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.
Questionable Dealing
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 dmcgowan@golocalprov.com.
Related Articles
- 38 Studios Insiders Have Been Connected Since May 2009
- EXCLUSIVE: U.S. Attorney Investigating Curt Schilling’s 38 Studios
- EDC Never Discussed 38 Studios After September 2010
- Future Remains Uncertain for Schilling’s 38 Studios
- Insiders Had Hands All Over Schilling’s 38 Studios Deal
- Lawmakers Feel Duped by Schilling’s 38 Studios Deal
- Schilling has Invested ‘Majority of Money I’ve Earned in My Life’ in 38 Studios
- Schilling Claimed 38 Studios Would Create Over 1,500 Jobs
- Is Curt Schilling’s 38 Studios Going Broke?
- Few Lawmakers Voted Against Deal that Paved Way for 38 Studios
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Comments:
Gary Arnold
7:23am on Friday, June 08, 2012
This game is called money ball, politicians who are lawyers/special interests groups/friends/banking/business groups all have made their deals on winning a chunk of this free to them, money backed by the state of RI.
A pure General Assembly and friends play from the start.
pearl fanch
8:40am on Friday, June 08, 2012
It's funny how NOW the state police and AG's office wants to investigate the entire "dealings" process that took place.
When the time came to make the agreement with 38 Studios, the GA had no need to look into the company, but rather only to make sure all the proper people were being PAID OFF.
Who says business isn't thriving in RI? Do you see any poor people sitting in the General Assembly?
Carol DeFeciani
8:48am on Friday, June 08, 2012
If Gordon Fox says he "knew nothing," it will further prove what a lying p.o.s. he truly is...
Douglas Caniglia
9:27am on Friday, June 08, 2012
It is a disappointment to see this going on in our state, these things are not that complicated. I would like to see how much was actually spent on Construction and also professional fees associated to the work out of the $75mm. And did the contractor pay back the City for its defaults?
dis gusted
9:31am on Friday, June 08, 2012
Corso, Nappa and former State Rep. Ray Rickman hosted a private fundraiser for then Majority Leader Fox at the Peerless Lofts in Providence.
And then I see Gordon Fox on TV this morning playing dumb,
saying "he knew nothing..how a company can go down so quickly
amazes him!"
What a liar this speaker of the house is...
These unethical politicians need to go to jail...especially Corso the lawyer. The feds should come down with some indictments...
Stokes, Carcieri,and especially lawyer Corso & Gordon Fox.they all knew,,..(Fox's boyfriend Marcus rents space from Corso!)
The people in his district should throw him out during election time. He is as corrupt as the day is long......
Howard Miller
10:12am on Friday, June 08, 2012
up until now the only people hated more then lawyers are tow truck people lawyers have have just claimed first place
Bob Stanley
10:45am on Friday, June 08, 2012
Hopefully the Jig is up with the Speaker of the House, Senate President, Corso, and others involved. As if these people don't make enough money, they get greedy in this state and all are doing deals behind the scenes and needs to stop. Its time to throw these bums out of office as well as governor bubble head. Why can't we have a recall election like they did in Wisconsin? We have two more years of this guy who has no clue what he's doing and how to get this states economy growing and the same can be said for the general assembly and leadership. Its time to have a good old fashion protest as things are not good at all any which way you look at the list of items. We need a change and lets start now with this blunder to throw the whole crew out of office and hopefully yes there will be some prosecutions...
pearl fanch
10:55am on Friday, June 08, 2012
You would think that after the three stooges of NP were caught taking bribes, that others would soon start doing business legitimately.
It just makes you realize the mentality of the politicians, lawyers, businessmen in this state. They just cannot help themselves. It's all they know.
Sad part is.....RIers keep voting for them. STOP IT!!
