RI bankruptcy trustee wants to explore bringing claims against former 38 Studios officials
Sep 1, 2013 / 10:49 am
PROVIDENCE, R.I. - The federal bankruptcy trustee in the 38 Studios case wants to explore opening a second legal front in the bid to recoup losses from the failed $75 million state investment in former Red Sox pitcher Curt Schilling's defunct video game company.
The state Economic Development Corp. last week voted to allow the trustee to use up to $150,000 in assets recovered from the company to investigate potential claims against its former officers and directors and other parties, Thomas Carlotto, an attorney for the agency, said. He said it could be a "fruitful and beneficial" course of action.
"There is the potential that he can bring in additional monies," Carlotto said.
The EDC already is suing Schilling, other company executives and some of its own former officials over the $75 million loan guarantee the EDC board approved in 2010 to lure 38 Studios from Maynard, Mass., to Providence.
The company filed for bankruptcy last year. The state is now on the hook for about $90 million related to the deal, which was financed with bonds.
To move ahead, Carlotto said, the trustee also needs the approval of The Bank of New York Mellon, the bond trustee, and the bond insurer.
Jeoffrey Burtch, who serves as the bankruptcy trustee, did not respond to messages seeking comment.
Sarah Heaton Concannon, one of Schilling's attorneys, declined to comment on potential claims by the trustee. She called the EDC's claims "entirely baseless."
The EDC cleared a major hurdle last week when Superior Court Judge Michael Silverstein ruled against most of the defendants' arguments to dismiss all or parts of the lawsuit.
The suit names 14 individuals or firms â€” including Schilling, former EDC Executive Director Keith Stokes and former EDC Deputy Director Michael Saul â€” and alleges fraud, misrepresentation and breach of fiduciary duty, among other things. It says the defendants knew 38 Studios would run out of money by 2012 but concealed that from the board.
The judge said in his ruling the EDC cannot seek to recoup a $75 million loss â€” at least not immediately â€” because it hasn't lost that much; the bond payments are being made over time. But Silverstein said the agency may have a claim for future losses if and when the General Assembly approves the spending. So far, the legislature has signed off only on an initial $2.5 million bond payment.
State lawmakers are also looking into the deal, including whether it was properly vetted and whether the EDC provided adequate oversight. The House Oversight Committee met in August to review emails and other documents from the EDC about the process that led to the loan guarantee.
Committee Chairman Michael Marcello, D-Scituate, said he intends to have more hearings. He plans to invite figures involved in the deal to testify but said it's too early to say who the committee wants to talk to.
Associated Press writer David Klepper contributed to this article.
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