Rhode Island sues Curt Schilling over 38 Studios

State's legal team files suit against Schilling, other architects of controversial $75 million loan to bring Amalur studio to state.

38 Studios may be off the hook for federal charges, but the state of Rhode Island is only just beginning its legal action against the company. The Rhode Island Economic Development Corporation (RIEDC) has filed a suit in Rhode Island superior court against some of the architects behind the controversial 2010 $75 million loan that brought 38 Studios to the Ocean State.

Schilling surrounded by media in Rhode Island in May. Image credit: Steven Senne, AP.

Defendants include 38 Studios founder and former Major League Baseball pitcher Curt Schilling and former company CEO Jennifer Maclean, as well as banks Wells Fargo and Barclays Capital, among numerous others. The entire 97-page complaint was posted to the RIEDC website.

Accompanying the suit was a video message (embedded below) from Rhode Island governor Lincoln Chafee. In the two-and-a-half-minute address, Chafee reiterated that the original $75 million loan did not sit well with him, and that his primary goal is to protect taxpayer money.

To this end, Chafee brought on attorney Max Wistow to examine 38 Studios with respect to the state's position. In an executive session of the RIEDC, Wistow briefed the board and it was unanimously decided that legal action would be authorized.

"This vote was not taken lightly, and it was taken with the clear goal of protecting the taxpayers of Rhode Island," Chafee said.

Chaffee refused to go into specifics regarding the complaint against 38 Studios, saying that doing so "could jeopardize this process and endanger our ability to recoup taxpayer losses."

"Litigation is often long and tedious," he said. "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."

The suit itself contains numerous claims, and opens by alleging that the defendants did not speak with the RIEDC board when doubts about 38 Studios' sustained financial viability became known.

"Defendants knew or should have known, but failed to inform the EDC Board, that 38 Studios was destined to fail according to 38 Studios’ own financial projections," reads a line from the complaint.

In total, the complaint includes 17 counts of alleged wrongdoing. These include counts of fraud, unjust enrichment, civil conspiracy, breach of implied covenant of good faith and fair dealing, negligence, legal malpractice, negligent misrepresentation, fraudulent misrepresentations and omissions, and breach of fiduciary duty.

The RIEDC has requested a trial by jury for all issues.

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Discussion

174 comments
BlueTurtz
BlueTurtz

I absolutely hate lincoln chaffee, i live in RI and I can't stand him. I wish 38 studios could have made more games and stayed in the business. Kingdoms of Amalur: Reckoning seemed like a really cool game.

Hurvl
Hurvl

A complaint that is only 97 pages? Hah, that's nothing compared to the complaints made by enraged fanboys who post walls of text in forums/comment sections, complaining about this and that.

ExtremePhobia
ExtremePhobia

I'm guessing that he's aiming this to line up with some kind of election. Can't say I understand suing a company that went so bankrupt it couldn't pay anyone in the first place. And I certainly don't see how you can sue a company that you invested in because it went under. That's an understood risk.

 

... So who's the fraud here?

Names_Sleep
Names_Sleep

Like the game very much until today when I found out after reaching level 40 with my character I can no longer level up, so my plans with my character abilities are no longer able to do unless I unbind my stuff and redo it or replay it after finishing the game.

Pavlara
Pavlara

so 18 months after a closing that let federal money the company goes belly up? the state didnt make the company produce quarterly statements for their review as part of the agreement? schilling and whoever else he paid off deserves that money

jsmoke03
jsmoke03

wait hold on, i think whoever decided to make this deal to schilling is stupid, but i don't think a lawsuit could be claimed here because 38 studios just failed to make money of a game, can you sue for that?

Yuusha09
Yuusha09

I hate turning on ESPN and seeing Curt Schilling still has a job...

philMcCrevis
philMcCrevis

this is ridiculous.  RI made a damn gamble loan to bring business to the state and it failed.  Curt and his team delivered an excellent game that press like GS failed to critically support - cause it wasn't like Skyrim or what ever the hell their problem was.  The state should go to hell like they give a damn about tax payers dollars.  Since when has any government in the US given a rats ass about tax payers dollars - anybody spell fiscal cliff??

tim1935
tim1935

Did Rhode Island put all their eggs in one basket?

downloadthefile
downloadthefile

Amalur is the most disappointing game I've ever played.  The character movement alone made me put it down.  It felt like the character was ice skating.  It's weird, but a sense of weight in video game characters is really important to me, probably more than anything else at the most basic level.  I wish game reviewers focused more on that kind of stuff instead of leading me to believe it was a well-made game.

