EDC authorizes trustee to pursue claims over 38 Studios

(Updated, 9 a.m.) Rhode Island leaders are prepared to allow 38 Studios LLC’s federal bankruptcy trustee to use assets salvaged from the defunct video game company to investigate claims against its former executives and architects of a failed $75 million state loan guarantee. More

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EDC authorizes trustee to pursue claims over 38 Studios

BLOOMBERG FILE PHOTO/SCOTT EELLS
THE R.I. ECONOMIC DEVELOPMENT CORPORATION has authorized the trustee overseeing the bankruptcy of Curt Schilling's former video gaming company, 38 Studios, to use assets recovered from the company to pursue claims against former company executives and government officials.
Posted 8/26/13

(Updated, 9 a.m.)

PROVIDENCE - Rhode Island leaders are prepared to allow 38 Studios LLC’s federal bankruptcy trustee to use assets salvaged from the defunct video game company to investigate claims against its former executives and architects of a failed $75 million state loan guarantee.

In a closed-door session Monday evening, The R.I. Economic Development Corporation’s board of directors authorized in principle the use of $150,000 by the trustee to explore potential legal action against “former directors, officers and others” tied to the company, EDC attorney Thomas E. Carlotto said.

To use any former 38 Studios funds, the trustee needs the consent of Bank of New York Mellon, which represents bondholders; the bond insurer, Assured Guaranty Ltd.; and the state.

Carlotto said no deal has been reached yet, but the EDC’s permission will allow negotiations to continue.

Rhode Island will likely insist on legal protections for any current state employees, but not any former employees, Carlotto said.

Carlotto said he does not know and could not speculate on what legal strategy trustee Jeoffrey Burtch, charged with recovering whatever he can for 38 Studios creditors, might take against those involved with the company founded by former Red Sox pitcher and current ESPN analyst Curt Schilling.

If he does sue former 38 Studios executives or state officials, Burtch would be following the EDC, which has a lawsuit pending against 14 people or organizations, including Schilling and its own former executive director, Keith W. Stokes.

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