Speaker Fox Cops to Campaign Finance Violation; Writes Check to Cover 2007 Fundraiser

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Wednesday, July 25, 2012

Dan McGowan, GoLocalProv News Editor

House Speaker Gordon Fox on Tuesday wrote a check to the business owned by 38 Studios insider Michael Corso to cover previously undocumented expenses from a March 2007 fundraiser, according to a letter obtained by GoLocalProv.

The $648 payment came nearly two months after initial inquires into the event, which was hosted by Corso, Steven Nappa and Robert Britto of Nappa Building Corp. and former State Representative Ray Rickman. Fox spokesman Larry Berman said the payment will appear on Fox’s third quarter campaign finance reports.

“To be in compliance with campaign finance regulations, I am enclosing a check to cover the expenses,” Fox wrote in a letter addressed to Tazza Café, the Westminster Street lounge owned by Corso. “I am basing the amount on approximately 30 people who attended and a menu which included shrimp, cheese and crackers, grapes, and beer and wine. As there was limited food, I have estimated the cost to be $20 per person, in addition to 8% sales tax.”

The event was originally expected to be a small fundraiser held by Rickman, but Corso and Nappa took the lead on the event, with Corso offering catering services. According to a source in attendance, the event consisted mostly of individuals involved in the historic tax credit business, which Corso was connected to until moving on to film tax credits several years later. Records show Nappa contributed $1,000 to Fox.

According to a Providence Journal article from April 2007, Fox, then the House Majority Leader, raked in “$10,000 or so” at the $100-per-ticket private fundraiser, which was held at the Peerless Lofts, a property owned by Arnold “Buff” Chace.

Fox, Corso & 38 Studios

Just over three years later, Fox, the newly minted Speaker of the House, met Curt Schilling to discuss the former Red Sox ace’s video game company for the first time. The meeting, which included Fox, Schilling, 38 Studios executive Thomas Zaccagnino and former Economic Development Corporation (EDC) executive director Keith Stokes, was held in Corso’s downtown law office.

Approximately two months later, the House jammed through legislation that increased the EDC’s Job Creation Guaranty Program by $75 million (from $50 million to $125 million), the exact amount Schilling would later receive to move his company to the Ocean State. Fox has said repeatedly that he did not know the EDC planned to award Schilling the majority of the available funds.

Corso, by then the state’s top film tax credit broker, was hired as a lawyer for 38 Studios.

Nappa,ended up securing the contract to build out the interior of 38 Studios’ Empire Street headquarters. Separately, Nappa also received a $250,000 taxpayer-funded loan from the Providence Economic Development Partnership (PEDP) in May of 2009.

Tax Credits

Fox has defended the $75 million loan guarantee provided to 38 Studios, but the company never managed to turn a profit. After running up a $4-5 million-per-month burn rate, the company’s executives worked with Corso to attempt to secure additional financing from the state through film tax credits beginning late last year.

The company received initial certification for the tax credits in December 2011 and less than a month later, Corso pledged over $14 million in credits as collateral to obtain an $8.5 million loan from BankRI to help keep the company afloat. State and federal authorities are now investigating the loan.

By June, the company, which had already laid off its entire staff, filed for bankruptcy. Documents show 38 Studios LLC has less than $22 million in assets and owes just over $150 million to over 1,000 mostly-unsecured creditors. The state is the largest secured creditor at $115.9 million.

The largest unsecured creditor: Corso, who is owed over $11 million. Court records also show Corso was wired $232,000 by 38 Studios a month before the company missed its payment to the EDC and just over two months before the bankruptcy.

State Never Issued Tax Credits

Schilling has consistently pointed a finger at Governor Chafee for scaring off potential investors after Chafee told reporters the state just trying to keep the company “solvent” in May. Schilling maintains the company had interest from several groups, but many backed away following the Governor’s comments.

Chafee has called the company's first game, “Kingdoms of Amalur: Reckoning," a flop, which Schilling disputed until 38 Studios executives Bill Thomas and Rick Wester told the bankruptcy court judge that sales fell well short of the 2 million copies they expected to sell.

During the hearing, Thomas and Wester also suggested that a local investor was willing to loan the company $15 million as late as the morning the company filed for bankruptcy if the state signed off on tax credits.

 

Editor's Note: The original version of this story incorrectly stated Steve Nappa's construction company was in receivership shortly before it received the 38 Studios contract.

 

Dan McGowan can be reached at dmcgowan@golocalprov.com. Follow him on Twitter: @danmcgowan

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