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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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10. Re: Rhode Island Sues Schilling and Others over 38 Studios Deal Nov 1, 2012, 23:12 NewMaxx
 
The excerpt does a good job of narrowing in on the fine points, although the "big picture" is simply a morass of legalities that for the most part will be worked out, although perhaps not appearing to be fair in nature; that is just the way of law. That being said,

Failure to disclose undercapitalization: again, government contractors/partners often undercap, but they have to disclose it! That's a small but crucial difference.

EDC loan analyst: like many of us have been saying, it's doesn't take an analyst (or apparently it does, but they have to listen) to see that a loan of this magnitude for a risky industry is insane.

Never ordered an independent assessment: this is unfortunately probably the sticking point that will decide the outcome of the case, again, despite what might be fair. Basically it means "find out who to blame as the scapegoat with the most legal backing and call it a day"; I'm usually not cynical, but no nice way to put that.

Hidden commission: typical finance/banking procedure that, yes, led to the recession and has created market collapses and lord knows what else, "nothing to see here," this case is not high profile enough to warrant more than at most a fine for them, the problem is proving it within a relative cost, which is not a high priority until the first point of the case is handled.

Also, to add more to my commentary, this situation is similar to why video game movies are a crapshoot. The movie industry and the game industry are just totally two different type of entities; likewise, government and game industry, here. Read about Microsoft's failed Halo movie and you'll see marked similarities (read paragraph 8, next to enlarged quote):

http://www.wired.com/gamelife/2012/04/halo-movie-generation-xbox/

This comment was edited on Nov 1, 2012, 23:18.
 
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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
  3. Nov 1, 20:47 Re: Rhode Island Sues Schilling and Others over 38 Studios Deal .Drifter
  4. Nov 1, 21:38  Re: Rhode Island Sues Schilling and Others over 38 Studios Deal Flatline
  7. Nov 1, 22:12   Re: Rhode Island Sues Schilling and Others over 38 Studios Deal .Drifter
  5. Nov 1, 21:38  Re: Rhode Island Sues Schilling and Others over 38 Studios Deal Prez
  16. Nov 2, 08:48  Re: Rhode Island Sues Schilling and Others over 38 Studios Deal Creston
  6. Nov 1, 21:39 Re: Rhode Island Sues Schilling and Others over 38 Studios Deal Panickd
  8. Nov 1, 22:18 Re: Rhode Island Sues Schilling and Others over 38 Studios Deal NewMaxx
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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
  12. Nov 2, 03:12 Re: Rhode Island Sues Schilling and Others over 38 Studios Deal dj LiTh
  13. Nov 2, 07:55 Re: Rhode Island Sues Schilling and Others over 38 Studios Deal ^Drag0n^
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  15. Nov 2, 08:44 Re: Rhode Island Sues Schilling and Others over 38 Studios Deal Creston
  17. Nov 2, 09:01 Re: Rhode Island Sues Schilling and Others over 38 Studios Deal wtf_man
  23. Nov 2, 20:14  Re: Rhode Island Sues Schilling and Others over 38 Studios Deal xXBatmanXx
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  20. Nov 2, 10:57  Re: Rhode Island Sues Schilling and Others over 38 Studios Deal Creston
  21. Nov 2, 13:23   Re: Out of the Blue Rigs
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