A lawsuit has been filed by Rhode Island against the people involved in the state's mismanaged $75 million loan to Kingdoms of Amalur developer 38 Studios.

Amongst the the defendants named in the suit are the Studio 38  founder/chairman Curt Schilling, CEO Jennifer MacLean, former EDC executive director Keith Stokes and other 38 Studios executives and EDC employees/lawyers. Other companies that were involved in the loan deal such as Wells Fargo Securities, Barclays Capital, First Southwest, and Starr Indemnity and Liability were also named as defendants.

The full storyincluding the full text of the suit can be read at various places, amongst which Gamasutra.

Boston Magazine has a piece titled End Game that chronicles the demise of 38 Studios. What makes this different is the inside information - including interview comments direct from Curt Schilling:

Most troublesome of all was the unique profit-sharing plan Schilling devised for his first employees. Wasserman, Bussgang, and Gordon write that, since Schilling was bank-rolling the company by himself, he was hesitant to give up equity in it. So instead of luring early prospective hires with stock options, he promised to share all profits 50-50 with them. Upon arriving as CEO, Close recognized that “investors’ heads would explode” when they saw the model, since they’d be bearing all the risk but reaping only half the reward. Close eventually convinced Schilling to scrap the policy and replace it with stock options. [...]

Deadlines were frequently missed, something for which staffers say Schilling rarely held anyone accountable. The ex-pitcher had a bigger concern. “The game wasn’t fun,” he says, unprompted, beside the softball field. “It was my biggest gripe for probably the past eight to 12 months.” Visually, Copernicus was stunning, but the actual things you could do in the game weren’t engaging enough. The combat aspects especially lagged. Schilling — who never wavered in his belief that the game would be great — says the MMO was improving, but after six years, it still wasn’t there. When Schilling walked around during lunch hour, he says, nobody was playing Copernicus’s internal demos. They were all on some other game.

A company spokesperson for 38 Studios has announced they have declared bankruptcy, according to the Providence Journal, who also claim police are looking over the situation:

According to statement to The Journal from 38 Studios, "This action comes after several weeks when the company has reviewed, considered and received the recommendations and advice with respect to potential avenues for relief that are currently available. After ongoing negotiations with the State of Rhode Island and potential investors and other interested parties, the Company has been unable to find a solution to the current stalemate."

Meanwhile, Col. Steven G. O'Donnell, superintendent of the Rhode Island State Police, says that his agency, the FBI, the U.S. Attorney's office and the Rhode Island attorney general "are working together to investigate activities that have recently come to light at 38 Studios."

Gamasutra writes about the 38 Studios debacle, with input from Big Huge Games' staffers. It definitely offers a different perspective but, like other articles leaning the opposite way, still only provides a limited view:

"We never would have survived to make Reckoning if he hadn't bought us," says a Big Huge Games source. He describes Schilling's "kindest, most generous" intent in the early days of the MMO, and says Schilling "went to lavish personal expense" for his teams, buying customized jerseys and other morale perks.

"But in the end, his optimism turned out to be naivete, and it slowly killed us," the source continues.

Employees never had warning when the company was going to miss its payroll because apparently Schilling had been all but certain another investor was coming through, up to the last minute. Employees say they later learned that on two occasions the threat of being unable to make payroll had been alleviated by savior investors, so on that third occasion, Schilling had just been counting on something to manifest -- and that didn't happen in time.

"Even so, for the next seven days, he insisted that they were just about to get a new investor who would solve everything, and we hoped and slowly collapsed," the employee continues. He even says he's worried about Schilling's well-being and how he's taking the failure of 38 Studios. 

The Providence Journal has Schilling's first public comments about the collapse of 38 Studios, with the celebrity sports star saying he stands to lose $50M of his own money and expressing bitterness at the public commentary from Governor Chafee:

Schilling's controversial partnership with the State of Rhode Island was forged with $75 million in taxpayer-backed bonds two years ago. If 38 Studios fails, Rhode Island taxpayers will be liable to repay more than $100 million. Also, Schilling says, he stands to lose $50 million of the fortune he earned as a professional baseball player and committed to the venture.

