State sues former Red Sox pitcher over failed loan

Rhode Island says Curt Schilling and others committed fraud

Rhode Island filed suit yesterday against a former Boston Red Sox pitcher, claiming he and others committed fraud and engaged in racketeering and conspiracy by misleading the state into approving a $75 million loan guarantee for a video game company.

Filed in Rhode Island Superior Court, the suit claims that pitcher Curt Schilling and other executives attached to 38 Studios knew the company was in financial trouble but concealed that information from Rhode Island’s Economic Development Corp. (EDC), which made the final decision to back the loan. 38 Studios ran out of money earlier this year, and the company filed for bankruptcy in June.

The suit also claims that the former executive director of the EDC, Keith Stokes—who is named as a defendant—was aware of 38 Studios’ financial problems and recommended to approve the loan anyway. Others named in the suit include Michael Saul, a former top official at the EDC; two law firms that worked with the agency (Adler Pollock & Sheehan, and Moses Afonso Ryan); a financial adviser for the state; Wells Fargo Securities and Barclays Capital, investment banks the EDC hired to assist in the deal; and an insurance company for 38 Studios.

"My message to Rhode Islanders is this: I know that you work hard for your paychecks, and for your tax dollars to be squandered is unacceptable," Rhode Island Governor Lincoln Chafee said in a video statement. "The [EDC's] legal action was taken to rectify a grave injustice put upon the people of Rhode Island."

Read  more about this story on ESPN and Thomson Reuters.

For more recent InsideCounsel stories about fraud, see:

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Alleged Broadway fraud involved bogus investors and a fake death

 

Contributing Author

Cathleen Flahardy

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