Curt Schilling on D&C: ‘I’m not asking for sympathy’ after losing $50M in business collapse
|06.22.12 at 10:01 am ET|
Schilling said he invested “just north of $50 million” of his own money and lost it all. “I’m tapped out,” he insisted.
Schilling said he sat down his family about a month ago and explained to them that “38 Studios was probably going to fail and go bankrupt, and that the money that I had earned and saved during baseball was probably all gone. And that it was my fault. And that they might start hearing some things in school and things like that. And let’s be clear: We’re not talking about a terminal illness or somebody dying. But it’s a life-changing thing. It’s not a conversation I would wish on any father, or on anybody. But I had to do it, and explain to them that part of growing up is being accountable. This was my decision to do this, and I failed. And life would probably start to change and be very different for us.”
Schilling acknowledged that he and his leadership team “made a lot of mistakes,” but he also made it clear that he feels Rhode Island Gov. Lincoln Chafee shares in the blame. Rhode Island lured 38 Studios from Massachusetts with $75 million in loan guarantees, but when the company missed a loan payment in May, Chafee publicly questioned the future of the company, indicating he was working to keep the company “solvent.”
Said Schilling: “That word, it was an enormous problem immediately for us.”
Asked if he thought Chafee was disappointed in the studio’s demise, Schilling said: “No, not at all. I think he had an agenda and executed it.”
Following are more highlights from the conversation. To hear the interview, go to the Dennis & Callahan audio on demand page.
On his personal investment in the company: “I put everything in my name in this company. I believed in it. I believed in what we had built. I never took a penny from this company. I never took a penny in salary, I never took a penny for anything. It was different. What we built was so incredibly different from a company perspective. And what we had, it was amazing. I think it was a dream place to work. …
“Obviously, it’s been a challenging couple of months, and I couldn’t imagine this. But I’m not asking for sympathy. That was my choice. I chose to do this. I wanted to build this. I wanted to create the jobs and create something that had a very longstanding world-changing effect. We were close. We were close to getting there. It just fell apart.”
On why his company failed: “We didn’t raise capital. We didn’t get private capital. At the end of the day, when you look at all the things that we did, I put all the money I said I’d put in, I guaranteed the things I guaranteed from a loan perspective, I never took a penny out, and we spent the money exactly how we defined it in all the documentation with the state. And the one thing that we always listed as a going concern, we couldn’t execute and we could not raise private capital. For a litany of different reasons — I’m sure if you ask anybody, they’ll give you one or more reasons — the hard part, and probably the most painful part, for the first time in 5 1/2 years, we were so close. And it just didn’t work out.”
On how 38 Studios employees found out about the company’s problems: “The employees got blindsided. One of the many, many mistakes I think that was made — or that I made, or that we made as a leadership team — was that this came out of nowhere for them. In all honesty, they found out because Gov. Chafee made a comment on Monday night about 7 o’clock, a public comment — which neither side had ever publicly commented on anything we were doing — and it was based around keeping the company, he used the word ‘solvent.’ That word, it was an enormous problem immediate for us. But the employees had no idea. Payday was the next day, and they didn’t get a paycheck. And it just went downhill from there. ‘¦ The employees got blindsided. They didn’t deserve it. It was not how we ever did business. The employees were everything. That was what the company was and it was about. ‘¦ I always told everybody, if something were going to happen you’re going to have a month or two lead time. And I bombed on that one in epic fashion.”
On if he overpaid his employees: “That was the only way we could build the team that we built. Listen, we absolutely made mistakes. But everything I’ve ever done in my life has been from my heart. That was why I was able to do what I was able to do I think in October [in the baseball postseasons]. And that was why I was the pitcher I was, because I feel like my heart pushed me to do some things that I might not have otherwise done if I was using my head. To counterbalance that I surrounded myself with incredibly intelligent people in the software business.”
