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38 STUDIOS

R.I. Supreme Court blocks the release of 38 Studios grand jury documents

Governor Gina Raimondo had argued that the failure of Curt Schilling’s video game company still haunts the state

Former Red Sox pitcher Curt Schilling, center, departed the Rhode Island Economic Development Corporation headquarters in Providence in 2012 after he met with the agency to discuss the finances of his troubled video company.
Former Red Sox pitcher Curt Schilling, center, departed the Rhode Island Economic Development Corporation headquarters in Providence in 2012 after he met with the agency to discuss the finances of his troubled video company.Steven Senne/Associated Press

PROVIDENCE – Another chapter in the decade-long saga involving former Red Sox star Curt Schilling’s failed video game company came to a close Wednesday when the Rhode Island Supreme Court rejected Governor Gina Raimondo’s request to unseal grand jury records related to the investigation into the deal that brought Schilling’s business to the state.

The high court’s 31-page decision to uphold a lower court ruling blocking the grand jury documents from public view acknowledged that the 2012 collapse of 38 Studios remains fresh on the minds of Rhode Island residents, but it sided with the attorney general’s arguments that grand jury secrecy is a vital part of the legal system.

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“For many people in this state, particularly those who are currently holding public office, the 38 Studios situation and the company’s bankruptcy, occurring as it did just as the entire country was clawing its way out of the Great Recession, still stings. We certainly understand those feelings,” Justice Francis Flaherty wrote in the opinion. “However, after careful consideration of the issues ably briefed and argued by the parties, the judgment of the Superior Court is affirmed.”

State lawmakers backstopped a $75 million loan for Schilling’s company in 2010, but the business was bankrupt two years later, leaving taxpayers on the hook for millions of dollars. A grand jury investigated the case for 18 months, but no charges were filed.

The fallout from the company’s failure has had a long-lasting effect on the state.

Virtually every new economic development project is now compared to the video game company, similar to the way projects in a previous generation were compared to the state’s banking crisis of the early 1990s. Lawmakers are often paralyzed by the fear that they might support another version of the loan deal.

The state’s civil lawsuit in the case resulted in settlements that recovered about $61 million from the deal. Raimondo’s proposed budget for the fiscal year that begins July 1 includes the final payment of the remaining funds.

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The State Police did release thousands of pages of records from the investigation – including depositions from lawmakers and other key players in the deal – but Raimondo argued there was a substantial public interest in releasing the grand jury records.

During oral arguments before the Supreme Court, attorneys for Raimondo argued that “she has suffered a unique injury because, each year, when putting together the annual budget proposal for the state, she must allocate funds to pay off the remainder of the 38 Studios debt,” according to the opinion.

The attorney general’s office argued that Raimondo did not have standing to release the grand jury records. Both former Attorney General Peter Kilmartin and current Attorney General Peter Neronha opposed the release of grand jury materials.

“We are of the opinion that, as the history reflects, grand jury secrecy plays an integral part not only in the effective prosecution of crimes, but also in the protection of those upon whom the grand jury casts its considerable inquisitorial powers, which in turn is a protection potentially afforded to every member of the public,” Flaherty wrote.


Dan McGowan can be reached at dan.mcgowan@globe.com. Follow him on Twitter at @danmcgowan.