PROVIDENCE, R.I. (WPRI) - The R.I. Economic Development Corporation has hired an outside law firm to examine whether taxpayers have legal avenues to claw back some of the tens of millions of dollars they're poised to lose after the collapse of Curt Schilling's video game company, 38 Studios.
The EDC board voted unanimously Monday to hire a special counsel, Max Wistow of the Providence law firm Wistow & Barylick, to review documents and conduct interviews about how the $75 million taxpayer-guaranteed loan deal went through and what went wrong at the company, Governor Chafee announced Tuesday.
"We intend to gather the facts as best we can and, to the extent those facts indicate a possible claim against anybody that can be brought, we intend to recommend those actions," Wistow, who won a $176 million settlement for victims of the Station nightclub fire, told reporters at the State House.
38 Studios filed for bankruptcy earlier this month, just two years after Rhode Island taxpayers lured the company from Massachusetts with the $75 million loan guarantee. Schilling has accused Chafee, who opposed the original deal, of actively working to sabotage the company, while the governor has said he was unwilling to risk more taxpayer money on the firm as it began to unravel.
Wistow said he wants to interview the former EDC board members who approved the deal in 2010, though he will not have the power to force them to talk unless a lawsuit is filed. "Respectfully, I really would be foolish to try to give any more details at this point," he said.
"We're going to try to find out what happened, when it happened, who was involved in it and see if there's any basis for action," Wistow said. "That's all I can say." He will keep 16.67% of any damages he wins as payment.
A Chafee administration official told WPRI.com earlier this month that one of the issues Wistow is expected to look at is whether taxpayers can seek damages from insurers who provided professional liability coverage to those involved with the 38 Studios deal.
Lawyer Jonathan Savage, who is the EDC's general counsel, said he will meet Wednesday with 38 Studios' bankruptcy trustee to discuss the state's separate legal strategy for recouping some of its losses through the sale of the insolvent company's assets. He said he hopes there will be news on that front within 10 to 14 days.
Chafee said the first time he learned 38 Studios was in trouble was on April 13, when he and House Speaker Gordon Fox met with company officials to discuss its situation. "There was no specific request at the time, but it was obvious when we got out onto the street and [we] said, 'The company's in trouble,'" Chafee said.
Chafee said 38 Studios executives didn't mention during that meeting that they were expecting to receive millions of dollars in state tax credits and had already received a loan from Bank Rhode Island backed by them. The governor rejected Schilling's suggestion that he blocked the credits from being issued to hurt 38 Studios.
Fox, D-Providence, said June 7 he was astonished by what happened to the company. "All of a sudden, suddenly without warning, there's, like, financial damnation and they're out of business," the speaker said. "I don't know what happened down there. ... I don't know what caused 38 Studios to fail."
Chafee also disputed Schilling's contention that an investor was waiting in the wings to save the company last month and would have provided the company with funding if the tax credits had been authorized immediately or if the state had agreed to allow other creditors to get repaid first.
"If we had any sense in our discussions that there was an investor, we would have been very aggressive in helping in any way possible," the governor said, calling Schilling's version of events "just very inaccurate. We didn't get any solid feeling. We wanted to help."
Due to an editing error, an earlier version of this story referred to lawyer Max Wistow's surname as "Ristow."
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