Insider Lawyer Paid $232,000 as 38 Studios Went Belly Up
Friday, June 08, 2012
Just over two months before Curt Schilling’s 38 Studios collapsed, the Providence lawyer whose connections to House Speaker Gordon Fox helped bring the video game company to Rhode Island was paid $232,800 by the company, according to filings with the U.S. Bankruptcy Court of Delaware.
Records show that Michael Corso was wired the large sum of cash on March 30. By May 1, the company had defaulted on a $1.125 million payment due to the Economic Development Corporation (EDC) and several weeks later, it was forced to lay off every single employee.
The new details, which include over $2.3 million in payments made by the company to hundreds of vendors, consultants and other businesses since March 1, came to light after the company officially filed for bankruptcy Thursday. Records show 38 Studios LLC owes over $150 million to more than 1,000 creditors, including $116 million to the state.
Included among those creditors is Corso, whose Preservation Credit Fund LLC is owed more than $11 million. Early this year, Corso, the state’s top tax credit broker, pledged over $14 million in film tax credits which hadn’t yet been issued as collateral to secure over $8 million in loans from BankRI to help keep 38 Studios afloat.
Less than six months later, the company drowned.
Now the State Police and the U.S. Attorney’s office have launched an investigation into all aspects of 38 Studios including all of its business dealings.
Aside from the unsecured millions owed to Corso, at least one questionable deal is already been linked to the lawyer.
Nappa Construction Management, a company owed by Steven Nappa, a friend of Corso and Speaker Fox, was awarded the contract to build out the interior of 38 Studios’ downtown office building located at One Empire Plaza.
In March of 2007, Corso, Nappa and former State Rep. Ray Rickman hosted a private fundraiser for then Majority Leader Fox at the Peerless Lofts in Providence. After GoLocalProv raised questions about who covered the expenses for that fundraiser earlier this week, Fox spokesman Larry Berman said the Speaker would examine his campaign finance records after the legislative session to see if any corrections need to be made. Neither Corso nor Nappa have made contributions to Fox since 2009.
Fox and former EDC director Keith Stokes met with Schilling and 38 Studios director Tom Zaccagnino in Corso’s law office in March 2010 to discuss bringing the company to the Ocean State. Corso and Zaccagnino had a previous business relationship relating to tax credits dating back to 2009.
Lawmakers, including Woonsocket Rep. Jon Brien (who cosponsored the bill), have consistently said they had no idea the money was essentially earmarked for only one company.
Over $8,000 Spent on Coffee
Thursday’s bankruptcy filing sheds more light on a company that was never quite able to receive all the funding it needed to remain solvent. In addition to the large wire transfer made to Corso, the company made thousands of dollars in payments in marketing companies and consulting companies in four months before it went under.
On May 1, the same day the company failed to make its payment to the EDC, the company spent over $3,700 at Dave’s Fresh Marketplace in East Greenwich. 38 Studios also paid Coffee Express Ltd in Pawtucket over $8,000 between March 8 and May 1. On May 15, the company bounced a check to Coffee Express.
The court filing also delves into the compensation package for the company’s top employees. While Schilling, who owns over 80 percent of the company, did not collect a salary, his health benefits package cost just over $16,400 over the last year. Records show Schilling also spent $39,424.67 on travel expenses, including over $11,000 in April alone.
Bill Thomas, the company’s chief operating officer, received a total compensation package of over $421,000, which includes a $130,000 payment last December to help Thomas relocate to Rhode Island. Jennifer MacLean, who served the 38 Studios’ chief executive officer until April, was paid over $253,000 in salary over the last year.
On the surface, the filings raise some question as to whether 38 Studios was appropriately managing its funds. Schilling and Governor Chafee have clashed in recent weeks after the former Red Sox ace felt Chafee had revealed too much sensitive information about the company and that he may have scared away potential investors. Chafee, who had maintained that he was always against the deal, has dismissed those comments.
During a State House press conference, Chafee indicated he was not surprised by the bankruptcy filing and said it could turn out to be a good thing for Rhode Island. His bankruptcy expert Jonathan Savage said he believes there is a “significant chance” the state could recoup some of its investment.
But the Governor also said he wants to know more about the company’s management. Asked where all of the state’s money went, Chafee said, “We’re going to find out.”
Dan McGowan can be reached at firstname.lastname@example.org.
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