of roughly $89 million.

“I think just giving everybody, including myself, an education on bonds – the committee and the people – because it’s easy to say, ‘Get rid of moral-obligation bonds,’ but then I find out the airport’s using them,” she said, referring to the quasi-public R.I. Airport Corporation. “So we need to know more.”

Overall, MacBeth said from her perspective the 38 Studios court documents have contained few surprises.

“There’s nothing right now that I can say, oh my goodness, that surprised me,” she said. “It just reinforces everything that we said before, or documents that we’ve seen before.”

MacBeth was a freshman lawmaker in April 2010, when she voted in favor of the leadership-backed bill that wound up authorizing the 38 Studios deal despite expressing some concerns about the legislation on the House floor.

In the years since the company’s costly 2012 collapse, MacBeth has doggedly pushed for answers to a variety of questions regarding the deal and its aftermath, which often put her in conflict with former House Speaker Gordon Fox, who court documents now show worked behind the scenes to help the company.

Mattiello named MacBeth chair of the little-used House Oversight Committee after she supported his bid to succeed Fox as speaker, raising expectations about how she might use the gavel. But the pair clashed publicly when Mattiello blocked her effort to issue subpoenas targeting those who put together the deal.

After the release of the documents from the 38 Studios civil lawsuit, however, Mattiello quickly announced the oversight panel would hold a new round of hearings on the deal. He also said it was “outrageous” that the company’s founder, former Red Sox ace Curt Schilling, was not forced to give testimony in the lawsuit.

MacBeth signaled her interest in having Schilling appear before her committee, but stopped short of committing to a subpoena. “What’s interesting is I don’t know if I would have to subpoena him,” she said. “If I feel he can add something to it, I would ask him to come first.”

She also said despite her previous clash with Mattiello over subpoena power, she isn’t dead set on using it now, particularly in light of how much information is already contained in the recently released court documents.

“I’m not just going to subpoena people just to subpoena them,” she said, adding: “I think both the speaker and I are very much on the same page this time on that, absolutely. We’ve had conversations, and he wants answers, too.”

(Meanwhile, the subpoena tug-of-war has drawn the attention of other lawmakers. Rep. Robert Lancia, R-Cranston, said last month he wants to amend the House rules on committee subpoena power, though the requirement to get the speaker’s approval is also written into state law.)

In addition to a hearing on bonds, MacBeth said she also wants the oversight panel to examine the way various outside consultants do business with the state. She singled out First Southwest, which has remained the state’s financial adviser despite being a defendant in the 38 Studios suit; Wells Fargo, the bank that was an underwriter on the 38 Studios deal; and Deloitte, which was hired to do a never-finished audit of 38 Studios, and is also managing the state’s largest-ever IT project.

Along with MacBeth, the other leaders of the House Oversight Committee are its two vice chairmen – Reps. Michael Chippendale, R-Foster, and Scott Slater, D-Providence – and its secretary, Rep. Raymond Johnston, D-Pawtucket.

The committee’s other Democratic members are Lauren Carson, Arthur “Doc” Corvese, Jay Edwards, Arthur Handy, Daniel McKiernan, William O’Brien, Thomas Palangio, Patricia Serpa and Thomas Winfield. Its other Republican member is Daniel P. Reilly.Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com. He hosts Executive Suite and writes The Saturday Morning Post. Follow him on Twitter: @tednesiEyewitness News has a team of reporters digging through documents to cover 38 Studios: Inside the Scandal. Keep checking the 38 Studios live blog on WPRI.com and catch all the latest reports on Eyewitness News on WPRI 12 and Fox Providence.

Copyright 2021 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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