State of Rhode Island Finally Gets Around to Suing 38 Studios

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Posted by Alex (2175 posts) -

And the indignities for 38 Studios just keep on coming.

Despite the recent cleansing of all 38 Studios owned property via auction, the state of Rhode Island is apparently not quite done wringing whatever cash it can out of the failed studio. Today, Rhode Island governor Lincoln Chafee released a statement (via the above YouTube video) declaring that the state would be filing a lawsuit against 38 in an attempt to recoup as much of the $75 million loaned to the studio as it can.

The lawsuit specifically names 38 brass like Curt Schilling, Jennifer MacLean, Richard Wester, and Thomas Zaccagnino, as well as former Rhode Island Economic Development Corporation head Keith Stokes, financiers Wells Fargo Securities, Barclays Capital, and more.

The complaint (which can be read in full here) alleges that Stokes, along with the rest of the EDC board, never bothered to properly investigate 38 Studios' actual ability to finish its Project Copernicus MMO, which it had been tasked to do. Additionally, the suit claims that 38 Studios heads directly misrepresented numerous risks inherent to the deal, as well as more than $500,000 in hidden commissions being earned by Wells Fargo.

According to the suit, "Wells Fargo secured its hidden commissions by concealing these facts from the EDC Board, notwithstanding that the undisclosed information showed that the loan was not in the interests of the EDC and probably would never be paid back."

This lawsuit was perhaps inevitable. Chafee has been beating the drum of financial recovery ever since this debacle began, and the money recovered from the liquidation of 38's assets, as well as any eventual money from the sale of the developer's Amalur IP, wouldn't be nearly enough to cover the money lost by the state in the deal. The auctions themselves netted just about $830,000, and the Amalur IP was recently valued at about $20 million. That's a long way to go.

We'll update this story if any responses from the defendants in the suit become available.

Staff
#1 Posted by Alex (2175 posts) -

And the indignities for 38 Studios just keep on coming.

Despite the recent cleansing of all 38 Studios owned property via auction, the state of Rhode Island is apparently not quite done wringing whatever cash it can out of the failed studio. Today, Rhode Island governor Lincoln Chafee released a statement (via the above YouTube video) declaring that the state would be filing a lawsuit against 38 in an attempt to recoup as much of the $75 million loaned to the studio as it can.

The lawsuit specifically names 38 brass like Curt Schilling, Jennifer MacLean, Richard Wester, and Thomas Zaccagnino, as well as former Rhode Island Economic Development Corporation head Keith Stokes, financiers Wells Fargo Securities, Barclays Capital, and more.

The complaint (which can be read in full here) alleges that Stokes, along with the rest of the EDC board, never bothered to properly investigate 38 Studios' actual ability to finish its Project Copernicus MMO, which it had been tasked to do. Additionally, the suit claims that 38 Studios heads directly misrepresented numerous risks inherent to the deal, as well as more than $500,000 in hidden commissions being earned by Wells Fargo.

According to the suit, "Wells Fargo secured its hidden commissions by concealing these facts from the EDC Board, notwithstanding that the undisclosed information showed that the loan was not in the interests of the EDC and probably would never be paid back."

This lawsuit was perhaps inevitable. Chafee has been beating the drum of financial recovery ever since this debacle began, and the money recovered from the liquidation of 38's assets, as well as any eventual money from the sale of the developer's Amalur IP, wouldn't be nearly enough to cover the money lost by the state in the deal. The auctions themselves netted just about $830,000, and the Amalur IP was recently valued at about $20 million. That's a long way to go.

We'll update this story if any responses from the defendants in the suit become available.

Staff
#2 Posted by xdaknightx69 (450 posts) -

75?

#3 Posted by nbadger (4 posts) -

Wow $75. Seems a bit ott

#4 Posted by Pyroph (23 posts) -

Wonder how much Schilling even has left now.

#5 Posted by Goggen240 (22 posts) -

The auctions themselves netted just about $830,000, and the Amalur IP was .

Huh?

#6 Posted by The_Nubster (2149 posts) -

How much was the Amalur IP? Otherwise, really shitty for these guys. It's kind of painful to know how this studio and their projects went to shit so quickly.

#7 Posted by rye256 (116 posts) -

@Goggen240 said:

The auctions themselves netted just about $830,000, and the Amalur IP was .

Huh?

Also confused on this point.

#8 Posted by CrossTheAtlantic (1145 posts) -

Man, the nightmare for all involved with this seems never ending.

#9 Posted by TurboMan (7547 posts) -
#10 Posted by DougQuaid (1274 posts) -

@Pyroph said:

Wonder how much Schilling even has left now.

