Did Curt Schilling’s game company know they would run out of money?

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May 20, 2014

Emails obtained by WPRI today suggest that former executives at Curt Schilling's failed video game company 38 Studios knew that the $75 million loan they obtained from the state of Rhode Island in 2010 would not be enough to complete development on MMO Project Copernicus.

Former 38 Studios vice chairman Thomas Zaccagnino said in an email dated July 1, 2010: "I really do not think we should highlight the fact that we might be under capitalized…wont go over well with the staff or board."

This email was sent to 38 Studios CEO Jen MacLean, 38 Studios Chief Financial Officer Rick Wester, and Michael Corso, a tax-credit broker. (All but Corso have since been sued by the state of Rhode Island, along with other architects of the loan.) It was at this time that 38 Studios officials were reviewing the proposed terms of the $75 million loan from the Rhode Island Economic Developer Corporation (EDC), which it would officially receive later that month.

Zaccagnino's email was sent in response to a message from MacLean, who she said she was concerned that the EDC was not planning to give 38 Studios the entire $75 million. MacLean told Zaccagnino, Wester, and Corso that the developer was "not expecting to lose as much as $10MM net." WPRI notes that she also explained that she was uncomfortable telling Rhode Island officials that proceeds from the loan would be enough for 38 Studios to finish Project Copernicus.

In Rhode Island's lawsuit against 38 Studios, the state argues that the developer knew or should have known that the $75 million loan would not have been enough to finish the game. The crux of the lawsuit is whether or not then-governor Don Carcieri and the EDC were intentionally misled about the state of 38 Studios' finances when they agreed to give the studio the loan, which brought the company from Massachusetts to Rhode Island.

Sworn affidavits dated October 2012 have Carcieri saying he believed that the $75 million loan, "together with other cash available or to become available to 38 Studios...would be sufficient to fund" Project Copernicus to completion. Three EDC board members also said in affidavits that they believed 38 Studios would have enough capital to finish the game.

But not all agree. A lawyer for former EDC executive director Keith Stokes, who was involved in the 38 Studios deal and is now a defendant in the lawsuit, said in court documents last year that, “The [EDC] Board was acutely aware that the capital needs of 38 Studios where [sic] in excess of $125MM as acknowledged in the 2010 EDC Inducement Resolution[.] The Board also knew that the net proceeds of the EDC Loan would be less than $75MM."

The 38 Studios vs. Rhode Island case is expected to head to trial, but there's no word on when it will begin. Schilling recently revealed that he has cancer. Last month, he completed his last round of chemotherapy, according to his daughter.