On his $75 million loan guarantee from Rhode Island: “I had put at that point about $30 million of my own money into the company, and we were looking for investment. When they approached us and talked about this deal, obviously it was incredibly attractive, because we would have the state as a partner — we initially thought we would have them as a partner. This is one of the private venture hubs of the works — Boston, New England area and California. Initially, that looked like it would be a huge boon, because we would have them in our corner, working with us and for us. And it just never ever materialized.”
On why 38 Studios needed additional tax credits from Rhode Island: “The payroll piece was all tied to the tax credits, which we, about a month prior, in mid-April we were in the finally stages and processes of finalizing and finishing, and we assumed would be done within a week of mid-April. And then we got the default letter, which was another kind of a stunning incident. They knew the week before that we were not going to be making [the May loan payment]. We had a meeting, and we told them cash is tight. As our partner, here’s where we are. We made a mistake, we didn’t specifically ask them to give us an extension. And we just assumed based on the conversation that they understood we won’t be able to make this payment on the first [of May], but at some time in the next 30-45 days we should be comfortably able to make that payment. ‘¦
“The first came and went and the fourth, which was the Friday of that May, we got a default letter, which completely blindsided us. The default letter triggered a lot of other things. We were then immediately ineligible for tax credits and all this other stuff. We were actually confused as to why we got it. Because again, this is our partner and we’re trying to work together to make the company successful. They had every right to issue it, we’ve never argued that, but we just assumed based on the conversation [that they would be more cooperative]. Absolutely. We ended up having multiple discussions. They came back and came to the table. We have a litany of e-mails where we made multiple agreements in different places. They came back, they wanted equity, they wanted other things. We acquiesced to everything. We had an agreement multiple times. And then the fraudulent check story popped up. That should have been the final red light, that somebody is doing something very evil here.”
On criticism that he, as a conservative, was hypocritical for taking money from the government: “I’m not sure where my stance and opinion in that we need a smaller government, I’m not sure how that correlates to this. ‘¦ The program was there for local businesses to use. In a sense, we were a dream company to use them, because we were local. That money was literally coming out of the budget into our company, going right back into the local economy. Our employees live in Rhode Island, spend the money in Rhode Island. And 99 percent of the tax credit money was for payroll and development. So, all that money was spent locally, for rent and all the things that you do to keep a company running.”
On a lack of support from Chafee: “If you remember, after Governor Chafee went into office, he came by the studio, he had made a public comment that he was against the deal before he got elected but now that he was in the office he was going to everything he could do to help this company succeed. And that absolutely unequivocally never ever happened in any possible way. That’s not the sole reason this company failed. It’s not. And again, I’ll keep repeating it: I’m responsible for absolutely a part of this. It’s just, it’s crushing and devastating to have seen it fall and fail exactly the way it did after five years of building this. ‘¦
“There were a lot of situations where I think he could have helped us succeed. And probably the one thing at the end — and I said this earlier — that people don’t understand is that we had an investor at the end that would write a 15-20 million dollar check — told the state, told the governor he would write this check. His ask of the state was to be in senior position for the debt and for the state to issue the $6 million in tax credits to clean up the mess that we had gotten into over April and May. If that happened, he would come in and save the company.”
On how he deals with all the criticism he’s received of late: “I’ve heard some of this before. From the comment in ’04 that I’ve never ever been able to walk away from, I’ve always heard things like this. It’s painful to hear people wish and hate. I’ve been in a lot of situations in my life. And in probably the 15 or 16 years since I’ve become a Christian, I don’t know that I’ve ever said I hate somebody. I dislike people and I have problems with [people], but I don’t hate. It takes too much energy to hate. But the amount of hatred is surprising, given that I’ve never hit my wife, I’ve never driven drunk, I’ve never taken drugs, I’ve never done steroids, I’ve never done the things that a lot of people have done. It doesn’t mean I’m faultless. I make mistakes every day and I’ve done and said a bunch of stupid stuff in my life. But I’ve never done it maliciously. I’ve never done it with ill will or evil intent. I believe I’ve always had a pretty good heart and tried to be good to people.”
On his future as an ESPN analyst: “We had a discussion, and we mutually agreed that we would back off and let this thing play itself out.”
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