Former Red Sox star Curt Schilling and three other former 38 Studios executives have reached a preliminary $2.5 million settlement with the State of Rhode Island over the failure of the video-game company in 2012.
If approved by a judge, the settlement filed Monday would be paid by Starr Indemnity and Liability Company, for a policy insuring Schilling and fellow 38 Studios executives Thomas Zaccagnino, Richard Wester and Jennifer MacLean.
The deal would bring the total amount recovered by the state to about $45 million — “over half,” as the state’s economic-development agency put it, “of the roughly $88 million state moral obligation on 38 Studios bonds for both past and future appropriations.”
Schilling has repeatedly spoken online of wanting to tell his side of the story of the failure of 38 Studios in court, and he has faulted former Governor Lincoln Chafee for the company’s collapse.
Asked on Twitter why he decided to settle, Schilling responded, “Should be obvious at this point no? Given HOW the settlement was structured.”
Schilling may be referring to a finding that the state would not recover more than $2.5 million from the four 38 Studios defendants, even if the state won in court.
Francis Darigan, the retired Superior Court judge who oversaw settlement talks, told reporters during an availability that he has “no idea” why Schilling decided to settle. “I’ve never met Mr. Schilling. I have no idea what’s in his mind.”
If the latest deal is approved, only one defendant, former state financial adviser, First Southwest, would remain from the state’s lawsuit, initiated by Chafee, over 38 Studios. Darigan said he hopes to re-start settlement talks with First Southwest.
In a statement, Governor Gina Raimondo offered this reaction to the latest settlement: “As I’ve said from the very beginning, 38 Studios was a bad deal for Rhode Islanders and I was against it from the start. My team and I remain focused on recovering as much taxpayer money as possible and we are preparing for trial with the remaining defendant.”
While some have hoped that the trial would shed fresh light on how the 38 Studios deal came together, Darigan touted the value of the settlement.
“I can’t speak on behalf of the taxpayers of the state of Rhode Island,” he said. “But I think you have to look at this in a realistic fashion. This was a very, very difficult case from the very beginning. The recoveries that have been made to date have been reasonably substantial. And I think that there should be some solace taken in the fact that the state is able to recoup almost half of the outstanding liability, and before we’re done, we might exceed that to some degree.”
Darigan said no one is going to be perfectly satisfied with the settlement involving Schilling and the other 38 Studios defendants. “But I do think that the efforts that have been put forward so far by all of the parties to reach this monetary amount has been very, very good for the people of the state of Rhode Island,” he added, “because you never know what the outcome of a trial would be in a case like this.”
38 Studios was attracted to Rhode Island in 2010 with a state-backed $75 million loan guarantee. The company went bankrupt in 2012.
The $2.5 million that would be paid by Starr Indemnity is what remains in an insurance policy. Darigan said it began as a $10 million policy and was spent down on legal expenses for the 38 Studios executives.
The retired judge said the settlement was reached after Thomas Carlotto, legal counsel for the state Commerce Corporation, researched what assets the state would have been able to recover from the defendants if the state won in court.
“I have not seen this material, so I really can’t answer questions to you about what Mr. Schilling’s assets may or may not contain,” Darigan said. “But the bottom line for the State of Rhode Island in this examination of all of these financial reports submitted by each of the four individual 38 Studios defendants, the State of Rhode Island is satisfied that the aggregate amount of all of their assets would not exceed the $2.5 million that is currently available in the Starr insurance policy issued to 38 Studios as an entity, and after their bankruptcy to 38 Studios defendants individually.”
Earlier settlement have produced about $3.2 million from Moses Afonso Ryan Ltd. and Antonio Afonso, Jr.; about $9.9 million from Adler Pollock & Sheehan, Robert Stolzman, Keith Stokes, and J. Michael Saul; about $21.3 million Wells Fargo and Barclays. In addition, state taxpayers have paid about $23.7 million so far to pay back 38 Studios bondholders.
