PROVIDENCE – Despite various objections, a Superior Court judge on Tuesday approved a $25.6 million settlement between two defendants and the state in the ongoing 38 Studios LLC civil lawsuit.
Superior Court Judge Michael A. Silverstein approved the settlement between the R.I. Economic Development Corp., now known as the R.I. Commerce Corp., and defendants Barclays Capital Inc. and Wells Fargo LLC. The settlement was proposed last month. It evoked objections from other defendants in the case, including First Southwest Co. The financial planning company was hired as an adviser to the state in 2010 when the EDC issued $75 million in taxpayer-backed bonds for the now defunct video game company founded and owned by former Boston Red Sox pitcher Curt Schilling.
Individual 38 Studios defendants, including Schilling, also objected to the settlement, raising concerns about the constitutionality of 2014 legislation that encourages settlements, according to a court filing released on Tuesday. Similar arguments were made and addressed in previous settlement decisions. The now-approved settlement increases the state’s total recovered funds to about $42 million, excluding however much Rhode Island has spent on legal fees.
The lawsuit stems from the EDC accusing company principals, underwriters and economic development officials of misleading it, causing it to make the decision to issue the bonds, which are still being paid back by taxpayers.
Retired Superior Court Judge Francis J. Darigan Jr., who mediated settlement meetings between the state and Wells Fargo and Barclays, estimates the state’s total exposure is about $88 million, although some estimates put the number closer to $100 million.
First Southwest’s objection to the most recent settlement accused the state of trying to “strong-arm private parties to pay for its mistakes.” The state later shot back in its own filing, saying the objection was “inflammatory.”
The case is scheduled to go to trial with the remaining defendants next month.