Diane M. Grassi
September 27, 2010
Curt Schilling's Rhode Island hoodwink
By Diane M. Grassi

Curt Montague Schilling, has never been one to duck controversy nor a good game of old-fashioned hard ball.

In fact, in the latter part of his Major League Baseball (MLB) career as a starting pitcher, who many experts believe will be an easy entry into the Baseball Hall of Fame, Schilling became a lightning rod for controversy.

With his outspokenness, particularly critical of fellow MLB players, initially with Barry Bonds, in addition to his political rants in interviews and on his website concerning Capitol Hill politics, Schilling relishes confrontation.

Nonetheless, his bravado, or big mouth in some circles, was backed up by three World Series Championships. The first was one with the Arizona Diamondbacks, who unexpectedly defeated the New York Yankees in a necessary 7th game in 2001.

And as a member of the 2004 Boston Red Sox, who won their first World Series since 1918, was almost as famous for Schilling's performances in the American League Division Championship Series (ALDS), playing on a gimpy ankle, against the NY Yankees.

The Red Sox came back from a 3-0 deficit to take that series. It was followed by a taking of the American League Championship Series (ALCS) against the Anaheim Angels, only to ultimately to win their crown against the St. Louis Cardinals in 6 games in the World Series.

But controversy followed Schilling in those post-season series in 2004, most notably for his bloody sock, the second of which was used in the ALCS, and now sits in the Baseball Hall of Fame.

It is still argued today, amongst fans and pundits alike, as to whether or not at least one of those socks was a prop, and perhaps the "blood" was fakery. After all, the reason for the blood was the supposed result of sutures used to hold ligaments and tendons together in his ankle, in order to forestall his eventual post-season required surgery.

There were not only questions about the bloody sock but whether or not sutures would even be effective for such a structural injury in the first place, bringing up doubts about the veracity of the injury.

No such prop, however, followed Schilling to his 3rd World Series Championship in 2007, again as a starting pitcher with the Boston Red Sox. But it is perhaps his bloody sock that has paid off for him in spades and helped to script his post-MLB career.

For the state of Rhode Island and its taxpayers, presently with the 4th highest unemployment rate in the United States at nearly 12%, is presently on the hook for a $75 million loan guarantee for Mr. Schilling and his 38 Studios, LLC. It was formed in 2006 under the original company name, Green Monster Games, which Schilling swears, the name of which has nothing to do with Fenway Park's famous Green Monster wall. Schilling's games are not, however, of the sports variety but modeled after the World of War Craft variety.

38 Studios is a start up intellectual property (IP) gaming developer, offering massively multi-player (MMO) and role player (RPG) game product for both online and free standing consoles and PC's. Based in Maynard, Massachusetts, with its 70 present employees, it also includes the wholly owned subsidiary, Big Huge Games and its studios, located in Timonium, MD, that includes 80 employees.

The Rhode Island Economic Development Corporation (EDC) was appropriated funding for a new program called the Job Creation Guarantee Program. It was approved earlier in 2010, by virtue of state lawmakers approving it to specifically increase jobs for "knowledge-based industry" jobs throughout the state, in the digital media and information technology sector.

The program was originally authorized in June 2010 for a total of $50 million in loan guarantees, which the state would arrange with commercial banks in the form of bonds, in order to distribute to multiple entrepreneurs in the $2 — $4 million range with a variety of companies within the field.

And at the same time that Rhode Island was looking to bring high-tech jobs to Rhode Island, Curt Schilling was knocking on the door of the Massachusetts state house asking for a guaranteed loan in order to expand his 38 Studios. And if Massachusetts made it worth his while, his company would not leave the state.

Word has it that Schilling got wind of Rhode Island's new program and was using it as leverage against Mass., much like MLB players do when they become free agents and use one team's bid against another in order to up the ante. When Mass. said they would work with him through a variety of tax incentives and not taxpayer based payouts, he bolted and approached Rhode Island in February 2010, for a loan guarantee.

Rhode Island, unlike its neighbor, Mass., apparently bought it hook line and sinker, because the program's original authorization was increased from $50 million to $125 million, with 60% of it specifically earmarked for Curt Schilling. Quite a feat for a non-resident with no prior allegiance to the state of Rhode Island, nor a commitment to personally move his home there to date, just his company.

While some Rhode Island lawmakers have questioned how an additional $75 million would be allocated, after they approved it, it also has played a part in the Rhode Island gubernatorial and state treasurer 2010 campaigns, as the whole matter has upset candidates and lawmakers on both sides of the aisle, on whether this was a wise use of state funding. After all, Schilling has yet to ever sell a video game.

