SEC Charges Wells Fargo With Fraud in 38 Studios Bond Offering

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I can't believe we are still hearing about this case. I wonder what took the Securities and Exchange Commission so long to bring charges against Wells Fargo?

The Securities and Exchange Commission today charged a Rhode Island agency and its bond underwriter Wells Fargo Securities with defrauding investors in a municipal bond offering to finance startup video game company 38 Studios. The Rhode Island Economic Development Corporation (RIEDC, now called the Rhode Island Commerce Corporation) issued $75 million in bonds for the 38 Studios project as part of a state government program intended to spur economic development and increase employment opportunities by loaning bond proceeds to private companies.
 
"part of a state government program"

We are from the government and we are here to help.
 
By now they are up to $500 million in legal fees right? They have to have spent far more on trying to recover this money than what they lost year ago.

One issue I have with this filing is this "When 38 Studios was later unable to obtain additional financing, the video game didn’t materialize and the company defaulted on the loan"

They seem to be mistaken as I have the game so it very much did materialize.
 
By now they are up to $500 million in legal fees right? They have to have spent far more on trying to recover this money than what they lost year ago.

One issue I have with this filing is this "When 38 Studios was later unable to obtain additional financing, the video game didn’t materialize and the company defaulted on the loan"

They seem to be mistaken as I have the game so it very much did materialize.

You are incorrect, I belive big huge games developed KoA:RECKONING

The game referenced in the filing and the one 38 studios was working on was project copernicus, a mmorpg based in the same universe
 
"part of a state government program"

We are from the government and we are here to help.

The source of the money is immaterial to the success of the project. The game failed because of budget overruns, poor management, and the sudden implosion of the mmorpg market.
 
The SEC also charged Wells Fargo’s lead banker on the deal, Peter M. Cannava, and two then-RIEDC executives Keith W. Stokes and James Michael Saul with aiding and abetting the fraud. Stokes and Saul agreed to settle the charges without admitting or denying the allegations and must each pay a $25,000 penalty. They are prohibited from participating in any future municipal securities offerings. The SEC’s litigation continues against Cannava, Wells Fargo, and RIEDC.

Fucking laughable as usual.

EDIT: Sweet, we can edit FP posts now.
 
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You are incorrect, I belive big huge games developed KoA:RECKONING

The game referenced in the filing and the one 38 studios was working on was project copernicus, a mmorpg based in the same universe


No you are incorrect.

Acquisition by 38 Studios
On May 27, 2009, 38 Studios announced that they were acquiring Big Huge Games and retaining 70 employees out of approximately 120 who were at THQ.[11]

From mid-2009 to January 2012, Big Huge Games developed a single player role playing game titled Kingdoms of Amalur: Reckoning, which was released in early February 2012 and published by Electronic Arts (EA) and 38 Studios for Xbox 360, PS3 and PC. The game is set in a fantasy world created with input from R A Salvatore and Todd McFarlane.

It was reported on May 24, 2012 that the studio and their parent company 38 Studios had laid off their entire staff.[12][13]
https://en.wikipedia.org/wiki/Big_Huge_Games#cite_note-13
 
For those that didnt follow this story closely. Schilling took money from the state on a loan that anybody with more than 4 brain cells should have known was a terrible idea (worth noting that this was under governor Carcieri's approval). Then while developing the main game they bought big huge games and immediately put them to work on KOA reckoning because schilling thought he would make more money off that game to go towards the main title and give fans a taste of the universe. Reckoning didnt even break even, they laid off the entire BHG staff 3 months after reckoning was released. They eventually ran out of money in the middle of development on the main game and turned to the new governor Chaffee for more loans to which he said no and caused a big stir. Schilling and crew then went on to pull some shenanigans like paying the first loan payment with a bad check, screwing his employees on the mortgage deal he made with them to get them to relocate to RI. Not paying his employees.

Basically Schilling had NO experience with game development or publishing and decided to make an MMORPG in a world where 9.5/10 MMORPGs fail miserably. Then instead of putting all of the loan money towards that MMORPG they bought another developer and made a different game that he spent WAY too much on...

Schilling spent years pitching this game idea to investors and never got a single investor interested in it, for good reason. The man was completely incompetent with no clue whatsoever what he was doing. The deal with Rhode island was pretty damn sketchy and no state should be gambling with taxpayer money like that. Hell with the success rates of MMORPGs they would have been better off taking that taxpayer money to Vegas.
 
For those that didnt follow this story closely. Schilling took money from the state on a loan that anybody with more than 4 brain cells should have known was a terrible idea (worth noting that this was under governor Carcieri's approval). Then while developing the main game they bought big huge games and immediately put them to work on KOA reckoning because schilling thought he would make more money off that game to go towards the main title and give fans a taste of the universe. Reckoning didnt even break even, they laid off the entire BHG staff 3 months after reckoning was released. They eventually ran out of money in the middle of development on the main game and turned to the new governor Chaffee for more loans to which he said no and caused a big stir. Schilling and crew then went on to pull some shenanigans like paying the first loan payment with a bad check, screwing his employees on the mortgage deal he made with them to get them to relocate to RI. Not paying his employees.

