Rhode Island is suing the owner of failed video-game company 38 Studios LLC over a $75 million loan guarantee the state’s economic development commission provided the company.
The suit, filed in Rhode Island Superior Court on Thursday, named 38 Studios owner and former Boston Red Sox pitcher Curt Schilling and several other parties, including former Rhode Island Economic Development Commission chairman Keith Stokes.
Gov. Lincoln Chafee, who also chaired the EDC, said the corporation’s board voted unanimously in an executive session to pursue legal action after a four-month study led by local attorney Max Wistow.
“This vote was not taken lightly, and it was taken with the clear goal of protecting the taxpayers of Rhode Island,” Chafee said in a statement.
Rhode Island taxpayers are on the hook for about $110 million, including interest, after the company’s demise in the spring. The state backed the guarantee with a moral obligation. Although Chafee and other state leaders said they intend to back the obligation, some legislators, including House Speaker Gordon Fox during his re-election campaign, say Rhode Island should at least consider defaulting on the bonds.
38 Studios, which received the $75 million guarantee from the EDC in 2010 to lure it to down Providence from Maynard, Mass., filed for Chapter 7 liquidation in Wilmington, Del, in June. A federal judge later transferred the case to Rhode Island Superior Court.
Last month the EDC held two auctions of the company’s assets, which included computers, television sets and office furniture.
Chafee said he would not discuss the complaint, because it “could jeopardize this process and endanger our ability to recoup taxpayer losses. The complaint on its own contains a great deal of important and illuminating information on how this deal unfolded.”
The governor expects a long legal fight.
“The filing of this complaint is only the beginning. I know therefore there still will be many unanswered questions as the legal process continues and if and when other information comes to light it will be appropriately addressed,” he said.
