Rhode Island sues 38 Studios to recoup losses
Rhode Island on Thursday sued Curt Schilling and his bankrupt company, 38 Studios LLC, in an effort to recoup the $75 million in loans the state guaranteed to lure the video game maker from Massachusetts.
The suit, filed with the Rhode Island Superior Court, names Schilling, several 38 Studios executives, the company’s bankers and Keith Stokes, the former director of the Rhode Island Economic Development Corp., who resigned earlier this year over the 38 Studios deal.
In a detailed, 97-page complaint, the state alleged the Schilling and others engaged in financial misconduct, neglect, fraud, and conspiracy to deceive officials about the company’s prospects. The suit also alleges that Stokes, who led the Economic Development Corp. for about two years, helped mislead his board to secure the bonds for 38 Studios.
“Defendants knew or should have known, but failed to inform the EDC board, that 38 Studios was destined to fail according to 38 Studios’ own financial projections,” the state charges in its suit.
Schilling, Stokes, and the other defendants could not be immediately reached.
The lawsuit follows a unanimous decision by the state’s Economic Development Corporation to take legal action against Schilling’s company, which closed abruptly in May in the midst of making its next video game.
The suit alleges that Stokes, and other defendants, violated the law and mislead the EDC board in the process of securing bonds for 38 Studios.
“The Board’s legal action was taken to rectify a grave injustice put upon the people of Rhode Island,” said Rhode Island Governor Lincoln Chafee in a statement.
When 38 Studios closed after it couldn’t make loan payments, it laid off about 400 employees in Providence and Maryland. Auctions held last month at both locations to sell off computers, furniture, video game memorabilia, and studio equipment raised a total of $830,000. The company owes as much as $150 million to dozens of creditors.Michael B. Farrell can be reached at email@example.com.