My take on the news

Chafee hasn‘t helped 38 Studios recover


WAS CHAFEE'S MOUTH PARTLY TO BLAME? There certainly appears to be plenty of blame to spread among the individuals and organizations that were involved in approving and later monitoring the much-maligned $75 million loan guarantee to now-defaulted 38 Studios. Until more information is uncovered, let's look at how the chairman of the EDC, Governor Chafee, has responded to the crisis. We all know that in 2010, then-gubernatorial candidate Chafee opposed the loan guarantee. Opposition to the deal at that time, before it was agreed to, was probably the correct position. Once the deal was made, however, and once Chafee was elected governor – regardless of his previous opposition – he promised to support the new company's efforts in order to protect taxpayers' investment. Did Chafee live up to his promise or did he, in an attempt to make himself look like the taxpayers' "white knight," undermine 38 Studios' financial viability by spouting out trade secrets and financial strategies that the EDC had promised to keep confidential?
From public reports, it appears Chafee blurted out information that anyone with business acumen beyond that of a farrier would have kept close to the vest in order to not spook potential investors and to give the company and the EDC time to implement financial strategies that were viable, legal and in the best interest of protecting taxpayers' investment. Chafee seemed eager to declare 38 Studios in default when a true "partner" would have allowed the permissible 30 days for the company to try and resolve its immediate cash-flow issue before airing dirty laundry in the press. Chafee then called the company's already released game "an abject failure" when industry analysts had determined it to be fairly successful. And Chafee gave away confidential information about the company's product publication date and its financial burn rate – information competitors value very highly.
Further, it appears Chafee misrepresented as a “bounced check” a check that was never delivered – a check that would have been delivered had the EDC honored its promise to issue tax credits. Chafee also claimed the company had refused to share financial information when the record shows it had provided regular monthly financial reports to the EDC. Chafee also talked about the company being incorporated in Delaware and possibly not eligible for EDC-promised tax credits – tax credits we have given willy-nilly to Hollywood producers not incorporated in Rhode Island.
Lastly, Chafee has now sent in a team of "forensic" auditors, which implies possible criminal behavior on the part of 38 Studios; a move guaranteed to scare away any potential investors. Altogether, it appears that Governor Chafee may have let his mouth and his actions overtake his common sense and has greatly harmed 38 Studios' chances to weather its financial difficulties – and thus, harmed taxpayers' chances of recovering their ill-conceived investment. The question is whether Chafee's lips were loosened purposely for self-serving reasons or flapped simply because he sometimes just doesn't think before he speaks.

"FIRED" CENTRAL FALLS RECEIVER: There is no way Governor Chafee's dismissal of former Supreme Court Justice Robert Flanders as Central Falls receiver can be characterized as anything other than a firing. Flanders’ notification by telephone the night before his removal while he was away at a conference on municipal affairs says, "fired!" very loudly.
It looks like Chafee could no longer fend off complaints about Flanders’ arrogance, capricious actions and disregard for the political voice of Central Falls residents. Additionally, Chafee was also suffering severe criticism for the contract he had awarded Flanders – $30,000 per month to administer a city in bankruptcy with another $25,000 per month paid to his two state-appointed assistants. With Chafee already worrying about the next gubernatorial race, possibly against the very able and highly respected Gina Raimondo, he seems to be taking actions now that might place him in better stead for the future.

WILL EUROPE PUNISH THE SUCCESSFUL? As Spain joins Greece and other weak European nations who face financial crises, the U.S. is pushing the European Union to do more to address the deteriorating situation before it has a greater impact on the already faltering U.S. economy. President Obama and the U.S.-controlled International Monetary Fund are imploring the stronger eurozone countries to create an integrated financial system that would "...provide banking support from a common resource pool independent from national sources." In other words, Mr. Obama wants the stronger countries like Germany to subsidize the weaker countries through what can only be defined as financial welfare.
It’s right out of George Orwell's “Animal Farm” – "From according to ability, to according to need." Take from those countries that worked hard, planned well and saved; give it to those countries that relaxed, spent foolishly and failed to plan for the future. We all want the European situation to improve and we certainly don't want it to adversely affect our own economy. However, the answer does not lie in Mr. Obama pushing onto Europe his philosophy of punishing the successful.

DECRIMINALIZATION OF MARIJUANA: It is heartening to see marijuana decriminalization bills have now passed both the R.I. House and Senate with fairly robust support, 50-24 in the House and 28-6 in the Senate. This bodes well for the bill to be signed by Governor Chafee. Although the law will represent only a relatively small step toward admitting to ourselves that the nation's so-called war on drugs has failed miserably, we have to remember the old adage that every journey starts with the first step. If other states follow suit, we may someday see legalization of marijuana and the end of the violence, crime and extreme costs – both financial and social – that current illogical and ineffective laws have visited on our country.


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