Commerce RI reaches $16M settlement in 38 Studios lawsuit

R.I. Commerce Corp. has agreed to a $16 million proposed settlement with Hilltop Securities Inc. (formerly First Southwest Company) in the 38 Studios litigation.
R.I. Commerce Corp. has agreed to a $16 million proposed settlement with Hilltop Securities Inc. (formerly First Southwest Company) in the 38 Studios litigation.

(Updated 11:02 a.m. and 12:03 p.m.)
PROVIDENCE – R.I. Commerce Corp. on Wednesday announced a $16 million proposed settlement with First Southwest Co., a former financial adviser for the state when it invested $75 million into the now-defunct video game company 38 Studios LLC.

The settlement is the final one in a string of settlements stemming from a lawsuit filed by the state, alleging former 38 Studios executives, underwriters and economic development officials misled the state in its decision to issue $75 million in taxpayer-backed bonds for the video game company. 38 Studios, which was owned by former Boston Red Sox pitcher Curt Schilling, went bankrupt in 2012, leaving Rhode Island taxpayers on the hook to pay back the bonds.

First Southwest, which has since rebranded as Hilltop Securities Inc., is the final defendant in the lawsuit. If the proposed settlement is approved, the suit would end, according to a state spokesman.

The proposed settlement, totaling $13.2 million net of legal fees, would bring the state’s total settlement amount to $61 million, or $49.7 million net of fees. The state estimates it lost in total about $88 million in the failed investment.

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Hilltop Securities released the following statement: “We have reached a settlement with the Rhode Island Commerce Corporation that once approved by the court will resolve the 38 Studios matter. This resolution contains no admission of liability or wrongdoing and it allows our firm to put this matter behind us and move forward … .”

Gov. Gina M. Raimondo said in a statement that she is pleased with the proposed settlement of $16 million, but said “we cannot rest on monetary recovery alone.”

“If the court approves this settlement, the civil case will end and I will immediately petition the court for the release of all materials associated with the grand jury investigation of 38 Studios. Rhode Islanders deserve to have access to all of the information that is known. Complete transparency is the best way to ensure that such a disastrous deal never happens again,” Raimondo said.

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