EXCLUSIVE: Schilling, Stokes & others File Response to RI’s Suit
Thursday, October 03, 2013
GoLocalProv secured 440 pages of responses filed in Superior Court. These answers filed by the defendants respond to the State of Rhode Island's suit initially filed on November 1, 2012 by Max Wistow, the State's attorney.
The collapse of 38 Studios and the corresponding lawsuit were global news due to the celebrity status of the founder of the company and the amazingly quick collapse of the company that burned through $75 million in state funds in less than 18 months.
Curt Schilling Disputes Every Claim
The documents secured by GoLocal include responses to the suit by Schilling, who consistently claims that the documents that his company provided to the State to secure the loan were not misleading.
In the documents filed in response to the State of Rhode Island's suit, Schilling claims repeatedly that the term sheet, investment materials and PowerPoint presentations presented to the Rhode Island Economic Development Corporation were appropriate. "Schilling states that the referenced Term Sheet speaks for itself, respectfully refers the Court to the document for its content and denies any characterization inconsistent with its terms…," said Schilling in his answer to the State's complaint.
Repeated efforts to reach Schilling and his co-defendant and then CEO Jennifer MacLean's local legal counsel Jeffrey Schreck were unsuccessful.
In Schilling's 91-page filling, the now-ESPN baseball analyst disputed each of Rhode Island's allegations.
In Rhode Island's suit, the State affirms that Schilling and the others mislead the State as to how much the company needed -- and whether the $75 million was enough to relocate the company, finish the game Copernicus and capitalize 38 Studios.
At the time of the suit, Governor Lincoln Chafee, an outspoken critic of the financing that brought Schilling's company to Rhode Island, said, "My message to Rhode Islanders is this: I know that you work hard for your paychecks, and for your tax dollars to be squandered is unacceptable. The Board's legal action was taken to rectify a grave injustice put upon the people of Rhode Island."
The State's suit claims:
The undisclosed risks included the express admission, made by 38 Studios’ directors and chief executives directly to these Advisors, and by 38 Studios’ own financial projections that were disclosed to the Advisors, that, even with the loan from the EDC, 38 Studios was undercapitalized by many millions of dollars and would not have nearly enough money to relocate to Rhode Island and complete Copernicus, and that, as a result of this cash shortfall, 38 Studios was likely to run out of money in 2012.
The EDC Board understood that 38 Studios’ capital requirements to complete Copernicus were approximately $75 million, and that the net proceeds to be lent to 38 Studios would be less than $75 million. Nevertheless, the EDC Board was also told that the net proceeds 38 Studios would receive, along with other sources of funds set forth in 38 Studios’ financial projections, “would provide necessary financing to relocate 38 Studios to Rhode Island, complete production of Copernicus, and capitalize the company’s growth and expansion in Rhode Island.” In fact, the Advisors knew or should have known that this was untrue, and that even if all of 38 Studios’ financial projections proved true, the net proceeds would not be sufficient to fund 38 Studios’ relocation to Rhode Island and completion of Copernicus.
Moreover, the State claims that the company and some of the other defendant's intentionally mislead Rhode Island and specifically the EDC as to how much investment it would take to build the company.
In his response, Schilling "admits that 38 Studios disclosed the Company's financial projections and financial needs to the EDC's representatives, the EDC and its representatives understood that 38 Studios capital requirements to complete production of Copernicus (not including the launch of Copernicus) were at least $75 million, the EDC and its representatives understood that the net proceeds to be lent to 38 Studios would be less than $75 million, and the EDC and its representatives knew that 38 Studios would need funding in addition to the net proceeds of the EDC's loan."
Moreover, Schilling denies the assertion made by the State that no members of the EDC Board "were experts in law, lending, video gaming, or economic development."
Schilling, former Red Sox great and founder of 38 Studios, was financially crushed by the failure of his gaming company and recently said in an interview with the Boston Globe that he suffered a heart attack due to the stress tied to the collapse of the company and the loss of tens of millions of dollars of his own personal wealth.
One of Providence's most prominent law firms, Adler Pollock & Sheehan, served as counsel to the EDC board at the time of the financing of 38 Studios and during the collapse of the gaming company. The law firm in the response to the suit filed by the State says the loss of millions was caused by Governor Chafee's actions -- who served then, and continues to serve, as Chairman of the EDC Board.
