By Ted Nesi and Tim White

PROVIDENCE, R.I. (WPRI) – House Speaker Gordon Fox on Friday denied that he pushed lawmakers to create a new $125 million loan program in 2010 knowing the R.I. Economic Development Corporation planned to pledge $75 million of the money to Curt Schilling’s 38 Studios.

In his first extended broadcast interview since 38 Studios’ demise, Fox told WPRI 12 about an April meeting where Schilling and Tom Zaccagnino, a 38 Studios board member, asked Gov. Lincoln Chafee to sign two consent agreements, one allowing the company to get tax credits and another to provide bridge financing.

Fox didn’t rule out the possibility that Rhode Island will opt to default on the $75 million moral-obligation bonds the EDC issued for 38 Studios, which are not legal obligations of the state and could require lawmakers to appropriate more than $12 million a year for bondholders through 2020.

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The average Rhode Islander would probably say 38 Studios has been lobbying Rhode Island political leaders, in light of multiple confirmed meetings and the company’s success in getting a $75 million taxpayer-guaranteed loan.

Secretary of State A. Ralph Mollis, however, takes a different view. His office says the company is under no legal obligation to register as an organization with business before the government.

“State law defines lobbying as influencing action on legislation by the General Assembly or the governor or on policy-making by the executive branch,” Mollis spokesman Chris Barnett told WPRI.com. “We have received no evidence or allegations of any such activities by 38 Studios that would trigger the requirement to register.”

38 Studios apparently agrees. The company has never registered anyone to lobby at the Rhode Island State House, even though Carcieri and Chafee administration officials, as well as House Speaker Gordon Fox, have all acknowledged meeting with Curt Schilling and other company representatives to discuss its plans.

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Read all about it.

Remember the Verrecchia report?

That was the scathing outside review of the R.I. Economic Development Corporation commissioned by Governor Carcieri in late 2008, following the abrupt departure of its then-executive director, Saul Kaplan. The report’s recommendations inspired lawmakers to make a number of changes to the EDC the following year, and Lincoln Chafee cited it all the time as a way to back up his own criticisms of the agency during the campaign.

It’s worth noting, then, that Governor Chafee’s decision to only commit to one more year for Keith Stokes at the EDC’s helm, and Carcieri’s original decision to only give him a one-year contract, both go directly against a key point made by former Hasbro CEO Al Verrecchia and his co-authors.

“There has been far too much turnover at the [EDC] director level, and that, unquestionably, has affected the performance of the organization,” they said in their final report. Carcieri echoed that after the report was released, saying the EDC needed to be guided by someone whom business leaders and agency officials were confident would be around for the long haul.

More from the report:

Given the end of the Governor’s term in 2010, it may be difficult to attract the best candidate possible if the director position is perceived to have a short term. Accordingly, the State should be prepared to offer a 3-5 year employment contract at market-based compensation levels, if required. Naturally, the next Governor would have the flexibility to replace the director, but the guaranteed term of employment (as outlined in an agreement) should afford sufficient protection to candidates so that they consider the position an attractive one.

The General Assembly followed that advice by allowing the executive director to serve a three-year term, regardless of whether someone else takes office in the interim. Carcieri then offered the job to Ioanna Morfessis, who accepted before quickly backing out.

By that time, the EDC had been without a permanent leader for a year, and the state’s unemployment rate had long since hit double-digits. So Carcieri brought in Stokes – but only for a year. Now Chafee is keeping Stokes – but only for a year.

Chafee doesn’t have to get rid of Stokes next January, of course. But if Verrecchia & co. are to be believed, the failure to put someone at the helm of the EDC for the duration is hurting the state’s economic development efforts. Since Verrecchia is now chairman of the EDC board, maybe he’ll make that point to Chafee himself.

Update: Chafee spokesman Christian Vareika argues that focusing on how long Stokes serves in the job misses the report’s larger point, which is that the EDC needs to be given a clear direction.

“Nothing in what Governor Chafee has said about retaining Keith Stokes precludes him from completing his appointed term,” which goes until February 2013, Vareika said in an e-mail. “Further, the policy, strategy, and programmatic focus of the RIEDC is the purview of the governor and the [EDC] Board of Directors, and regardless of whether Stokes serves one year or more, there will be consistency in those areas.”

Keith Stokes can stay in his job for up to two more years without a vote by the Senate, according to the Chafee administration.

When Governor Carcieri appointed Stokes to lead the R.I. Economic Development Corporation last winter, Carcieri said he was appointing him to a one-year term so the next governor could decide what to do about the EDC once he took office.

But it turns out the Senate’s vote to confirm Stokes gave him a three-year term, so he can stay in the job until February 2013 without another confirmation vote, spokesman Christian Vareika told me a few minutes ago.

