Rhode Island reaches $25.6M deal over Schilling's 38 Studios

Markets Associated Press

Rhode Island has reached a $25.6 million settlement with two of the financial backers it sued over a disastrous deal with former Red Sox pitcher Curt Schilling's 38 Studios video game company.

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The state's Commerce Corp. announced Tuesday that it has agreed to the proposed settlement with Wells Fargo Securities and Barclays Capital Inc.

The settlement was filed Tuesday in Rhode Island Superior Court and is contingent on the court's approval.

The company founded by Schilling moved from Massachusetts to Rhode Island in 2010 after the state's economic development agency agreed to give it a $75 million loan guarantee. The deal was financed through bonds offered to investors. Less than two years later, 38 Studios ran out of money and filed for bankruptcy.

The state says it's still in litigation with First Southwest Co. and Schilling.

The new settlement brings to $42 million the amount the state has recovered from parties involved in the deal.

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"This really and truly is a hard-won victory for all the parties, particularly the taxpayers of the state of Rhode Island," said retired Superior Court Judge Francis Darigan, Jr., who was called in as a mediator to help broker the settlement.

Darigan told reporters Tuesday that negotiations are ongoing with the other parties and he is hopeful they can agree to a settlement before a trial scheduled for October. But he described Wells Fargo and Barclays as the biggest players and said he's doubtful the state will be able to recover from the remaining parties the nearly $40 million it says it's still owed.

"That might be a stretch," Darigan said. "I'm hoping that we can make a significant contribution towards that, but I don't want to mislead anybody to think that the state is going to recover every nickel."

Wells Fargo said in a statement that it's pleased to have reached an agreement.

"We are not admitting liability, nor did we do anything improper," spokesman Gabriel Boehmer said in a statement. "It is simply in our shareholders' best interest to minimize the risk that accompanies lengthy litigation."

The state's top law enforcement officials announced last month that there would be no criminal charges following a yearslong investigation into the people and organizations involved in the 38 Studios deal. But the U.S. Securities and Exchange Commission is still pursuing a lawsuit against Wells Fargo and Rhode Island's economic development agency, which accuses them of making materially misleading statements about the bonds used to fund the deal.

Democratic Gov. Gina Raimondo said in a statement Tuesday that the settlement is a big step in recovering taxpayer money lost to a bad deal.

"Rhode Islanders understandably feel hurt by this deal — and I do too — but I want everyone to know that we are demanding accountability, getting money back, and moving the state forward," she said.