As it turns out, it’s really fine that MA didn’t try to meet Rhode Island’s $75 million loan package to Curt Schilling’s video game company, which is now in deep trouble.
As part of the RI Economic Development Corporation’s effort to create jobs in the state, they offered 38 Studios a $75 million loan, if only they would pack up operations and bring them to Rhode Island. Schilling and co. moved to Providence, and pledged to employ 450 locals. It was a gamble for the state, which only had $125 million for the entire job creation program, and took criticism at the time.
It’s 2012, and 38 Studios is in trouble. They’ve only employed 288 Rhode Islanders so far, and the company recently had to pull out of next month’s E3 showcase because their upcoming game, paid for by the loan, isn’t close to being ready. An independent audit expressed “substantial doubt” about whether the company can remain solvent, and state officials have been meeting with 38 Studios in recent days.
The worst case scenario? 38 Studios goes under, and is unable to repay the loan. If that happens, taxpayers are on the hook for $112.6 million after interest is factored in.
Ugh. But here is the worst part, which smells an awful lot like “SEC investigation” to me…
Last year Schilling told Reuters that he had invested “$30 million to $35 million” in 38 Studios. [Similarly, this Globe story reports that as of 7/8/11 he claimed to have invested $20 million. -ed.] A disclosure filing obtained by WPRI shows that Schilling advanced the company $4 million of his own money, and has already been paid back—with funds from the Rhode Island loan.
Yikes. UPDATE: Upon further review, I think it’s possible that the author I quoted above misread the WPRI report. Here’s what WPRI actually said about Schilling paying himself back:
In July 2010, the same month the EDC approved the loan guarantee, 38 Studios established a revolving line of credit with Schilling so it could borrow up to $4 million from him, according to the disclosure filing obtained by WPRI.com. Part of the taxpayer-guaranteed loan money was used to pay Schilling back.
Still on the sleazy side, but not inconsistent with Schilling having made a larger initial investment outside of the revolving line of credit.