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The State of Rhode Island sues Curt Schilling

Nov 1, 2012, 2:00 PM EDT

Curt Schilling AP

This was probably inevitable:

The state of Rhode Island on Thursday sued former Red Sox pitcher Curt Schilling and one-time officials with the state’s economic development agency in connection with a $75 million loan guarantee to his failed video game company.

The AP Story on it is rather vague as to the specifics, but if you care enough about this story to have clicked this link you already know the broad contours: Curt Schilling started a video game company. Poured millions and years into it. Was lured to relocate the company to Rhode Island with loan guarantees from the state in exchange for promises of job creation. Company spent money like crazy, product wasn’t terribly successful. Company went bust, but not before leaving its workers high and dry and in some cases in severe financial straits. Curt Schilling called the governor of Rhode Island a “dunce.” Allegations arose that the company knew it was screwed but misled employees. Everyone with a bit of jurisdiction over this mess has or still is investigating.

And now, the lawyers.

  1. vansloot - Nov 1, 2012 at 2:05 PM

    Who’d a thunk that giving $75 million in public funds to a former baseball player who “liked playing video games” to create a game would’ve blown up in their faces? The amount of financial acumen you would’ve needed to see this coming is mind-numbing. Good thing no one involved had it!

    • churchoftheperpetuallyoutraged - Nov 1, 2012 at 2:15 PM

      From what I recall in the other threads, his first game was actually very successful. They were working on the second game, a MMORPG when the problem became that he couldn’t make his first loan repayment to the state, the governor announced that the company would was defaulting on its loan responsibilities, and Schilling stated that scared other investors away which had a trickle down effect of bankrupting the company.

      • castillo_ken - Nov 1, 2012 at 3:58 PM

        The company never even started producing one game. Some of the employees they hired moved to R.I. and never got to work one day because the money dissipated.

      • dcfan4life - Nov 1, 2012 at 8:35 PM

        Successful games can cost anywhere from $50,000 to $50 million. What i dont understand is how somewhere around $120 million got put into this company for one game that isnt near completion and they couldn’t even sell the rights to it like other bankrupt gaming companies do. Something just doesnt add up here…

      • churchoftheperpetuallyoutraged - Nov 1, 2012 at 8:52 PM

        38 Studios, formerly Green Monster Games, was the entertainment and IP development company founded by Major League Baseball pitcher Curt Schilling and named for his jersey number. In February 2012, the company released its only title, Kingdoms of Amalur: Reckoning, a single-player action role-playing game for several platforms. The game got mixed reviews, some very negative and some very positive, but only sold an estimated 330K copies in its first month; the company defaulted on its first payment just over three months later.

        Per wikipedia, so i was corrected that it wasn’t successful even though 330k sales for an independent producer is a lot.

      • seeingwhatsticks - Nov 1, 2012 at 9:16 PM

        330k sales for a first offering is actually very good, especially if it had mixed reviews. The problem with 38 Studios is that they tried to make their second offering an MMORPG, as churchoftheperpetuallyoutraged mentioned. MMORPG’s have the potential to generate far more revenue than individual games, but they’re also incredibly expensive to produce and without any kind of track record of success they can be incredibly difficult to sell even if the game itself turns out to be good. For a company like 38 Studios an MMORPG is like trying to shoot the moon, and the reality is they never should have tried it.

  2. townballblog - Nov 1, 2012 at 2:07 PM

    Hi Craig. From what you can tell, is he screwed?

    • Craig Calcaterra - Nov 1, 2012 at 2:33 PM

      Impossible to tell based on this story. These kinds of cases are pretty complicated and can cover dozens of potential theories of recovery. I wouldn’t hazard a guess as to whether there is any civil liability there.

      • townballblog - Nov 2, 2012 at 7:40 PM

        Thanks, Craig.

  3. nelsonsaint - Nov 1, 2012 at 2:10 PM

    Will he have to try on the bloody sock at trial?

