Elorza’s Consultant on New Pension Bond Is Financial Firm Forced to Pay $16M for Role in 38 Studios

Elorza’s Consultant on New Pension Bond Is Financial Firm Forced to Pay $16M for Role in 38 Studios

Providence Mayor Jorge Elorza on Thursday outlined his new proposal to borrow more than $700 million to pay off the city’s pension fund obligation.

The financial firm that designed the new plan has done bond work for the Elorza administration and is also tied to one of the biggest controversies in modern Rhode Island history.

That same firm, Dallas-based Hilltop Holdings Inc. unit Hilltop Securities Inc. agreed to pay $16 million to “settle any and all claims in a litigation involving the Rhode Island Commerce Corp.” over the infamous failed video gaming company headed by former Boston Red Sox Pitcher Curt Schilling

GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST

The litigation was related to The Rhode Island Economic Development Corporation Job Creation Guaranty Program Taxable Revenue Bond (38 Studios, LLC Project) Series 2010.

In 2016, the Rhode Island Commerce Corp. entered into a proposed settlement agreement with two other firms — Wells Fargo Securities LLC and Barclays Capital Inc. — in connection with the issuance of bonds related to 38 Studios, a startup video game company.

As GoLocal reported in February of 2017

After legal fees -- a total of $11.34 million to state attorney Max Wistow -- Rhode Island will recover $49.66 million in settlements in the 38 Studios litigation, after the Rhode Island Commerce Corporation announced that they settled with the last remaining defendant, First Southwest. 

In a legal strategy developed under Governor Lincoln Chafee, the state will realize more than half of the approximately $88 million state moral obligation on the 38 Studios bonds for both past and future appropriations. 

Commerce announced Wednesday that it agreed to a $16 million proposed settlement with Hilltop Securities Inc. (formerly First Southwest Company) in the 38 Studios litigation.

"We have reached a settlement with the Rhode Island Commerce Corporation that once approved by the court will resolve the 38 Studios matter. This resolution contains no admission of liability or wrongdoing and it allows our firm to put this matter behind us and move forward on the important work we undertake for municipal clients across the country."

 

Pension Plan

Elorza is trying to push through a plan for the City’s intent to submit special legislation authorizing the City of Providence to issue a 25-year, fixed-rate, low-interest $704 million Pension Obligation Bond (POB).