Although Schilling claims that he tried to raise venture capital for six months, not a one bit, as he had no product or track record to provide. In addition, the gaming industry is considered high risk, and in such a recessive economy, given that many game makers are also laying off employees regularly, did not further endear Schilling to investors for his endeavor.

Perhaps Schilling's best selling point was that he said he had invested his life's savings or $20-30 million into the company since 2006, and was dedicated to making it work out. Well, hardly, as his MLB contracts totaled $114 million over the course of his career, and he earned over $21 million alone during his last two years with the Red Sox in 2007 and 2008. He retired from MLB in 2009.

And with intellectual property start-ups, unlike traditional manufacturing, where hard assets are used as collateral, there is little to liquidate with an IP venture. Its soft assets would include intellectual property, licenses, publishing contracts and software, but could be worth very little in the end.

Schilling has two pending game releases the first titled, Kingdom of Amalur: Reckoning, a single role-player or RPG for Xbox 360, Play Station 3 and PC's, due in September 2011 and to be published by Electronic Arts (EA). His other game, in development since 2006, has the working title, Copernicus, with no release date. It is a massively multiplier online game (MMO).

And even with the prospect of a game product, and only the promise of creating 450 well-paying high-tech jobs to be located in the state of Rhode Island by the fall of 2013, three years from now, in a volatile economy where discretionary income is in free fall, Rhode Island took the bait anyway.

But EA and 38 Studios would need 1.75 million copies of Reckoning to sell, just to break even. Best estimates presently are slated for 1million copies to sell. And even though EA has decreased its number of annual releases each of the past two years from 50 to 35 games, due to the soft economy, in addition to laying off 1,500 employees, it has already made its commitment.

Barely a month after the EDC's newest program was approved in June 2010, Curt Schilling signed his agreement with the EDC on July 26, 2010. And regardless of all the executed contracts and promises, it will still take a great video game that will be the basis for well-paying jobs, expected to be in the range of $80,000.00 annually. It will take a great game in order to make good on this guaranteed loan by Schilling.

But if 38 Studios does not earn a dime, it will but pick the pockets of the good taxpayers of the state of Rhode Island based upon how the deal was structured. Genius perhaps on Schilling's part?

While the deal requires 450 jobs be established, not all of them will be in the $80,000.00 range. For some of the most lucrative jobs at Big Huge Games, based in Maryland, may never end up moving up to Rhode Island at all. Schilling just needs to present full-time jobs.

Of the $75 million guaranteed, just in the past two weeks it was decided that $20 million will be held in reserve, for the time being. But within 15 months, the entire $51 — $55 million, depending upon who you believe, becomes payable based upon certain demands being met, such as the number of employees added and a scheduled release date for Copernicus, for example.

But the initial payment in the amount of $13 million will be payable at the expected October 2010 closing date with the full balance paid prior to the requirement of adding the full 450 jobs and only 300 jobs.

Oversight of the contract by a third party has yet to be chosen by the EDC, nor have all of the final pieces been finalized as to how the Job Creation Guarantee Program will operate other than the outlining of Schilling's finalized deal.

The state also has yet to publicly offer the program for the remaining $50 million, to be divided amongst other start-ups with each receiving between $2-4 million. Rhode Island will unveil the program with local Chambers of Commerce in October, supposedly after the Schilling deal is done.

Putting Shilling's corporate welfare deal at the head of the line is apparently a priority. If it were not so ironic it perhaps would not be such a wheel barrel of crazy. After all, "What government-run funded program in this country's history has ever been run with an ounce of financial responsibility, prudence or with peoples' best interest at the forefront? None. That's which one." The aforementioned was said by Curt Schilling himself, on January 14, 2010.

How the winds have changed in just a short 6 months. For now going to one of the most cash-strapped states, not to mention the smallest state, with hand outstretched in search of government subsidized corporate welfare is apparently just fine.

The upshot is, Curt Schilling may like to play video games and may know how to pitch a winning World Series game, but he knows little about managing a multi-million dollar operation and in building the empire in which he predicts will become a billion dollar business.

And while Schilling is not blameless, as the state of Rhode Island, its governor and lawmakers gave the keys to the EDC to arrange this high stakes gamble, it could not have come at a worse time. With the public trust in government waning by the day, not to mention taxpayers' wallets, many may be left with egg on their faces as well as out in the cold after all is said and done.

But do not expect one of them to be one Curt Schilling. He will just go on to the next controversy and likely into the Baseball Hall of Fame.

© Diane M. Grassi

 

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Diane M. Grassi

Diane M. Grassi is an investigative journalist and reporter providing topical and in-depth articles and analysis on U.S. public policy and governmental affairs, including key federal and state legislation as well as court decisions relative to the public interests of average Americans... (more)

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