A report commissioned by Governor Chafee and released on Friday bolsters – surprise! – the governor’s desire for Rhode Island taxpayers to repay the 38 Studios bonds. It concludes that Rhode Island’s (borrowing) world would end and our bonds would likely go to junk status if we defaulted on the 38 Studios bond payments.

Andrew and Justin have done an excellent job demonstrating the bogosity of the report’s arguments; Andrew thoroughly rebutting John Simmons’ testimony to the Oversight Committee last week which previewed the findings of the report.

Now the question is, why would Governor Chafee, who vociferously opposed, as a candidate, giving a loan guarantee to 38 Studios, now be so in favor of repaying the moral obligation debt? (A wag commented someplace over the weekend: oh, NOW the state is going to get morals?)

Could it be that the governor would prefer not to have his own potential role in the taxpayers’ loss exposed?

A lawyer who has done his homework would quickly determine at least two separate areas on this front for discovery, deposition and ultimately testimony. Firstly, though the loan guarantee documents provided the state ample oversight facility of the operation of 38 Studios, Governor Chafee failed to conduct any such oversight upon entering the governor’s office. If he had done so from the beginning and right along, might the taxpayers’ potential losses have been mitigated?

Secondly, perhaps more alarmingly, was the action of his administration with regard to the company, IBM, that WAS monitoring 38 Studios. More specifically, IBM was charged with monitoring the progress of 38 Studios’ development of Project Copernicus, the game which our elected officials decided to gamble upwards of one hundred million dollars of our money on. So it would probably have been a good idea for the state, in the form of the Executive Branch, to have been kept well apprised of the progress of the game’s development and, minimally, to have insisted on written reports so as to avoid potential … um, confusion down the road, especially as what ultimately felled the game and the company was a high cash burn rate.

Inexplicably, however, in August of 2011, the Chafee administration agreed to allow IBM to switch from written reports to “briefings”. Most original links to this story other than my post of two years ago are dead, but it appears that this interesting and alarming piece of information was broken by the Associated Press (not Anchor Rising). In any event, the quote below is embedded in my post of two years ago but originally came from a contemporaneous A.P. story.

The EDC and 38 Studios signed a monitoring agreement in November 2010 under which IBM would provide 38 Studios with an initial assessment of “Project Copernicus” — the development of the company’s second game — and quarterly “milestone verification” reports, according to a copy of the agreement.

The initial assessment was to include a review of project plans, financials and financial management as well as an analysis of risks and recommendations on how to mitigate them. Subsequent reports would essentially be progress checks, which IBM suggested would include a review of the project’s financial status and a list of results “relevant to Rhode Island’s interests.”

The agreement said 38 Studios would provide to the EDC copies of all materials prepared by IBM and invite EDC to attend all discussions between 38 Studios and IBM.

But in August [of 2011], the EDC and 38 Studios signed a “modification and waiver” to the agreement saying that, instead of being provided with IBM’s actual reports, the economic agency would agree to briefings from IBM on the findings. This came at the request of 38 Studios.

Around about the same time – two years ago – the Providence Journal’s Mike Stanton wrote an in-depth article about the state’s involvement in 38 Studios. From it, we gleaned this gem.

IBM was chosen as the third-party monitor in September 2010 but has declined to provide The Journal with any details of the agreement. When the newspaper asked for copies of IBM’s written reports, the EDC said there are no written reports, just verbal updates.

Questions. Why did the Chafee administration agree to this? Who in his administration was receiving these “briefings”? What information did the “briefings” contain and what did that person do with the information?

Returning now to Friday’s development, could this be part of the reason that the Chafee administration commissioned a report which so virulently urges the repayment of these bonds?