I remember listening to an interview he did with ESPN after everything went bad back in May. He pretty much said that he was almost completely tapped out in terms of his savings from his baseball career.

#11 Posted by Oginam (447 posts) -

Fuck Chafee. Vote Gallup.

#12 Posted by laserbolts (5322 posts) -

Amalur is worth 20 million? How? I can shit out more interesting worlds than that.

#13 Posted by Hailinel (24842 posts) -
@rye256

@Goggen240 said:

The auctions themselves netted just about $830,000, and the Amalur IP was .

Huh?

Also confused on this point.

I think Alex the whole bottle.
#14 Posted by JasonR86 (9710 posts) -

I don't particularly like either side. 38 Studios clearly fucked up and mismanaged their company. They left a ton of employees out to dry. But how many times can you kick a dead horse?

#15 Posted by kerse (2114 posts) -

Is there anyone even left to sue? Isn't the company just one guy now or something?

#16 Posted by AlisterCat (5575 posts) -

That video seems like it was filmed in 1995.

#17 Posted by MTSaSquatch (36 posts) -

I thought necrophilia was illegal? because chafee has been humping the corpse of 38 for awhile now and this.... goes to a disturbing level for this analogy.

On a different note, is this on YouTube as a warning to other developers or because they've already auctioned off 38s phones?

... yes I know why it's on youtube

#18 Posted by HighPriest (100 posts) -

@AlisterCat said:

That video seems like it was filmed in 1995.

That is because it is still 1995 in Rhode Island.

#19 Posted by DiGiTaL_SiN (1789 posts) -

The state will clearly lose this case; everything Rich Gallup does is legit, he is after all too legit to quit.

#20 Posted by Ramone (2967 posts) -

38 done fucked up.

#21 Posted by VisariLoyalist (2993 posts) -

Damn so I guess this must be a big political thing for such a small state

#22 Posted by Jack268 (3387 posts) -

Well that sucks for them. Amalur could have been pretty damn great, it was just lacking in a lot of areas. I think it's unfair to see the studio go down so spectacularly for only one failure. I guess that's what happens in a world where video games are this expensive to produce.

#23 Posted by joeshabadoo (251 posts) -

can you hear the beating of the drums?

this sum fukked shit

#24 Posted by believer258 (11914 posts) -

@Hailinel said:

@rye256

@Goggen240 said:

The auctions themselves netted just about $830,000, and the Amalur IP was .

Huh?

Also confused on this point.

I think Alex the whole bottle.

How is it confusing? The auctioning off of 38 Studio's stuff got the State of Rhode Island $830,000. At least that's what it seems like it says to me.

#25 Edited by JoeyRavn (4974 posts) -

75 million dollars.

<>

#26 Posted by I_Stay_Puft (3401 posts) -

Giggity Giggity Goo.

#27 Posted by peritus (1013 posts) -

@JasonR86 said:

I don't particularly like either side. 38 Studios clearly fucked up and mismanaged their company. They left a ton of employees out to dry. But how many times can you kick a dead horse?

Nintendo's been doing it for years. Yes, im looking at you, Mario.

Im kidding, i actually like mario games.

More on topic, this doesn't surprise me. When there is money involved people get vicious.

#28 Posted by Kidavenger (3556 posts) -

I find it absolutely hilarious that GOVERNMENT is suing BUSINESS for being irresponsible with money; I can hardly wait for the day we can sue government for all the embarrassing wastes of taxpayer money they manage on a consistent ongoing never ending basis.

#29 Posted by xite (899 posts) -

Oh boy.

#30 Posted by Hailinel (24842 posts) -
@believer258

@Hailinel said:

@rye256

@Goggen240 said:

The auctions themselves netted just about $830,000, and the Amalur IP was .

Huh?

Also confused on this point.

I think Alex the whole bottle.

How is it confusing? The auctioning off of 38 Studio's stuff got the State of Rhode Island $830,000. At least that's what it seems like it says to me.

Read the whole sentence. "the Amalur IP was ."

Was what?
#31 Posted by rye256 (116 posts) -

@believer258: It was confusing because the sentence was not finished. It is edited now and currently says:

"The auctions themselves netted just about $830,000, and the Amalur IP was recently valued at about $20 million."

I was confused because when I posted the sentence ended "Amalur IP was ." which seemed incomplete.

#32 Posted by Razorlution (186 posts) -

@DougQuaid said:

@Pyroph said:

Wonder how much Schilling even has left now.

I remember listening to an interview he did with ESPN after everything went bad back in May. He pretty much said that he was almost completely tapped out in terms of his savings from his baseball career.

