Rhode Island Judge OKs Lawsuit Against Schilling, Others

Most of a state agency's lawsuit against former Red Sox pitcher Curt Schilling and executives at his failed video game company can move forward, a Rhode Island judge ruled Wednesday.

Superior Court Judge Michael Silverstein issued a 99-page decision that allows the state Economic Development Corp. to go ahead with its lawsuit against Schilling, former 38 Studios executives, former EDC officials and others. The suit accuses them of fraud, negligence, breach of fiduciary duty and other acts that misled the agency's board into approving a $75 million state loan guarantee for the company in 2010. The company filed for bankruptcy last year, leaving the state on the hook for more than $100 million.

The EDC sued in November, naming 14 defendants. Nine of those worked for the agency, including former Executive Director Keith Stokes and former Deputy Director Michael Saul, as well as its attorneys and financial advisers. Four of the defendants were executives or on the board at 38 Studios, including Schilling. The final defendant issued an insurance policy to 38 Studios.

All the defendants moved to dismiss the lawsuit, and the judge turned most of them down.

In his ruling, Silverstein said the state can't immediately seek damages of the entire $75 million in bonds that supported the deal because it has not yet lost that much. The bonds are being repaid over time. But the judge said the state could seek repayment once the money has been spent. He also said the EDC could sue for fees and salaries paid to the defendants and damage to its reputation and credit.

The General Assembly this year appropriated $2.5 million in payments on the bonds.

Max Wistow, a lawyer for the EDC, told The Associated Press he was "quite pleased" by the decision and was looking forward to moving ahead with the case. Wistow in court has described a "fraudulent scheme" in which the defendants both withheld information and provided false information.

Schilling attorney Jeffrey Schreck declined to comment. Previously, Schilling has called the lawsuit political and denied any wrongdoing. He said at the time the suit was filed that the EDC's approval of the loan guarantee was made "with its eyes wide open and with full understanding of any risks."

Messages were left with attorneys for Stokes and Saul.

Associated Press writer Michelle R. Smith contributed to this report.