PROVIDENCE, R.I. (WPRI) – Gov. Gina Raimondo’s administration announced Wednesday the state has reached a settlement with the last remaining defendant in the lawsuit over 38 Studios, likely ending more than four years of litigation over the failed deal.
Hilltop Securities Inc. – which served as the state’s financial adviser on the transaction under its old name, First Southwest – has agreed to pay $16 million to settle its portion of the suit, the R.I. Commerce Corporation said. The other 13 original defendants in the case, filed by then-Gov. Lincoln Chafee in 2012, have already agreed to settle.
38 Studios, a video-game company founded by former Red Sox star Curt Schilling, collapsed in 2012 after receiving a $75-million loan backed by Rhode Island taxpayers, triggering years of bitter political recriminations. The state was left on the hook for roughly $90 million, and Chafee sued some of the deal’s architects in an effort to recover the money.
If approved, the new settlement will yield $13.2 million after legal fees to cover bond payments, according to Commerce spokesman Matt Sheaff.
“We have reached a settlement with the Rhode Island Commerce Corporation that once approved by the court will resolve the 38 Studios matter,” Patti Doyle, a spokeswoman for Hilltop, said in a statement.
“This resolution contains no admission of liability or wrongdoing and it allows our firm to put this matter behind us and move forward on the important work we undertake for municipal clients across the country,” she said.
Another reason Hilltop may not have wanted to be the only defendant to go to trial: under the terms of the special 38 Studios settlement law enacted by the General Assembly in 2014, the company would have been liable to pay all of the state’s damages regardless of whether they were directly tied to its own actions.
Previous settlements with the other 38 Studios defendants including Schilling have already brought in about $45 million before legal fees, so the new agreement brings that total to around $61 million.
The settlements have yielded a total of $49.66 million after legal fees to cover bond payments when the latest one is added, Sheaff said. Between that settlement money and $26.16 million appropriated by lawmakers so far to pay the bonds, the state’s remaining liability for 38 Studios is just $12.5 million, he said.
A judge must still approve the Hilltop settlement, which was approved by the Commerce Corporation board on Dec. 19 but not filed in court until Wednesday. The two sides had been scheduled to go to trial last month, before a last-minute delay. Settling the case means there will not be a trial over the 38 Studios debacle.
After the settlement was announced, Raimondo reiterated her pledge to petition a judge to release all grand-jury and other documents generated by the four-year 38 Studios criminal investigation, which ended last summer with no charges. She said she will do so once the settlement is approved.
“Rhode Islanders deserve to have access to all of the information that is known,” Raimondo said in a statement. “Complete transparency is the best way to ensure that such a disastrous deal never happens again.”
But Attorney General Peter Kilmartin’s spokeswoman, Amy Kempe, said Kilmartin continues to oppose such a move.
“The position of the Office of the Attorney General remains the same: we consider this investigation open, and all of the rules of the grand jury, as well as the protocols and procedures regarding any criminal investigation, remain in effect,” Kempe said.
“We are not going to comment on the governor’s intention to petition the court to release grand jury materials other than to say, we look forward to reviewing her written request to the court, and will respond accordingly,” she added.
The lawsuit filed by Chafee is separate from another ongoing legal matter involving 38 Studios: civil fraud charges filed by the U.S. Securities & Exchange Commission last year against the state and some of the deal’s architects. Court documents say that case is also close to being settled.
Also still pending is 38 Studios’ original bankruptcy case, filed in June 2012 in Delaware, where the company was formally incorporated.
Ted Nesi (firstname.lastname@example.org) covers politics and the economy for WPRI.com. He writes Nesi’s Notes on Saturdays and hosts Executive Suite. Follow him on Twitter, Facebook and InstagramTim White contributed to this report.