First Southwest Objects to Barclays, Wells Fargo 38 Studios Settlement

Aug 29, 2016

First Southwest Company, one of the financial institutions involved in the ill-fated 38 Studios deal, is objecting to the state’s recent settlement agreement with two other banks in the ongoing lawsuit against actors in the video game fiasco.

Lawyers for First Southwest filed a memorandum in Rhode Island Superior Court objecting to the settlement with Barclays Capital and Wells Fargo Securities, which, if approved by the court, would yield just under $26 million in payments to the state.

First Southwest objects to a provision of state law known as the `settlement statute,’ which the bank asserts is unfair and unconstitutional.

``The fundamental unfairness of this rigged game is amplified by the government’s role in this failed loan,’’ the memo states. ``the then governor (Donald Carcieri) and the now imprisoned speaker of the House pushed through the funding legislation without telling legislators they had already earmarked $75 million for 38 Studios.’’

After the loan failed and 38 Studios slid into bankruptcy, ``the governor (Lincoln Chafee) and the General Assembly enacted the settlement statute and fundamentally changed the allocation of liability among defendants – all to the benefit of the state.” First Southwest asserts.

“The government wants to strong-arm private parties to pay for its mistakes,’’ states the First Southwest objection.

First Southwest  argues that approval of the $26 million settlement agreement would violate the bank’s due process rights and amount to an unconstitutional taking.

A hearing on the matter has been scheduled for September 6 in state Superior Court.