Rhode Island holding public hearings over 38 Studios, exploring loan default

The story of 38 Studios as a video game developer is long over, but the financial fallout from its $75 million in taxpayer-backed loans continues in the state of Rhode Island. The Providence Journal reports two developments this week, as the state will shortly begin a public hearing process over the debacle and consider whether it will pay back the loan.

House Oversight Committee Chairman Michael J. Marcello said the state will launch the hearing process shortly based on the "thousands of pages" of documents it received this week, in response to a public information request made over a month ago.

The committee will focus on two issues: Did the state properly retain an independent, third party to monitor and assess 38 Studios' financial standing? And what happens if the state decides not to pay the loan, which amounts to nearly $113 million after interest.

Governor Lincoln Chafee's administration believes the state, which has no legal necessity to pay the loan, does have a "moral obligation." Chafee's proposed state budget (which needs to be approved by July 1) does factor in an initial $2.5 million payment, with $12.5 million paid out over the next seven years.

This article was originally published on Joystiq.