The collapse of 38 Studios is one of the biggest political and economic scandals that has faced Rhode Island in recent years. According to many, the deal was doomed to fail from the start and could have been avoided if not for the blind ambition and heedlessness of state officials. The start-up company, headed by baseball star Curt Schilling, came to state officials promising hundreds of jobs for Rhode Islanders and speedy returns on their investment but were ultimately unable to fulfill these promises. If the people who secured this deal had paid attention to the facts about company and heeded careful warnings from the many professionals who advised against 38 Studios would have never been able to put Rhode Island taxpayers on the hook for $90 million. Curt Schilling is a household name in the baseball world and the pitcher who helped the Red Sox clench their first World Series title in 86 years. He was also an avid video game player who was interested in getting into the video game industry after his baseball career ended. Schilling first talked about starting a computer and video game production company in 2005 and started the company in 2006 out of an office space in Maynard, Massachusetts with his wife's uncle, CEO Brett Close, and 6 of his gamer friends. The company was named Green Monster Games, a name that Schilling insisted was not inspired by the Green Monster of Fenway Park. He brought in fantasy author R. A. Salvatore to help create his vision of a fantasy video game world. In 2007 the company name was changed to 38 Studios, after Schilling's jersey number when he played baseball. Schilling's plan for the company was, for its first project, to create a wildly successful massive multiplayer online game (or MMO for short).

This is known as the most difficult video game to create and takes twice as long to develop as single player video games. When he did not get the economic backing from private venture capitalists in Boston that he had hoped for, Schilling approached MA Governor Deval Patrick, requesting financial support from the state. Patrick's administration said “they couldn't make the numbers work” and refused to give 38 Studios the money they were asking for (Fisher).
Meanwhile, in Rhode Island, Republican Governor Don Carcieri was in over his head and struggling to find a way to bring the state out of its 12% unemployment slump (fourth worst in the nation) and massive debt. When running for governor, he relied on his experience as a business executive and made promises to turn around Rhode Island's poor state economy. Carcieri met Curt Schilling at a private event at Schilling's home in Massachusetts for a fundraiser for a World War II documentary. Carcieri began talking to Schilling about 38 Studios and he saw a chance to turn Rhode Island's economy around. Schilling described the company to Don Carcieri, talking about his plans for expansion and the massive success he was expecting with the video game he was developing. Whether or not it was Schilling's celebrity status or Carcieri's desperation, the governor jumped at the chance to have a potentially successful video game production company in the state's capital. He saw the opportunity to create hundreds of jobs for Rhode Islanders and, if the company was successful, to attract other start-up companies to the area. He had plans to make Providence a destination for tech companies in order to help boost the state's economy and create jobs. Schilling's company was Carcieri's way to kick-start this plan (Bai). After Schilling told Carcieri how Massachusetts was not providing 38 Studios with the funding it needed, the governor began plans to provide Schilling the political backing he needed to secure state funding. In spring of 2010 Schilling began meeting with politicians who were intrigued and excited by Schilling's ambitious plans to make 38 Studios the next huge video game company and to do so in Rhode Island. It seems, though, that this had been in the works since well before Schilling and Governor Carcieri met.