 

Curt should have made an old school, top down isometric RPG for 1/100th the cost because that would have had a legitimate market.  These games make millions on Kickstarter before they're even developed, obviously people want to buy those games.

Kr0w1Nc4rNa73
Kr0w1Nc4rNa73

I don't really see the point in the argument that taxpayer's money is being wasted. I mean, that's always the case no matter where it goes.

crushbrain
crushbrain

lol that's what those north eastern liberals get when they vote socialists into the government. hahahaha why would a government even begin to consider loaning money to a private entertainment company.

Unfallen_Satan
Unfallen_Satan

I do hope Rhode Island gets some of its money back, but I don't recall any news of resignation by state officials in relation to this incident. If there was clear fraud or misrepresentation, it would be another matter; otherwise Rhode Island political and business leaders involved in the deal should also share the blame. I hope those responsible suffer in the next election if not in court.

 

Are the defendants worried about any conflict of interest between a jury trial in Rhode Island over an issue that may elicit strong populous sentiment from the people of Rhode Island?

ziproy
ziproy

I love how these people pretend that we don't know why they do the things they do.

 

Rhode Island is pissed that the company they funded went under (which we all know is pretty common in the world of video games right now).

 

They want a refund from a company that no longer exists

tgwolf
tgwolf

Wow, so many questions and so many implicit answers.

Motroucet
Motroucet

I know I sound stupid, but I hate the government, all governments. I don't know about the technicalities regarding the loan nor do I care; Curt is my friggin' hero and the same goes for Jen, Ken, Rob and Todd and everyone who worked at BHG and 38S. They've been through enough, heck the vast majority of them don't have jobs anymore (or maybe working some job they don't want to) apart from those who have gone on to work for Epic Baltimore; so just leave the poor sods alone, they have nothing and certainly not $75M. The thing is yeah Curt admitted his optimism played a part in his venture's downfall, but the RI government is guilty of the same thing; all the claims of fraudulent tactics and other alleged wrongdoings to me are BS; the RI government knew exactly what they were doing and what they were getting into, and if Kingdoms of Amalur: Reckoning were more of a financial success then the government would be all to happy to get back the loan and then some, but damn when it failed they friggin' swoop in like vultures.Also if the government - of all things - were to loan $75 Million, then they don't have the right to claim 'fraud' and other such non-sense because who would lend that much money and not do proper pre-deal investigations. No, like I said they knew exactly what they were getting into. Heck, the amount of checks they had to do regarding myself when I claimed disability pension, and later youth allowance (which they declined even though I literally only had $7.23 in my bank account; which was my whole life savings)  was downright excessive. Hence, I'd imagine for a $75M loan, to dole that much out and not do proper 'homework' well it's the government's fault as much as any.Anyway, to me Kingdoms of Amalur was a right mint game and one I thoroughly enjoyed and still do.As for tax (personal income tax), shouldn't even exist, there are countries in the world who do fine without PIT and they're some of the most affluent nations around; think UAE, Monaco and The Bahamas. So in the end if you want to do right by taxpayers - don't friggin' have tax in the first place.Flame me all you want, I'm an uneducated fool with thick skin. :)

FlyingAce1016
FlyingAce1016

why the heck would anyone get a loan from the gov.?.... lol especially ours

wizo59mt
wizo59mt

Big Huge Games = Big Huge Loan = Big Huge Failure = Big huge Pile of DooDoo to clean up.

PixelHunter
PixelHunter

Is the RI governor up for re-election? Sounds like he's trying to boost his ratings with the taxpayers a month before elections!

Gen_Warbuff
Gen_Warbuff

Hey, here is a company that lost millions, and lost everything they had in the process, lets SUE them to see what we can get out of nothing. Take your losses RI.

BrianGyrofire
BrianGyrofire

 @ExtremePhobia Please read up on the differences between loans and equity. Also, so you can further be embarrassed, Rhode Island's gubernational election is in 2014.

XIntoTheBlue
XIntoTheBlue

 @philMcCrevis Curt's studio may have delivered an excellent game, but the studio did not go out of business at a whim. Do not blame GameSpot for not critically supporting the game. The blame, ultimately, is Curt's. Any business owner is always at fault for their failed company. Not that they can't share the blame, but it's their ultimate responsibility.

