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Former official says governor forced 38 Studios’ bankruptcy

PROVIDENCE — The former head of Rhode Island's economic development agency is accusing Governor Lincoln Chafee of forcing the video game company of former Red Sox pitcher Curt Schilling into bankruptcy last year by impeding its efforts to restructure its debt or raise additional money.

In court filings, a lawyer for Keith Stokes, the former director of the state's Economic Development Corp., alleges that Chafee blocked 38 Studios' attempts to restructure its debt or raise more capital in late 2011 and early 2012.

The filing also alleges the governor refused to meet with 38 Studios executives in 2011 to discuss the issues, and says Chafee rebuffed efforts to bring them before the agency's board for deliberation.


The company filed for bankruptcy in June of last year, and the state is now responsible for some $90 million related to the deal.

Christine Hunsinger, Chafee's spokeswoman, had no immediate comment Thursday. Chafee, a vocal opponent of the 38 Studios deal while he was campaigning for governor, has insisted he did everything he could to help the company.

The economic development agency's board approved a $75 million loan guarantee for 38 Studios in 2010 as an incentive for the company to relocate from Massachusetts to Providence. Stokes and Governor Don Carcieri said at the time that the deal would bring tremendous benefit to the economically struggling state.

In an effort to recoup the money Rhode Island stands to lose on the deal, the agency in November sued Stokes; the agency's deputy director, Michael Saul; Schilling; and 11 other parties, asserting that they knew the company would run out of money by last year but concealed that from the board. The suit alleges fraud, negligence, and breach of fiduciary duty, among other things.

In Stokes's response to the suit, filed in Superior Court last week, lawyer David Martland denied that Stokes misled the board or failed to disclose information.


Schilling's response also denies the allegations and says 38 Studios fully disclosed its financial condition to the agency. Schilling has accused Chafee of having an agenda that hurt 38 Studios and called him a ''dunce of epic proportions.''