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Lawmakers cry foul as former pitcher strikes out with taxpayer funds

Steven Senne / AP

Former Boston Red Sox pitcher Curt Schilling, center, is followed by reporters as he departs a meeting at the Rhode Island Economic Development Corp. in Providence Monday. Schilling's 38 Studios is asking for more taxpayer support after falling behind on a $75 million loan.

Updated at 12:20 p.m. ET: Former pitching great Curt Schilling is finding out what countless entrepreneurial-minded hobbyists have learned the hard way: Turning your passion into a viable business is really difficult. Unfortunately, Rhode Island taxpayers might be learning that lesson along with him. 

Schilling, a longtime aficionado of massive multiplayer online games, decided to develop his own game after retiring from baseball in 2007, founding 38 Studios. (Schilling wore number 38 for the Arizona Diamondbacks and Boston Red Sox.) In 2010, the venture  received a $75 million loan guarantee from Rhode Island's Economic Development Corp. with a promise to bring 450 jobs to the state. Now, the cash-bleeding company is on shaky financial ground, and company leaders have applied for more than $20 million in additional tax credits.

If the company folds, it could leave state taxpayers on the hook for more than $100 million including interest and payments to bondholders.

Lawmakers are weighing how to keep 38 Studios afloat so it can pay off its loan without putting taxpayers even further at risk, and some are saying they never would have signed off on 2010 legislation that added $75 million to a loan guarantee program if they had known the entire amount would go toward an ex-ballplayer's digital fantasy world just four months after the votes were cast. 

Late last week, 38 Studios finally made a $1.125 million payment to the state that was due on the first of the month as local media outlets were reporting that the company couldn't scrape together enough cash to pay its 300 employees and was laying off workers. Last Wednesday, the official who oversaw the loan guarantee resigned, the Boston Globe reported, and the board of the Economic Development Corporation, 38 Studio representatives and Gov. Lincoln Chafee met in an emergency, five-hour session.

Schilling attended the meeting and, according to the Globe, asked for more public money. "There were heated moments during that meeting," said Chafee spokeswoman Christine Hunsinger. "Ultimately the governor prevailed upon the board to unanimously agree to take no action to further put at risk taxpayer dollars."

A three-and-a-half hour follow-up meeting Monday night ended with no resolution. Schilling attended the meeting, at which state officials asked for "additional, confidential information regarding the financial and game development status of 38 Studios," EDC  Council spokeswoman Melissa Chambers said.

“There’s so much misinformation out there I cannot begin to clear it up with a sound bite,” Schilling told reporters as he left the meeting, according to the Boston Herald. “We’re not asking the taxpayers for more money."

It has hardly escaped public notice that the often-outspoken Schilling, who made more than $100 million in his baseball career, according to baseball-reference.com, has toyed with a political career as a Republican advocating smaller government.

In a 2010 blog post backing Republican Scott Brown in the race for the Senate seat formerly held by Ted Kennedy, Schilling wrote that the state of Massachusetts "has done nothing but spend, and grow, at a time when we have no money to spend and absolutely unequivocally NO need for a larger government."

Schilling also campaigned for President George W. Bush in 2004 and Sen. John McCain in his 2008 presidential run.

Whether or not Schilling's struggling company can survive without another handout is unclear. Although it released one single-player video game earlier this year, it recently withdrew from the Electronic Entertainment Expo next month. The gaming industry expo was supposed to be the scene for the unveiling of 38 Studios' much-anticipated "Project Copernicus," but now the game reportedly won't be released until mid-2013. 

"(Massive multiplayer) games are notoriously expensive with long development cycles, and hard to predict how successful they will be," said Robert W. Baird & Co. analyst Colin Sebastian.

Sebastian said there have been some worrisome signs for the industry lately, including lower subscriber levels for the popular World of Warcraft game and sliding game play of the "Star Wars" online game.

"In addition, there is a rapid shift towards free-to-play games on phones, tablets and Facebook, which is taking a bite out of the traditional video game market," he said.

38 Studios did not respond to a request for comment.