    • indaburg - Nov 1, 2012 at 2:58 PM

      I think he should use the Chewbacca defense.

    • missthemexpos - Nov 1, 2012 at 3:09 PM

      If the sock don’t fit, you have to acquit.

  4. Reflex - Nov 1, 2012 at 2:12 PM

    I’m not really concerned about the fact that the developer failed, that happens all the time in the game industry. But Curt’s treatment of his employees was reprehensible and according to many, illegal. I hope this lawsuit is not just about recovering what was a pretty stupid bit of corporate tea party welfare in the first place, and includes the illegal activity in their treatment of thier employees.

    • churchoftheperpetuallyoutraged - Nov 1, 2012 at 2:16 PM

      Has there been a (legal) clarification on what has happened to the employees, specifically in regards to the second mortgages many of them faced?

      • Reflex - Nov 1, 2012 at 2:18 PM

        I haven’t seen an update on it yet, although I haven’t paid attention for a while. There was also the moving bills many got stuck with, and the layoff without 30 days notice as required by law in RI.

    • hockeyflow33 - Nov 2, 2012 at 2:00 AM

      What about it was illegal?

      • Reflex - Nov 2, 2012 at 2:25 AM

        Multiple sites have commented that it is illegal to lay off employees without a 30 day notice. 38 Studios certainly knew they were going bankrupt more than 30 days before they actually did. Not only did they not notify employees, they convinced many of them to continue working for free while they supposedly secured new funding.

        Legally speaking, a month before the money ran out they should have notified them of the impending layoff, continued seeking funding, and on that last day stopped work but let people know they were still trying to find funding if they wished to risk sticking around for a rehire.

      • hockeyflow33 - Nov 2, 2012 at 2:51 AM

        That’s why your shouldn’t rely on commenters for facts. Rhode Island, like many, is an at-will employment state and thus, unless a contract states otherwise, have the right to fire anyone, at any time, for no cause. However, I believe you’re trying to reference the WARN Act which requires 60 day notice for employers with over 100 employees, (I have no idea how many they had). Case law is mixed as to how enforceable this is when a company files for bankruptcy and looks heavily towards when they filed and fired employees.

  5. schlom - Nov 1, 2012 at 2:38 PM

    Is this common? I’m sure the government (either state or federal) has given out plenty of loans to companies that have subsequently gone bankrupt – do they usually sue to get the money back? I’m not sure the reasoning behind this – if the company failed than how can they get the money back? Unless they are claiming that Schilling pocketed the money instead of investing it into the company.

    • lmoneyfresh - Nov 1, 2012 at 6:25 PM

      I’m taking a shot in the dark here, but I would guess that states/governments would only pursue something like this if they thought there was negligence on the behalf of the recipient of the loan money. A failing business is one thing, but blatant misuse of funds is another. Again, I don’t know the details, but that seems to be the issue at hand here.

    • seeingwhatsticks - Nov 1, 2012 at 9:24 PM

      I think it’s fairly common for smaller states to try and lure new business to the area, and bigger states to try and prevent a company from leaving. This case is really bizarre though because 38 Studios I believe only had around 50 employees at the time they got the loans so it’s not as if the state was attempting to lure hundreds or thousands of new jobs. Giving this type of deal to what is essentially a startup, with no track record of success, that isn’t going to be creating a large amount of manufacturing jobs is pretty odd. It makes sense to try and help out a large company with blue collar jobs and a long history in the state, or a small but growing company with at least some track record of recent success because in those cases the risk the state takes is worth the potential reward. 38 Studios represented a huge amount of risk with a pretty pedestrian return so I can’t possibly fathom how this deal made sense. If I remember correctly from reading a long Boston Magazine article about this saga, outside investors said that Schilling was very charming and confident when pitching his company but that the presentations were all style and no substance. It sure sounds like Rhode Island politicians fell for the charm and the lure of saying they were in business with the bloody sock hero.

