SEC Investigating Rhode Island's $75 Million Loan to 38 Studios

September 11, 2013 - James Fudge

The Rhode Island Economic Development Corporation has confirmed with several outlets that the U.S. Securities and Exchange Commission (SEC) is actively investigating the $75-million taxpayer-backed loan given to Curt Schilling's now-bankrupt video-game company 38 Studios.

The EDC confirmed with Providence News channel WPRI and the Providence Journal that the SEC has had an active investigation into the loan deal and that the state agency hired lawyers from Manhattan law firm Cohen & Gresse to deal with the situation because of their expertise and familiarity with the agency.

The EDC declined to comment in detail about the investigation beyond that. WPRI claims the firm was hired to answer questions from SEC staff over a five-month period last fall and winter, according to documents obtained by the news outlet under the Access to Public Records Act. The EDC paid the firm $102,615 in five installments between Feb. 27 and March 31, documents also showed. The money was for work performed last October and November, which maybe an indication of when the SEC probe began.

The EDC "doesn’t discuss ongoing matters related to 38 Studios and maintains a level of confidentiality as requested by the SEC," EDC spokeswoman Melissa Czerwein told

Czerwein told Bloomberg that she wasn't authorized to share details of the SEC investigation.

"We are maintaining confidentiality at the request of the SEC," she said, adding that the EDC has a policy of not commenting on investigations while they are still under way.

Details on the SEC investigation beyond that were not disclosed, and most state officials were unaware that an investigation was initiated by the SEC. Some redirected requests for comments back to the EDC or cited pending litigation against 38 Studios as a reason to refuse comment.

38 Studios went bankrupt in May 2012, leaving Rhode Island taxpayers with a $100 million debt in principal and interest due on the $75 million in bonds. Last week, the EDC board agreed to a proposal by the federal bankruptcy trustee to use up to $150,000 to conduct his own investigation of the company's former officers and directors. This investigation was in addition to a lawsuit the state filed earlier this year against founder Curt Schilling and 13 other defendants, including former EDC executive director Keith Stokes and former legal counsel Robert I. Stolzman.

Meanwhile, Rhode Island lawmakers on the House Committee on Oversight are set to meet Wednesday afternoon to continue to review documents relating to the loan guarantees given to 38 Studios under the state's Job Creation Guaranty Program. The oversight committee has no subpoena powers to call in witnesses.


Re: SEC Investigating Rhode Island's $75 Million Loan to 38 ...

I still wonder if this would get nearly the same amount of investigation if it was a stadium, casinio,  waterfront development project, or any number of other bad loans to private companies that local governments make all the time.

These things only seem to actually get traction when some political party wants to take down an opponent or some other sound byte ready hook is in play.

Re: SEC Investigating Rhode Island's $75 Million Loan to 38 ...

38 Studios is the train wreck that keeps on happening.

---You are likely to be eaten by a Grue.

Re: SEC Investigating Rhode Island's $75 Million Loan to 38 ...

Correct me if I'm wrong, but wasn't this the company that had the state trying to collect it's entire loan payment only weeks after their first, and only, game had been released?

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