38 Studios fails to pay employees, Rhode Island

Things are looking decidedly grim for 38 Studios, after it was revealed earlier this week that the Rhode Island developer was in some financial difficulty (to put it politely).

Earlier today, it was reported that the studio was “robbing Peter to pay Paul”, by paying back a $1.125M debt to the state, using money it had saved by not paying employees.

[img_big]center,52,2012-03-20/Reckoning_DLC1_GallowsEnd03.jpg,Kingdoms of Amalur: Reckoning[/img_big]

38 Studios reportedly hand-delivered a cheque to the state’s Economic Development Corporation for the full amount owing, to the delight of Governor Chafee’s office. However, the smiles didn’t last long, as chief financial officer Rick Wester soon contacted the EDC to explain that there were “insufficient funds” to cover the cheque.

The $1.125 is part of an annual repayment deal agreed to by 38 Studios when it accepted the offer to relocate to Rhode Island from Massachusetts. Originally due on May 1st, the EDC has announced it is willing to accept the overdue payment just as soon as 38 Studios can come up with the cash.

Meanwhile, the saga has started claimed people’s jobs:38 Studios has reportedly laid off all temporary workers and contractors, leaving it with 379 full-time employees – 288 of which live and work in Rhode Island.

Job cuts aren’t limited to the studios, either, as Keith Stokes resigns from his position as head of the EDC. Stokes was instrumental in securing the 38 Studios move, offering the fledgeling company $75 million in a tax-payer guaranteed loan.

Project Copernicus concept art

Project Copernicus concept art

38 Studios released Kingdoms of Amalur: Reckoning in February, selling a relatively low 410,000 copies despite “solid” reviews. The developer is currently working on a new game – an MMO codenamed Project Copernicus – but has not announced many details, or the all-important release window just yet.

Under the conditions of the loan, all intellectual property created by 38 Studios belongs to Rhode Island if the company shuts its doors.

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