The
video game company issues a bad check and faces financial ruin
It has been reported that a check worth $1.125 million
issued by the 38 Studios video game company has been returned unpaid. The reason given by the bank was that there
were insufficient funds to cover the payment which was accumulated as a result
of a fee owed to the state of Rhode Island. The news has seriously damaged the
credibility of the company in question.
The company officials had made inquiries about the
possibility of sending the money electronically but instead a check was
hand-delivered. Governor Lincoln Chafee of the state said that the company had
defaulted on the payment the month before. Curt Schilling (a former Red Sox
pitcher) owns the troubled company. The state is demanding settlement of the
debt with costs.
Early
warning signs that the video game company was failing
By the 24th of June the company had issued a
warning to the effect that they required more funding in order to implement
future operations. According to the report “the company will require additional
financing to fund future operations… [there is] substantial doubt about the
company’s ability to continue as a going concern.” [1]Critics argue that this
should have sent warning signs to the Governor and his team.
Corporate
indiscipline and state regulation is on trial
The issue for the state at the moment is to save the
situation and the governor summarized the concerns: “How do we avoid throwing
good money after bad — that’s the crux of the question”. Taxpayer funds are at
stake and many people remember the Wall Street Crash which virtually
debilitated the American economy. How could a private company get over $100
from the state without sufficient guarantees?
There are some people who argue that regulation kills
business and that the state has no role to play. This is the result of such a
paradigm. If a company is getting a ‘bailout fund’ then they need to be
answerable to the state. Moreover there have to be guarantees of the payment.
Companies that are unable to raise sufficient capital
should not be in business and they should certainly not be relying on the state
to prop them up. The 450 jobs promised to Rhode Island are probably going up in
smoke. It is ironic that Curt Shilling is a famous Republican who does not
support state bailouts. Hopefully the company will follow that philosophy in
the future.
Resources:
- G.J. Remal and F. Quaratiello ,” Schilling’s company didn’t have money to pay the check”, 17th May 2012, Boston Herald,
- A. Groberman,” Republican Curt Schilling Needs a Bailout for His Failing 38 Studios Company”, 18th May 2012, Opposing Views
- The author recommends articles about used cars and prescription medicine.
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