Schilling says that state economic-development officials reneged on a deal to approve film tax credits to which 38 Studios was legally entitled, and to allow the company to defer a $1.12-million payment that was due the state on May 1 so that 38 Studios could meet its May 15 payroll.

Schilling also criticized Chafee's "devastating" public remarks about 38 Studios' financial health, which he says scared off private investors.

Sadly, all 379 staff have been laid off at 38 Studios, including Big Huge Games. You can read summaries of the events at RPS but our original source is mostly Gamasutra, who obtained a copy of this brusque company-wide email:

“The Company is experiencing an economic downturn. To avoid further losses and possibility of retrenchment, the Company has decided that a companywide lay off is absolutely necessary.

These layoffs are non-voluntary and non-disciplinary.

This is your official notice of lay off, effective today, Thursday, May 24th, 2012.”

Gamasutra's article quotes Rhode Island Governor Chafee as saying Kingdoms of Amalur:Reckoning failed to meet expectations and needed to sell 3M to break even but only hit 1.2M total:

Update: During a Rhode Island press conference this afternoon, Governor Lincoln Chafee said that 38 Studios ran into such dire financial trouble in part because Kingdoms of Amalur: Reckoning failed to live up to expectations.

"The game failed," Chafee said, noting that in order to break even, the game needed to sell more than 3 million copies, and it unfortunately did not come close to hitting that lofty goal.

Although 38 head honcho Curt Schilling defended the 1.2m sales on twitter:

Reckoning, 38 Studios first game, has outperformed EA's projections by selling 1.2mm copies in its first 90 days

Further confirmation comes from a number of developers on twitter, such as BHG lead world designer Colin Campbell:

Big Huge Games was home for my wife and me for our adult lives so far. I’ll miss it terribly, but so proud. Good night and good luck.

But Curt Schilling on twitter links to this post on fan ste 38Watch showing some images from their in-development MMO with the message:

38 isn't dead yet. 

It sure seems dead for most of the employees. We wish the best to all the affected staff.

VG247 reports Rhode Island Governor Lincoln Chafee held a press conference to announce 38 Studios' first payment had now cleared:

Earlier reports stated that in order to make the required payment, the firm deferred payroll and let go of all contract and temporary staff. The report also said the check handed over to the state bounced, but it seems to have cleared now.

“It’s time for them to go out and get private capital funding,” said governor Chafee. “That’s the deal. It’s a generous deal, but stick to it.

“I want to make sure we’re doing everything possible to make sure 38 doesn’t fail. We’re in deep. There’s not going to be any money from the state. They’re not coming here for easy money.”

He also revealed 38's Copernicus MMO is expected June 2013, if they make it there.

Things look dire at 38 Studios with WPRI.com reporting a payment cheque for their overdue $1.125M payment was hand delivered - but it subsequently bounced due to a lack of funds. According to a spokesperson for the Rhode Island Economic Development Corporation, the company also failed to make payroll:

Curt Schilling's taxpayer-backed video game company was unable to make payroll this week, Judy Chong, a spokeswoman for the R.I. Economic Development Corporation, confirmed Thursday in response to an inquiry from WPRI.com.

Separately, Governor Chafee's office said 38 Studios hand-delivered a check for the overdue $1.125 million payment to the EDC that set off this week's crisis. But shortly thereafter Rick Wester, its chief financial officer, called the agency and said there were insufficient funds to cover the check, so the EDC returned it.

Thanks, cptbarkey.

Joystiq reports a meeting to resolve 38 Studios' failure to pay the first $1.125M of their Rhode Island state loan - and 38's request for more money - didn't reach an outcome:

Today's emergency meeting by Rhode Island officials to determine what they are going to do about Curt Schilling's 38 Studios has concluded with officials freezing like deer in headlights. Nothing happened.