However – and here’s where it gets confusing – Carcieri’s agreement with Stokes only covered one year. So Stokes will now need to negotiate a new contract with the Chafee administration to figure out, among other things, how much he makes. Carcieri paid him $185,000, nearly double what Stokes’ predecessor made but less than the $250,000 offered to Ioanna Morfessis, who backed out after taking the job.

For now Chafee is only committing to keeping Stokes for another year, through next January. “During that time, the governor wants to develop a working relationship [with Stokes], and they’ll revisit the issue in a year’s time,” Vareika said.

Update: Only giving Stokes a one-year commitment also goes against the Verrecchia report that Chafee has praised in the past.

Governor Chafee has decided to retain Keith Stokes as executive director of the R.I. Economic Development Corporation. (Told ya.) Stokes was appointed to lead the agency last February by Governor Carcieri after Ioanna Morfessis decided not to take the gig. He makes $185,000 a year.

Mike Trainor, Chafee’s spokesman, tells me it’s unclear at the moment whether the Senate will need to approve Stokes’ reappointment.

The EDC’s press release from last year said Stokes “will serve in the position for one year, pending advice and consent of the Rhode Island State Senate.” According to Trainor, Stokes has a three-year contract with the EDC but only took a one-year leave of absence from his job as head of the Newport County Chamber of Commerce.

Thus it may be Stokes can continue on through February 2013 without action by the Senate. The administration’s legal team is sorting all that out at the moment, and Trainor says he’ll let us know when they figure things out.

Despite Chafee’s condemnation of the 38 Studios deal, Stokes has had kind words for the new governor since the day after the election.

As I mentioned in December, 38 Studios aside, Chafee and Stokes share similar versions of how Rhode Island should move forward economically – a point Chafee made in his statement today. “Keith Stokes shares my vision of encouraging the success of small business while building on Rhode Island’s economic assets,” he said, “from the soon-to-be-developed Station District in Warwick and the Knowledge District in Providence to our defense industry on Aquidneck Island and our impressive tourism industry.”

Update: Senate spokesman Greg Paré says the Senate is also looking into whether Stokes needs to come before the chamber again. He said it does appear Stokes was only given a one-year term when the vote was taken last February.

Update #2: Just spoke with Paré again, who said that after asking around some more, he’s not sure whether Stokes got one year or not. They’re trying to figure that out this afternoon.

Update #3: The mystery is solved – no vote is needed. See my follow-up post for more.

(photo: EDC)

There’s been a bit of discussion today about whether Lincoln Chafee will keep Keith Stokes on as executive director of the much-criticized R.I. Economic Development Corporation following a Projo story that took up the question this morning. Dave Scharfenberg offers some context:

Chafee sharply criticized the EDC during the campaign over the 38 Studios deal, leading to heavy speculation that he would dump Stokes.

But that could be harder to do if Stokes pulls off the grand coup he has been working round the clock on in recent days: poaching an America’s Cup boat race that seemed destined for San Francisco just a few weeks ago.

Also worth mentioning is that Chafee said he was open to keeping Stokes in place during our Oct. 6 TV debate. The two men have known each other for years, and Stokes is widely respected in the business community. Stokes’ emphasis on job growth and infrastructure improvements fits Chafee’s stated goals nicely. And Stokes himself sounded quite conciliatory toward Chafee when I spoke to him the day after the election.

In light of the 38 Studios deal, it still wouldn’t be a surprise if Chafee tapped someone else to lead the EDC. But it shouldn’t be a huge surprise if he keeps Stokes, either. For the record, Stokes’ one-year term expires Feb. 11.

You couldn’t blame the R.I. Economic Development Corporation’s heavy-hitting board of directors if they harbored some ill will toward Gov.-Elect Lincoln Chafee, considering the criticism he leveled at the agency on the campaign trail – particularly for its approval of the 38 Studios deal, which closed today.

But it’s all water under the bridge now, and there are no hard feelings about the incoming governor among the directors, who includes the heads of Verizon, Rhode Island Hospital parent Lifespan, and insurer FM Global, EDC Executive Director Keith Stokes told reporters at a press conference this morning. The comments were made in the heat of a hard-fought campaign, and the executives understand that, he said.

In a follow-up conversation, Stokes reinforced the point, saying he has spoken with every member of the board about the election and none of them was upset about Chafee’s comments. There won’t be any mass resignations when Chafee takes office next January, he said.

Stokes also downplayed Chafee’s eyebrow-raising threat to sue Gov. Donald Carcieri and the board over 38 Studios, saying it was his understanding that Chafee was only talking about a situation comparable to the shenanigans that allegedly went on at the Rhode Island Resource Recovery Corporation, another quasi-public agency.

Chafee will get the chance to start putting his own stamp on the EDC board shortly after taking office. The terms of three expire in February: FM Global CEO Shivan Subramaniam, Gilbane Chairman Paul Choquette Jr., and Verizon region president Donna Cupelo. Under a law enacted earlier this year, one of those three seats must go to a small businessperson.