In October of 2009, lawyer Michael Corso and two House Representative leaders, House Speaker William J. Murphy and House Majority Leader Gordon Fox, all signed non-disclosure agreements with 38 Studios on the same day. It appears that there was a preexisting agreement between 38 Studios, Corso (who had experience “brokering tax-credit deals across the country” (Bai)), and the two legislators to orchestrate 38 Studios' move from Massachusetts to Rhode Island and secure loans from the state. Also in the fall of 2009, Speaker Murphy held a meeting with Schilling in Massachusetts at the 38 Studios headquarters. This meeting only came to light recently, and sheds new perspective on the intentions of our state legislators. Murphy stated that the sole purpose of this meeting was to facilitate a meeting between Schilling and the House Speaker of Massachusetts at the time. He says that he merely wanted to “see what 38 Studios was about” and did not discuss any plans about moving the company to Rhode Island (Nesi, White). All of these meetings and dealings were only exposed after the 38 Studios deal was in place, and this information more and more makes it look like the deal was brought to be by backdoor dealings and sneaky alliances.
Early in 2010, Michael Corso organized a meeting between Curt Schilling and House Majority leader Gordon Fox. Schilling and his team also met with Keith Stokes, the executive director of Rhode Island's Economic Development Corporation, which was in charge of distributing state funding to companies in Rhode Island. Soon after that, Fox and his friend and colleague, House Finance Chairman Steven Costantino began working to secure an additional $75 million as part of an existing $50 million plan for a job guarantee loan program. The Job Creation Guaranty Program had already been in the works and legislature was already receptive to the proposal securing $50 million to help fund small local businesses. After these meetings took place between state leaders and Schilling's company, $75 million was added to the proposed bill. As it turns out, $75 million was the exact amount that 38 Studios needed to continue production and move to Rhode Island, as Schilling told Stokes and Fox in their private meetings. In these meetings Schilling also promised job creation for Rhode Islanders (450 new jobs). The Job Creation Guaranty Program was passed through legislation with only 1 opposing vote. The one lone legislator who voted against the bill was Republican East Greenwich Representative Robert Watson. In an interview with Rhode Island Public Radio, Representative Watson explained the concerns that he had when the bill was initially presented to legislation and the concerns that he had after the bill was passed. He explained that the additional $75 million was only added to the bill one week before the bill was voted on and that he had serious concerns about why so much money was being added to the bill. His concerns were not addressed and he did not feel comfortable passing the bill, saying that it was “too fast, too loose, and a scandal waiting to happen.” He said there was no specific parameters regarding where the money was going and that the majority of representatives believed all the money would be distributed to many small businesses. However, Watson says some leaders (like Stokes) obviously knew that $75 million was slotted for 38 Studios, even if they did not share this information with their colleagues. The bill was presented to legislature three separate times and although a few representatives initially voted against the bill, Watson was the only representative who dissented in the final vote. In the radio interview, Watson alludes to a sense of hierarchy in legislature, saying that if leadership wanted a bill passed, it was certain to be passed regardless of any concerns raised. In this case, Stokes, Fox, Murphy and Costantino all were proponents of the bill, so there was effectively no way that the bill would be stopped from passing. When the EDC handed over $75 million of state-backed funding to 38 Studios, others were in opposition, as well, such as then-gubernatorial candidate Lincoln Chafee and then-state treasurer candidate Gina Raimondo. They both voiced concerns about the loan being too risky for the state, which was already in economic trouble.
There were a number of others who objected to such serious state funding. Among those was even the financial portfolio manager for 38 Studios, Sean Esten. According to an email he sent his bosses, Esten was concerned and felt that he could not support the massive loan from the state. He said that he did not believe loaning $75 million to a single company was wise because the video game industry was very volatile and the success of a new video game could not be assured.

Works Cited
Bai, Matt. “Thrown for a Curve in Rhode Island.” The New York Times. The New York Times Company, 20 April 2013. Web. 9 June 2014. <http://www.nytimes.com/2013/04/21/business/curt-schilling-rhode-island-and-the-fall-of-38
-studios.html?pagewanted=all&_r=2&>
Fisher, Anthony. “38 Studios: Curt Schilling's Crony Capitalism Debacle.” Reason.com. Reason Foundation, 3 January 2013. Web. 9 June 2014. <http://reason.com/reasontv/2013/01/03/3
-studioscurt-schillingri-crony-capital>
Nesi, T., White, T.. “Former Speaker Murphy visited 38 Studios in 2009.” Eyewitness News. WPRI, 20
May 2014. Web. 9 June 2014. <http://wpri.com/2014/05/20/former-speaker-murphy-visited-38
-studios-in-2009/>
Shwartz, James. “End Game.” Boston Magazine. Metrocarp Inc., August 2012. Web. 9 June 2014. <http://www.bostonmagazine.com/2012/07/38-studios-end-game/1/>

http://www.nytimes.com/2013/04/21/business/curt-schilling-rhode-island-and-the-fall-of-38-studios.html?pagewanted=all&_r=1& http://topics.nytimes.com/top/reference/timestopics/people/s/curt_schilling/index.html?inline=nyt-per http://www.boston.com/business/news/2014/05/16/why-curt-schilling-studios-back-the-news/jUpYU1ITl8GkX7yN1Qzs0M/story.html http://www.bostonmagazine.com/2012/07/38-studios-end-game/ http://www.bloomberg.com/news/2014-05-08/threats-sent-to-r-i-lawmakers-probing-schilling-deal.html