Schilling asks Rhode Island, ‘What do you want me to apologize for?’

38 Studios founder attacks Corso and Chafee in marathon call-in radio interview

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PROVIDENCE, R.I. (WPRI) – 38 Studios founder Curt Schilling spoke out at length Tuesday about why his video-game company collapsed after receiving a $75-million taxpayer-backed loan and what role various Rhode Island leaders played in the process, but stopped short of apologizing to taxpayers for the expensive debacle.

Over the course of a three-hour interview with WPRO host John DePetro, Schilling veered from topic to topic, insisting he was not aware of any illegal activity related to the deal but accusing former House Speaker Gordon Fox and Michael Corso, a Fox ally and 38 Studios adviser, of committing criminal acts that investigators can’t nail down.

Schilling alleged that investigators think Fox and Corso “committed some sort of crime, but they couldn’t prove it and didn’t know what it was.” He said he’s “stunned” Corso has not been charged. Asked whether someone should be in jail, Schilling replied: “Yes. Absolutely.”

Corso’s attorney, Michael Lepizzera, shot back Tuesday afternoon that Schilling had issued “a diatribe of slanderous remarks” against his client, saying that “it appears that Curt Schilling is readying himself for a personal slander suit.” He described the interview as containing “untruths, falsehoods, speculation, conjecture and pure emotional baggage.”

Attorney General Peter Kilmartin announced last summer no criminal charges would be filed over 38 Studios; Schilling confirmed he was interviewed as part of the probe. Kilmartin’s spokeswoman said Tuesday, “We are not going to comment on anything Schilling said during his talk show appearance.”

Schilling said he was told by some involved in the deal that there were “rumors” of “some really awkward stuff going on” involving Corso and the renovations to 38 Studios’ Providence headquarters, which he said wound up costing roughly $10 million, far more than he’d expected, in part because of the union contractors Corso forced him to use. Additionally, Schilling suggested there is “proof” money from the deal was “channeled” into a restaurant owned by Corso.

“Clearly there was mismanagement, and at the end of the day I’m at the top of the food chain here, so it falls on me,” Schilling said. “But I don’t think we mismanaged it, in the sense that we spent it on the things we had to spend it on. We just had to spend a lot more money than we had planned on spending.”

“I would like to see an accounting for the $75 million,” he said.

One thing Schilling didn’t offer to Rhode Islanders: an apology.

“What do you want me to apologize for?” he asked, later reiterating: “If somebody thinks I need to apologize, what is that thing I need to apologize for? I didn’t commit any crimes.” He did say at one point, “I’m sorry it ended the way it did.”

“A lot of what people want me to apologize for never happened, or I never did,” he said.

‘People are going to play with specific details’

Schilling’s appearance on WPRO came after he published a lengthy op-ed in Sunday’s Providence Journal excoriating former Gov. Lincoln Chafee for his handling of the company’s final days. Last month he settled a civil lawsuit brought by the state against him and 13 other architects of the 38 Studios deal.

But on Tuesday Schilling acknowledged an error in the op-ed, first flagged by Eyewitness News, when he suggested the company found out just two weeks before the deal closed that it would receive only about $49 million of the $75 million in bond proceeds. Documents show company executives knew months before the deal closed that its proceeds would be well below $75 million, and an official state fact sheet shows the lower amount was disclosed publicly two months before the transaction was complete.

However, Schilling still insisted the dollar amounts came to 38 Studios management’s attention too late, and argued the company could have succeeded if it had received the entire $75 million. (The $26 million the company did not receive was almost entirely set aside in reserve for bond payments in case the company failed.) He argued the company had no choice but to take the money, even though it wouldn’t be enough to complete their game.

“We were past the point of no return from the negotiating/bargaining perspective and from the internal perspective of the company,” Schilling said. But he ruled out the idea, floated by a number of outside observers, that the company had been given a private promise it could make up the rest of the $75 million through state tax credits, saying: “We would have never gone in on a deal that was going to ‘potentially’ be something.”

As for the mistake in his op-ed, Schilling said: “One of the challenges of recounting this story and talking about this story is, people are going to play with specific details around words.”

DePetro asked Schilling why 38 Studios launched its first video game at a store in Massachusetts rather than in Rhode Island, the state that had given the company tens of millions of dollars in additional capital. Schilling acknowledged that was a mistake, saying it “wasn’t thought through.”

