The tragedy of 38 Studios, Curt Schilling’s bankrupt video game company, is not that a private business went under—though there are hundreds of employees out of work, and Kingdoms of Amalur: Reckoning showed a lot of promise. The real crime (and the state is still investigating to see whether criminal charges should be brought) is that 38 Studios accepted a shady $75 million loan, and now taxpayers are on the hook for it.
38 Studios sought and accepted the loan from Rhode Island’s Economic Development Corporation to move its offices to the state, as part of the EDC’s mission to create local jobs. The loan was taxpayer-funded, but the risk was deemed acceptable. Now 38 Studios is gone, the former EDC head fired in disgrace, and the state is taking the unusual step of suing anyone that had anything to do with the loan.
The suit filed today, which can be found below, names numerous 38 Studios executives, former EDC director Keith Stokes, and the banks and firms involved with the deal. At issue—even with the $75 million, the company didn’t have nearly enough money to be viable, and everyone should have known the loan was never going to be repaid.
Among the specific accusations, ominously, is “racketeering.” Also, this, which doesn’t sound good for Schilling:
Defendant MacLean of 38 Studios that discussed various options for 38 Studios to pursue to make up the shortfall of funds to complete Copernicus. The email notes the “[o]bvious but important conclusion is that completing the EDC low-cost financing adds material value to current shareholders [primarily Schilling] … .” Lamarre was thereby recommending that 38 Studios accept the loan from the EDC even with the shortfall.
Because of the interest, Rhode Island taxpayers owe about $100 million. The EDC is seeking to recover whatever it can.RI sues Schilling, Stokes, others over 38 Studios deal[WPRI]