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Rhode Island sues Curt Schilling’s game studio over $75 million loan

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Curt Schilling (Credit: Getty Images)

Former Red Sox ace Curt Schilling's bad luck in the video game industry didn't end with the closure of his development studio. In fact, it could be about to get a lot worse.

The state of Rhode Island is suing the founder of 38 Studios -- and several others -- over the $75 million loan it made to the company, saying they "knew or should have known … that 38 Studios was destined to fail."

While Schilling is the most prominent defendant, the state cast a wide net, also naming CEO Jennifer MacLean, former Rhode Island Economic Development Corporation executive director Keith Stokes (who oversaw the negotiations and was fired when 38 Studios shut down), and several other 38 Studios executives and EDC employees/lawyers in the suit. Wells Fargo Securities, Barclays Capital, First Southwest, and Starr Indemnity and Liability are also mentioned.

"My message to Rhode Islanders is this: I know you work hard for your paychecks, and for your tax dollars to be squandered is unacceptable," said R.I.Gov. Lincoln Chafee, in a video message to constituents. "The board's legal action was taken to rectify a grave injustice put upon the people of Rhode Island."

The state maintains that the game developer was aware of "risks that [were] not disclosed" to the state, essentially accusing the studio of fraud. Specifically, it says, "38 Studios was undercapitalized by many millions of dollars and would not have nearly enough money to relocate to Rhode Island and complete Copernicus [the company's planned online title], and that, as a result of this cash shortfall, 38 Studios was likely to run out of money in 2012."

Chafee has been a long time opponent of the loan -- even before the company's problems were known -- and he was consistent in his criticism as 38 Studios imploded. A recent auction to raise money to partially repay that loan raised just $830,000.

While this sort of suit was inevitable, legal experts say the governor might not get what he wants.

"Practically speaking, I don't think they'll recover anything," Law of the Game attorney Mark Methenitis told Joystiq.  "Without commenting on the merit of the claims, I would think this is part of a common strategy to 'sue those who have deep pockets,' since any judgment against 38 Studios worthless at this point."

Schilling's company released just one game, the role-playing game Kingdoms of Amalur: Reckoning, which performed modestly at retail when it launched back in February.

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