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
). 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.