    • hockeyflow33 - Nov 2, 2012 at 2:55 AM

      Obama has given out a ton. I saw this list earlier today:

      Bright Source: FAIL! – Bright Source warned Obama’s Energy Department officials in March 2011 that delays in approving a $1.6 billion U.S. loan guarantee would embarrass the White House and force the solar-energy company to close. Bright Source lost billions of dollars but is getting more money to keep trying. Can you say, “This isn’t working Mr. President?”

      Solyndra: FAIL! – Obama gave $500,000,000 (that’s a HALF BILLION!) in taxpayer money to Solyndra who shut its doors and laid off 1100 workers in August 2011 after billions in losses due to failure to make a solar product that works! Barack Obama was not vetted before being elected President and neither was Solyndra before Mr. Obama threw that taxpayer money down the drain of unproven technology.

      LSP Energy: FAIL! – LSPEnergy LP filed bankruptcy protection and a sale of its assets in Feb 2012

      Energy Conversion Devices: FAIL! – On February 14, 2012 Energy Conversion Devices, Inc. and its subsidiaries filed for bankruptcy

      Abound Solar: FAIL! – Abound Solar received a $400 million loan guarantee from Barack Obama then announced in June, 2012 that it would file for bankruptcy. Many of these failed corporations, such as Abound, donated MILLIONS and continue to donate to Barack Obama’s campaign. Can you say, “Democrat Slush Fund”? Yes this is illegal. But Democrats are being protected from being prosecuted, for now.

      SunPower: FAIL! – SunPower stopped producing solar cells in 2011 at near bankruptcy then restructured with the help of, get this, oil giant TOTAL, Inc. who owns 60% stake in SunPower. Irony? The company is still struggling.

      Beacon Power: FAIL! – Beacon Power Corp filed for bankruptcy protection in October, 2011 just a year after Obama approved a $43 million Government loan guarantee. They remain barely in business, still struggling to make energy that makes sense or that works at all.

      Ecotality: FAIL! – ECOtality, a San Francisco green-tech company that never earned any money and remains on the verge of bankruptcy after receiving roughly $115 million in two loan guarantees from President Obama, who wants to do some more of this kind of Democrat Slush Fund Guarantees after he is elected to a 2nd term.

      A123 Solar: FAIL! – A123 Solar received $279 million from taxpayers thanks to President Obama’s Department of Energy loan guarantees even after the Solyndra bankruptcy and is getting another $500M from Obama after a loss of $400M.

      UniSolar: FAIL! – Uni-Solar filed for Ch 11 bankruptcy in June 20, 2012 after laying off hundreds of workers. UniSolar received even more Obama money after showing now progress, no profits and is still failing… yet they still remain in business with Obama’s help.

      Azure Dynamics: FAIL! – Azure Dynamics filed for bankruptcy in June , 2012 wasting millions in Obama “Stimulus” money and received abatement on taxes owed and and several tax credits. Azure Dynamics LLC filed for bankruptcy protection in Canada and the US. Azure laid off 120 of its 160 employees in Oak Park; Boston; Vancouver, British Columbia; and the UK.

      Evergreen Solar: FAIL! – Evergreen Solar received $527 Million in Taxpayer money from Obama and filed bankruptcy in late 2011. Evergreen, which closed its taxpayer-supported Devens factory in March, 2011 cut more than 1800 jobs. Evergreen’s $450 million factory, turned out to be a colossal “waste” of taxpayer money.

      Ener1: FAIL! Ener1 Inc. received a $118 million U.S. Energy Department grant from President Obama to make electric-car batteries but filed for bankruptcy protection January 2012 after defaulting on bond debt.

      • ezthinking - Nov 2, 2012 at 4:19 AM

        go jerk off into your mitt

      • kkolchak - Nov 2, 2012 at 7:31 AM

        Nobody cares.

