EDC rejects check from 38 Studios

The Rhode Island Economic Development Corp. on Thursday rejected a hand-delivered check from 38 Studios for $1.125 million that was due May 1.

The EDC said the company’s chief financial officer told the agency there would be insufficient funds to cover the check.

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Rhode Island’s governor said Thursday that former Red Sox pitcher Curt Schilling’s troubled video game company is making a $1.125 million payment it defaulted on this month, prompting worries about its solvency and the possibility the state might have to step in to pay its debts.

Gov. Lincoln Chafee said Schilling’s 38 Studios – which got a $75 million loan guarantee from the state in 2010 – is paying the Rhode Island Economic Development Corp. the money that was due May 1.

Judy Chong, a spokeswoman for the corporation, could not immediately confirm whether the payment had been received. Messages were left for Schilling and a company spokesman.

Chong told The Associated Press that 38 Studios informed the EDC that it would be unable to make its payroll this week.

The company relocated from Massachusetts in 2010 after Rhode Island offered the loan guarantee, which state officials said would means hundreds of jobs and millions of dollars in tax revenue.

38 Studios on Wednesday asked the economic agency for additional assistance after missing the scheduled payment, but the agency’s board did not act on the request.

Chafee would not describe the details of the request after an emergency board meeting Wednesday. But he said Thursday that the board agreed “unanimously” not to give the company additional taxpayer support.

“I fought very hard to not have further taxpayer investment,” Chafee said at the State House. “No taxpayer concessions were made yesterday. So this is positive.”

He said he did not know where the funds for the $1.125 million payment originated and if it was Schilling’s personal money.

As worries over the company’s future mounted, Keith Stokes, the Economic Development Corp.’s executive director, submitted his resignation to Chafee, who accepted it Wednesday. The governor thanked Stokes for his service.

“Keith is committed to seeing Rhode Island succeed and I am confident that he will continue to be very involved in the state he loves,” Chafee said.

Stokes told NBC 10 his resignation was a mutual decision between him and the governor. He refused to say if he felt personally responsible because he championed the loan deal for 38 Studios.

“It’s really unfair for me to comment on 38 Studios transactions.  We had an executive session, there’s confidential proprietary discussions going on. So, it wouldn’t be fair for me to comment on that,” Stokes said.

Stokes said he has no regrets.

“There’s always risk and rewards. And again, I’ve got complete confidence in EDC. We’ve got a great team. Gov. Chafee is leading that board.  I had an opportunity to build a good team there, that team will continue to do well,” Stokes said.

Chafee has asked Colin Kane, a real estate developer who is chairman of a commission that is overseeing redevelopment of a key parcel in downtown Providence, to serve on an interim basis. They are negotiating over compensation.

Stokes said the legislation that allowed the Economic Development Corp. to back up to $125 million in loans was not intended for a single company and that other firms have benefited from the program. Since Chafee took office, the board has adopted a new policy that caps the amount that any company can receive in loan guarantees at $10 million.

After the loan guarantee was approved in 2010, Stokes called it a calculated risk “well worth taking.” He said the board performed months of due diligence in analyzing the video game sector and 38 Studios and crafted an agreement that went “to great lengths to safeguard taxpayers and ensure economic performance.”

Stokes was appointed head of the Economic Development Corp. by Republican Gov. Donald Carcieri in 2010 after serving 15 years as executive director of the Newport County Chamber of Commerce. Stokes also served on the Economic Development Corp. board for 16 years, and he said he was involved in every major development project over that time.

Chafee kept Stokes on when he took office last year despite misgivings about the loan guarantee for 38 Studios. Chafee, an independent, was a vocal critic of the guarantee, saying on the campaign trail he thought it was “one of the biggest risks I’ve ever seen.”

In a statement, House Speaker Gordon Fox called Stokes a “tireless advocate” for Rhode Island’s economy and a man of “great vision” and courage. Senate President Teresa Paiva Weed said Stokes’ resignation leaves a void that will be hard to fill.

Neither legislator mentioned 38 Studios.

Leonard Lardaro, an economics professor at the University of Rhode Island, called Stokes’ resignation “ridiculous,” saying he is being held responsible for the mistakes of political leaders like Carcieri, who pushed for the deal with 38 Studios.

“He is absolutely first-rate,” Lardaro said of Stokes. “We can’t afford to lose really good people like that. We’re not going to get anyone better.”

Carcieri has not returned a message left for comment. No one answered the door at his North Kingstown home on Thursday.

Associated Press writer Laura Crimaldi and NBC 10 News reporter Parker Gavigan contributed to this report.

Article source: http://www2.turnto10.com/business/2012/may/17/22/stokes-reportedly-resigns-edc-ar-1039299/

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