Jack Cottone
11:09am on Friday, June 08, 2012
Good work again, Dan! Looks like Schiller knew which big fish to feed first before getting out of the business. Looks like blatant fiscal mismanagement. Auditors should look further into the investment companies owned by Corso (Sakonnet Capital Partners, Preservation Credit Fund LLC), Zaccagnino (Wellesley Advisors, Haymarket Capital) and the special investment fund set up by Michael Sweeney in 2009 as a bridge loan (38 Bridge Partners) - supposedly a 7-figure investment that Schiller repaid in 2010. Follow that money: Was this so Schiller could buy Big Huge Games in Maryland, his twin company that also went down? Did taxpayers in RI give Schiller fun bucks to buy other companies or was it supposed to provide income for Rhode Islanders?
http://www.golocalprov.com/news/38-studios-loan/
http://www.golocalprov.com/news/tax-cred2/
Jack Cottone
11:21am on Friday, June 08, 2012
Dan, you had such a nice weekend chat with Sweeney. I don't know why golocal keeps dropping that interview from the related reading list!
"On July 17, 2009, Duffy & Sweeney co-founder Michael F. Sweeney formed 38 Bridge Partners LLC to provide Schilling’s company with a short-term bridge loan, Sweeney said during a brief weekend interview. He did not reveal the exact amount the group loaned 38 Studios, but said the investment was “significant” and that Schilling honored their agreement and paid off the loan." Sweeney says the group was comprised of private citizens and "did not include any elected officials or lawyer Michael Corso,"
Auditors need to follow that money. Just search "Providence Investors Gave Schilling 7-Figure Loan in 2009" or http://www.golocalprov.com/news/38-studios-loan/
Captain Blacksocks
12:26pm on Friday, June 08, 2012
Good investigative journalism. RI needs more of that! I suggest an article on this...which should be very amusing reading: How much did 38 Studios contribute to political candidates in the past couple of years, and to who?
Captain Blacksocks
12:32pm on Friday, June 08, 2012
You can expect as much from this fake State Police investigation as you got from their prior fake investigations of the Land Fill and all the rest. Might be different this time with the FBI involved. The feds tend not to cover up stuff as readily as RI police.
Dan McGowan
1:04pm on Friday, June 08, 2012
Captain,
It appears as though the top folks at 38 didn't make campaign contributions.
Thanks for your kind words, by the way. And thanks to everyone for reading.
Dan
dmcgowan@golocalprov.com
Dawn Wardyga
3:37pm on Friday, June 08, 2012
Let's be realistic here and take the blinders off. Is anyone at all surprised by ANY of this???
Bob Stanley
3:43pm on Friday, June 08, 2012
I can't say that I am surprised. I have no idea how to fix it other than voting these people out of office in November. We need to clean house and get some straight shooters in office to get things back in check and moving forward to fix this horrible economy in RI. There are some smart people still here of whats left in population. Until we do that, were always going to be at the bottom...
Captain Blacksocks
4:00pm on Friday, June 08, 2012
I still don't know why RI taxpayers cant file a class action lawsuit against all the bad actors in the 38 Studios fiasco. It's a lot of taxpayer money that just got stolen. Your money, my money, our money. Why can't RIer's make a clain to it? If we can't vote these clowns out can we litigate them out??
Bob Stanley
4:08pm on Friday, June 08, 2012
I would still love to see us have a recall election vote out Chafee, Paiva-Weed, and Fox and their liberal/socialistic business as usual views. Chafee has no plan as well as the house and senate leadership on how to make Rhode Island economically better other than to tax everything. That is not going to work and something needs to be done because we're not getting it done with them. I would be curious to hear from people if they would support a recall vote. Realistically we have at least two more years of this nonsense and only going to get worse with the cities and towns on the verge of bankruptcy. We started seeing what the plan is and that is plain and simple tax/fee you to death with this new budget and proposed ideas of "Revenue Enhancement" <-- I hate that term....
Carol DeFeciani
4:20pm on Friday, June 08, 2012
Hopefully Gordon Fox will be busted by the Feds under RICO - still doesn't rid us ofvthecrest ofvthe corrupt crooks up there in the worthless GA. This crap has got to stop. If the idiots are not voted out in November, there will be a massive exodus from this sorry State. Leaving only the non-working (and yes, "non-working" includes the rip-off politicians who don't work, only spend our money.)
We also need a STATEWIDE PETITION to end free health care for these GA schmucks. Especially when so many WORKING RI-ers have NONE!
