Rhode Island Gov. Lincoln Chafee signed a bill enhance chances for a settlement in Rhode Island's lawsuit against the principals of failed video-game developer 38 Studios, including owner and former Boston Red Sox pitcher Curt Schilling.
The measure, drafted specifically to apply to 38 Studios, would protect any party that settles out of court from other lawsuits.
"This legislation will enable us to pursue our legal options to the best of our ability," Chafee said Thursday.
The Rhode Island Economic Development Corp. sued 38 Studios in 2012 over a failed $75 million investment. The suit seeks repayment plus extra compensation for damages.
The agency, now called Rhode Island Commerce Corp., sold federally taxable municipal bonds in 2010, backed with the state's moral obligation, to induce Schilling to move the company from Maynard, Mass., to Providence.
38 Studios filed for liquidation under Chapter 7 of the bankruptcy code, leaving taxpayers on the hook to repay the bonds. Controversy over the fiasco triggered national debate over state funding for companies in high-risk sectors.
Lawmakers last year approved an initial $2.5 million payment after Moody's Investors Service threatened to downgrade Rhode Island, saying a moral obligation essentially paralleled a general obligation.
The U.S. Securities and Exchange Commission is also investigating the transaction.
Chafee, who is not running for re-election, has proposed $12.5 million payments annually through 2020.
38 Studios filed for Chapter 7 bankruptcy, with taxpayers on the hook to repay the bonds. Schilling, who pitched for three World Series championship teams including two with the Red Sox, recently had cancer surgery.
Rhode Island crafted similar settlement facilitation legislation in 2001, when Fleet Financial Group agreed to pay the Depositors Economic Protection Corp. $15.5 million amid allegations that it deceived regulators and triggered an early 1990s banking crisis, and in 2009, to encourage a $176 million settlement with defendants in The Station nightclub fire in West Warwick that six years earlier killed 100 people.
