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Ex-Rhode Island official says governor forced 38 Studios under

Ex-Rhode Island official says governor forced 38 Studios under

Fri 04 Oct 2013 8:57pm GMT / 4:57pm EDT / 1:57pm PDT
Legal

Former RIEDC head accuses Gov. Lincoln Chafee of blocking attempts to handle debt, raise capital before bankruptcy

After 38 Studios declared bankruptcy in May 2012, studio founder Curt Schilling said Rhode Island Governor Lincoln Chafee had made public remarks that were devastating to the company's attempts to stay solvent. According to a lawyer for former Rhode Island Economic Development Corporation Keith Stokes, the governor did more to hurt the developer's survival than just that.

The Boston Globe is reporting that court filings made by Stokes' lawyer accuse Chafee of actively blocking 38 Studios' attempts to restructure its debt or raise capital in the months leading up its collapse. Chafee allegedly refused to even meet with 38 Studios executives in 2011, and shot down attempts to bring the issues up for discussion before the RIEDC's board of directors. Chafee has said publicly that he made every attempt to save the company.

38 Studios decided to relocate to Rhode Island from Massachusetts in 2010 after the state committed to $75 million in loan guarantees. When the studio went bankrupt, it left Rhode Island on the hook for more than $100 million. In the wake of the collapse, the state filed suit against Schilling, Stokes, and a dozen others involved in the loan in an attempt to offset some of those losses. The charges include fraud, negligence, breach of fiduciary duty, racketeering, conspiracy, and more. The state believes that all of the defendants knew or should have known that 38 Studios would not be able to survive, even with the loan money, and that the accused concealed the company's actual financial health when the deal was made.

3 Comments

Jonah Falcon
Writer

25 15 0.6
What's Studio 38's recourse here?

Posted:6 months ago

#1

Nicholas Pantazis
Senior Editor

968 1,161 1.2
None, they are gone, and the governor did nothing illegal. He required them to pay debts immediately rather than work out extensions and bargains with them. It may have resulted in the studio's closure, but it wasn't illegal.

Also, the studio still deserves much of the blame themselves. They expanded far faster than was reasonable and did not temper expectations for reality.

Posted:6 months ago

#2

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