PROVIDENCE, R.I. (WPRI) – House Democrats led by Speaker Gordon Fox on Thursday proposed a complete overhaul of the state economic agencies as they unveiled a sweeping set of bills they say will “improve the coordination and quality” of Rhode Island’s troubled economy.

The Democrats’ other proposals include bringing back the tax credit for historic buildings, this time capped at $5 million per project and potentially $30 million in total; allowing employers to pay workers biweekly; considering curbs on the overuse of jobless benefits by seasonal employers; and creating a new tax credit for local employers who add jobs after making major capital investments.

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Gov. Lincoln Chafee’s nominee to head up the Economic Development Corporation may be a blast from the past, but Marcel Valois has made it pretty clear that the quasi-public agency is in need of major changes.

In an op-ed published last year in the Providence Journal, Valois and former Rhode Island Public Expenditure Council executive director Gary Sasse argued that the state’s economic development strategy “should be changed from a government-dominated, reactionary model to one that operates within a strategic network of committed, innovative, collaborative and agile stakeholders from all sectors.”

Here’s their pitch:

To reboot the Ocean State’s economic development, a new public/private economic-development process should be built on the following organizational framework:

• Create an Office of Strategic Development and Economic Policy within the governor’s office, using existing resources. This office would help set a vision and strategic direction for economic-development activities. It would also work with other state agencies to ensure that economic-development-related functions are effectively coordinated and to reinforce statewide economic strategies and programs. This office would help make sure that all state agencies are rowing in the same direction.

• Establish an independent, university-based professional economic-research collaborative to provide decision makers with real-time economic data and analysis needed in making evidence-based decisions. The collaborative would collect and aggregate critical economic data create dashboard indicators measure specific trends, develop performance metrics, conduct cost/benefit analyses for major state investments and market based reality checks. The mission of the collaborative would be provide invaluable insight and foresight necessary for formulating effective economic-development policies.

• Transform the current EDC in to a public/private Economic Resource and Management Investment Board. This new board would have the responsibility invest state economic-development resources into public/private initiatives in the areas of (1 marketing, reputation management, and customer-relationship management, (2) restructuring public-finance programs to better leverage private capital through public and private collaboration and professional financial management, including underwriting and oversight, (3) investing new business expansion strategies and value-added services and measuring the return on those investments.

Read the whole piece here.

After Curt Schilling’s game company collapsed into bankruptcy last spring, Chafee asked for the resignations of every R.I. Economic Development Corporation board member who voted in 2010 to approve the company’s $75 million taxpayer-guaranteed loan.

Nearly all the members complied in one way or another, with one noteworthy exception: George Nee, president of the Rhode Island AFL-CIO and the leading voice of organized labor in the state. Nee didn’t resign and continued to attend board meetings despite Chafee’s request.

And on Thursday it was Nee – not Chafee – who got the last word: the governor just nominated the union leader for another term on the struggling board, along with four other new members.

Asked by WPRI.com why he’d flip-flopped about Nee, Chafee said in a statement: “I felt strongly that anyone who voted in favor of the 38 Studios deal should resign from the EDC board. Obviously, there was a difference of opinion there between me and George Nee.”

“As time has passed, I have been able to work with George on the board and have a number of private discussions with him regarding 38 Studios,” the governor continued.  “I believe that George agrees with me that the process was not performed in the proper way and that 38 Studios was a mistake.”

Chafee’s new nominees for the board are Shannon Brawley, executive director of the Rhode Island Nursery and Landscape Association; Rhode Island College President Nancy Carriuolo; Roland Fiore, president of South County Sand & Gravel Co. Inc.; and Jason Kelly, executive vice president of Moran Shipping Agencies. All the nominations, including Nee’s, are subject to Senate confirmation.

• Related: Chafee picks Parsons despite ties to EDC credit-card scandal (Nov. 30)

PROVIDENCE, R.I. (WPRI) – The troubled R.I. Economic Development Corporation is losing three more board members less than a year after its taxpayer-guaranteed loan to Curt Schilling’s 38 Studios fell apart.

