EDC spokesman confirms SEC investigating 38 Studios loan [The Providence Journal, R.I.]
(Providence Journal (RI) Via Acquire Media NewsEdge) Sept. 11--PROVIDENCE, R.I. -- A spokesman for the state Economic Development Commission has confirmed that the agency's $75-million loan guarantee to Curt Schilling's failed video game company 38 Studios is being investigated by the federal Securities and Exchange Commission.
Melissa Czerwein, the EDC spokeswoman, said Tuesday that as a result of inquiries from the watchdog agency, the economic development agency hired the law firm, Cohen & Gresser, to help staffers deal with the inquiries over a five-month period starting last fall.
She said she wasn't authorized to go into details as to what the SEC may be looking for. "We are maintaining confidentiality at the request of the SEC," she said, adding that the state agency also has a policy of not commenting on investigations while they are under way.
Czerwein confirmed that the commission paid slightly more than $100,000 to lawyers help staff members respond to the SEC inquiries.
38 Studios went bankrupt in May 2012, leaving Rhode Island taxpayers with the prospect of paying investors about $100 million in principal and interest due on the bonds.
Last week, the EDC board agreed in principle to a proposal by the federal bankruptcy trustee to use up to $150,000 to conduct his own investigation of the company's former officers and directors.
That is separate from the lawsuit the state has filed against founder Schilling and 13 other defendants, including former EDC executive director Keith Stokes and former legal counsel Robert I. Stolzman. Superior Court Judge Michael Silverstein said on Aug. 28 that he is allowing much of the state's case to proceed, though he dismissed some charges against some of the 14 defendants.
The news comes as lawmakers on the House Committee on Oversight are set to meet at 4 p.m. Wednesday to continue to review documents relating to guarantees offered to 38 Studios under the state's Job Creation Guaranty Program.
The program had been intended to provide access to capital and credit for growth-oriented businesses looking to expand and relocate in Rhode Island. Under the program, the EDC was authorized to guarantee private lender loans and certain bond obligations to innovation-driven businesses to create permanent, high-paying jobs in the state.
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