More broadly, Schilling said: “Probably one of my many mistakes in all this – I wasn’t the point man on any of this stuff. I was basically told that at some point in the process, listen, you just sit here and if we need you to shake somebody’s hand or get us an introduction, we’ll come get you.”

Corso attorney calls comments ‘reckless and false’

Tracing back the history of 38 Studios’ involvement in Rhode Island, Schilling said Tom Zaccagnino, a company board member who worked on its finances, initially introduced him to Corso, who in turn introduced him to then-House Speaker William Murphy, who was succeeded by Fox in early 2010. Corso also introduced Schilling to Fox, he said.

“As I understood it, [Murphy] was going to potentially lobby the state of Rhode Island on our behalf, and we had one meeting and it never ever went anywhere, and he was very upset apparently,” Schilling said, adding: “He was pissed because we didn’t go back to him and have him do the things I guess we were thinking about having him do.”

Murphy has previously confirmed he visited 38 Studios’ headquarters in the fall of 2009 but provided few details about his discussions with the company. Schilling also scoffed at Murphy’s suggestion that he was brought in to introduce Schilling to Mass. House Speaker Robert DeLeo, noting that as a famous athlete he could have gotten such a meeting on his own. Overall, though, Murphy was “a bit player” in the saga, according to Schilling.

Schilling said it was made clear to him that Corso “wrote legislation for Speaker Fox” and that he was an individual who could get things done in Rhode Island. But Corso’s attorney, Lepizzera, argued that his client was a victim of the deal, too.

Schilling “wants to blame everyone but himself for making what has proven to be a very poor business decision not only for himself and the state of Rhode Island, but Mr. Corso as well,” Lepizzera said. “As it turns out (and Curt conveniently forgets), Mr. Corso was one of the largest individual investors in the company and suffered some of the largest losses . . . losses that resulted in millions of dollars of losses for my client. Curt knows this yet he claims Mr. Corso profited from this failed business venture.”

“Curt’s comments are completely reckless and false,” he added.

‘I never looked at it as a taxpayer investment’

Schilling insisted that Rhode Island approached 38 Studios, not the other way around, to discuss moving the company to Providence in exchange for a taxpayer-backed loan. He walked through the now well-known story of his initial meeting with then-Gov. Don Carcieri at a fundraiser in early 2010, which led to meetings with R.I. Economic Development Corporation officials and legislative leaders, culminating in a new law that allowed the Carcieri-chaired EDC to provide the $75 million.

“I never looked at it as a taxpayer investment,” Schilling said, since taxpayers would only be on the hook to repay the loan if the company failed, which he did not expect.

Schilling recalled watching then-Rep. Robert Watson, a Republican, give a speech on the House floor during the debate over the loan bill warning that it would lead to a scandal, and thinking to himself that rank-and-file legislators were in the dark that $75 million of the money being authorized had already been “earmarked” for 38 Studios. But he acknowledged he took no action after the realization.

As for Carcieri, Schilling said: “If I was the governor, I would have never even offered this deal. The government doesn’t even belong in this business.”

Schilling also reiterated his intense criticism of Chafee, a staunch opponent of the original 38 Studios deal who Schilling alleges allowed the company to fail once he was governor to prove a point. He said other than himself, Chafee is the person most responsible for the company’s collapse, blaming his public comments for the abrupt collapse of a $38-million deal to create a sequel to 38 Studios’ first game.

“The first time I met him he came to the studio and took a tour, and it was very socially awkward,” Schilling recalled. “He didn’t talk. He didn’t ask really any questions.”

“When he left, I went to Tom and Mike both, and said, ‘Is he socially off or awkward?’ Because it was very uncomfortable. … I have a son who’s on the autism scale, but I thought after meeting him and hearing him talk, that he had a learning disability,” he said.

Speaker Fox, on the other hand, “is one of the nicest men I’ve ever met in my life,” Schilling said. Fox is currently in federal prison on unrelated corruption charges.

Callers who rang into DePetro’s show with questions for Schilling were generally respectful and polite, with more than one mentioning his heroics on the baseball field and another apologizing to him for getting “caught in the Rhode Island political gravy train.”

At one point in the interview, Schilling appeared to suggest 38 Studios was allowed to move into its Providence office without proper occupancy permits because he signed autographs for the inspectors. He later said, however, that there was no “quid pro quo” involved.

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

Tim White and Steph Machado contributed to this report.