I wouldnt believe that for a second. No one would use their own fortune on something like this, even Schilling isnt that stupid.

#33 Posted by Brodehouse (9951 posts) -

If they actually wanted to 'protect their taxpayers money' they shouldn't have done everything in their power to take the company apart and thus ensure there was absolutely no opportunity of seeing revenue. It's one thing to throw good money after bad, it's another thing to cost the state 75 million dollars so you can look like a big shot.

#34 Posted by ch3burashka (5083 posts) -

@Ramone said:

38 done fucked up.

From what I understand, everyone done fucked up, and now is trying to wash their hands of any guilt. Whether 38 could have finished and delivered a profitable MMO or not, the interference of government seemed to have had a significant influence.

#35 Posted by Awcko (52 posts) -

Talk about kicking them while they're down, how is the skeleton crew of a dead studio supposed to get that kind of cheddar?

#36 Posted by Mr_Skeleton (5144 posts) -

How did they get to 75 million?!

#37 Posted by downtime58 (224 posts) -

Maybe I'm misunderstanding the issue, but it sounds like the government is suing 38 studios because it's investment didn't pan out. In other words, had 38 Studios been a success there would have been no lawsuit.

So fundamentally, this lawsuit is saying: If I make a bad investment in a company without doing my own due diligence, I can just sue the company I invested in and absolve myself of any blame for making a bad decision.

I wish it were that easy for the rest of us.

#38 Posted by Christoffer (1823 posts) -

I'll admit it was tough reading this story with all the sad headshaking I had to do.

#39 Posted by LAR (42 posts) -

I guess in a couple years we should expect to see the headline "New Governor of Rhode Island <insert name> adds former Rhode Island Governor Lincoln Chafee to 38 Studios Lawsuit" ;-)

#40 Posted by TheHumanDove (2523 posts) -

shieet

#41 Posted by Cold_Wolven (2220 posts) -

Well this pretty much ensures that from now on no company whether it be a game development studio or anything for that matter will want Rhode Island as an investor. The more this Governor chases this lawsuit the more he is shooting Rhode Island in the foot.

#42 Posted by Grilledcheez (3947 posts) -

So basically they would have gotten a much higher percentage of their money back if they had just given them a few million more and let them develop for one more year and put it out...GOT IT.

#43 Posted by kindgineer (2730 posts) -

Even though I do not agree with either side, this seems a bit dirty. I feel like both sides of the part (political and 38) made mistakes equal to one another and Rhode Island needs to atone for it's sins just as much as 38 did.

#44 Posted by iAmJohn (6120 posts) -

Anyone else get the feeling that Rhode Island would've been better off if they just gave Schilling the money?

#45 Posted by JesterPC238 (341 posts) -

As shitty as this situation is it will be fascinating to watch it play out. I can't really make an informed judgement on the issue because I don't know what the terms of the loan were, and it is clear that fault lies on both sides, but it seems like Chafee is turning this into a partisan political affair. Seems like 38 has been on his shit list since day one.

#46 Posted by Robinson (173 posts) -

@Brodehouse said:

If they actually wanted to 'protect their taxpayers money' they shouldn't have done everything in their power to take the company apart and thus ensure there was absolutely no opportunity of seeing revenue. It's one thing to throw good money after bad, it's another thing to cost the state 75 million dollars so you can look like a big shot.

exactly!

#47 Posted by PandaShake (388 posts) -

@Grilledcheez: I remember the last news I read about reckoning was that it didn't sell enough to break even. So who knows if the mmo is even close to being finished or if it'll even be profitable to run when it goes live since it'll have to thrive through reckoning's hype and fiction. Shit sucks, hopefully Rich is fine now.

#48 Edited by Supersoaker (78 posts) -

As a guy who used to live in Rhode Island, I'm not entirely sure that this isn't some ploy to look good for whatever reason. I'm not exactly sure if I'm on a side if any.

All I know is that there is a reason I left that god-forsaken state and got as far away from all of the people there as I possibly could (which granted is probably not far away enough). For now though, I don't have to worry that in 15 years my kids school won't just be a graveyard of dead extracurricular activities and a selection of candidates that are literally walking the fine line between complete idiot or corrupt asshole.

#49 Posted by aceofspudz (938 posts) -

@Grilledcheez said:

So basically they would have gotten a much higher percentage of their money back if they had just given them a few million more and let them develop for one more year and put it out...GOT IT.

In RI's defense, I bet this is what the investors behind Duke Nukem Forever were telling themselves.

#50 Posted by cikame (1002 posts) -

I, by nature, want to defend the underdog... but i don't see any other developers borrowing money from government in such enormous quantities.

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