RBS Citizens, better known as Citizens Bank, has sued Curt Schilling to recover $2.4 million in loans it made to the retired Red Sox star’s bankrupt video game company.
Providence-based RBS Citizens is among the first creditors seeking to hold Schilling personally responsible for debts incurred by 38 Studios LLC, which filed for Chapter 7 bankruptcy protection last week, the first step in liquidating the company. Most creditors like RBS Citizens have little hope of recovering their money from 38 Studios; it reported owing more than $150 million but has less than $22 million in assets.
RBS Citizens, owned by the Royal Bank of Scotland, said Schilling personally guaranteed the debt to the bank on October 26. But, RBS Citizens said, “Schilling has failed and refused” to pay it. “This is a straightforward matter of liability,” RBS Citizens said in the lawsuit, filed last week.
Schilling, who founded 38 Studios six years ago and lives in Medfield, could not be reached for comment. A lawyer for RBS Citizens declined to comment.
The bulk of the debt owed to RBS Citizens is a $2.06 million line of credit established by 38 Studios in October 2010. In addition, 38 Studios had a business credit card account with a $375,596 balance as of June 7, according to court documents.
The suit was filed in Suffolk Superior Court in Boston on June 7, hours after 38 Studios filed its bankruptcy case. When companies seek bankruptcy protection, they typically receive immediate relief from legal action by creditors, who must pursue their claims through the bankruptcy process.
In this case, RBS Citizens sued Schilling, not the company. RBS Citizens also sued Morgan Stanley Smith Barney, where RBS Citizens believes Schilling has financial accounts.
The former Red Sox pitcher could be on the hook for other loans, too.
Court documents indicate Schilling also personally guaranteed a $1.5 million line of credit from Middlesex Savings Bank of Natick. He also used his personal gold coin collection to help obtain a loan from Bank Rhode Island, a unit of Brookline Bancorp. in Brookline, for an unspecified amount, according to records.
In all, Schilling told the Providence Journal last month, he guaranteed $12 million in loans for the company, in addition to investing $38 million directly.
Meanwhile, state and federal agencies stepped up their investigation this week into whether any laws were broken. Both the Rhode Island Economic Development Corporation and Bank Rhode Island received subpoenas.
The economic development agency handled the $75 million state-backed loan that helped lure the company from Massachusetts to Rhode Island. Bank Rhode Island made loans to two companies controlled by Michael Corso, a Providence tax credit broker who used state tax credits he agreed to buy from 38 Studios as collateral. 38 Studios applied for but never received the credits.
Todd Wallack can be reached at email@example.com. Follow him on Twitter @twallack.