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PROVIDENCE, R.I. (WPRI) – Rhode Island’s economy is being held back by problems that include relatively high taxes, a maze of regulations, too many dropouts and a lack of funding for startups, according to a new study commissioned by the Chafee administration.

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• Related: Read the full Fourth Economy Consulting study of Rhode Island (PDF)

Parsons was reprimanded and demoted from deputy director to associate director after he approved – perhaps inadvertently – the EDC’s purchase of a plane ticket to Disney World for the son of its legal counsel, who wound up resigning along with other top staff members, according to newspaper accounts.

Parsons was also criticized for taking a $300 cash advance off his EDC credit card, charging $19.77 at a Family Pet Center in North Providence and failing to reimburse the agency for $390 he spent to bring his wife on a trade mission to London.

Christine Hunsinger, a spokeswoman for Governor Chafee, said Friday the governor was aware of the expense irregularities but decided it wasn’t a reason to pass over Parsons, who has worked for the EDC and its forerunner since 1975, a year after former Gov. Philip Noel created it.

“Yes, there was an issue several years back and that was dealt with, and since that time his track record has been impeccable,” Hunsinger told WPRI.com. “The governor is confident that Bill Parsons is the right person because of the institutional knowledge he has in 37 years of public service. EDC will move forward and under the governor’s direction will be a force in driving economic development in the state.”

Hunsinger declined to say how many others Chafee approached about taking the job. She also said the governor called Senate President M. Teresa Paiva Weed to inform her of the choice. Parsons’ appointment must be confirmed by the Senate.

PROVIDENCE, R.I. (WPRI) – Rhode Island officials say they did extensive due diligence before awarding a $75 million taxpayer-guaranteed loan to Curt Schilling’s doomed video game company, but documents obtained by Target 12 suggest the process was rushed and shortcuts were taken.

Officials began drafting the terms of the 38 Studios deal as early as March 26, 2010, more than two months before state lawmakers even created the new $125 million loan-guarantee program that was used to lure Schilling’s company to Rhode Island in July, according to more than 2,500 pages of emails, financial documents and internal memos the EDC provided in response to Target 12′s public records request.

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Back when the study was first published, Thompson gave an interview about it to The Real News Network, a left-leaning alternative media outlet that broadcasts online. This video will help you understanding the economic thinking of the man who has the ear of Rhode Island’s governor:

• Related: Chafee sees progress, sets guidelines for fixing RI economy (Oct. 11)

Chafee’s message was twofold: I’m hard at work on economic development, and I want your support for my ideas. The governor clearly hopes to have the nine influential individuals who attended pushing for the same changes moving forward.

Attending the EDC meeting with Chafee were John Simmons, head of the Rhode Island Public Expenditure Council; Bob DiMuccio, president and CEO of Amica; Jon Duffy, chairman of the Greater Providence Chamber of Commerce; Neil Steinberg, president and CEO of The Rhode Island Foundation; Gary Sasse and Marcel Valois, veteran policymakers; Ron Machtley, Bryant University’s president; Janet Raymond, senior vice president at the Providence Chamber; and George Nee, president of the Rhode Island AFL-CIO.

Steinberg described the meeting as “a dialogue” that was “very positive,” saying afterwards: “I think the consensus was, 75% to 80% everybody agrees on.”

Chafee told the group his three priorities for improving the economy are education, infrastructure and work force development, and the governor argued his administration is already taking positive steps. He also detailed what he described as rapid progress being made in fixing the EDC by Paul McGreevy, director of the Department of Business Regulation, whom Chafee has indefinitely reassigned to oversee the agency following the resignation of Keith Stokes.

