It turns out even Republicans are miffed at Don Carcieri for hiding from the media when one of his signature decisions as governor blew up in the face of Rhode Island.
“Former Gov. Donald L. Carcieri’s long silence on the 38 Studios bankruptcy wound up putting fellow Rhode Island Republicans on the spot this week at Mitt Romney’s nominating convention,” wrote correspondent John Mulligan in today’s ProJo. “Carcieri, the delegation’s most prominent exponent of running a government according to sound business principles, declined to be interviewed Wednesday about his role in a state-backed loan guarantee for former Boston Red Sox star Curt Schilling’s company. The failed deal may leave Rhode Island voters on the hook for up to $102 million.”
That Carcieri broke his long silence on the 38 Studios debacle once it “wound up putting fellow Rhode Island Republicans on the spot” speaks to our post on Carcieri from Thursday in which we wrote: “Carcieri always represented conservatives first and then Rhode Islanders somewhere after that.”
Carcieri broke his silence on 38 Studios not when Rhode Island was most desperate for answers about it, but when Republicans were most desperate for cover.
Apparently that cover didn’t come quick enough.
Because Carcieri thought he could dodge the issue indefinitely, it ended up becoming a story when other Republicans had to answer for him. So not only was Carcieri’s tack on 38 Studios selfish, it was foolish too.
Here’s what some prominent Republicans told Mulligan about how Carcieri handled the situation:
“I would probably have spoken about my role” in such a loss of taxpayer dollars and Rhode Island jobs, said John Robitaille, Carcieri’s former communications chief.
“A lot of people are wondering” what went into Carcieri’s “business judgment” that the 38 Studios venture was a good investment of Rhode Island tax dollars, [Cranston Mayor Allan Fung] said.
Rhode Island’s incoming GOP national committeeman, Steven Frias, said Carcieri’s support of Schilling’s video venture will dog the state’s Republicans for a long time…
Pro business, huh?
What self-respecting big timer would want to do business in Carcieri’s Rhode Island? Everything is
dealt with on the frat boy inside, and even then, it’s never over. You’ll still have to pay and pay
and pay for your level of influence, which average people are too smart to accept or even
acknowledge on any level of dignity. WPRO listeners have given up, really.
Most people want to pay once for services. Better people want legitimate laws and statutory
protections. These cons depend upon the common herd.
Two beautiful major cities, one a resort, and a blessed state are being squandered by untalented
local frat boys and their ilk.
They’d sell Rhode Island for good football seats and a tacky car.
The only person who hates free markets more than a communist is a capitalist.
That’s a good one. A bit off-topic, but I picked up this quip on FSRN during the Indian blackout:
<blockquote>They have communism in China, and we have communism in India. And the problem is that in India…we believe in communism. </blockquote>
” I commend the RIEDC Board for its EXTENSIVE DUE DILIGENCE (emphasis mine ) and for taking this significant step to bring jobs to Rhode Island,” Don Carcieri said the night the agency approved the loan to Schilling.
Rhode Island’s director of revenue said she “was not in favor” of the 38 Studios deal and and expressed those concerns DIRECTLY to then-Gov. Don Carcieri.
Is Carcieri hiding-out in VP Dick Cheney’s bunker LOL.
It is now obvious that either Carcieri was lying/uninformed or he doesn’t know what the necessary due diligence was. It’ll be interesting to hear what his story is.
”What self-respecting big timer would want to do business in Carcieri’s Rhode Island? ”
You mean the General Assembly’s, right? They make the laws, so they set the business (or more specifically the anti-business) climate. They could clean it up in one GA session if they had the gumption to.
This discussion of ‘due diligence’ is a bit misplaced, I think. Or there was a unique but massive concern overlooked in the process.
Due diligence is generally a pre-investment exercise, and from what I know, it was well-handled. I doubt any of the players didn’t appreciate the risk of the investment, but that was mitigated by the apparent quality of the executive team.
Perhaps, though, they didn’t appreciate the impact that Carcieri’s lame duck status would have on the post-investment executuion. And for me, this is all about failures of oversight and execution.
One VC company that funded a place I worked moved two people into our office from, literally, two floors below. That’s how much visibility they wanted. Where I am now, we have weekly review meetings with the private equity group, albeit on the phone, with weekly dashboards that we submit.
If the EDC had such dashboards or held such meetings, we’d know about it by now. That it came as such a shock that 38 was broke IS WHAT WE ALL SHOULD BE TALKING ABOUT!
Sorry for yelling.
This isn’t a topic I’m really versed in, but, from what I’ve read from the gaming contingent–the target market for 38 Studios–the games were either redundant or not appealing enough to wrench people from WOW, or whatever else.
IOW, it was a crappy product from conception. I cannot understand how due diligence did not pick that up. More likely it did, but the concerns raised were simply overlooked because it was Curt Schilling.
The GOP really has a problem with hero worship–Clint, Curt, Sylvester Stallone…etc.
(I believe a lot of conservatives think Rambo II was a documentary),
Frymaster wrote:
“Due diligence is generally a pre-investment exercise, and from what I know, it was well-handled.”
I don’t understand how you can call it well-handled when it became obvious that the company was vastly under-capitalized. They were somewhere between $50M and $150M short, even with RI investing. I’ve read that there was no business plan in existence either. If you can’t get a single private investor in the few years that 38 was in Mass, why did it make sense to anyone who understood the gaming industry? It didn’t, that’s why no one invested. Did the EDC do their diligence with the gaming industry and bring in a few experts to look at what 38 was offering and see if it made sense? I remember hearing from day 1 of the deal that gaming peoples said that this deal would be a failure. Did the EDC hear from them? Did they ignore those warnings or did they think those people were wrong?
I’m not saying that this investment was a wise one, but I’m not buying the meme that it was a loser from the start. Let’s go step at a time, k?
It was obvious to whom at what point that 38 was undercapitalized? Ball-parking a $3mm monthly overhead, $60mm gives 18 months or so of operation, which is about how long they lasted. The console game was badly late, missing the critical 2011 holiday season and it won’t see season this year. But it sold far above projections at full price. I have yet to see what kind of deal 38 had with EA, but they didn’t seem to get much of that revenue. So, given better execution and a better distribution deal, that revenue should have provided the bridge until the MMO came out.
You read where that there was no business plan? I find that difficult to believe (not that you read it, but that no plan existed).
That private money stayed away is not a surprise. This was, without doubt, a risky play. Also, no Mass private money would back Facebook, either. So there’s that. And please find me the press on any deal in any industry at any time where the naysayers don’t outnumber the supporters. That’s the nature of the beast. If ‘everybody’ believes in a company, they’d just go get a bank loan. Investments in company creation are de facto counter to common opinion.
There’s a much larger discussion about whether a financially wobbly state should put so giant an investment into any company, much less one so risky, and there’s not much to say that we should have. No doubt, the EDC thought they were creating another Hasbro, and, no doubt, there were some starry eyes. For some, it was Schilling, for others it was MacFarlane/Salvatore.
No entrepreneur approaches their industry thinking that the incumbent is unimpeachable. Did 38 set out to knock off or take a chunk out of WoW? Yes. Was it doomed to failure? We don’t know.
Clearly, 38 failed to execute, and EDC failed to maintain the necessary oversight. If this were an 8th or 9th investment that had grown to this scale, the discussion would likely be different.
I could buy into a ‘bit off more than they could chew’ analysis, but not ‘DOA’.
And I ask again – how could this come as a shock. That is the question I want answered.