EagleTribune.com, North Andover, MA

Boston and Beyond

March 5, 2013

Schilling seeks dismissal of suit over 38 Studios loan

PROVIDENCE, R.I. (AP) — Former Boston Red Sox pitcher Curt Schilling asked a Rhode Island judge to dismiss a state economic development agency’s lawsuit over its $75 million loan guarantee for his now-defunct video game company, calling claims he and fellow executives misled the agency “implausible.”

Attorneys representing Schilling and others at his former startup, 38 Studios, on Friday filed documents asking Superior Court Judge Michael Silverstein to throw out the lawsuit alleging fraud, racketeering and conspiracy.

The state Economic Development Corp. in November sued Schilling, other 38 Studios executives and some of its own former officials, including Keith Stokes, the executive director at the time. The lawsuit claims the defendants misled the agency’s board into signing off on the loan guarantee in 2010 and withheld information, including that the company needed more money than it was getting from the state’s bond sale to complete a video game in production in Providence.

The company filed for bankruptcy in June, and Rhode Island is now likely on the hook for some $100 million, when interest is factored in.

The filing seeking dismissal says Schilling and the other 38 Studios defendants — the former chief executive and financial officers and the board chairman — repeatedly disclosed the company’s financial needs to Economic Development Corp. officials.

It notes that the initial lawsuit says Stokes and others at the agency, including two law firms working for it, knew 38 Studios needed the full $75 million, but that it was getting only about $50 million because some was to be kept in reserve.

“Given the EDC’s admissions concerning 38 Studios’ disclosures to the EDC’s executives, attorneys and financial advisor, it is impossible for the EDC simultaneously to claim that the 38 Studios defendants supposedly defrauded the EDC,” the filing says.

The filing says the economic agency’s board “well knew” the amount 38 Studios was getting wouldn’t be nearly enough to fully finance the game. The resolution approved by the board says the estimated cost of the game’s production is “in excess of $125 million.”

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