“The governor is the chairman of the board of the Economic Development Corporation, so Gov.[-Elect] Chafee has every ability as chairman of this board to set the tone and the direction” of the agency, Stokes said. “At the end of the day, the governor has the right and the need to pick his team,” he later added.

As for Stokes, whose one-year term also expires in February, he hinted today that he would be willing to stay on board as head of the agency if Chafee wants him – which is a possibility, based on the governor-elect’s comments at our Oct. 6 televised debate. Other members of the EDC’s management team are currently being asked to reapply for their jobs as the agency continues to undergo a broad shakeup in the wake of the 2009 Verrecchia report.

Stokes, who has known Chafee for years, said his knowledge of all levels of government will come in handy on Smith Hill. Stokes also said he plans to invite the incoming governor to the EDC board’s next meeting, which is scheduled for Nov. 17, two weeks from today. The agency’s staff is preparing briefing materials to get Chafee up to speed on its activities.

Stokes, who served on the EDC board before Carcieri appointed him to a one-year term as its chief, also offered strong words of praise for the current board, which was put in place after the Verrecchia report. Calling them “the best and brightest” from Rhode Island’s business community, he said they have been engaged and forceful in their oversight of the agency since their confirmations in February.

We’ll hear from Gov.-Elect Chafee about this and many other issues at a press conference he is scheduled to hold at 3 p.m. in Warwick.

A reckoning for "Reckoning"?

The Projo’s PolitiFact Rhode Island has an item today calling out EDC Executive Director Keith Stokes for describing video games as “a growth industry,” a statement he made while defending the $75 million loan guarantee the agency has agreed to provide 38 Studios, Curt Schilling’s video game company.

PolitiFact says the statement is “barely true,” since video game sales fell in the U.S. last year (as well as back in 2005). And indeed, the NPD Group, my trusted source on such matters, said U.S. game sales dropped 8 percent in 2009 compared with 2008. The decline was also 8 percent when you add in the other two top game markets, the U.K. and Japan. Here’s the crux of PolitiFact’s beef:

By all accounts, the video gaming industry has grown substantially since the 1990s, topping more than $46 billion worldwide. But the sharp drop in U.S. sales in 2005 and 2009, combined with last year’s minimal increase in global sales — or decline, depending on who’s giving you the numbers — show that, at least for those years, the growth in the industry has not been consistent. Strategy Analytics, in its report to the EDC projecting double-digit growth over the next five years for the type of game 38 Studios plans to develop, noted as much.

Stokes could have said that the overall trend in the video gaming business has been strongly upward despite a downturn or two. But he didn’t. He said growth in the industry was clear and consistent. So we rate his comment as Barely True.

These questions are tough, I think. The U.S. economy was likely in recession for at least half of 2009, and U.S. retail sales were down 6.2 percent across the board last year, so it may have been an outlier. (Considering Rhode Island’s unemployment rate averaged 11.2 percent last year, let’s hope it was an outlier.)

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Despite a year-old hiring freeze and a shrinking work force, at least one arm of Rhode Island’s state government is planning to add a few more employees.

The R.I. Economic Development Corporation is looking to hire three new executives: a Director of Regulatory Reform, a Managing Director of Research, Strategy & Policy, and a Managing Director of Communications.

The agency wants an economist for the policy gig and either a policy wonk or a lawyer for the regulator role. (Ironically, the link to the communications job posting doesn’t work.)

The jobs are part of EDC Executive Director Keith Stokes‘ efforts to shake up the agency and tackle the economic woes that have left Rhode Island with an 11.9 percent unemployment rate.

A search committee made up of Stokes, senior EDC officials and members of the agency’s board will start reviewing applications early next month and then begin interviewing candidates later in the month, EDC spokesman Michael Blazek told me. The agency hopes to fill the positions by the end of the year.

The $64,000 (at least) question: How much will the trio get paid?

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I spoke this afternoon with Keith Stokes, executive director of the R.I. Economic Development Corporation, to get his side of the story on the Schilling deal. I also asked him about why his agency’s board voted to give Schilling 60 percent of the amount it is allowed to guarantee before the EDC had even finalized the rules that will govern the program. Here’s an excerpt from my story that was just posted:

Rhode Island signed away more than half of its brand-new loan program to Curt Schilling’s company before state officials had developed rules and regulations for it because it was too good a deal to pass up, a top official said Tuesday. …

The EDC had originally asked for the Job Creation Guaranty Program to have authorization for up to $50 million in loan guarantees, which would “provide a level of flexibility that our [existing] capital programs had not had,” Stokes said.

But after Schilling reached out to state officials in February, the General Assembly decided to increase the program’s size to $125 million, Stokes said. That way, $75 million would be available for 38 Studios and the original $50 million would remain for new and existing companies in Rhode Island.

Basically, Stokes said the General Assembly added $75m to the $50m program with the idea being it would almost certainly be used to aid 38 Studios – so that money would not have been there to help other companies, as has been argued by some critics.