May 9 (Bloomberg) -- Two Rhode Island legislators investigating the collapse of former Red Sox pitcher Curt Schilling’s bankrupt video-game company have received poison-pen letters.
Representatives Karen MacBeth and Michael Chippendale have been leading the House Oversight Committee’s probe into the collapse of 38 Studios LLC and the $75 million of taxable municipal bonds issued to support the company.
“You have a beautiful family,” said the letter to Chippendale, which arrived April 29. “Stop poking around.”
The meaning was unmistakable, he said yesterday.
“The only common link between Representative MacBeth and me is this investigation,” said Chippendale, a Foster Republican. “So it’s clear what they’re talking about.”
Schilling, a former Major League Baseball player who pitched on the team that won the 2004 World Series, has gone from being an economic-development hero to the center of a fiscal scandal. The former Rhode Island Economic Development Corp., now called Commerce RI, in 2010 sold the debt to lure his 38 Studios. The video-game maker filed for bankruptcy about two years later, leaving the state on the hook.
The U.S. Securities and Exchange Commission is investigating the financing, Rhode Island is suing the insolvent company and lawmakers are looking into the affair.
MacBeth’s legislative office received a threatening letter May 1, after Chippendale warned her to be on the lookout, she said. The Cumberland Democrat, who chairs the oversight panel, called police, who opened it in her presence before taking it away.
“Hopefully the police will be able to get something off the letter,” MacBeth said.
State police are probing the threats, Major Todd Catlow, a spokesman, said in a telephone interview.
“We’ll try to trace the origins of the letters that were sent and we’ll go from there,” Catlow said in a telephone interview.
In recent weeks, the legislators say, they have unraveled ties among 38 Studios, people who lobbied for the project and those who might have benefited.
“We’ve had success digging up stuff that state police and others did not dig up,” Chippendale said
While the legislators’ investigation is aimed at preventing similar losses, they are providing their findings to law enforcement, he said. MacBeth said she was in contact with SEC officials.
Chippendale, a real-estate investor, says he is receiving protection from the six police officers in his home town. MacBeth, a public-school principal, said she also is being guarded.
Lawmakers will decide whether to allocate $12.5 million to bondholders in the fiscal year beginning July 1, after having approved $2.5 million in the current year. Moody’s Investors Service last year threatened to cut Rhode Island’s Aa2 rating, third-highest, if it skipped payments.
Governor Lincoln Chafee, a Democrat, has said Rhode Island must honor its obligations. The state has hired Minneapolis-based SJ Advisors LLC to review the impact of a default. The company is set to finish its report in the next two days, Steve Johnson, its founder and principal, said in a telephone interview.
The 38 Studios debt has been gaining in value this year as investors seek riskier municipal bonds for higher yields. Bonds maturing November 2020 traded yesterday with an average yield of 4.6 percent, down from 7.75 percent when the debt first sold in 2010, data compiled by Bloomberg show.
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