Judge hears settlement arguments in 38 Studios suit

PROVIDENCE, R.I. (WPRI) – A Rhode Island Superior Court judge heard arguments Tuesday on a proposed settlement by two of the defendants in the state’s lawsuit against the architects of the failed 38 Studios loan deal, but did not issue a ruling on the matter.

Lawyers on both sides of the suit will continue to argue the merits of the proposed settlement in front of Judge Michael A. Silverstein Friday morning. The judge also continued an attempt to block the deal by two former employees of the Rhode Island Economic Development Corporation – known now as the Rhode Island Commerce Corporation – until Monday.

The draft settlement with Moses Afonso Ryan Ltd., a law firm that was bond counsel in the 38 Studios deal, as well as Antonio Afonso Jr., one the firm’s partners, calls for them to pay $4.4 million to settle the suit. The payment would be made by their insurance company, Liberty Insurance Underwriters Inc.

The state guaranteed a $75-million loan to lure 38 Studios, a video-game company founded by Curt Schilling, to Rhode Island in 2010. The company collapsed into bankruptcy in May 2012, and the Chafee administration sued Schilling and other architects of the deal for alleged negligence the following November.

David Grossbaun, a lawyer for Moses Afonso Ryan, said his clients “wholeheartedly deny” the claims made by the state, but argued that if they continued to fight the suit, there will be “little or nothing” left of the firm’s $5-million insurance policy.

“It’s all about the numbers,” Grossbaun said.

Max Wistow, a lawyer representing the state, encouraged Silverstein to approve the deal, arguing that settlements are “good public policy.”

The state has still not announced settlements with any of the other defendants in the case, but House Speaker Nicholas Mattiello said during a taping of WPRI 12’s Newsmakers last week that he believes the state may soon reach agreements with another law firm, Adler Pollock & Sheehan PC, and Schilling himself.

Separately, Silverstein heard arguments from lawyers for the two former Economic Development Corporation officials, Keith Stokes and J. Michael Saul, challenging the constitutionality of the proposed settlement.

Dan McGowan ( dmcgowan@wpri.com ) covers politics, education and the city of Providence for WPRI.com. Follow him on Twitter: @danmcgowan

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