“We’ve stabilized it here, and good things are happening,” Chafee said of EDC. “It’s methodical. We’re not naïve about the challenges, but it’s steady and methodical.” McGreevy said he’s flattened the agency’s organizational chart and beefed up oversight of its loan programs.

There was broad agreement at the meeting that a high-ranking individual in state government needs to be tasked as the “focal point” for promoting and protecting commerce, according to Steinberg. Chafee said he is “very open” to the idea of making such an appointment, though it’s unclear whether he would add that position within the governor’s office or seek to create a new secretariat, as RIPEC proposed, which could require Senate confirmation.

RIPEC’s Simmons said he was especially pleased that Chafee is preparing to order a new independent study of Rhode Island’s business climate, which could recommend major changes to the state’s tax and regulatory structure.

Chafee spokeswoman Christine Hunsinger said that study could be completed within three to six months, soon enough for the governor to incorporate its ideas into his 2013-14 budget proposal. A separate study will put together an overarching economic development strategy for the state, possibly along the lines of what Massachusetts recently published [pdf].

Also at the meeting were Chafee cabinet members Charlie Fogarty and Michael Lewis, as well as gubernatorial staffers George Zainyeh, Peter Marino, Kelly Mahoney, Jamia McDonald and Christine Hunsinger. EDC deputy director Bill Parsons was also there.

Chafee’s office provided the meeting attendees with three documents. Two came from inside the governor’s office: a one-page statement of his economic development vision [pdf] and a three-page outline of his administration’s current activities and next steps to execute that vision [pdf].

The third handout was an academic study by Jeffrey Thompson, an economist at the University of Massachusetts Amherst’s Political Economy Research Institute, called “Prioritizing Approaches to Economic Development in New England: Skills, Infrastructure, and Tax Incentives” [pdf].

• Related: Watch: Chafee’s economic development guru shares his ideas (Oct. 12)

• Related: Chafee reacts coolly to study saying demote EDC (Sept. 25) | RIPEC study (PDF)

Laurie White, the chamber’s president, said Governor Chafee and state lawmakers should act within the next 90 days to implement the proposals put forward by the Rhode Island Public Expenditure Council. Those include demoting and renaming the R.I. Economic Development Corporation and creating a new secretary of commerce position in the governor’s office to oversee economic strategy.

“I think it’s important that action occur quickly,” White told WPRI.com. “Our view is that economic development in Rhode Island has to be the main event. … We need a very dramatic, aggressive effort to change the path that we’re on.”

White called the RIPEC study “very well done,” saying she appreciates the amount of outreach the business-backed think tank conducted and agrees strongly with the idea that there is a lack of focus inside state government on supporting commerce in Rhode Island.

“This is an excellent foundation to launch from,” she said. “Let’s act swiftly and move quickly, but not just rearranging what we have – we’ve got to do something new and dramatic and bold, or else we’re going to get the same old same old. We don’t want these reports to become a caricature of themselves.”

Update: Charlestown Rep. Donna Walsh, co-chair of the Joint Committee on Economic Development, tells WPRI 12′s Susan Campbell that it’s “probably not possible” for lawmakers to pass new legislation by December, since a new class will be elected on Nov. 6 and an emergency session would be required. But Walsh said legislation could be drafted and pre-filed in December to be acted on the following month if there is a consensus around changes.

• Related: Demote EDC, says study ordered by Chafee after 38 Studios (Sept. 25)

An earlier version of this story misstated Laurie White’s title.

PROVIDENCE, R.I. (WPRI) – The R.I. Economic Development Corporation would be demoted and supplanted by a new secretary of commerce who reports directly to the governor if Rhode Island officials embrace the recommendations of an independent study ordered in the aftermath of the 38 Studios debacle.

During a press conference on Tuesday, Chafee thanked RIPEC for its “terrific, hard work” in putting together the study, which involved 75 interviews with more than 100 people. But the governor didn’t embrace its findings – and left the event without listening to the presentation by John Simmons, RIPEC’s executive director.

