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Curt Schilling's Video Game Company Files For Bankruptcy

PROVIDENCE, R.I. (CBS/AP) — Former Red Sox pitcher Curt Schilling's troubled video gaming company, lured to Rhode Island with a $75 million state loan guarantee two years ago, filed for bankruptcy protection on Thursday, and federal authorities have begun an investigation into the firm.

"This action comes after several weeks when the company has reviewed, considered and received the recommendations and advice with respect to potential avenues for relief that are currently available. After ongoing negotiations with the State of Rhode Island and potential investors and other interested parties, the Company has been unable to find a solution to the current stalemate," the company said in a statement.

The filing by Providence-based 38 Studios, which laid off its entire staff last month, was made in U.S. Bankruptcy Court in Delaware, where the company is incorporated as a limited liability corporation.

The company owes between $100 million and $500 million, while its assets are estimated at $10 million to $50 million, according to court filings.

A second filing was made by 38 Studios Baltimore, a separate limited liability corporation. It owes between $100 million and 500 million, and has assets of $500,000 to $1 million, the filings show.

Jim Martin, a spokesman for the U.S. attorney in Rhode Island, said his office had been in contact with the FBI and state police but didn't say exactly what it's investigating.

38 Studios was lured to Providence from Massachusetts in 2010 when Rhode Island officials offered a $75 million loan guarantee they said would bring hundreds of jobs and millions of dollars in tax revenue. The state is likely to be on the hook for some of the company's debts.

A message was left for Schilling.

The firm last month laid off nearly 300 employees in Providence and more in Maryland. That move came after 38 Studios was more than two weeks late on a $1.1 million payment to the state — the first indication, state officials have said, that the firm was in financial trouble.

Christine Hunsinger, a spokeswoman for Gov. Lincoln Chafee, on Thursday described the filing as expected.

"He was well aware that this was one of the possible outcomes," she said.

Hunsinger said she didn't immediately know what impact the company's bankruptcy filing would have on the state.

The state government recently selected an outside auditor to review the finances of Schilling's company.

Judy Chong, a spokeswoman for the Rhode Island Economic Development Corp., whose board approved the loan guarantee in 2010, did not immediately return a message seeking comment.

The executive director of the agency, along with several board members, resigned last month after the company's troubles came to light.


Associated Press writers Erika Niedowski, Laura Crimaldi and David Klepper contributed to this report.

(TM and © Copyright 2012 CBS Radio Inc. and its relevant subsidiaries. CBS RADIO and EYE Logo TM and Copyright 2012 CBS Broadcasting Inc. Used under license. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)

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