PROVIDENCE, R.I. (AP) — Most of a lawsuit claiming former Red Sox pitcher Curt Schilling and executives at his failed video game company duped the state's economic development agency into approving a $75 million investment can move forward, a Rhode Island judge ruled Wednesday.
Superior Court Judge Michael Silverstein's decision allows the Economic Development Corp. to proceed with its lawsuit against Schilling, former 38 Studios executives, former EDC officials and others. The suit alleges fraud, negligence, breach of fiduciary duty, racketeering and conspiracy and says the board was misled into approving a $75 million loan guarantee for the company in 2010.
38 Studios — named for Schilling's old jersey number — filed for bankruptcy last year, leaving the state on the hook for $112 million. About $90 million is outstanding.
With the decision, the EDC has cleared the first major hurdle in pursuing potential claims against Schilling and others. Among other things, the lawsuit claims the defendants knew the company would run out of money by 2012, but concealed that from the EDC board, which made the final decision to back the deal.
The agency had used the loan guarantee to lure 38 Studios from Maynard, Mass., to Rhode Island, which has struggled for years with a bad economy and high unemployment.
Gov. Lincoln Chafee, who opposed the deal before he took office and who serves as EDC board chairman, said he was "gratified" by the ruling.
"It allows the important claims to proceed and is a significant first step to recovering the taxpayers' losses," he said in a statement.
Jeffrey Schreck, who represents Schilling and others at 38 Studios, declined to comment. Schilling has previously called the lawsuit political and denied wrongdoing. He said at the time the suit was filed that the EDC's approval of the loan guarantee was made "with its eyes wide open and with full understanding of any risks." Schilling has accused Chafee of not doing enough to help 38 Studios stay afloat and publicly called him a "dunce of epic proportions."
The EDC sued in November, naming 14 defendants. Nine of those worked for the agency, including former Executive Director Keith Stokes and former Deputy Director Michael Saul, as well as its attorneys and financial advisers. Four of the defendants were executives or on the board at 38 Studios, including Schilling. The final defendant issued an insurance policy to 38 Studios.
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