Basically Schilling had NO experience with game development or publishing and decided to make an MMORPG in a world where 9.5/10 MMORPGs fail miserably. Then instead of putting all of the loan money towards that MMORPG they bought another developer and made a different game that he spent WAY too much on...

Schilling spent years pitching this game idea to investors and never got a single investor interested in it, for good reason. The man was completely incompetent with no clue whatsoever what he was doing. The deal with Rhode island was pretty damn sketchy and no state should be gambling with taxpayer money like that. Hell with the success rates of MMORPGs they would have been better off taking that taxpayer money to Vegas.


He is a baseball player, pitching is all he knows.
 
The source of the money is immaterial to the success of the project. The game failed because of budget overruns, poor management, and the sudden implosion of the mmorpg market.

My comment had nothing to do with the failure of the game itself.

I just find it laughable that a government program would be used to loan money to a game development studio.

Possibly one of the stupidest ideas ever.
 
My comment had nothing to do with the failure of the game itself.

I just find it laughable that a government program would be used to loan money to a game development studio.

Possibly one of the stupidest ideas ever.


I agree with you there, there are millions of better ways to stimulate job growth in their state than what they used it for.
 
My comment had nothing to do with the failure of the game itself.

I just find it laughable that a government program would be used to loan money to a game development studio.

Possibly one of the stupidest ideas ever.

I don't know that it was dumb just because it was a game. The right game with the right management could have been lucrative. The story they bought and were preaching was basically "hurr hurr, video game, hurr hurr." It was dumb because they didn't know anything about what they were investing in. Which is a disturbing trend in investing in general nowadays - public, private, individual, whatever.
 
In Rhode Island?
Yeah for instance, incentives to bring Google fiber or municipal fiber in. Infrastructure projects. I imagine there is a port there- upgrades. Tax breaks for software and services companies to relocate that are contingent on jobs added and kept. Basically stuff that isn't a high risk loan.
 
Yeah for instance, incentives to bring Google fiber or municipal fiber in. Infrastructure projects. I imagine there is a port there- upgrades. Tax breaks for software and services companies to relocate that are contingent on jobs added and kept. Basically stuff that isn't a high risk loan.

fiber doesn't bring jobs.
 
I'll give you another example, the town I live in did not exist before the state built an expressway nearby, it now has 80,000 residents. Infrastructure brings jobs.
 
Sure it does, who is going to build it? Also, it will attract tech companies, startups, and be a magnet for young tech savvy people. So yeah, both directly and indirectly it brings jobs.

Looking at getting fiber in the ground, that is a temp job that is done in a few months. So not much help there. You started off this line of though by saying that giving money to a software developer was a horrible way to try to make jobs to start with and that it should be given for fiber instead, to which that is what my comment in relating to. The concept that software is a stupid thing to invest in while fiber is going to bring them shit loads of money hand over fist. That is a more long term investment and one that is very risky also. If they stay in business, a software company will bring in people into an area, will hire more people from the area and will be around for many years, all of this is true and helps an area without or without the fiber also. Google putting fiber in the ground is a short term project and once they are done they up and walk away. If looking at city fiber, that is contracted out to some other company (which will probably be from out of state) they come in, do the job and leave. In either case you aren't looking at anything that long term, once the fiber is in the ground you don't need more people there. That is not a 100% fool proof way for them to make back their investment.

Now as for bringing in more businesses. Not really. You guys seem to think bandwidth is hard for everyone to come by. Those that can get it, aren't going to want to pay for anything crazy. The speeds that most would pay for are equal to what they get from any other ISP (sub 200Mbps). You go down town of any major city and if you want high speed fiber you are going to have access to it for a business district. You expect every business in the USA to up and move to Rhode Island because somebody puts in fiber? Those that are there will make use of it, but you aren't going to have businesses deciding holy shit we have to make our office to RI right now because somebody just put in fiber.


How do you figure? Infrastructure is the key to bringing jobs. You lay fiber and start giving tax breaks to tech startups and you will create some jobs.

We were looking at this from the standpoint of giving money to software companies was an idiotic idea and fiber was the perfect way for a state to make all their money back and then some. Your method requires software companies (and not 100% ISPs) be given money. That said, as I just stated above that isn't going to create a shitload of jobs but is only going to add a few for the fiber itself. And then as a side result, you might get a few businesses, but nothing to dent the employement rate of an area.
 
I was talking about video game developers, there is a huge difference. Yes they make software but the type of software they make is extremely risky to make, most video game developers fail fast and spectacularly. I was talking about tech companies in general. This could be a branch office of an established company or even a Datacenter or startup.
 
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