Wednesday, March 12, 2014
The Associated Press
PROVIDENCE, R.I. – Curt Schilling and executives of his bankrupt video game company "disclosed everything" to Rhode Island's economic development agency before being granted a $75 million loan guarantee, a lawyer told a judge Wednesday in arguing he should dismiss a lawsuit against them.
Attorney Michael Connolly said the former Boston Red Sox pitcher and other 38 Studios executives "repeatedly and continuously" told top officials at the state Economic Development Corp., whose board approved the deal, about the company's finances.
Connolly said that included the fact that 38 Studios needed more money than it was getting from a bond sale to complete a video game it was developing and to relocate from Massachusetts to Rhode Island, a requirement of the deal.
Connolly and lawyers for others named in the suit outlined their arguments before Judge Michael Silverstein in Superior Court in Providence on Wednesday. Schilling did not attend.
In arguing that the case should be allowed to go ahead, Max Wistow, a lawyer for the economic development agency, described a "fraudulent scheme" in which the defendants both withheld information and provided false information.
38 Studios had wanted the full $75 million in proceeds from the bond sale, but the EDC kept a significant amount in reserve; the company got only about $49 million. Wistow said financial documents the board relied upon in approving the loan guarantee in 2010 indicated the money 38 Studios was getting would be enough.
"Every defendant knew that affirmative misrepresentations were being handed up to the board," he said.
The quasi-public EDC sued Schilling, several executives at 38 Studios and some of its own former employees -- including then-executive director Keith Stokes -- in November. The company's collapse into bankruptcy several months earlier left the state on the hook for some $100 million, once interest is factored in.
The suit alleges fraud, racketeering and conspiracy, among other things.
38 Studios' relocation to Rhode Island was supposed to be a coup for the economically struggling state because it would create hundreds of high-paying jobs and bring millions of dollars in tax revenue. Critics maintained the state was making too big an investment in too risky a venture.