Former Rhode Island State Treasurer Frank Caprio (D) is calling on the Gov. Chafee's administration to cancel the state’s new financial advisor contract with a company the state is apparently suing in connection with the $75 million 38 Studios loan deal.
A new two-year contract had been awarded to First Southwest this week, but this deal has not been formally signed according to a spokeswoman for current State Treasurer Gina Raimondo - who is also running for governor. Caprio is running for his old job this year.
Caprio highlighted the hiring in a series of Tweets late last week. This week he issued the following statement:
"There are just too obvious problems with having a firm the State is suing for fraud, negligence and legal malpractice advising the State on how to conduct its financial business. I call on the State to cancel the lucrative contract immediately."
"If the contract isn’t canceled I commit to take such action if the people of Rhode Island return me to the Treasurer’s office."
According to the state’s lawsuit, First Southwest was paid $120,000 for its role in pitching the $75 million state-backed loan to Curt Schilling’s video-game company to the Economic Development Corporation’s board of directors and bond rating agencies. The lawsuit accuses First Southwest of misrepresenting critical details or withholding vital information about the financial position of Schilling’s under-capitalized company. The firm is accused of fraud and breach of fiduciary duty to the EDC, among other things.
“Another problem highlighted by First Southwest’s alleged misdeeds in the 38 Studios deal is the firm’s monetary desire to see the loan closed,’’ Caprio said. “As a financial advisor to the State or Former Economic Development Corporation, First Southwest should not be in position to make more money if the deal happens. They should give advice that’s in the best interest of the taxpayers not what will line the firm’s pockets with cash."
“Future financial advisors under my watch will be paid a flat fee for advice,’’ he added.
As state treasurer and a candidate for governor, Caprio initially supported the 38 Studios loan with caveats, saying that as details became available it might prove to be "unacceptable."
The Chafee and Raimondo administrations have not publicly commented on Caprio's statement.
Source: Providence Journal