R.I. Strikes Out On Ex-Pitcher's Video Game Venture

In 2004, pitcher Curt Schilling became a New England folk hero. That's the year he helped the Boston Red Sox beat their archrival, the New York Yankees, by pitching with a surgically repaired ankle. And when that wound started to bleed, his bloody sock also became legend.

The Red Sox went on to win the 2004 World Series, and from then on, Schilling could do no wrong — that is, until last week. That's when news broke that his video game company, 38 Studios, had chewed through a $75 million state loan. Now, Rhode Island officials are trying to figure out how to protect taxpayers from what appears to have been a very bad investment.

'Scandal Finds Money'

The path that led to Schilling to this uncomfortable situation began at a fundraiser two years ago, where former Rhode Island Gov. Don Carcieri suggested that Schilling move his video game company from Massachusetts to Rhode Island. The idea was to bring jobs in and turn the state into a video game hub. Carcieri even offered Schilling financial help, in the form of a state loan.

Opponents of the loan said the hit-or-miss video game industry was too risky for taxpayer money. They thought spreading loans among smaller businesses was a better idea. But Carcieri saw a like-minded conservative Republican in Schilling, and he appeared smitten.

Back in 2010, Republican state Rep. Robert Watson protested the loan guarantee bill that Schilling ultimately got a big slice of.

"Scandal finds money," Watson said. "Scandal finds a pool of $125 million with sketchy, sketchy strings attached. Scandal will find this bill some day and your vote will aid and abet it."

Current Rhode Island Gov. Lincoln Chafee, an independent, also opposed the deal with Schilling's company, a position he ran on in 2010. But it now falls to him to figure out how to salvage the state's investment.

"It's a balance of making sure that 38 Studios is successful so we can recoup our huge investment, and also not getting further exposed if the company is ultimately not going to make it," Chafee says. "That's a tough balance."

The Fallout

Last week, 38 Studios finally made a delinquent payment of more than $1 million after trying to give the state a bad check two days earlier. That same week, the company didn't make its payroll. According to Chafee, an unspecified number of 38 Studios' almost 300 employees have been laid off.

The governor says he doesn't know if 38 Studios will find the private investors it needs for a cash infusion. That uncertainty leaves taxpayers like Wayne Feeley of Providence fearing they'll be left holding the bag for Schilling, a multimillionaire.

"I just think he wasn't ready to do what he did and he mismanaged his money," Feeley says.

38 Studios has pushed back the release date for its marquee online video game, known as Project Copernicus, to mid-2013. But at this point, it may take the mystical abilities of a video game wizard to turn this soured deal around.

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