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38 Studios claims state withheld funds from ‘negotiated deal’


PROVIDENCE – Former Red Sox pitcher Curt Schilling’s bankrupt video game company, 38 Studios LLC, claimed that the state of Rhode Island refused to honor a “fully negotiated deal and agreement” to give the company funding from film tax credits, reported The Boston Globe.

According to public record documents obtained by the news source, William Thomas - the president and chief operating officer of 38 Studios - wrote a strongly worded letter to the state’s film office chastising Rhode Island lawmakers for withholding millions of dollars in film tax credits available to video game makers.

In the May 25 letter, Thomas suggested that the state promised to give the gaming company as much as $8.7 million in tax credits after 38 Studios made the $1.1 million payment to the state.

The state decided to withhold funding after 38 Studios missed its payment, but studio executives argued that the payment was made within a grade period and the company wasn’t actually in default, according to the news source.

“The intentional delay in issuing the [tax] credits has caused severe damages to the Company, its employees and the State of Rhode Island. To prevent further harm, we are urging you to please issue the 2011 tax credits as agreed,” Thomas wrote in the letter.

According to the Boston Globe, even if those were the terms of the deal made by former R.I. Economic Development Corporation Executive Director Keith W. Stokes, the EDC may not have had the authority to promise the state tax credits.

38 Studios noted that communication from Rhode Island officials stopped after a letter was sent to the company notifying it that the tax credits were being canceled.


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This is "so Rhode Island" where influential people try to play one agency against another. Anybody who read the regulations would know that EDC had nothing to do with film credits. Its general counsel even complained about the role that Rhode Island Department of Revenue plays in determining film tax credits.

Perhaps Mr. Thomas did not know enough about the film tax credit situation in Rhode Island to base the future of his company on this arcane program. But he should have!

When I approached the Department of Revenue about its regulations in May, I was told that I was the first person to ask for the regulatory hearing details. I thought that was kind of strange. I would have thought that 38 Studios would have been there before me.

These details show that the EDC's general counsel was well aware of the difficulties that 38 Studios would face in applying for film tax credits. Why didn't that message get to 38 Studios?

Mr. Thomas apparently it relied on some pretty bad advise from somebody. I am sure that the investigators will get to the bottom of "who said what!"

And there will be a price to pay.

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