R.I. governor claims violation by Schilling’s company

PROVIDENCE, R.I. – Gov. Lincoln Chafee on Friday said former Boston Red Sox pitcher Curt Schilling’s video gaming company is again in violation of a loan guarantee agreement with Rhode Island after it failed to notify state officials of mass layoffs, and that he’ll seek an audit of the company’s finances.

Schilling’s 38 Studios laid off its entire workforce Thursday – including about 300 employees in Providence and more at a second Maryland location – and did not notify the state, Chafee said at a news conference.

The company was lured to Rhode Island from Massachusetts in 2010 after the state Economic Development Corporation board agreed to a $75 million loan guarantee, which was supposed to bring hundreds of jobs and millions of dollars in tax revenue.

38 Studios’ financial troubles came to light this month when it defaulted on a $1.1 million payment to the EDC that was due May 1. The company later paid.

But now it is in default again, Chafee said. Under federal law, employers who have at least 100 employees and plan to shed at least 50 jobs are required to give a 60-day notice to workers and state unemployment officials.

Chafee said Friday he would seek an audit of how the company used the $50 million it has received in loan funds, all of which is gone, state officials have said. The governor wants “everything documented” because, he predicted, there are going to be “so many lawsuits.”

Chafee described himself as “quite pessimistic” that the company could secure the type of outside investment that may be the only way for it to stay afloat. Schilling has not responded to messages left for comment.

Meanwhile, the EDC was in disarray as questions mounted over whether the state exercised proper oversight of the loan guarantee.

Chafee was seeking the resignation of EDC board members who approved it, but the fate of some of them wasn’t clear Friday. EDC Executive Director Keith Stokes, a vigorous backer of the guarantee, and board Vice Chairwoman Helena Foulkes already resigned.

EDC board member George Nee said Chafee asked him to step down and Nee refused.

“He felt it would be better to have a new start,” Nee said of Chafee’s request. “I disagreed with him. We had a pleasant conversation.”