      • stlouis1baseball - Nov 2, 2012 at 4:37 PM

        Hockey: I appreciate the spirit in which you post.
        That in mind…please know you are wasting your time.
        Many of my fellow HBT friends (say….about 98%)…
        Think the sun rises and sets in Barack Obama’s ass.
        They think the Man can do no wrong. I mean that literally…the dude has done a bang up job in their opinions. For this…I sincerely hope they don’t vote.
        Me? It isn’t that I voted FOR Mitt Romney. To the contrary…I voted for “change.”

      • hockeyflow33 - Nov 3, 2012 at 12:16 AM

        Well someone asked if it’s common for government to fund businesses and clearly the answer is yes. Someone does care because they asked the question.

  6. proudliberal85392 - Nov 1, 2012 at 2:58 PM

    I thought he was a small-government conservative who didn’t need any help.

    • sophiethegreatdane - Nov 1, 2012 at 3:54 PM

      Small govt conservatives are like Big Foot or UFO’s — I’ve heard of them but never actually seen one. “Small government conservatism” is not a particularly effective at helping politicians insulate their mansions with tax dollars from the middle class. Banknotes are crazy comfy and warm.

  7. sportsfan69 - Nov 1, 2012 at 3:17 PM

    Yeah, Curt is a right wing / tea party conservative, who’s only out for himself. Hypocrite.

    • joecool16280 - Nov 1, 2012 at 4:34 PM

      or we can just leave the politics out of it and call him what he really is…a blowhard narcissist who needs to mix in some salads and find a tanning bed

      • drewsylvania - Nov 1, 2012 at 4:44 PM

        He’s also a tea party conservative who’s only out for himself.

      • lmoneyfresh - Nov 1, 2012 at 6:27 PM

        When it is such a glaring instance of hypocricy, it’s really hard to overlook the fact that a staunch right winger took government money and pissed it away.

  8. chill1184 - Nov 1, 2012 at 3:46 PM

    I wish there was a way both of them could lose. The state creates a crony capitalism situation and then gets pissed when it fails. Then you got Schilling who squawks the bullshit lie that conservatives squawk that they actually believe in getting the state out of your life. At least liberals are “honest” in wanting the state jackboot in my face.

    • Reflex - Nov 1, 2012 at 3:54 PM

      To be fair, the governor who is behind this was not governor at the time the loan was granted, and publicly opposed it at the time. He’s a pretty moderate guy in general.

  9. castillo_ken - Nov 1, 2012 at 4:01 PM

    A small Government Conservative stealing $ millions and blaming the market for his failure … Where is the small Government when your asking for Millions to fund your pet project. they helped you build it, you screwed it up.

    • chill1184 - Nov 1, 2012 at 4:02 PM

      Conservatives dont believe in small government

  10. stairwayto7 - Nov 1, 2012 at 4:44 PM

    Could not have happened to a better guy!

    • hockeyflow33 - Nov 2, 2012 at 2:02 AM

      He doesn’t need me defending him but if you ever meet him, he couldn’t be nicer and more gracious. Most business fail and unfortunately, his did as well.

  11. sanzarq - Nov 1, 2012 at 6:45 PM

    Quite by accident, I talked to a former employee of Schilling’s video game company this past summer. Based on what I heard in that conversation, Schilling should be sued. There’s more than one DUNCE in this deal & the one I’m thinking of has a Bloody Sock in his drawer!

    • hockeyflow33 - Nov 2, 2012 at 2:56 AM

      What would be the basis of their claim?

  12. sidelineshot - Nov 1, 2012 at 8:47 PM

    This guy had lots of people fooled for a long time with his non-stop talking.
    Guess everyone found out, as it’s often the case with show-offs like him, that his I.Q. level was just above his shoe size.

  13. Chipmaker - Nov 2, 2012 at 9:12 AM

    Hey, Curt Schilling — you didn’t build that.

    You did wreck it, though. At least that is A result.

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