Rhode Island reopens probe into loan to former Red Sox player's company

By John Larrabee
Former MLB player Curt Schilling poses in a game demonstration room at the Electronic Entertainment Expo, or E3, in this photo taken June 9, 2011 in Los Angeles, California. REUTERS/David McNew

By John Larrabee

PROVIDENCE, R.I. (Reuters) - Rhode Island lawmakers investigating the state's $75 million loan guarantee to former Red Sox pitcher Curt Schilling's now-bankrupt video game company said on Tuesday documents show that numerous red flags were raised before the deal was approved.

Schilling, who named his company 38 Studios in a reference to the number on his jersey, approached Rhode Island in 2009, offering to relocate the company from Massachusetts and bring some 450 jobs to the state, which was then struggling with one of the highest unemployment rates in the country.

A state Superior Court judge in August unsealed some 38,000 pages of documents related to a lawsuit by the state, which showed Schilling wooed top Rhode Island officials at his home before the state's quasi-independent Economic Development Corporation approved the guarantee.

At a hearing on Tuesday, state legislators said the unsealed documents showed a number of questions were raised about the deal's viability.

In the documents, Rhode Island Governor Gina Raimondo, then a partner at a private investment firm, warned that 38 Studios was "a high-risk investment".

"The government should not get into the VC business and attempt to individual 'pick winners,'" a document from Strategy Analytics, a business consulting firm working for the state, said. "Other regions have failed miserably in their attempt to cultivate games."

Schilling pitched for the Boston Red Sox team that won the World Series in 2004, ending an 86-year championship drought.

The documents showed that former House of Representatives Speaker Gordon Fox, now imprisoned on unrelated corruption charges, was one of the first state leaders to take an interest in the loan proposal.

Another critic, an employee at the Economic Development Corporation, was reassigned after raising questions about the investment, the documents showed.

Rhode Island taxpayers were eventually left to foot the bill for some $100 million, including interest due to private investors that bought bonds linked to the loan guarantee, after 38 Studios filed for bankruptcy.

Current House Speaker Nicholas Mattiello has said he would like to see Schilling subpoenaed. Since Schilling lives in Massachusetts, it is uncertain whether he will appear before the committee.

(Editing by Eric M. Johnson and Peter Cooney)