No charges in 38 Studios criminal probe after 4-year investigation

PROVIDENCE, R.I. (WPRI) – Rhode Island State Police Col. Steven O’Donnell and Attorney General Peter Kilmartin announced Friday no criminal charges will be filed stemming from the 38 Studios deal despite an investigation that lasted four years.

The two made the announcement at a hastily called press conference Friday afternoon at Rhode Island State Police Headquarters in Scituate. They said no evidence of criminal wrongdoing had been uncovered.

“We do not possess the luxury of just being emotional when it comes to matters such as this,” Kilmartin said, raising his voice occasionally as he defended the decision to reporters. The attorney general, a Democrat in his second term, said he is as frustrated as other Rhode Islanders but insisted only “cynics” would fail to understand the decision.

O’Donnell added that “a bad deal does not always equate to an indictment.”

Their eight-page explanation concluded by saying that “the quantity and quality of the evidence of any criminal activity fell short of what would be necessary to prove any allegation beyond a reasonable doubt and as such the Rules of Professional Conduct precluded even offering a criminal charge for grand jury consideration.”

38 Studios, a video game company founded by former Red Sox star Curt Schilling, collapsed in 2012 after receiving a $75-million loan backed by Rhode Island taxpayers. A criminal investigation into the deal has been in progress since shortly after the company’s bankruptcy.

A spokeswoman for Gov. Gina Raimondo – who already reneged on a pledge she made during her 2014 campaign to order an independent probe of 38 Studios – said she was briefed on the decision and “has no plans to call for an additional investigation.”

To the likely frustration of many, Kilmartin also said he would not support releasing the information about 38 Studios collected during the grand-jury investigation the way his predecessor Patrick Lynch did after the Station nightclub fire.

Kilmartin said the 38 Studios case is not actually being closed and charges could be filed someday if more information is discovered, so the evidence should remain secret; he declined to suggest how much longer the case would be open or whether he would support releasing the information once it’s finally closed. He also noted that there were indictments in the Station case, unlike in this one.

The eight-page summary of the investigation released Friday included a lengthy section on the importance of secrecy when it comes to grand juries.

“Although it was recognized that the principles of grand jury secrecy would be viewed by some as limiting the public’s access to the results of this criminal investigation, it was determined that the investigative benefits of utilizing the grand jury to compel the production of evidence outweighed that potential criticism,” the summary said.

House Minority Leader Brian Newberry, R-North Smithfield, said he disagreed and the public interest would be better served by releasing the investigative materials. “I would bet details of investigation contain plenty of embarrassment for public officials,” he wrote on Twitter.

Kilmartin refused to say whether the investigation had uncovered any bad behavior by elected officials who remain in office today. O’Donnell did acknowledge that the process which led to the 38 Studios deal was “flawed” and not transparent.

Officials said 146 people were interviewed as part of the investigation, and 34 were called to testify before the grand jury. The initial phase was conducted by federal investigators, who finished their work in September 2012 and handed off their findings to state investigators.

The decision by state law enforcement not to file criminal charges is separate from two other ongoing legal processes related to 38 Studios: a civil suit filed in 2012 by the state against the architects of the deal, which is set to go to trial this fall; and civil fraud charges filed by the U.S. Securities & Exchange Commission against the state and some architects of the deal earlier this year.

Schilling reacted quickly on Twitter:

Kilmartin declined to respond to Schilling’s comments. O’Donnell said that while Schilling is entitled to his opinion, there had been credible allegations made at the outset of the 38 Studios probe that it was necessary to investigate.

Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com. He writes The Saturday Morning Post and hosts Executive Suite. Follow him on Twitter, Facebook and Instagram

Steph Machado and Walt Buteau contributed to this report.

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