Reporter kicked out of latest hearing on 38 Studios

Former Chief Justice Williams continues mediation talks in long-running suit over failed deal

PROVIDENCE, R.I. (WPRI) – Someday the secrecy surrounding 38 Studios may end. Tuesday was not that day.

Lawyers in the long-running lawsuit over the failed video-game deal succeeded Tuesday afternoon in barring a WPRI.com reporter from covering the latest hearing in the case, which the Chafee administration filed in November 2012 in an effort to recoup some of the money lost when Curt Schilling’s company went bankrupt.

At the start of Tuesday’s hearing, Gerald Petros, an attorney representing defendant First Southwest Co., asked R.I. Superior Court Judge Michael Silverstein to make the lone reporter present leave the room so information could be discussed in secret, saying that’s how it’s been so far.

Silverstein, who appeared at least somewhat resistant to the request, responded by asking some of the lawyers to join him for a sidebar to discuss it. After about five minutes of whispered back-and-forth, Silverstein acquiesced and ordered the reporter to leave the room.

Petros was one of 22 lawyers – a sea of mostly men in dark suits – who packed into Silverstein’s courtroom for the latest episode in the sprawling, interminable litigation over 38 Studios. They were expected to focus Tuesday on whether the state can obtain damages from the defendants for their roles in crafting the deal.

In May, former R.I. Supreme Court Chief Justice Frank Williams was appointed as a mediator in the suit, which still doesn’t have a trial date scheduled. Williams just finished ironing out a successful settlement that ended another long-running lawsuit involving state government, over pension changes.

The mediation process is confidential, but Max Wistow, the state’s lead attorney in the 38 Studios case, acknowledged Tuesday the two sides have met for talks. “The fact that we’re here today shows the mediation hasn’t succeeded yet,” he said.

Wistow declined to comment further on the frequency or substance of the mediation effort. William Dolan, a lawyer for defendant Adler Pollock & Sheehan, also declined to comment on it.

Wistow has already asked Silverstein to unseal depositions and other documents in the suit so the public can review them, but some of the defendants have expressed concern about the manner in which they could be released. The judge has yet to rule on the request. The lawyers are also still waiting for Silverstein to decide on a motion for summary judgment.

Rhode Island’s economic-development agency sold $75 million in bonds to lure former Red Sox ace Curt Schilling’s video-game company to Rhode Island in 2010. The company collapsed less than two years later, leaving taxpayers on the hook for roughly $90 million in principal and interest payments on the bonds.

Despite vocal opposition in some quarters, lawmakers have continued to include money in the annual state budget to pay the 38 Studios bonds. The most recent payment, of $2.2 million, was made on May 1. Taxpayers currently have a total of $74.3 million left to pay through 2020.

Two of the original defendants in the 38 Studios suit, the law firm Moses Afonso Ryan Ltd. and its partner Antonio Afonso Jr., agreed to pay $4.4 million last year to settle with the state. The money was put toward the bond payments.

Petros’ client, First Southwest, continues to serve as a financial consultant to the state even as they battle it out in court over 38 Studios. Records show the firm received about $31,000 from state agencies as recently as last December.

Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com. He hosts Executive Suite and writes the Nesi’s Notes blog. Follow him on Twitter: @tednesi

An earlier version of this story identified William Dolan’s client incorrectly.

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