Nicholas Mattiello, Speaker of the Rhode Island House of Representatives, used the last section the address he gave to Saturday’s summer meeting of the Rhode Island Taxpayers organization, to comprehensively lay out his views on how the aftermath of the collapse of 38 Studios should be handled. Below is is a direct transcript of the Speaker’s presentation (in a retro-liveblog layout):

[29:43] “I just want to, before I wrap up, say a couple of things about 38 Studios, because I feel it’s my obligation to inform folks as to what we’re going to do, as the point person on the issue and the person that ultimately made the decision that we have to pay. And that was in agreement with all of the other general office holders, the Treasurer, the Governor and so forth. But I ultimately made the decision after going up to New York and listening to all of the experts, and everybody that I thought had an informed decision on the issue.”

[30:25] “I started off by saying the we have to improve jobs and the economy, and that’s been my primary goal. Everything I do, whether it’s right or wrong, is designed to move us in that positive direction. I’m very concerned about the reputation of this state. You know, I often say, almost tongue-in-cheek, that if you go to Texas, and you go to a bar in Texas and you make fun of Texas, you’re going to leave that place on a stretcher. You go to a bar in Rhode Island and you make fun of Rhode Island, and twelve people are going to buy you a beer.”

[31:08] “That’s got to change. Rhode Island is the best state in the union. We have historic sites. We had a role in the creation of the Constitution. We have the best coastline in the world. We have a centralized transportation system. We’re small and compact, so you can get around, you can visit different areas of the state within a half-hour/45-minutes. Rich culture, great restaurants. It’s a great state, with great tourism; we have Newport. It’s the best state, but we’re hard on ourselves.”

[32:00] “Hence comes the decision on 38 Studios.”

[32:03] “There’s only one state in the country that’s ever defaulted on bonds, and that’s Arkansas in I believe 1933, and was a result of the depression — and they ultimately paid those bonds that they defaulted on, because the only reason they defaulted is that they didn’t have the resources to pay the bonds. When they had the resources, they paid the bonds, because they wanted to clear their reputation. But today, people still say Arkansas is the only state in the union that didn’t pay their bond obligation.”

[32:34] “I’m not putting Rhode Island second on that list, for any reason. Because when you are on that list, you send a message out to businesses: Rhode Island doesn’t keep its promises. And that’s not a message I want to send, because Rhode Island does keep its promises. Rhode Island has never missed a payment, and when you deal with someone one-on-one, you want to be able to shake their hand, and know that their commitment is good. It’s the same thing for a state. When people are going to rely on the policies of a state, they want to know that the state’s reputation and willingness to fulfill its commitments are good.”

[33:18] “So, first and foremost, I thought it was important to make the payment to preserve our reputation, so that our reputation would be good; everybody would know that Rhode Island keeps its commitments, so that we can go forward, and improve our jobs and the economy. That was number one. And everything that I do is designed to promote the state, and move us in the right direction.”

[33:47] “Number two, we had a great story in the paper today. We actually received, I think $4.37M, $4.4M from one of the defendants, and I’ve always been saying, the only reasons the defendants haven’t been paying is that there wasn’t a commitment to pay and we needed the damages. If the House of Representatives decided not to make that payment in the budget, not to appropriate the money, the damages wouldn’t have been there, that settlement wouldn’t have occurred, and no monies would have ever come in. I believe that we’re going to get more settlements in the future.”

[34:27] “So, why would you compromise your reputation, your future cost of borrowing, your ability to move forward and promote your state and promote your business environment, when you’re going to get the money back anyway. The argument for it just never made sense to me.”

[34:47] “And let me just give you some of the facts. Moral obligations are judged exactly as general obligations. They were a commitment of the state. And I know everybody is angry with the issue, as I am. But distinguish the debacle that should never have occurred from our obligation on that. 38 Studios was not creditworthy. The only reason anybody rated it as creditworthy was on the reputation of the state of Rhode Island and its promise to appropriate the moneys if the venture went bad, which it did because it wasn’t creditworthy. It should have never have happened. The EDC drove that through, and it shouldn’t have happened.”

[35:33] “Everybody is frustrated with that, and the facts of that will come out. But distinguish that from your obligation to pay, because your obligation to pay is set by the fact that the state said if it goes bad, we will pay. That’s what the state said, through a very legal process. Whether you agree with that or not, whether that frustrates you or not, that’s what happened, and that’s what you have to look at, when you determine whether you pay. When you give your word, I presume you keep it. When the state gives its word, as long as I have anything to say about it, it will keep its word.”

[36:20] “Moral obligations are judged exactly as I said, they’re one notch lower than general obligation bonds, they go up or down together.”

[36:34] “Some folks have said escrow the money. Escrowing the money and not making the payment is a default. It’s not going to put us to junk-bond status, but everyone agrees it will be a multi-notch downgrade, costing us more money to borrow in the future.”

[36:50] “Some people have said settle somehow. Well, a distressed transaction, if you’re forced to settlement, is a default. Now, it’s not as significant as saying I’m not paying anything, but you’re not going to save that much. I’m going to get a lesser default for saving less money. It doesn’t make economic sense.”