“I’m very impressed with what has happened in the last few months down at EDC,” Chafee said. The governor later added: “We’re moving forward. … I have full confidence in what is occurring at EDC right now.”

Read the rest of this story »

• Related: Read the full RIPEC study on economic development (PDF)

“I take ‘moral obligation’ to the fullest extent of those words,” Chafee told WPRI.com in a State House interview this week. “We made a moral obligation and I’m going to live up to it.”

Asked how he reconciles that with his support for last year’s pension cuts, Chafee said: “I don’t think the words were as strongly associated as the exact words ‘moral obligation.’”

“I think we – to the Rhode Island state workers, teachers, public safety employees, we want to look out for their future,” he said. “But this is selling bonds based on those words – ‘moral obligation.’”

The R.I. Economic Development Corporation sold $75 million worth of moral obligation bonds in 2010 to finance 38 Studios. They differ from the more familiar general obligation bonds because with moral obligation bonds a state only pledges that its governor will ask lawmakers to use taxpayer money to pay bondholders; with general obligation bonds, the state pledges its full faith and credit toward repayment.

Rhode Island officials including Chafee and Treasurer Gina Raimondo have steadfastly refused to even consider stiffing investors who bought the 38 Studios bonds despite suggestions by former R.I. Supreme Court Justice Robert Flanders, Josh Barro, Gary Sasse and others that they should in light of the state’s fiscal woes.

“Moral obligations should be taken very seriously and not casually dismissed solely on the ground that the taxpayers do not have a legal obligation,” Sasse, who served in the Carcieri administration, told WPRI.com. “Nevertheless, the state should consider both the long and short term costs and benefits of all options.”

State officials should be studying all options, including a negotiated settlement with bondholders, Sasse said. ”It would be equally irresponsible for any official to take a position either to have the taxpayer meet the moral obligation or default or negotiate until evidence-based due diligence is completed,” he said.

State officials are, however, considering asking lawmakers to spend the money next year to refinance the bonds by converting them to general-obligation bonds at lower interest rates, Revenue Director Rosemary Booth Gallogly told Bloomberg News this week.

“We’ve looked at it preliminarily just to see if that’s an option and probably will pursue it,” Gallogly told Bloomberg. “If it were beneficial we would probably be able to sell that to the General Assembly.” She estimates paying off the bonds in full could cost state taxpayers around $100 million.

• Related: RI officials tell Moody’s state will pay off 38 Studios bonds (May 24)

PROVIDENCE, R.I. (WPRI) – Curt Schilling’s video game company 38 Studios blew through more than $133 million before it collapsed into bankruptcy last month, according to documents newly obtained by WPRI.com.

The documents obtained by WPRI.com also raise new questions about whether 38 Studios executives were overoptimistic about the company’s prospects. Their business plan projected the company would take in $109 million in revenue over the course of this year.

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The state’s first error, economic development experts say, was placing so much of its economic development fund in one venture, especially a risky video game company.

“It’s the first time I’ve heard of a government giving away almost the entire store to one company,” says Anthony Figliola, the vice president of Empire Government Strategies and a familiar figure in economic development policy. “The state gave away most of its money to a start-up company. That’s alarming.” …

Since they’re moral obligation bonds, there’d be little standing for bondholders to recoup their losses should the state walk away. The wild card is the market’s reaction, and some say the backlash would be swift. “The market would treat it as tantamount to defaulting,” says Matt Fabian, managing director of Municipal Market Advisors. “They would be ostracized.”

But others say that’s overstated. With more debtors facing accumulated red ink, the market could be more forgiving. “Bondholders knew what they were getting into,” argues Craig Chilton, an adviser with BondView. “If I were a taxpayer in Rhode Island, I’d be hard-pressed to want to make good on the obligation.”

