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38 Studios Debacle: Top Stories in RI in 2012

Monday, December 31, 2012

 

It was, put simply, the biggest story of 2012.

The collapse of former Red Sox star Curt Schilling’s 38 Studios shook up the state’s economic and political landscape, leading to changes within the state’s Economic Development Corporation and finger pointing that is likely to continue into the 2014 Governor’s race.

We now know that the video game company’s downfall began long before it defaulted on the state’s $75 million taxpayer-funded loan guarantee, but once news got out that 38 Studios was having cash problems, everything quickly collapsed for Schilling.

Investors panicked. Governor Lincoln Chafee balked at helping the company secure tax credits. Lawmakers played the blame game.

Before long, the company had laid off its entire staff and filed for bankruptcy, leaving the state potentially on the hook for nearly $100 million. It was a dagger in the heart for the business community and a black eye for Rhode Island.

And it’s not over.

2013 will see the state move forward with its lawsuit against many of the key players behind the deal, including Schilling, former EDC director Keith Stokes, a handful of major financial institutions and several prominent local law firms. The goal, Chafee says, is to recoup as much money from the deal as possible.

But the failure of Schilling’s company may have a long lasting effect on the state’s economic development efforts. Look for lawmakers to pay far more attention to the deals offered to companies, which could scare off new business.

One thing is for sure: In a state desperate for a homerun, Schilling’s strikeout won’t soon be forgotten.

 

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