 

As for Rhode Island, granting a loan is the worst possible way of attracting business to their state. Governments, local to federal, need to make their place more attractive by better taxes and things like that. That way, they don't get screwed out of tax payer dollars.

notorious98
notorious98

 @crushbrain They thought it would bring jobs to their state.  Lawdy Lawdy, what a terrible thing they've done.  Jackass.

notorious98
notorious98

 @Unfallen_Satan Actually, the people who authored this loan did step down when news started coming out that 38 Studios was having serious money issues and couldn't make their loan payment.

worlock77
worlock77

Those aren't really great examples that you cite. The UAE is a confederation of princedoms where the few ruling families basically own and control everything. Monaco is an extremely small (both in terms of area and population) playground for the uber wealthy that's propped up by France. And the people of the Bahamas may not pay a personal income tax, but that's because the taxpayers of the United Kingdom pay for them.

Motroucet
Motroucet

I swear I had proper paragraphs and indents when I typed.

 

parrot_of_adun
parrot_of_adun

 @wizo59mt Eh... No. It was 38 Studios. Not BHG. BHG was merely hired by 38 and had nothing to do with the loan.

Slipstream720
Slipstream720

 @PixelHunter No, he isn't. Since we're such a small state, this is a HUGE deal with our government. He's just doing what everybody's saying should be done.

Slipstream720
Slipstream720

 @Gen_Warbuff Up until the moment Schilling declares bankruptcy, the RI gov't will be looking for their money back.

 

Also, we really CAN'T take our losses. Our state economy is one of the worst in the nation, and this loan was made without unanimous approval. 

no_fear_in_hell
no_fear_in_hell

 @Gen_Warbuff That's PRECISELY the point, THEY DIDNT LOST THIER MONEY, they lost SOMEBODY ELSE'S MONEY (thats why it's called LOANS). One big chunck of it belonged to Rhode Island...

philMcCrevis
philMcCrevis

 @Bl4KD37H  @crushbrain yah well they tried - it was a gamble.  there were no guarantees that the game studio would succeed and pay back to loan.  RI has no recourse in my mind they made a play and it failed.  its like buying facebook on IPO then demanding your money back when it bombs.  no sympathy what-so-ever for RI - they sit right smack in the middle of socialist part of the country.  didn't mean to get all political but Curt didn't do anything wrong here and I personally enjoyed the game

philMcCrevis
philMcCrevis

 @Slipstream720  @PixelHunter so your governent made a gamble to bring jobs to the state - which Schilling did.  he took the loan in exchange for bringing his business to the state.  He met his obligation.  WTF are you liberal losers complaining about.  They knew the risk when they made the loan for gods sake.  what was the recourse agreement?  what was the collateral?  i get so sick of idiots like RI government that get all pissy when things don't go their way.

mindpurge
mindpurge

 @Slipstream720  @Gen_Warbuff And who's fault is that? Shillings or your fuckin' stupid Governor?

 

Because last time I check, Kingdom of Amalur wasn't exactly a bad game, it sold quite  well.

Gen_Warbuff
Gen_Warbuff

 @no_fear_in_hell

I get that... but the company has nothing left, all assets were sold, or are being sold, and shilling has almost nothing left, he's even selling is bloody sock. What else can RI expect to get out of this?

 

PixelHunter
PixelHunter

 @philMcCrevis  @BrianGyrofire  @Slipstream720  @PixelHunter Why is all this happening on my comment? Geez, I am NOT a RI resident and I only know the tidbits about this case that I've read on Gamespot. I simply posed a question: Is the governor making a big deal out of this simply to win votes by "working for the people". It seems he wasn't even running, so I guess not. But it could still be a PR ploy. I wouldn't put it past ANY politician to do stuff like that.

 

So how does that make me a liberal loser? Or an idiot or even stupid? I swear, sometimes people just want to stand on their soapbox and spout their biased opinion even if it isn't appropriate for the context of the conversation. Besides, I'm a registered Independent, so stuff it.

 

My take on the whole RI v. 38S fiasco: Well, for the most part, I don't care. It's a shame a studio was shuttered for any reason, especially since I played Reckoning and enjoyed it. From the news snips I've seen, it seems like something fishy was going on with the RI government. Since when does a governor make press releases for a gaming company, and declare it a failure when it's game sold and was reviewed well? I'm just glad I'm not a RI resident, and feel for them as $75M of their tax money was used unwisely.