(photo: Ted Nesi/WPRI)

PROVIDENCE, R.I. (WPRI) – Just weeks after the epic collapse of Curt Schilling’s 38 Studios, another high-profile loan guarantee to a politically company has gone sour after being approved by the R.I. Economic Development Corporation during the final year of former Gov. Donald Carcieri’s tenure.

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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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PROVIDENCE, R.I. (WPRI) - The R.I. Economic Development Corporation has hired a special counsel, Max Wistow, to examine whether taxpayers have legal avenues to claw back some of the tens of millions of dollars they’re poised to lose after the collapse of Curt Schilling’s video game company, 38 Studios.

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38 Studios missed the $1.125 million payment to the EDC on May 1, technically putting it into default and making it ineligible for state tax credits. After trying to pay with a bad check May 17, 38 Studios made good the next day by cutting a check for $100,000 and wiring the rest of the money.

That money didn’t go to the investors who bought $75 million in taxpayer-backed bonds the EDC issued for 38 Studios, however; it was an “annual guaranty fee,” equal to 1.5% of the average amount of outstanding bonds, that 38 Studios owed the EDC itself under the terms of the 2010 loan deal.

EDC spokeswoman Judy Chong told WPRI.com the quasi-public agency split the $1.125 million into two pots. Under the 2010 law that created the $125 million Job Creation Guaranty Program, half the money was required to go into “a reserve fund from which shall be charged any and all expenses of the [EDC] with respect to guarantee or bond obligations of the [EDC] pursuant to these resolutions resulting from a program borrower’s default.”

Chong said the EDC is still weighing what to do with the other half of 38 Studios’ $1.125 million payment. ”The use of the other half has not been determined,” she said in email. “It could go toward payment of fees (such as legal fees).”

• Related: 38 Studios owed EDC money on May 1; did Schilling firm pay? (May 15)

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – The Chafee administration wants to know whether Rhode Island taxpayers have legal avenues to claw back some of the tens of millions of dollars they’re poised to lose after the collapse of 38 Studios.

The governor’s office is close to choosing a law firm to examine whether Rhode Island can seek damages from the professional liability insurance policies of those who worked on the $75 million loan guarantee, a person familiar with the discussions told WPRI.com on Monday evening.

Professional liability insurance, also known as errors and omissions insurance, is purchased by professionals such as lawyers and consultants to protect themselves if they’re accused of negligence. It’s different from the municipal bond insurance the EDC and 38 Studios purchased from Assured Guaranty to protect investors.

Administration officials began discussing possible legal avenues to “recover as much as possible” back on May 1, when 38 Studios defaulted on a $1.1 million payment it owed the R.I. Economic Development Corporation, the person said, adding that the governor also wants to hold people accountable.

It’s not the first time Chafee has made such a suggestion: he said as a candidate in 2010 that then-Gov. Donald Carcieri and the EDC board could be sued for approving the 38 Studios deal if it turned out badly, a remark that drew gasps from an audience of business leaders when he uttered it.

38 Studios filed for bankruptcy on Thursday and the EDC will seek to recover money in court as its only secured creditor. Taxpayers are facing a loss of more than $90 million when all is said and done, Revenue Director Rosemary Booth Gallogly said Friday on WPRI 12′s Newsmakers.

At least six law firms worked on the 38 Studios deal in 2010, including Moses & Afonso of Providence, the EDC’s bond counsel; Adler Pollock & Sheehan of Providence, the EDC’s general counsel; and Taft & McSally of Cranston, the state’s disclosure counsel.

In addition, Pannone Lopes Devereaux & West advised the placement agents on the bond deal; Edwards Angell Palmer & Dodge of Providence was 38 Studios’ counsel; and Bernstein, Shur, Sawyer & Nelson of Portland, Maine, advised Bank of New York Mellon, the bond trustee.

As it discussed whether to approve the 38 Studios deal, the EDC board also received guidance from Strategy Analytics, a Boston-based market research firm, and Mark Lamarre, a managing director then at Wells Fargo Securities who is now with Morgan Keegan & Company.

