By ANDY SMITH
Journal Staff Writer

PROVIDENCE, R.I. -- The Rhode Island Economic Development Corporation is continuing to negotiate a $75-million loan guarantee with retired Red Sox pitcher Curt Schilling's video game company, 38 Studios LLC, despite the political controversy swirling around the deal.

"We've moved forward at the EDC on track with this transaction through all the noise," said EDC spokeswoman Melissa Chambers.

Two candidates in the Rhode Island governor's race, Democrat Frank T. Caprio and Independent Lincoln D. Chafee, issued statements Thursday in response to new details about the Schilling deal.

Caprio said the deal "has gone from bad to worse" because the EDC is setting aside a $20-million reserve fund to pay three years of interest and debt payments on the $75 million in bonds. He said the need for such a large reserve sheds light on the risks of the deal.

Chafee said the reserve fund is a warning sign that 38 Studios will not be able to pay its debt. Chafee also asked the EDC for an accounting of about $4 million being set aside for fees and expenses connected with the deal.

A spokesperson for 38 Studios declined to comment on the Rhode Island governor's race.