End Game: Curt Schilling and the Destruction of 38 Studios

On May 24, the entire 38 Studios staff was laid off via e-mail. They hadn’t been paid since the end of the previous month, but their problems were just beginning. In short order, their healthcare disappeared and their 401(k)s were frozen. Then, MoveTrek Mobility — a company 38 Studios hired during the relocation to Providence to buy and resell employees’ Massachusetts homes — notified seven people that, because it had not yet sold their houses, they were potentially responsible for their old mortgages. And Atlas Van Lines alerted some individuals that they were on the hook for bills that management hadn’t paid.

Thom Ang is one of those people suddenly stuck with his old mortgage. With two young kids, no salary, rent due on his Rhode Island home, and now a mortgage in Massachusetts to pay, he’s afraid his credit is about to be ruined. “I wasn’t even aware that this could or would happen,” he says, “and then having it affect where I could possibly live and where I could possibly work?”

At the last minute, Schilling believed he’d found a white-knight investor to inject $15 million into the company. But that deal, too, was dependent on additional tax credits from the state, and fell apart. On June 7, 38 Studios filed for bankruptcy.

One of the company’s final acts — between June 4 and June 6 — was to pay COO William “Uncle Bill” Thomas just over $12,000 for his work shutting down 38 Studios, according to bankruptcy documents. Nearly every other employee had not been paid for more than a month. Many local industry veterans and tech investors tell me they’re outraged by how Schilling failed to responsibly unwind the company and transparently communicate the dire situation to his employees long before May.

One former staff member vented his frustrations on Facebook, writing, “I’d like to honestly know why I was hired in the first place on January 16th, 2012…when members of the company knew they were behind on bills and not doing well economically? I moved my pregnant wife, sold my house for a loss of 18k, relocated away from all my family and friends for a company I thought was honest and forthright to their employees. What did I get in return? An unpaid [$10,500] relocation package months after it should have been paid, a pregnant wife who found out our insurance had lapsed from our doctor, a ton of bounced checks and payments to bills when we found out our paychecks had not been paid through the media and a large debt to my unemployed father to help us survive.”

Surprisingly, though, during and after the company’s demise, many former employees continued to stand up for Schilling. When I attended a June 13 mini reunion at a bar in Waltham, one ex-staffer told me, “I’d still take a bullet for him.” On the phone, even Thom Ang — stuck with his old mortgage — said, “I love the man,” adding that Schilling could not have been responsible for how he and his coworkers were misled and mistreated. “How the business was run? That’s not Curt,” Ang says.

But it was. Schilling acknowledges as much. In the private Facebook postings, executives like MacLean and Mrochek claim they tried to stop Schilling and he wouldn’t listen. MacLean wrote that executives “brought their issues up many times and were largely ignored.”

“You knew we had not been paying all the bills for months,” Mrochek wrote to Schilling. “You bet our lives on the roulette wheel of Rhode Island state politics.”

Schilling disputes that his lieutenants warned him. He says he pushed 38 Studios to the edge because, as ever, he was confident a deal would come through. “I believed with every ounce of my being that everything was going to work itself out,” he says. “I’m $50 million in at this point, so I’m not going to walk away,” he adds. “You could make an argument that that was blinding me, but there was the tenor and the velocity and the content of the conversations with the investors.”