Adler Pollock & Sheehan said in the response, "By way of example only, at the express instruction of its Chairman and ex officio, Governor Lincoln Chafee, the Rhode Island Economic Development Corporation (EDC) failed and refused to even speak to, meet with, or engage representatives of 38 Studios in 2011 and early 2012 about restructuring the existing debt obligations of 38 Studios to EDC. Further, Governor Lincoln Chafee prohibited discussion of such issues by the EDC board. Such conduct constitutes a violation of EDC's obligations to act in good faith and deal fairly with its borrower and of its duty to mitigate damages."
Governor Chafee's office referred GoLocal's questions to attorney Max Wistow.
Former EDC Director Stokes' Places Blame Squarely on Chafee
"These actions, among others, by Governor Chafee and as Chair of the EDC Board forced 38 Studios into bankruptcy, breached its fiduciary duties owed by the Governor to the EDC and State of Rhode Island, breached the EDC's obligations of good faith and fair dealing with 38 Studios, and breached the EDC's obligations to mitigate its damages and ultimately the damages to the State of Rhode Island."
- Carcieri Accepts Responsibility for Approving Failed 38 Studios Deal
- EDC Buried in Legal Fees over 38 Studios
- GoLocal’s Coverage of 38 Studios is Featured on CBS Radio - Listen
- Insurance Policy Would Pay Back 38 Studios Bonds
- NEW: 38 Studios Auction Brings in $650k
- 38 Studios Bankruptcy Hearing Begins Today: Company Owes $150 Million
- 38 Studios Insiders Have Been Connected Since May 2009
- NEW: Feds No Longer Investigating 38 Studios
- NEW: Richard J. Land Named 38 Studios Receiver
- Questions Surround Speaker Fox’s Relationship with 38 Studios Insider
- Schilling has Invested ‘Majority of Money I’ve Earned in My Life’ in 38 Studios
- State Report: Gemma’s Investigation, Governor Carcieri & a 38 Studios Lawsuit
- Who Has Been Effective Responding to 38 Studios Crisis?
- Dan Lawlor: The Political 1% Need to be Held Accountable for 38 Studios
- EDC Buried in Legal Fees over 38 Studios
- GoLocalTV: Medieval Weapons and Software Auctioned off from Curt Schilling’s 38 Studios
- Is Curt Schilling’s 38 Studios Going Broke?
- NEW: 38 Studios Bankruptcy Case Moving to RI
- 38 Studios Bankruptcy: Executives Say Tax Credits Could have Saved Company
- 38 Studios Relocates Ahead of Schedule
- NEW: Hinckley Rips 38 Studios Deal
- NEW: Sasse Says ‘Zero Evidence’ 38 Studios Default Would Have Long-Term Harm
- RI State Report: Fung’s Governor Moves + 38 Studios Hearings
- Schilling’s 38 Studios Deal Hatched Earlier than Disclosed
- State Report: Hurricane Aftermath, the 38 Studios Lawsuit & House Oversight
- De Ramel Blasts Pacheco on 38 Studios
- EDC Never Discussed 38 Studios After September 2010
- GoLocalTV: Sen. DaPonte Says Senate Did Not Know About 38 Studios
- LISTEN: EDC Paid $40K to Bond Agencies for 38 Studios
- NEW: 38 Studios Defaulted on $1.125 Million
- 38 Studios Company-wide Layoff
- 38 Studios Scandal Could Spell Trouble for Incumbents
- NEW: Lawmakers Refute Speaker Fox’s Claims on 38 Studios
- NEW: Schilling’s 38 Studios Makes $1.125 Million Payment to EDC
- RICO, Fraud & Negligence Claimed in 38 Studios Lawsuit
- Schilling’s 38 Studios Lays Off Entire Staff—Taxpayers May Be Stiffed
- State Report: Problem Gambling, 38 Studios & Millions for Medicare
- Defaulting on 38 Studios Bonds May Not Hurt State Finances
- EXCLUSIVE: O’Neill Says Fox Lied About 38 Studios
- Guest MINDSETTER™ Dr. Edward Mazze: 10 Questions for 38 Studios
- LISTEN: Insurance Covers 38 Studios Bonds + Who’s Hot & Who’s Not
- NEW: Binder Rips Fox on 38 Studios; Taveras Endorses Fox
- 38 Studios Debacle - A Timeline
- 38 Studios Secret Documents - See Copies
- NEW: Meeting Notes Show Fox, Paiva-Weed Pushing for 38 Studios
- NEW: Schilling’s 38 Studios is Bankrupt
- Rep O’Neill Criticizes Fox & Superman Plan - Similar to 38 Studios
- Special 920 WHJJ Radio Report: 38 Studios
- State Report: Speaker Fox’s Battle, Tax Amnesty & the 38 Studios Debacle
- Does Carcieri’s 38 Studios Legacy Hurt Fung?
