38 Studios trouble continues, drops second mortgages on former employees

The implosion of 38 Studios has been an ongoing nightmare for the studio's former employees. They hadn't be paid since April 30, their health insurance ran out, and the company unceremoniously laid off everyone yesterday. Now, Polygon is reporting that employees who took advantage of the studio's relocation plan are being stuck with their former mortgages.

38 Studios used to be located in Massachusetts, but moved to Rhode Island on the promise of tax credits and funding. To make the transition smoother, 38 Studios agreed to take over the existing mortgages of employees, allowing them to purchase new homes in Rhode Island. Now certain employees are saying that banks are calling them about a lack of payment on their old mortagages.

Much like the news of yesterday's layoffs, Rhode Island officials had no knowledge of the mortgage problem when contacted by Polygon. One former 38 Studios employee blames those same officials for the state of the company.

"We just needed a little more help, and we thought the state would have our backs on that," 38 Studios director of Story and IP Development Steve Danuser told NECN.com. "We thought the governor was an ally. It didn't turn out that way."

"We've really loved it here...we bought homes, we've helped the businesses in the area," he said. "The governor has turned his back on a lot of taxpaying Rhode Island citizens who work here and it's unfortunate because we had a lot of great people who wanted to contribute to Rhode Island and now they can't."

The staff-less studio is now seeking private capital in order to restart development. Corporate lawyer Jonathan Savage is helping Rhode Island Governor Lincoln Chafee with 38 Studios' ongoing effort to return from the brink of death.

"They are diligently pursuing additional capital," Savage told the Boston Herald. "I would anticipate any additional capital would be private."

Savage says that 38 Studios founder Curt Schilling is apparently willing to do whatever it takes to make sure the company achieve some measure of success.

"I've heard from Mr. Schilling's representative that his goal is the success of the company," Savage said. "They have said they don't want in any way to impede that success. Everything is on the table, including dissolution of equity and management control."

"There are any number of actions a business could take. There are certainly other potential options. It's difficult to say how viable other options might be," he answered when asked about possible bankruptcy proceedings.

All is not dire news though. A number of developers and publishers have reached out to the former employees of 38 Studios. Studios that are hiring have been collected on this document, and those looking to help are using the hashtag #38jobs on Twitter.