Captain Blacksocks
4:22pm on Friday, June 08, 2012
I think a recall election would have the same results as any general election in RI. The un-informed voters who make up about 90% of RI voting public will simply vote the entire "D" column because they have been brought up to see the "R" column as the Evil Empire. And that's not going to change until more RI cities and towns go bankrupt with all these great "D" (dumb) ideas to transfer wealth from successful people to those who want a free ride. Those folks are now in the majority. Scary.
Bob Stanley
4:23pm on Friday, June 08, 2012
RECALL Election!!!!!!! Wisconsin did it, why can't we? We have more of reason than they ever did...
Who's on board with that?
Joyce Bryant
4:34pm on Friday, June 08, 2012
Not surprised at at all. One party state.
Captain Blacksocks
4:48pm on Friday, June 08, 2012
Recall election in WI didn't succeeed. Thank God!!
I think it would be fun to try it in RI, but what result can you expect when 95% of RI voters are life-long Dems and 95% of the General Assembly is the same? We created a one-party state here, and with that comes all sorts of corruption and monkey business. But keep on voting for Dems...keep poking yourselves in the eye and maybe it will feel good one of these times.
dis gusted
5:25pm on Friday, June 08, 2012
The most powerful person in this state is Gordon Fox and I agree with Carol that the feds should bust Speaker Fox on RICO charges and his leadership colleagues--his cronies including Mattiello-Helio Melo, Paiva-Weed and others who knew about Studio 38 should all be indicted by the feds. They all need to be thrown out in the November elections.
Recall won't work here in RI. There are too many incestuous relationships in the State House. Fox won't allow it. Paiva Weed won't allow it. We are not Wisconsin and the depth of corruption is just too great in RI. The people in Wisconsin are not like the people in RI AT ALL.....
You can't even get the statehouse to change how they create and pass the budget. The Finance Committee writes it and then they distribute it to the lawmakers about an hour before discussing it. Some read it and some don't..they follow whatever Fox and Mattiello vote on when they unlock the board and then they vote the same way.
The reps we elect do not create and put the budget together...only 2 or 3 from Finance write it, the chief architect being that arrogant moron, Helio Melo who smoozes his way answering the questions of the other lawmakers with answers that are not true but the others accept them...This is what needs to change...Forget recall...Change the way the General Assembly writes the budget by including every lawmaker elected by their constituents.
And Fox should have suspended the budget meeting around 8 or 9 ...not go all night till 3:30 AM....This is wrong..Yet no one says anything to change it.
This is done year after year after year. They sneak things into the budget in the wee hours of the morning....There should be no voting after 9...Lawmakers are tired and they vote Fox's way just to get the heck out of there and go home...
They want it both ways....They want to be your lawmaker and have you vote for them but then they just vote whatever way the speaker votes to get the heck out of there and go home since they have work in a few hours!
Instead of having dinner at 8:30 that we taxpayers pay for...(YES,
we even pay for their dinners) they should be told to go home and
get a good night's rest and come back the next day when refreshed
to finish the budget in the right frame of mind.
The many voters that Capt Blacksocks calls uninformed, not 90% but a very high percentage I am sure, I call just plain stupid and ignorant because the media for months and months and months have talked about the illegal and unethical antics of lawmakers and they don't care..They still vote them in.
Some of you write great blogs. Write your thoughts in Projo's letters to the editor page. The uninformed voters don't read this blog but they do read Projo...Put your thoughts in letters to the editor in Projo...The more the voters who are uninformed hear the same thing over and over from other voters, it might begin to sink in.
Carol DeFeciani
5:35pm on Friday, June 08, 2012
@ dis gusted: you are so right on it isn't even funny. Not only do we pay for their dinners, but their EXPENSIVE health-care: and do we also pay their PENSIONS?! I don't think my Rep. Grace Diaz even has a job other than the GA. But she sure knows how to spend the working stiff's money. Unfortunately politics on the South Side are like a soccer game and this Rep and Senator here(Diaz and Pichardo) are entrenched in government because a majority of their constituents vote like they are betting on a soccer game... UGH! I wish I had the opportunity to vote out others not in my ward like Councilperson Wilbur Jennings who is Council for the Ward where my business is located and who is an utter disgrace, no-show, lazy, do-nothing. And David Cicilline -- who happens to represent the SAME PEOPLE as GORDON FOX the lying crook.
