State reaches $2.5M settlement with Schilling, others in 38 Studios suit

THE R.I. COMMERCE CORP. has reached a settlement with 38 Studios founder Curt Schilling and four other defendants in the lawsuit that is looking to collect as much as possible from the company and others to help pay back the moral obligation bonds that the state guaranteed in order to attract the company to Rhode Island. The $2.5 million settlement must be approved by Superior Court.
THE R.I. COMMERCE CORP. has reached a settlement with 38 Studios founder Curt Schilling and four other defendants in the lawsuit that is looking to collect as much as possible from the company and others to help pay back the moral obligation bonds that the state guaranteed in order to attract the company to Rhode Island. The $2.5 million settlement must be approved by Superior Court.

(Updated, 1 p.m.)
PROVIDENCE – The R.I. Commerce Corp. on Monday agreed to a $2.5 million proposed settlement between the state and Curt Schilling, three other defendants and their insurer in the ongoing 38 Studios LLC lawsuit.
In addition to Schilling, the former Boston Red Sox pitcher and founder of the now-bankrupt video game company 38 Studios, the proposed settlement includes defendants Thomas Zaccagnino; Richard Wester; Jennifer MacLean; and their insurer, Starr Indemnity and Liability Co.
The lawsuit stems from Commerce RI, formerly known as the R.I. Economic Development Corp., based on accusations that 38 Studios principals, underwriters and economic development officials misled the state in its decision to issue $75 million in taxpayer-backed bonds.
The $2.5 million settlement amount – if approved by the Superior Court – would be paid entirely through an insurance policy the defendants hold with Starr Indemnity. Superior Court Judge Francis J. Darigan Jr., who has mediated settlement negotiations, says this deal is likely in the state’s best interest, as the combined total assets of the four 38 Studios defendants – including Schilling – do not exceed $2.5 million, according to a review of personal assets done by Commerce RI.
“The state of Rhode Island is satisfied that the aggregate amount of the all of [the defendants’] assets would not exceed $2.5 million that’s currently available in the option of the policy issued to 38 Studios,” Darigan said.
This validates to some degree widespread speculation that Schilling has lost much of his fortune he accumulated during a lucrative baseball career. He’s said to have invested upward of $50 million of his own money in 38 Studios.
His assets, however, will not be released to the public, as all the defendants’ financial documents, reviewed during this process, will remain confidential, according to Darigan. The retired judge, however, did say Schilling’s recently signed contract to host a syndicated radio show with Howie Carr Radio Network was considered in the review of his assets.
The Starr Indemnity policy was originally worth $10 million, but as a cannibalizing policy roughly $7.5 million has already been earmarked for legal fees incurred by the four 38 Studios defendants’ lawsuit during the four-years of this lawsuit.
“This was a very difficult case from the very beginning. The recoveries made to date have been reasonably substantial,” Darigan said. “I think that there should be some solace taken from the state that’s been able to recoup almost half of its outstanding liability.”
The proposed settlement is contingent on Superior Court approval. If the court approves the deal, the corporation will have reached settlements totaling approximately $45 million in the case. That’s more than half of the roughly $88 million of 38 Studios bonds taxpayers were left responsible for when the company went bankrupt. The state most recently settled with Wells Fargo LLC and Barclays Capital Inc. for $25.6 million.
Commerce RI is still engaged in litigation against First Southwest Co., the only remaining defendant.
In a statement, Gov. Gina M. Raimondo said she and her team remain “focused on recovering as much taxpayer money as possible and we are preparing for trial with the remaining defendant.”
To see the full settlement document, click HERE.
In addition, to see the full text of the state’s settlement with Wells Fargo, click HERE.

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