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Schilling’s 38 Studios Lays Off Entire Staff—Taxpayers May Be Stiffed

Friday, May 25, 2012

 

Rhode Island taxpayers may be stuck covering the $75 million tab left by former Red Sox star Curt Schilling’s collapsing video game company after the company was forced to lay off all of its more-than 300 employees in Providence and Maryland.

The announcement came Thursday, less than two week after state officials confirmed 38 Studios had defaulted on a $1.125 million loan payment to the state’s Economic Development Corporation (EDC). The company made the payment last Friday, but has been unable to pay its employees since May 1.

Schilling moved his company to the state from Massachusetts after EDC board members voted 8-1 to give38 Studios a $75 million loan guarantee in 2010. The deal was made possible thanks to a last-minute piece of legislature that increased the amount the EDC could award businesses from $50 million to $125 million – the exact amount Schilling needed.

Employees are expected to meet with the Department of Labor and Training (DLT) today to discuss their options for filing for receiving jobless benefits. The gaming and tech industry have already set up a Twitter hash tag (#38jobs) to help point laid off workers to new job opportunities.

The layoffs appear to be the fatal blow for a company that many considered a risky venture to begin with. During his 2010 gubernatorial campaign, Governor Lincoln Chafee threatened to sue then-Governor Don Carcieri if Schilling’s company went belly up.

But Chafee has said he and Schilling “buried the hatchet” and he became the company’s “biggest cheerleader” once it opened its doors in downtown Providence in April 2011. Despite the support, Chafee indicated this week that he was opposed to bailing out the company and was against offering tax credits if the company couldn’t line up private investors. He has called the company’s first game, “Kingdom of Amalur: Reckoning,” a “flop” even though it sold 1.2 million copies.

Still, critics have charged that Chafee and members of the EDC board failed to monitor its investment even though the company was burning through $4 million per month and failing to find private investors. On Thursday, GoLocalProv reported that the EDC board never discussed the finances of the Schilling’s company after September 2010.

In addition to the layoffs at the company, two members of the EDC board (vice chairperson Helena Foulkes and Stephen Lane) resigned and another two are expected to step away from their posts.

“I Just Feel Bad For Them”

The employees aren’t the only ones suffering the 38 Studios’ apparent demise. Chafee told Rhode Island Public Radio that local vendors have been contacting his office to explain that they haven’t been paid.

Linda Hawkins, a local photographer who has taken family photos for several employees at the company, said she learned through an e-mail that she wasn’t going to be paid. She claims an employee told her the company was, “dissolving before our eyes.”

“I just feel bad for them,” Hawkins said. “It’s not just the employees [that are hurt,] it’s the whole state.”

Hawkins said she won’t get rid of the photos and will work something out with the former employees, but noted that the company’s collapse could be damaging to many small businesses in Rhode Island.

“That’s my bread and butter,” she said. “That’s how I support my family.”
 

 

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