[37:12] “What makes the most economic sense (well, first you have to keep your obligation)…is pursue the lawsuit and get the money in. And as I was assured before we made the appropriation, I sat down with Max Wistow also, we sat down, we looked at the legal case, and I came away with the conclusion — I wasn’t convinced there was going to be settlements — but I believed there was going to be a high probability of settlements which, in fact, have just started, and I believe there are going to be more, based on the facts as I understand them. And the rest of the case will go to trial, in the spring I believe.”

[37:57] “Now, some people say you have to do subpoenas. I’ve committed that the public is going to learn what happened, and let me just say we have the state police investigating right now. They’ve actually spoken with me. I know they’re investigating. They have the best investigative group in the state, potentially the country. I’m very confident in the expertise, the professionalism and the integrity of the Rhode Island State Police. Whatever they need to learn, they will learn.”

[38:35] “There’s also a lawsuit that is ongoing, and all of the principals or most of them have given deposition testimony. Eventually, that will be unsealed. And when that’s unsealed, you’ll learn what happened with 38 Studios. And if that doesn’t happen, then we’ll figure out a different way for the public to become informed, because the public is entitled to be informed.”

[39:00] “But I just want to address the issue of the subpoenas for a minute, because I’ve resisted the subpoenas, and I’m going to tell you why I’ve resisted the subpoenas. First of all, let the state police investigate, they’re the professional investigators. I’ve said, and it’s true, the House is a legislative body, not an investigative body. We just don’t have the training or the skill to do that. More importantly, or just as importantly, if I issued subpoenas– I’m not a court. The House is not a court. We have no ability to enforce those subpoenas. So we would have to, I believe, go to, the superior court, and Judge Flanders can correct me if I’m wrong, [but] I think we’d have to go to superior court to enforce those subpoenas if folks decided not to show up.”

[39:51] “I believe that we’re on new ground. No speaker has ever issued subpoenas as far as I know. That’s going to cause legal challenges. I’m probably going to have to have the House hire attorneys, at considerable cost to the taxpayers, to enforce those subpoenas. I don’t know what that cost would be, but tens of thousands of dollars later, eventually someone would come into the House, presumably our oversight committee to testify.”

[40:21] “Now, first of all, the persons that knew nothing about it, and have not much information to offer are going to come it and say whatever they would have to say about it, and it’s going to be of little value to the public. The principals that might have more information regarding it would probably, in my estimation, plead the fifth amendment privilege against self-incrimination. So, after spending tens of thousands of dollars, the public is going to learn no more regarding what happened with 38 Studios.”

[40:52] “The House is not an investigative body. We don’t have the ability to give immunity. That is the sole purview of the Attorney General, who is investigating it, and the superior court. We would have no way of compelling testimony. So, after getting negative news stories regarding 38 Studios on a regular basis, to no end– you know, if the public is becoming informed, I believe there is a very valuable end to that…but if you’re getting the negative news stories for no value, no productive end, no information to the public, it’s not in the public’s best interest.”

[41:34] “So after going through that analysis, right or wrong, and that’s my analysis — and I’ve checked with other lawyers, and they’ve agreed with that analysis — after going through that analysis, I believe it is in the public’s best interest to let the experts investigate from a criminal viewpoint (that is, the Rhode Island State Police, and I trust they will do a fine job), and let the civil lawsuit bring the facts out.”

[42:03] “The facts are already out in depositions. They already exist. All we need to do is get them unsealed, and I’ve received opinion that at some point in the relatively near future, those depositions will be unsealed, and the public will ultimately have a clear view of what happened here. I am committed, and I will remain committed, I don’t know what the timeframe will be, but we will get the facts of this situation out to the public, because the public is entitled to know. They’ve made a significant investment in this debacle. Hopefully, the lawsuit brings us that investment back, and the public’s interest will be best served.”

[42:40] “Knowledge of the facts is important, because we never want to repeat these facts. We want to learn what went wrong, first for knowledge and then to prevent it from ever happening again. But, most importantly of all of that, and I apologize because I know I spoke too long about that, but it seems to be something of interest — is the reputation of the state of Rhode Island and the environment in which businesses have to work. And I commit to you that every decision that I make will focus on what’s best for the state, what’s best for our reputation, what’s best for our business climate, and what’s going to help all of us. And in my considered opinion, the best thing for the state of Rhode Island is to preserve our reputation, make the appropriation, and try to get the money back through the other process.”

[43:37] “When the economy is doing good, you can make up $12.5M in no time. I’ve seen us lose revenue very quickly, and I’ve seen us gain revenue very quickly, and that’s generated by the economy. So it’s more important to preserve your economy than to worry about $12.5M. And I’m not suggesting that I don’t think it’s a significant amount of money, and the public’s tax dollars have to be protected very frugally, but when the public’s interest is to preserve the engine, the economy, that generates the revenue, that where you want to protect, and that’s what I’ve done.”