Schilling Claimed 38 Studios Would Create Over 1,500 Jobs
Tuesday, May 22, 2012
As he made his pitch to board members at the Economic Development Corporation (EDC) in 2010, former Red Sox ace Curt Schilling promised his video game company would create 450 direct jobs and another 1,113 indirect jobs in Rhode Island in exchange for a risky $75 million loan guarantee that would leave taxpayers on the hook if the company went belly up.
Less than two years later, Schilling’s 38 Studios has defaulted on a $1.125 million payment due to the EDC, attempted to pass a bad check to the corporation to cover the payment, failed to make payroll and as Governor Chafee has indicated, laid off an unknown number of employees.
Schilling was back in Providence Monday evening for the second EDC board meeting in a week as state officials try to figure out how to help the cash-strapped company that could cost taxpayers over $100 million if it is forced to close. Governor Chafee has said he is against providing a bailout for 38 Studios, but he has noted that company has been approve to apply for over $20 million in tax credits between 2011 and 2012.GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST
The EDC did not take action Monday.
“RIEDC Board of Directors met in closed session to receive additional, confidential information regarding the financial and game development status of 38 Studios,” an EDC spokesperson said in a statement. “Members of the Board asked additional questions of company representatives and had candid dialogue. The Board also received information regarding the structure of the bond transaction and received a report from our auditor Braver PC. The Board did not take a vote tonight. The members of the Board may not discuss the confidential information received and discussed today.”
Presentations Convinced Board
During an EDC meeting held on June 14, 2010, board members viewed three presentations in regards to the 38 Studios. The first came from Harvey Cohen and Barry Gilbert, President and Vice President, respectively, of Strategy Analytics, who evaluated the impact 38 Studios could have in the state. The two presented the potential risks from the investment, but also sold the idea as a chance to retain more RISD and Brown graduates. Cohen said his research included meeting with local university officials, but he noted that schools were unlikely to focus on the industry until a business actually moved to the state and had success.
The next presentation came from Mark Lamarre of Wells Fargo, who described 38 Studios as “having a complete and experienced board of directors and management team, with an ability to hire and retain the right people.” Lamarre highlighted the company’s “substantial progress on game development,” including its past track record of success, experienced production staff, disciplined development process and validation from Electronic Arts, arguably the most well-known game developer in the world.
The final presentation came from 38 Studios, including Schilling, who touted himself as a video game lover who said he hoped to become the best in the business. Executives from the company then offered their vision for the company.
Accountability and Transparency are Not Important
The three presentations worked. In July, the board voted 8-1 to offer Schilling’s company the $75 million loan guarantee. By September, Schilling had signed a lease to move into its current One Empire Plaza location.
According to Dr. Edward Mazze, Distinguished University Professor of Business Administration at University of Rhode Island, it is unlikely a small business already set up in the Ocean State would ever have the same opportunity 38 Studios had in 2010.
“The reason for the ‘stop-over’ by out-of-state businesses is that Rhode Island needs new jobs so badly that the due diligence process to get financing can be fast tracked depending on who you know,” Mazze said. “Accountability and transparency are not important.”
Dan McGowan can be reached at [email protected].
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