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Friday, January 03, 2014

Polygon: SEC serves subpoena related to 38 Studios lawsuit

The U.S. Securities and Exchange Commission subpoenaed the Rhode Island Commerce Corporation in December for information related to its $75 million loan guarantee to 38 Studios, The Providence Journal reports.

A pair of attorneys confirmed the subpoenas, which requested “depositions and exhibits related to the state’s lawsuit against former ballplayer Curt Schilling,” according to the publication. Shechtman Halperin Savage’s Thomas E. Carlotto, general counsel for the RICC, said that the December subpoena was sent directly to Cohen & Gresser, a law firm that the Rhode Island Commerce Corporation hired in response to an SEC inquiry. Documents obtained last year by WPRI revealed the SEC’s investigation and Cohen & Gresser’s involvement.

Tripon Posted: January 03, 2014 at 01:10 PM | 11 comment(s) Login to Bookmark
  Tags: curt schilling

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   1. RoyalsRetro (AG#1F) Posted: January 03, 2014 at 03:17 PM (#4629371)
It used to be a company could squander $75 million in public money and the government would stay off your back. Thanks a lot Obama.
   2. valuearbitrageur Posted: January 03, 2014 at 04:14 PM (#4629433)
Startups mis-spend tens of millions on poorly conceived products every day, rarely is a lawsuit filed because the investors and their partners are willing to shoulder the risks of a startup failing in return for outsized rewards when they succeed.

This is just an example of how government monies should never be invested in private businesses, too much acrimony over failures, finger pointing, and often shadiness in how the businesses are selected for the windfall.
   3. madvillain Posted: January 03, 2014 at 04:24 PM (#4629443)
This is just an example of how government monies should never be invested in private businesses, too much acrimony over failures, finger pointing, and often shadiness in how the businesses are selected for the windfall.


Unfortunately many states, such as my home state, Michigan, are so desperate for business (such as Michigan's courting of film industry) that they are willing to offer extreme incentives out of sheer desperation. It's a race to the bottom imo and just as foreign outsourcing has hurt the American working class so too does this. Reading up on the film industry in Michigan it seems that the revenue lost through the tax incentives was actually greater than the total revenue generated by the industry itself, sure some jobs were created, but they were temporary and in the meantime the state's tax base continued to decline.
   4. Publius Publicola Posted: January 03, 2014 at 04:47 PM (#4629460)
This is just an example of how government monies should never be invested in private businesses, too much acrimony over failures, finger pointing, and often shadiness in how the businesses are selected for the windfall.


What if the product(s) is needed by the government itself, and the marketplace has failed to provide it?
   5. Swedish Chef Posted: January 03, 2014 at 04:57 PM (#4629470)
What if the product(s) is needed by the government itself, and the marketplace has failed to provide it?

If you need a new fighter jet or something, you write a gigantic pile of documentation specifying your needs and put it out to tender. Won't help against getting skinned, but on the bright side you can make sure that the "winning" bidder is miserable too.
   6. The Piehole of David Wells Posted: January 04, 2014 at 03:19 PM (#4630065)
If you need a new fighter jet or something, you write a gigantic pile of documentation specifying your needs and put it out to tender. Won't help against getting skinned, but on the bright side you can make sure that the "winning" bidder is miserable too.


Most government contracts that go out to private companies have very specific language stating that if the company fails to deliver the product they must return all of the money. It's usually not a bad deal for the government in that sense since they're covered. Where they fail is that they WAY overpay for goods and services because of the rules that they themselves have designed to ensure their protection.

As to 38 Studios, the RI government wasn't buying a role-playing game so they weren't paying for a product. They were trying to capitalize on their proximity to Silicon Alley/Route 128 and to convince companies to move to RI. The loan was an investment designed to attract other tech companies. That they picked 38 Studios just shows that they had no idea how to go about doing that.
   7. Publius Publicola Posted: January 04, 2014 at 04:57 PM (#4630119)
That might work for procurement contracts but what about R&D contracts, where there is no guarantee of success? It's unfair to sue the contractor in a situation like that, when a best effort was put forth but things just didn't work out

This seems to be the case with 38studios. The state just made an unwise investment decision, and probably did a poor job of overseeing performance. It must have been apparent early on that failure was looming.
   8. spike Posted: January 04, 2014 at 06:04 PM (#4630166)
I will be very interested to see if the documents and depositions verify Schilling's stated level of investment.
   9. ptodd Posted: January 04, 2014 at 09:21 PM (#4630277)
I will be very interested to see if the documents and depositions verify Schilling's stated level of investment.


I am also interested in his current financial situation. I find it hard to believe he was foolish enough to bet his families financial security on a start up business. I wonder if he was able to protect a significant part of his wealth in some fashion, via a foundation or transfer of assets to a family member? Of course, many corporations go bankrupt and leave their creditors in the dust while the owners personal wealth is protected. That's the beauty of being a corporate citizen, bankruptcy protection and paying tax on profit and not income.
   10. The Piehole of David Wells Posted: January 05, 2014 at 09:44 AM (#4630412)
That's the beauty of being a corporate citizen, bankruptcy protection and paying tax on profit and not income.


Corporate citizens pay taxes? Someone better tell GE.
   11. Publius Publicola Posted: January 05, 2014 at 10:24 AM (#4630421)
Even I his entire fortune is gone, he'll still have his pension to live on. He might not be a 0.1%er anymore but hel'll still be quite comfortable.

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