Rhode Island's Economic Development Corporation will take no immediate action to aid the developer, following a closed-door meeting attended by Governor Lincoln Chafee and Schilling, who asked for additional help to save the company. Schilling refused to answer press inquiries and officials wouldn't declare how much money the studio is seeking.

"How do we avoid throwing good money after bad?" Chafee is quoted by the Associated Press as saying after the three-hour emergency meeting finished.

The Providence Journal is reporting comments from Rhode Island Governor Chafee that cast doubt on the financial position of 38 Studios. Apparently the Governor met with 38 Studios to discuss the security of a $75M government loan to the studio:

Reached Sunday, the governor said "it has been a weekend of work on this subject."

While the governor would not discuss details of the meetings with 38 Studios officials, he said there is a "tight timeframe we're working under."

"We're doing everything possible, like I would for any Rhode Island company," he said Monday afternoon at the State House, adding that the work at stake is "keeping 38 Studios solvent." 

WPRI.com goes on to look at other sources and also cites NPD data apparently showing 410,000 sales at US retail, a modest but solid number when you consider international and digital sales:

“Kingdoms of Amalur: Reckoning,” the first game from Curt Schilling’s Providence-based 38 Studios, sold another 80,000 copies in the United States last month, WPRI.com has confirmed.

That brings total U.S. retail sales of “Reckoning” to 410,000 copies during its first two months on the market, according to data provided to WPRI.com by NPD Group, a New York-based research firm.

The next E3 article from GameBanshee comes from having dinner with Curt Schilling, Tim Train and others from 38 Studios.  Unfortunately, they still aren't ready to show their wares so the details are limited.  Here's an excerpt on Project Mercury:

In an attempt to get more information about Project Mercury (Big Huge Games' multi-platform, single player RPG previously known as Ascendant), I ran a number of questions past COO Tim Train. As it turns out, a vast majority of the original game has been scrapped since their acquisition by 38 Studios, though the team is still using the same engine tech and much of their original vision for the game. Now that they're a part of 38 Studios, the decision was made to rewrite the game's storyline and base it within the elaborate 10,000-year fiction that R.A. Salvatore had created for Copernicus. Tim explained that the Ken Rolston-led team at Big Huge Games was given the opportunity to choose an area within that history for Mercury's storyline, and that the team was "very passionate" about an epoch that takes place about 2000 years before the MMORPG. Unfortunately, he couldn't elaborate on the events that made that particular era so compelling, but he assured me that the storyline in the single player RPG would very effectively tie-in to the lore within Copernicus.

38 Studios has hired Travis McGeathy, former Everquest lead designer, as their new systems design lead for their in-development project codenamed Copernicus:

Said 38 CEO and president Brett Close, "38 Studios is extremely proud of the well-known and highly respected designers, artists, and engineers we've attracted. Having Travis, Jason, and Steve as the nucleus of our design team adds further credibility within the industry, strengthening our commitment to deploying a first-rate MMOG, and ensuring fans that we have the skill and experience to deliver an Online Entertainment Experience like no other."

38 Studios has hired Jennifer MacLean for the position of VP of Business Development. She is best known for her work as VP and GM of Games at Comcast and she is also the incoming chair of IGDA. Here's the press release:

Jennifer MacLean Joins 38 Studios as Vice President of Business Development

Former Comcast VP, Incoming Chair of the Board of Directors of the IGDA, and One of Industry's Most Influential Women Heads Up Business Development

Maynard, MA, March 19, 2008 - 38 Studios (www.38studios.com), a pioneering entertainment company dedicated to delivering a broad spectrum of entertainment products, today announced the appointment of Jennifer MacLean as Vice President of Business Development. MacLean was previously vice president and general manager of Games at Comcast, the largest cable company in the United States.

