A state Superior Court judge said Rhode Island can recover some but not all $75 million in damages from money lost in the 38 Studios video-game company bond fiasco.
Judge Michael Silverstein in Providence said Wednesday in a 99-page ruling that the Rhode Island Economic Development Corp. can sue over payments state lawmakers authorized, damage to the agency’s credit reputation, and the defendants’ fees and salaries.
“I am gratified by the court’s initial ruling in the 38 Studios case. It allows the important claims to proceed and is a significant first step to recovering the taxpayers’ losses,” Gov. Lincoln Chafee said in a statement.
Silverstein said the state could not recoup all the money yet because it did not lose $75 million. It can not claim a damaged ability to issue bonds, he said, because the jobs creation guaranty program that backstopped the expense no longer exists, nor can it claim on the basis of a possible future obligation for bond-service payments “because it is not ripe for review.”
The EDC in 2010 issued a $75 million loan guarantee, backed by the state’s moral obligation, to entice 38 Studios, owned by former Boston Red Sox pitcher Curt Schilling, to move the company to downtown Providence from Maynard, Mass., The company dismissed all its employees and filed for Chapter 7 liquidation last year, with state taxpayers owing bondholders roughly $105 million if future interest is included.
In June, lawmakers approved an initial $2.5 million payment in fiscal 2014 after intensely debating the consequences of defaulting on a moral obligation.
Moody’s Investors Service rates the state’s general obligation bonds Aa2, while Fitch and S&P assign AA ratings.
Chafee’s payment plan calls for $12.5 million annually from fiscal 2015 through 2021. Net capital reserve payments would total $89.2 million.
The political firestorm over 38 Studios’ demise triggered a restructuring of the EDC.