FirstSouthwest of Lincoln was the EDC’s financial advisor, and Moody’s Investors Service and Standard & Poor’s both vetted the transaction.

Ted Nesi ( tnesi@wpri.com ) covers politics and the economy for WPRI.com and writes the Nesi’s Notes blog. Follow him on Twitter: @tednesi

By Ted Nesi

PROVIDENCE, R.I. (WPRI) - Senate President M. Teresa Paiva Weed says her chamber may not take up Governor Chafee’s nominees to the troubled R.I. Economic Development Corporation board before lawmakers leave Smith Hill this week.

“I think we may have to come back,” Paiva Weed told WPRI.com. “That’s the way it’s looking.” She said the governor has been sending a significant number of appointments to the Senate in the waning days of the session.

Lawmakers are hoping to adjourn as soon as Tuesday, but confirmation hearings haven’t been scheduled for any of the six EDC nominees Chafee has put forward in the wake of the 38 Studios debacle: Marcia Blount, Pablo Rodriguez, Roland Fiore, Stephen Hardy, William Holmes and Peter Crowley.

The EDC board has 12 members in addition to the governor, who serves as chairman but only votes to break ties. The board has a number of major issues to take up in the coming months, including the runway expansion at T.F. Green Airport and dredging the port at Quonset Point.

Failure to confirm Chafee’s nominees would not necessarily cripple the EDC board, however. State law says “a majority of directors holding office shall constitute a quorum,” and that a vacancy “shall not impair the right of a quorum to exercise all of the rights and perform all of the duties of the corporation.”

As The Providence Journal first reported, Paiva Weed opted to move the EDC nominations through the Senate Judiciary Committee instead of the Senate Corporations Committee, which considered and approved his previous slate of candidates last year.

PROVIDENCE, R.I. (WPRI) – Some Rhode Island lawmakers are concerned a bill to push a wind energy project in the East Bay would expand the reach of the embattled R.I. Economic Development Corporation even as the agency is under fire for mismanaging the 38 Studios deal.

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PROVIDENCE, R.I. (WPRI) – Governor Chafee on Monday nominated three more people to the R.I. Economic Development Corporation’s board and tasked a special advisor with overseeing the quasi-public agency as it deals with the fallout from its botched $75 million loan guarantee to 38 Studios.

Read the rest of this story »

Congratulations as well to Rhode Island’s other winner, Providence-based advertising agency (add)ventures, which won the Outstanding Commercial Emmy for this “Knowledge Providence” spot it created for the R.I. Economic Development Corporation.

• Nov. 2, 2010 … $10.9 million. “Upon delivery and the Date of Issuance of the Bonds AND after the date when [38 Studios], or a letter of credit bank selected by [38 Studios], presents reasonable documentary evidence to the [EDC] that the letter of credit required in connection with [38 Studios'] execution of that Lease dated Sept. 20, 2010 is to be issued subject only to the funding of a deposit account at such letter of credit.”

• Nov. 2, 2010 … $2.1 million. ”Collateralization for letter of credit that serves as the security deposit on Empire Street lease.”

• Dec. 10, 2010 … $9.4 million. ”Upon public announcement by [38 Studios] of a relocation date to RI.”

• April 18, 2011 … $17.2 million. ”Upon relocation of [38 Studios'] headquarters and the current object, Coperncius studio to RI AND the creation of at least 80 full-time jobs in RI with an average annual wage not less than $67,500 per year.”

• April 18, 2011 … $4.2 million. “Upon the creation by [38 Studios] of an additional 45 full-time jobs in RI with an average annual wage not less than $67,500 per year.”

• Aug. 16, 2011 … $4.1 million. ”Upon the entry by [38 Studios] into a satisfactory distribution agreement for its Project Copernicus.”

• Nov. 2, 2011 … $1.6 million. ”Upon the creation by [38 Studios] of at least an additional 125 full-time jobs in RI with an average annual wage of not less than $67,500 per year.”