Fabiano Terrenni
6:09pm on Friday, June 08, 2012
What about the rest of the Legislators? Couldn’t they have at least asked what was going on? What a bunch of sorry excuses for humanity….
Will the AG’s Office, RISP or Feds check to see how much Fox’s Leg Counsel, John J. Flynn, knew about this? Maybe he can also provide them with information on that infamous “break in” at Fox’s Office at the State House several years ago…
After all, John J. Flynn, Former WW Town Council President and friend of Former Senator and now $$$$ State House Lobbyist Steve Alves, was just given a 10 year appointment as a Magistrate in the RI Judiciary at how much per year? Is it really, $140,000? The timing is just coincidental I guess.
Kilmartin is on record as stating “political corruption” will not be tolerated. So why the silence on this BS?
Why did it take GoLocalProv to ferret out this crap?
This state is a total cesspool!
Carol DeFeciani
6:16pm on Friday, June 08, 2012
Absolutely, Fabiano. They think we're all dunces, but some of us can smell that they're all rotten eggs. We're being governed by a "mob" of sorts and I hope the US Attorney takes this seriously and comes up with some indictments, starting with Gordon Fox and Corso. Then clean house throughout. It's our only hope, because seriously, I have so little faith in the voting populace of this state -- some don't show because of apathy, others pull the lever across the board because the recognize the name, and others vote like they are rooting for a team at a soccer game. Not all of us are that ignorant, but unless we have help from the Federal Government in a thorough, no-holds-barred investigation, we will continue to be screwed by the GA mobsters. And people complain about gangs in Providence?!!! This gang on Smith Hill is killing us slowly...but surely.
Fabiano Terrenni
6:43pm on Friday, June 08, 2012
Carol,
Think about it?
Over $75 million is added to "cover" the 38 Studios deal and Fox's NEVER asked his $115K Leg Counsel about the legalities" involved? Over $100 million total!!! Yeah right!
What the hell is Fox paying his Leg Counsel for if not advice?
I just hope most of the House and Senate "leadership" gets drawn into this mess and is held accountable...
dis gusted
6:55pm on Friday, June 08, 2012
Hate to tell you Fabiano, they have been killing us for years and years and years...
bottom line here is you have to rid of the disease when there is a virus spreading...cut off the disease--Fox and Paiva Weed--Mattiello and Melo..rest of lawmakers wson't beafraid to speak out...and until they do, you are correct, Fabiano, they are sorry excuses for humanity...
dis gusted
7:19pm on Friday, June 08, 2012
The Senate Finance Committee voted 8 to 0, with one abstention, Friday to recommend passage of an $8.1-billion state budget that expands the state sales tax, hikes the cigarette tax and opens the door to bridge tolls on the Sakonnet Bridge that connects Portsmouth and Tiverton.
We are doomed!
paul zecchino
9:28pm on Friday, June 08, 2012
Sound like money laundering to anyone else? Does to me, too. The Zecchino Estate Grift was also masterminded by prominent connected predators with law degrees, including Girard R. Visconti, ex- of the Judicial Nominating Commission. It too, involves money laundering, extortion, millions diverted and people dead before their time.
Nothing to see here, people. Move along, please.
Paul Vincent Zecchino
Manasota Key, Florida
08 June, 2012
"It's Chinatown, Jake. What does a policeman do
in Chinatown? As little as possible."
- "Chinatown",
c. 1974, Robert W. Towne
paul zecchino
9:33pm on Friday, June 08, 2012
Maximo McGowan -
Compelling reading, excellent investigative reporting, an enlightening pleasure to read it. More surely shall follow.
After a while, they start to expose themselves.
What's the old saying? Dig six feet, you find a stiff.
Dig nine, you find six. Dig twelve? Find forty stiffs.
Our Cuban friends two-hundred sixty five miles south this laptop, down Havana there, have long said,
"A coincidence is just a coincidence."
Two are a pattern. Three? Conspiracy."
