Rhode Island Taxpayers To Foot $2.4 Million 38 Studios Bill
The state of Rhode Island will pay out $2.4 million to investors holding 38 Studios bonds. This will mark the first time that the state will pay out interest out of public funds.
This payout follows a November 1 disbursement totaling $7.4 million in principal and $2.7 million in interest. Those funds were drawn from a reserve contingency crated when the $75 million economic development funding was awarded to the now-defunct 38 Studios.
The 38 Studios ordeal has been going on for nearly two years. The developer laid off staff in May 2012 following the release of its only game, Kingdoms of Amalur: Reckoning.
Bankruptcy filings began in June of that year and were followed with allegations that 38 Studios mislead state officials. Rhode Island considered abandoning its debt, but has continued to pay out despite a bill that would have ended payments.
The SEC is currently investigating the circumstances of the original loan. The Rhode Island House Oversight Committee is also requesting answers from 38 Studios founder Curt Schilling and government officials involved in the deal.
It was inevitable that Rhode Island’s taxpayers were going to suffer for the mismanagement of both 38 Studios and the state economic development agency. Defaulting on the loan will make it harder to pass bonds in the state, and paying out will drain public resources for a private business' collapse. There isn’t a good solution here for Rhode Island, but there is a lesson about public investment in volatile business.