Total … $49.5 million between Nov. 2, 2010, and Nov. 2, 2011.

When the $75 million worth of bonds were sold on Nov. 1, 2010, the EDC spent $1.9 million of the proceeds on fees, then put the rest into three accounts: $49.5 million went into the Project Fund, $12.8 million went into a Capital Reserve Fund and $10.6 million went into a Capitalized Interest Account.

As of Nov. 2, 2011, a year after the bonds got sold, the Project Fund was empty – that was the source for all the above transfers from EDC to 38 Studios. The company told the state all $49.5 million is gone, but no details have been provided about how the company spent the money.

As of now, the Capitalized Interest Account is down to about $2.7 million – enough for one more interest-only payment, which is due on Nov. 1.

Starting next May 1, 38 Studios itself is supposed to start making the principal and interest payments to bondholders from its own revenue; if it can’t do so, the EDC will tap the Capital Reserve Fund. If that happens, the governor is required to ask state lawmakers to appropriate money in the budget to replenish the fund. However, lawmakers aren’t legally obligated to actually appropriate the money.

As this September 2010 story noted, it’s important to realize that these milestones are different from the job milestones that got most of the attention when the deal was done (i.e., that 38 Studios would create 450 full-time jobs here by 2013). Collecting the bond proceeds only required 250 jobs in Rhode Island; the company will pay minor penalties separartely if it doesn’t reach the 450 mark by November 2013.

• Related: RI taxpayers actually on the hook for $112.6M with 38 Studios (May 15)

In November 2009, Curt Schilling’s embattled video game company apparently incorporated two limited liability companies under Delaware law, records show: Mercury Project LLC and Precision Jobs LLC. Neither company was registered in Rhode Island.

WPRI 12 reported Wednesday evening that 38 Studios’ failure to incorporate in Rhode Island could make it ineligible for more than $8 million in state tax credits it’s seeking to avoid insolvency. The governor’s office says officials are looking into the question of 38 Studios’ corporate residency.

Precision Jobs holds the trademarks to logos for 38 Studios’ game “Kingdoms of Amalur: Reckoning” and listed its address as a building on Market Street in Philadelphia. 38 Studios put up Mercury Project’s assets to the R.I. Economic Development Corporation as security for the agency’s $75 million loan guarantee.

The Mercury Project and Precision Jobs LLCs are in addition to the company’s other two LLCs, also incorporated in Delaware: 38 Studios LLC, the parent company, and 38 Studios Baltimore LLC, the former Big Huge Games studio in Maryland that 38 Studios bought in 2009.

Governor Chafee will hold a press conference at 5:30 to offer an update on 38 Studios’ situation. Asked by another Twitter user whether he will “pay back” the government for his “bail out money,” Schilling replied: “Haven’t received a penny of it, and have not asked for any.”

“Don’t believe what you read, especially when what you read is a lie,” Schilling wrote Friday.

More coverage of the 38 Studios crisis:

• Schilling links to leaked ‘Copernicus’ art – ’38 isn’t dead yet’ (May 24)
• Schilling holds onto job as ESPN analyst amid 38 Studios woes (May 24)
• As Delaware firm, 38 Studios may be ineligible for RI tax credits (May 23)
• The Globe’s Kirsner lays out the likely endgames for 38 Studios (May 23)
• 38 Studios loses CEO and high-profile VP, LinkedIn suggests (May 23)
• Seven of EDC’s current directors voted to OK 38 Studios deal (May 23)

Scenario #1. A bigger game studio or media company comes in and offers to take the 38 Studios assets for nothing. They keep developing 38′s forthcoming game “Project Copernicus.” …

Scenario #2. Someone acquires 38 for their division in Maryland, formerly known as Big Huge Games, as well as the game that group launched earlier this year, “Kingdoms of Amalur: Reckoning.” … An acquirer in this scenario would probably get the assets related to “Copernicus,” but may or may not decide to invest in finishing that game. …

Scenario #3. … 38 eventually shuts down and files for bankruptcy, and sells its revenue-generating product, “Kingdoms of Amalur,” to another game company. Office furniture and computers get sold cheap, and it’s likely that “Copernicus” never sees the light of day.