 

As for loans having no risk!? What bank do you use because I need to start going there! Of course loans are a risk. Why do you think they hold your assets as collateral in case you default when you take a loan? Why do you think you need to pay Private Mortgage Insurance on top of your loan if you don't have enough of a down-payment? Why do you think that little event called the Great Recession that pretty much #^@%ed the world economy even started in the first place!?

philMcCrevis
philMcCrevis

@BrianGyrofire @Slipstream720 @PixelHunter well Brian, I am approximately way less stupid than you. My best guess. Loans have no risk huh? Reading that statement 4 years after our country's financial system almost totally collapsed due to sub prime LOANS, makes me wonder if you might possibly be the most ignorant product of our current generation. It was a stupid play by RI and I'm saying their recourse should be limited to the terms of the loan agreement and no more. If it was an uncollateralized loan then further shame on them but they made the bad play and should own responsibility for it. Kurt never tok a penny in salary and the injustice perpetrated against residents of the state was by their state gvt not curt. Own it!!!

philMcCrevis
philMcCrevis

@Slipstream720 @PixelHunter bro I'm not making a personal attack on you or anyone else from RI that got stuck in this mess. I'm referring to state gvt officials that pushed this through. I'm sure the residents are as miffed as anyone simply saying they took the risk when they made the loan and I doubt curt personally guaranteed the loan. Curt lost, gamers lost and RI lost but RI shouldn't be seeking recourse beyond the collateral agreed to in the terms of the loan. It was a terrible play by RI and they should take responsibility for it.

BrianGyrofire
BrianGyrofire

 @philMcCrevis  @Slipstream720  @PixelHunter How stupid are you? Loaning money is not investing money. There is no factor of risk associated with a loan - you are a creditor and you will get your money back, either by being paid with interest or by litigation. And since this isn't a political issue, you can leave your nonsensical political bias out of it. Schilling and the others are guilty of fraud because they failed to inform the EDC about their financial projections that showed the company failing. Next time you decide to rant like a butthurt angsty teen, have an idea.

Slipstream720
Slipstream720

 @philMcCrevis  @Slipstream720  @PixelHunter You're right man, I MUST be a wacky liberal if I support a state's right to sure over an unpaid loan.

 

No, I did NOT support the state's decision to make the loan in the first place. But if you were actually educated on the topic you'd know that us as voter's didn't even have a say on the decision.

 

It was made without voter approval.

philMcCrevis
philMcCrevis

@CrazyFool319 @mindpurge @Slipstream720 @Gen_Warbuff geezus krist finally a sane post. Nice to meet you crazy. You must have an IQ above that of the average liberal to understand who's at fault here. That's the liberal disease - their failures are ALWAYS somebody else's fault...always. They are incapable of accepting ownership of their failures and so they want to be compensated by those who don't fail instead of learning from mistakes and ultimately succeeding themselves.

philMcCrevis
philMcCrevis

@surppo @mrboone01 @mindpurge lol not cod. Good point. RI didn't do their diligence and it was their responsibility to understand their risks not schillings responsibility to educate them duh.

CrazyFool319
CrazyFool319

 @mindpurge  @Slipstream720  @Gen_Warbuff Actually its the RI governors fault.  38 had an investor lined up that would have seen the MMO and possibly the sequel released down the line, which would have floated 38 until they were out of the debt.  But because of the RI governor mouthing off about the deal the investor pulled out.  The RI governor really expected the loan to be paid off by the first game of a brand new studio making a new IP.

 

And RI didnt get scammed for this loan like some people think.  38 wasnt originally in RI, they were persuaded to locate there by getting the big fat loan.

surppo
surppo

 @mrboone01  @mindpurge I think its bad business on both ends.  I dont care how many people he hired to make this deal look good. a rookie investor can look over the business proposal and tell there is no way the can get a return on $75 million from a videogame that isnt COD.  the government was star struck and gave shilling a sweetheart deal, its just sad that the people have pay for it.

philMcCrevis
philMcCrevis

@Slipstream720 @mindpurge @Gen_Warbuff I expect them to take the collateral as agreed and that's it. The reason many fiscally liberal states are a financial mess, think CA and north east, is because of liberal fiscal policies that don't work. And as usual liberals always want someone else to be responsible for their mistakes.

Slipstream720
Slipstream720

 @mindpurge  @Gen_Warbuff Schilling's because he took a LOAN. As the guy before me said, a loan isn't a fucking investment. If you can't pay it, there are consequences.

 

What do you expect the state to do? "Oh. You aren't paying back your loan. Whatever."

philMcCrevis
philMcCrevis

@Gen_Warbuff @no_fear_in_hell exactly it's simply a political play by the RI gvt instead of taking responsibility for their actions. It's a disgraceful act meant to deflect their accountability...typical politics and it makes me sick. Curt put everything into that business and my sympathies are with him and the employees. I personally know how hard it can be to lose a business you believe in