Schilling was named on Thursday in a lawsuit that targets both him and state Economic Development Center (EDC) Director Keith Stokes. The state is seeking damages after Schilling’s company, 38 Studios, "squandered" a $75 million taxpayer-guaranteed loan and filed for bankruptcy less than two years after receiving the money.
The news came in a statement by Rhode Island Governor Lincoln Chafee early on Thursday morning, just one day before the two-year anniversary of the deal’s closing in 2010:
My message to Rhode Islanders is this, Chafee said. I know 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.
Watch the Governor’s full statement on November 1, 2012 below.
Additionally, various banks and law firms were also named as defendants in the suit due to their involvement in structuring the deal. Wells Fargo Securities, Barclays Capital, First Southwest Co., Starr Indemnity and Liability Co. and Adler Pollock and Sheehan were the named parties.
You can read the entire complaint from the Rhode Island Economic Development Corporation in PDF form here.
38 Studios failed because of risks that had not been disclosed to the EDC board, but were or should have been known by all of these advisors, and by 38 Studios, and defendants Schilling, Zaccagnino, Wester and MacLean, the 98-page complaint says.
In summary, the 38 Studios company failed to disclose the economic hardships it was going through until May 2012, when the time came to begin making repayments on the loan. It also allegedly drastically and irresponsibly squandered Rhode Island taxpayer money, which has prompted this lawsuit by the state.