Read the rest here. This quote that one VC gave Scott is particularly damning in view of how Governor Carcieri and Keith Stokes sold the idea locally: “You want a team that’s in a center of excellence that you can build around. Providence is a great place, but it’s just not there as far as game development.”

Additionally, check out CNET’s Jim Kerstetter explaining why the 38 Studios loan was always “tremendously risky” and lambasting Schilling for “hypocrisy on top of bad business.” And RIPR’s Ian Donnis reports that the fiasco is adding to the tension between Governor Chafee and Treasurer Raimondo.

Update: Appearing Wednesday on WPRO’s Dan Yorke program, Raimondo said she wants to avoid “politics as usual” but is pretty clearly trying to put the blame on Chafee.

“Six or eight months ago, if we had been brought in, perhaps we could have been helpful,” she said. “The time for panic was six to eight months ago.” (Six to eight months ago, of course, is when the State House was consumed by the pension debate Raimondo instigated.)

Raimondo also subtly shifted the blame from former Governor Carcieri, who pushed the deal through, to Chafee, who won office the day it was finalized. “I think the strategy here is a good strategy,” she said, referring to the EDC’s focus on innovative businesses. “What happened here was a failure of execution.”

Asked last Monday whether Raimondo’s office knew anything about what was happening with the 38 Studios deal, her spokeswoman emphasized that it was an EDC situation and that the treasurer had no involvement.

Seven of the 13 board members who took their seats during the Carcieri administration supported the former governor and his EDC executive director, Keith Stokes, when they proposed committing 60% of the loan resources in the new Job Creation Guaranty Program to Curt Schilling’s video game company.

The seven EDC directors currently serving who approved the 38 Studios deal are:

• Timothy Babineau, president and CEO of Rhode Island Hospital;
• David Dooley, president of the University of Rhode Island;
• Stephen Lane, chairman and chief venture officer of medical device firm Ximedica;
• George Nee, president of the Rhode Island AFL-CIO;
• J.L. “Lynn” Singleton, president of the Providence Performing Arts Center;
• Cheryl Watkins Snead, president and CEO of supply-chain manager Banneker Industries;
• and Dan Sullivan Jr., president and CEO of Collette Vacations.

Babineau missed the meeting and could not cast a vote, but he submitted a statement saying: “I believe that the time is now for Rhode Island and the EDC to take bold and decisive action to demonstrate its commitment to our knowledge economy. … 38 Studios presents such an opportunity. Hopefully it will be the first of many to come.”

An eighth EDC board holdover from the Carcieri administration – Karl Wadensten, president of industrial vibrator manufacturer VIBCO – was the only director who voted against approving the 38 Studios deal in 2010. The Senate voted to confirm them and Stokes in February 2010 in the wake of a critical report on the agency.

The directors serve staggered terms, with Dooley, Singleton and Snead appointed through February 2013 and Lane and Wadensten appointed through February 2014. The terms of Babineau, Nee and Sullivan expired last February, but Governor Chafee hasn’t nominated successors so they remain in place.

The Job Creation Guaranty Program authorizes the EDC board to approve up to $125 million in loan guarantees for companies with intangible assets. It now has $44.5 million available after the board approved guarantees for 38 Studios, NuLabel Technologies and The Corporate Marketplace, a spokeswoman said.

• Related: No hard feelings toward Chafee from EDC board (Nov. 3, 2010)

An earlier version of this story said Timothy Babineau voted in favor of the 38 Studios deal; Babineau missed the meeting and did not cast a vote but did submit a statement expressing support for the deal.

(photo: Sean Daly/WPRI)