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Rhode Island Sues Schilling and Others over 38 Studios Deal

The R.I. Economic Development Corporation filed suit in R.I. Superior Court today against some of those involved in the deal that loaned 38 Studios $75 million in taxpayer money, reports WPRI (thanks VG247). This document offers the full complaint, and this video lays it out further. Here's a portion explaining that part of the problem was the developer not explaining clearly enough they were borrowing this money because they needed money, and another issue is an alleged conflict of interest:

The complaint says 38 Studios officials failed to disclose that the company was "undercapitalized by many millions of dollars" and therefore "was likely to run out of money in 2012." It also warns that EDC board members who approved the deal could be liable themselves if the legal discovery process uncovers evidence that they knew the risks and signed off on the $75 million loan guarantee anyway.

It quotes an email from an unnamed EDC loan analyst who told his bosses: "I don't think I can support a $75 million loan guarantee to any single company in this industry," referring to video games.

The EDC never ordered an independent assessment of whether 38 Studios would be able to finish the game after the board voted to approve the deal on July 26, 2010, even though board members were told the agency would do so, the complaint alleges.

It says Wells Fargo earned nearly $500,000 "in hidden commission from 38 Studios" that were not disclosed to the EDC board at the same time the bank was also supposed to be looking out for the agency's interests.

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12. Re: Rhode Island Sues Schilling and Others over 38 Studios Deal Nov 2, 2012, 03:12 dj LiTh
 
As far as the bank loan fees. There's nothing to sue in regards to that. If the state of RI had lent their own money then there wouldnt have been any fees. They didnt, they told Wells Fargo to issue a State backed loan to the company. If you were to buy a 75million dollar house you wouldnt bat an eye at a 500k commission (less than 1 percent) being doled out to the real estate agents, or likewise if you got a 75million dollar loan to the Mortgage broker's commission fee.

How it works is, the State told the bank give them this loan. That means no more bank mortgage guidelines, they are now guaranteed by the state of RI for the value of the loan. Now if the State or EDC analysts had a problem with that bank in particular (it would be nearly the same from any banks) fee's then they should of funded else where. Its the EDC loan analysts that should be sued whole heartily and be the 'scape goat' for making the decision on such a bad loan with tax payers money.

The sad part is, i'm sure nothing will come out of this than the taxpayers of RI being out 75million dollars. Which to me is an absurd amount to even make a game. What you want to bet you can take any one person of BluesNews, and come out with a more profitable game with much less money.
 
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