- timeless Cuban adage
Paul Vincent Zecchino
Manasoviet Key, Florida
08 June, 2012
Todd B
10:48pm on Friday, June 08, 2012
There's no need to be concerned. All that money and then some will be going to BankRI when they sue Corso and his insurer for listing fraudulent assets in the bank loan application.
As for those people criticizing Chafee, get real. I'm not a big fan of Chafee's politics, he warned about the 38 Studios deal from the start. Anyone looking at 38 Studios bankruptcy filing could tell there was no chance of the state saving it, so it wouldn't have mattered if Chafee knew about it last week, last month or last year.
Mike Hamel
12:20am on Saturday, June 09, 2012
Big deal! This ones connected to that one and that one knew this one and the taxpayers got screwed.
Please, they should turn this into the official R.I. state anthem. This will get chased right into the taxpayers pockets and no one and I MEAN NO ONE will pay for this but us.
There won';t be an indictment, criminal proceeding or anything that smacks of justice.
W H Y ???????
This one is connected to that one and that one knew about this one and, etc., etc., etc.,
Don't you get it?? We don't vote and they use it as license to run the state into the ground. It's been going on for almost 80 years. What part don't you get???????
Jack Cottone
12:18pm on Tuesday, June 12, 2012
Thanks ProJo for publishing the lists of secured and unsecured creditors in the 38 Studios bankruptcy filing. Maybe someone can explain how RIEDC is unsecured? Other names on this list are:
Michael Corso, under the name of Kingston Capital Group, an engagement letter and consulting agreement, as well as Tax Credit Purchase Agreement dated January 2011. There is nothing about what this company is owed. But Here’s a chestnut: under the name of Preservation Credit Fund on Chestnut Street in Providence, Corso is owed 11 and a half million dollars. Corso, individually, is owed 77,600. (There goes Corso’s baby Tazza just when it closed to fumigate the beatniks and reopened to the pantyhose crowd ; )
Tom Zaccagnino, under the name WRMM, LP (Wellesley Rosewood Maynard) in Maynard is owed 1 and a half million, while he is individually owed only 5000.
See people, incorporate, incorporate!
Duffy and Sweeney, the attorneys on this deal, strangely are only owed 1916.00. Nothing is owed to “38 Bridge Partners”. Would still like to know who made up this group of investors in 2009 and why they were paid over the other entities!
See “Providence Investors Gave Schilling 7-Figure Loan in 2009, http://www.golocalprov.com/news/38-studios-loan/
http://www.golocalprov.com/news/tax-cred2/
http://www.providencejournal.com/breaking-news/assets/docs/2012/38_Studios_Creditors_Matrix.pdf
http://www.providencejournal.com/breaking-news/assets/docs/2012/38_Studios_Bankruptcy_Unsecured_Nonpriority_Creditors.pdf
Jack Cottone
1:17pm on Tuesday, June 12, 2012
To those of you wondering who is the bank on these deals, BankRI is strangely not listed on the 38 Studios bankruptcy, instead it is Bank of NY, Mellon. RIEDC is listed as a “co-debtor” on the “unsecured/nonpriority creditors list”. Does that mean Rhode Island is getting nothing?
http://www.providencejournal.com/breaking-news/assets/docs/2012/38_Studios_Bankruptcy_Unsecured_Nonpriority_Creditors.pdf
The governor’s press conferences have stated we will get every penny, nickel, dime coming to us. We’ll be lucky to get a penny, being an unsecured creditor, or “co-debtor” to BNY. Taxpayers want to see all these documents to which we are a party so we can have a party while burning them in the corporate Waterfire.
Since the politicians are looking for ingenius ways to save money, take it to a vote: Perhaps Rhode Islanders would vote for nonpayment of the “moral obligation” on these bonds, since the state has no moral obligation to the people of Rhode Island and it’s on the verge of bankruptcy anyway.
Captain Blacksocks
1:46pm on Tuesday, June 12, 2012
I still don't know why RI taxpayers can't collectively file a class action civil lawsuit against all the parties responsible. It's not the government's money that was lost...it's our money! We paid for it. Why can't we try to recoup some millions from the idiots who happily drove this ship into the rocks?? Where are the law firms proposing the class action suit? Thousands of RI'ers would sign on as plaintiffs.