- Associated Press - Sunday, October 11, 2015

PROVIDENCE, R.I. (AP) - When former Rhode Island Gov. Lincoln Chafee took office in 2011, he inherited a deal he strenuously opposed: a $75 million loan guarantee used to lure video game company 38 Studios from Massachusetts. Less than two years later, the company started by former Red Sox pitcher Curt Schilling ran out of money, leaving taxpayers on the hook.

Recently released documents shed new light on the behind-the-scenes frustrations some surrounding Chafee had about his leadership, decision-making and oversight as the company unraveled.

Chafee is now running for president, although his candidacy has gained no traction. He is scheduled to appear in the first Democratic debate on Tuesday.

More than 38,000 pages of previously sealed depositions, emails and other documents were released last month in the lawsuit over the deal. Chafee -then an independent - sued in 2012 in his role as chairman of the state’s Economic Development Corp.

The deal was sharply criticized from the beginning as too much money for the state to invest in a company with no record working in a risky industry. Even so, the documents show that people surrounding Chafee saw him as sometimes slow to react amid an unfolding crisis.

Though some who criticized Chafee’s leadership acknowledge there may have been little he could do to save the deal, the documents illustrate several occasions they questioned his decisions and thought him disengaged: keeping in place an economic development official with whom he appeared to clash, showing little interest when 38 Studios exhibited early signs of financial trouble, and only calling a meeting on its failing finances when a fellow board member threatened to do so herself.

That board member, CVS executive Helena Foulkes, testified in a 2014 deposition that even once it was clear how dire the situation was, Chafee never laid out a plan for dealing with it.

“I was frustrated with his unwillingness to engage us the way we wanted to be engaged,” she said.

Chafee himself has said he didn’t want to get too involved.

“I was reluctant to micromanage to have it be ‘Chafee screwing this up,’” he told the New York Times. When asked about the comment in his 2014 deposition, Chafee acknowledged he did not want to “over-interfere,” and instead left oversight to the EDC’s executive director, Keith Stokes.

“I had the broad view of this deal,” Chafee said.

Chafee declined a request for an interview, citing the pending lawsuit and noting that nearly $17 million in settlements have been reached so far.

“The depositions speak for themselves,” he said in a written statement.

In his deposition, Chafee describes meeting with Schilling in the early weeks of his administration.

“I came out of that meeting thinking we’re, our money’s been spent, we’re in significant amounts of money, we’ve got to make this successful,” he testified.

Stokes was at the helm of the EDC when the deal was pushed through in 2010 under former Republican Gov. Don Carcieri. Chafee kept Stokes there even though, as Foulkes observed, they did not have a good working relationship.

Chafee testified that no one wanted the deal to succeed more than Stokes.

In a 2013 deposition, Stokes said he disagreed with Chafee over attempts by 38 Studios to restructure its debt and raise capital. When the company approached the EDC in November 2011 to say it needed to raise money and wanted to meet, Stokes testified he was told the governor’s office was “not interested in meeting with 38 Studios.”

Stokes testified that months later, in April 2012, he, Foulkes and another board member met at 38 Studios and were told the company was in dire straits - yet Chafee took a week to call an EDC meeting and only did so after Foulkes threatened to call one herself.

When the board ultimately met in mid-May, it learned 38 Studios could not pay its debts. After work and meetings to decide what to do, EDC board member Karl Wadensten in an email expressed frustration with Chafee, saying he was apparently taking a “wait-and-see approach” when immediate steps were necessary.

“In times of crisis, the public has the right to demand decisiveness and leadership from those charged with the responsibility to lead,” Wadensten wrote, adding: “We need action now.”

Chafee replied that he was seeking more information, and said the company had not been forthcoming with accurate, reliable details.

“Mistakes were made in the past based on misinformation and unproven assumptions,” he wrote. “That will not happen in this administration.”

The company ultimately filed for bankruptcy in June 2012.

Schilling has harshly criticized Chafee, saying he did not take action when he could have. Schilling told The Associated Press in an online exchange that Chafee “had everything to gain being ‘right.’”

Schilling said he never convinced Chafee that the governor would be better off if 38 Studios succeeded, even if it meant Chafee’s misgivings about the deal were proved wrong.

“Next to me he was the biggest reason 38 failed,” Schilling wrote.

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