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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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9. Re: Rhode Island Sues Schilling and Others over 38 Studios Deal Nov 1, 2012, 22:48 Cutter
 
And why isn't Wells Fargo getting sued? They sound entirely complicit in this. Regardless, as others have said, they definitely overreached trying to make a CRPG and MMO at the same time when they had nothing proven to begin with. From the looks and sounds of it it really seems that Rolston, Salvatore, and McFarlane did little more than dial it in for the outrageous money they made. And there sounds like there was a ton of serious mismanagement going on - wasteful spending, nepotism, etc.

I too have a bit of sympathy for Curt, but damn, this falls under the 'How hard can it be?' school of business where the excitement of doing a thing was obviously not really thought out versus the reality. I mean who the hell says 'Oh we've never made a game before but we're going to blow 75 mil right out of the gate on the super awesome lucky best game evar!!!' There has to be some accountability in there somewhere. You pay your money, you take your chances.

 
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James Woods: Oh that's fun. That sounds like you had a fun time. Where would I fit in with the fun time, huh? Where does James Woods fit into the fun?
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  1. Nov 1, 20:15 Re: Rhode Island Sues Schilling and Others over 38 Studios Deal ldonyo
  2. Nov 1, 20:16 Re: Rhode Island Sues Schilling and Others over 38 Studios Deal ASeven
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  10. Nov 1, 23:12  Re: Rhode Island Sues Schilling and Others over 38 Studios Deal NewMaxx
  11. Nov 2, 02:20 Re: Rhode Island Sues Schilling and Others over 38 Studios Deal Jivaro
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