September 28, 2012

No federal charges on Schilling's 38 Studios

The Associated Press

PROVIDENCE, R.I. — No federal criminal charges will be brought in the case of the video game company owned by former Red Sox pitcher Curt Schilling, which received a $75 million state loan guarantee before going belly up, the U.S. Attorney's office in Rhode Island said Friday. A state investigation continues.

Jim Martin, a spokesman for U.S. Attorney Peter Neronha, told The Associated Press the office conducted a narrow and focused review of 38 Studios to see if any federal laws were broken, including bank fraud.

"No further federal action is planned at this time," he told the AP.

Col. Steven O'Donnell, head of the Rhode Island State Police, said the investigation into whether any state laws were violated is still open.

"It's still being pursued and we follow all leads that are presented to us," he said.

An investigation into federal bank fraud could have looked at whether any false statements or false information was given to banks that loaned money to the company, among other questions.

A spokeswoman for Gov. Lincoln Chafee said he would not comment because of the ongoing state investigation. A spokeswoman for Attorney General Peter Kilmartin did not immediately return a message seeking comment.

State and federal authorities announced they were looking into the 38 Studios' finances in June, the same day the firm filed for bankruptcy. The company was lured to Providence from Massachusetts in 2010 by the $75 million state loan guarantee and promised to create hundreds of jobs. Instead, it suddenly collapsed and laid off all its workers in May. At one point, the company was burning through about $5 million per month.

The company's failure left the state likely on the hook for more than $100 million, including the $75 million in bonds it floated as part of the deal, plus interest.

The state Economic Development Corp. has also hired a law firm to investigate whether anyone might be held financially liable for the deal.

 

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