[N]ewly released court documents show that Department of Vermont Health Access Commissioner Steven Costantino was aware that money in a loan-guarantee program he crafted as a lawmaker in Rhode Island was being set aside for the now bankrupt video game designer 38 Studios.
In 2010, as chair of the Rhode Island House Finance Committee, Costantino helped craft and guide the passage of a $125 million loan guarantee program. The economic development program was increased from $50 million as a result of Costantino’s involvement.
Though it was not public at the time, $75 million of that was earmarked to induce 38 Studios, the video game company owned by former Boston Red Sox pitcher Curt Schilling, to move its operations from Massachusetts to Rhode Island. Less than two years later, the game maker went bankrupt.
In a statement to VTDigger on Monday, Costantino said that while he was aware 38 Studios was a potential recipient of the program, he had no involvement with the failed loan.
“I did not play any role in bringing (38 Studios) to Rhode Island as did others in government. I was tasked to handle the legislation affecting the company by my superiors. After that legislative activity, I had nothing to do with approving the loan to the company and have had nothing to do with the company ever since. I want to make it very clear that the legislation granted authority (to create the fund) only,” Costantino said.
He declined to answer follow-up questions citing an ongoing civil lawsuit. One outstanding question for many in Rhode Island is why Costantino didn’t disclose 38 Studios as a likely beneficiary of the program he championed.
The Rhode Island Economic Development Corp. (EDC) is suing Schilling and others who engineered the deal. Last week, a judge unsealed documents in the three-year-old lawsuit. Costantino is not named as a defendant in that lawsuit, but the documents show that he was aware that money was being set aside for 38 Studios.
Costantino met with Schilling and former Rhode Island House Speaker Gordon Fox in late March or early April 2010, the documents show. Fox is in jail after being convicted on unrelated corruption charges. In a deposition, former EDC director Keith Stokes said he met with Costantino and Fox at Costantino’s Statehouse office around the same time, according to a WPRI Channel 12 report.
“I was briefing them on a variety of different things. I said we met on two occasions with 38. We had a team in place and from that initial meeting of the team they brought back that their capital needs, relocating to Rhode Island was in the $75 million range,” Stokes said in the deposition, according to WPRI.
Stokes said that Costantino’s response was, in part, “What if we were to add an additional 75 – it wasn’t called job creation, but this capital program would become $125 million program versus a $50 million program.”
The loan guarantee program was originally part of a supplemental appropriation bill that sailed through the Rhode Island House but ran aground in the Senate. Costantino later introduced the loan guarantee program as standalone legislation, which was ultimately passed by the Legislature.
The Providence Journal reviewed the legislative record from House debates on the loan guarantee program when it was still part of the larger appropriation bill. The review found that Costantino “insisted that the loan guarantee program arose from a hearing two weeks earlier in which the business community encouraged the state to ramp up its portfolio of financial offerings and incentives.”
After losing a bid for mayor of Providence, Costantino took a job as secretary of the Rhode Island Department of Health and Human Services, appointed by former Rhode Island Gov. Lincoln Chafee. Costantino served in that role until shortly after Gov. Gina Raimondo took over.
Raimondo hired former Green Mountain Care Board Chair Anya Rader Wallack to take over Rhode Island’s Affordable Care Act exchange, and shortly after that Vermont Gov. Peter Shumlin announced he would hire Costantino to take over DVHA.
Shumlin spokesman Scott Coriell said the governor and his staff were “generally aware” of Costantino’s involvement in the 38 Studios ordeal when he was hired. “Steven’s been doing a great job as commissioner. We’re lucky and glad to have him,” Coriell said.
Lawrence Miller, a top Shumlin aide, said he was mostly focused on Costantino’s time with Rhode Island’s Health and Human Services Department, saying his experience with Medicaid and the Ocean State exchange made him an attractive candidate.
Miller said he’s read some of the recent coverage of Costantino’s role in crafting the program that ultimately brought 38 Studios to Rhode Island.
“At that time, it was really competitive,” Miller said. He said he wasn’t surprised that Rhode Island officials were working on a way to lure the company, which was being wooed by other states, too.
As for Costantino not revealing that 38 Studios was the likely recipient of much of the money from the loan-guarantee program, Miller said he’s not aware of what’s customary in the Rhode Island Legislature, but it doesn’t surprise him that Costantino and others didn’t “broadcast” that intent to rank-and-file legislators.