"Jen is a valuable addition to our exceptional team, bringing impeccable credentials, strong relationships, and impressive knowledge of the industry," said Brett Close, CEO and President of 38 Studios. "Her extensive industry experience, intersecting product development, media infrastructures, and entertainment properties, will most certainly open new opportunities for the 38 Studios vision."

Named by Next Generation as one of the game industry's 100 most influential women, MacLean has more than ten years of extensive experience in online content and interactive entertainment. She is the Incoming Chair of the Board of Directors of the International Game Developer's Association (IGDA), and is a frequent and much-requested speaker at industry events.

MacLean's responsibilities at Comcast included interactive entertainment strategy, business development, and product management. She spearheaded products including Chill, Comcast's multi-platform casual games product line, and GameInvasion.net, the company's video game news and content aggregator site and Video on Demand offering. MacLean also negotiated, implemented, and managed major partnerships for Comcast including Electronic Arts, Major League Baseball Advanced Media, Fox Sports, Real Networks, Oberon Media, and Microsoft. Products under MacLean's watch delivered more than three million client installations and 30 million downloads.

Prior to Comcast, MacLean was Programming Director for AOL Games. There she led content strategy for games including creation, communication, and implementation of strategic content initiatives on AOL online properties. MacLean also oversaw the integration of custom marketing solutions for multiple partners. Previously, she held the position of Senior Product Manager, responsible for more than 35 individual game titles at AOL. MacLean began her career in the video game industry at Microprose Software.

She holds a BA degree in international relations from Johns Hopkins University and an MBA with an international business concentration from Columbia University.

MacLean will be responsible for the company's development of business opportunities, industry relations, and product distribution. She will report to Close and be based at the company headquarters in Maynard, Massachusetts.

"38 Studios is developing a reputation as one of the industry's top companies at which to work because of its people, leadership, and vision," said MacLean. "I'm truly excited to join a ground-breaking company that is working to deliver a next-generation online entertainment experience that transcends the traditional games we understand today."

Curt Schilling has unveiled the real identity of Green Monster Games:

Curt Schilling introduces official identity of his Entertainment Company, 38 Studios, LLC

(Maynard, MA, March 2, 2007) Major League Baseball Pitcher Curt Schilling announced today that 38 Studios, LLC, will be the official corporate name of the entertainment company he launched last fall. Schilling introduced 38Studios.com apparel last week during a press conference following his first Spring Training start of 2007 for the Boston Red Sox.

“Our vision as a company is to build something revolutionary, to be the leader in the entertainment industry. The executive team I put in place, lead by 38 Studios' President Brett Close, felt this name was a more accurate reflection of what our company is working to achieve,” said company founder and CEO Curt Schilling .

The 38 Studios brand will deliver not only massively multiplayer online games, but a broad spectrum of immersive products.

“The name 38 Studios captures the scope of our goals,” Brett Close said. “Our mission is to create ground-breaking intellectual properties that inspire a vast selection of entertainment experiences.”

Regarding the number 38, “It's not only about what we're going to accomplish, but how,” Close continued. “38 is Curt's number, of course. Anyone familiar with Curt recognizes that he represents excellence, integrity, and achievement. These are attributes intrinsic to our people, our organization, and our products.”

Close and members of the executive management team will be attending Game Developers Conference 2007 (GDC) in San Francisco this week, March 5 th -9 th . It will be the team's first appearance at an electronic gaming industry show on behalf of 38 Studios.

38 Studios is planning a mid-March launch of its official company web site, www.38Studios.com.

ABOUT 38 Studios:

38Studios, LLC was founded in the Boston area by Boston Red Sox pitcher Curt Schilling . 38 Studios' products will feature the artistic vision of Todd McFarlane (creator of Spawn, www.spawn.com ) and celebrated author R. A. Salvatore (creator of Drizzt Do'Urden, one of modern fantasy's most memorable characters, www.rasalvatore.com ). Together with a growing team of experienced industry professionals, 38 Studios is now in pre-production on its premier title.