- EXCLUSIVE: U.S. Attorney Investigating Curt Schilling’s 38 Studios
- House Leadership Scrambles for Budget Vote on 38 Studios Provision
- LISTEN: O’Neill Says Fox Lied About 38 Studios
- NEW: Block Says Superman Building Has All the Makings of 38 Studios
- NEW: Chafee Supports Initial Ruling in 38 Studios Case
- 38 Studios Tried to Keep Public in the Dark, E-Mails Say
- NEW: Preview to 38 Studios $50 Million Game Released
- NEW: Schilling’s 38 Studios to Owe $395,000 Tax Bill in Providence
- Rhode Island EDC Paid $40K to Bond Agencies for 38 Studios
- Special Report 38 Studios: GoLocal on WHJJ Podcast
- State Sues Key 38 Studios Players—See the Complaint
- Arthur C. Schaper: 2013 So Far–38 Studios, Babysitters, and Guns
- Does Carcieri’s 38 Studios Legacy Hurt Fung?
- EXPERTS: State Should Consider Defaulting on 38 Studios Bonds
- INVESTIGATION: Secret Documents Reveal True Risks of 38 Studios
- Lawmakers Feel Duped by Schilling’s 38 Studios Deal
- NEW: Block Urges RI House Democrats To Stop 38 Studios Payment
- 38 Studios Debacle: Top Stories in RI in 2012
- 38 Studios: The More We Learn the Worse it Gets
- NEW: RIEDC Statement on 38 Studios
- NEW: Speaker Fox Backtracks on 38 Studios Comments
- Russell Moore: 38 Studios Taints RI House Budget
- State House Report: Death Penalty, Chafee’s Son & 38 Studios
- Wells Fargo Refuses to Discuss ‘Secret’ Cash from Curt Schilling’s 38 Studios
- BREAKING: Governor Chafee to Return Campaign Contributions from Defendants in 38 Studios Suit
- Don Roach: 38 Studios Was Never a Good Investment
- Few Lawmakers Voted Against Deal that Paved Way for 38 Studios
- Insider Lawyer Paid $232,000 as 38 Studios Went Belly Up
- Momentum Builds For 38 Studios Anti-Bailout Plan
- NEW: Brien Rips Speaker Fox on 38 Studios
- 38 Studios Fallout—What Next?
- NEW: Curt Schilling’s 38 Studios has Insufficient Funds in Bank Account
- NEW: RISC Opposes Any Bailout for 38 Studios
- New RIPEC Report: RI Begins Post-38 Studios Recovery
- Russell Moore: Don’t Pay 38 Studios Bonds
- State Report: 38 Studios Debacle, Unemployment Dips & Pot Dispensaries
- Who Created the 38 Studios Deal?
- Bonds Sold for 38 Studios Deal
- E-Mails Reveal 38 Studios’ Desperate Attempts to Secure Tax Credits
- Future Remains Uncertain for Schilling’s 38 Studios
- Insiders Had Hands All Over Schilling’s 38 Studios Deal
- NEW: 38 Studios Assets to Be Sold at Two Auctions
- NEW: Chafee Releases Video on 38 Studios Lawsuit
- 38 Studios Insider Gets $625k in New Film Tax Credits
- NEW: EDC takes No Action on 38 Studios
- NEW: Rhode Island Gets Back $713K from 38 Studios Video Game Sales
- PolitiFact Fraud - Projo Changes Its Truth-O-Meter Score on 38 Studios
- Schilling Claimed 38 Studios Would Create Over 1,500 Jobs
- State Report: 38 Studios, Legislative Raises & Casino Gaming
- Who Fought Against the 38 Studios Deal?