PROVIDENCE, R.I. (WPRI) — Michael Corso, a Rhode Island tax broker, attorney and ally to former House Speaker Gordon Fox, was poised to make $3.75 million from the failed 38 Studios deal, a Target 12 review of court documents reveals.
According to depositions and emails released Thursday in the 38 Studios lawsuit, Corso had an agreement with the company to get 5% of the $75 million taxpayer-backed loan 38 Studios received from the state, which equals a payment of $3.75 million. The deal also included a 2% ownership stake in the company.
Leading up to the controversial deal, documents show Corso arranged meetings with key players, including at least one between Fox and a 38 Studios board member.
Lawyers for the state argue Corso’s commission agreement hurt the video game company’s already fragile bottom line.
“[38 Studios executives] failed to disclose that 38 Studios’ net proceeds were to be reduced by $3.75 million to pay Michael Corso’s commission,” lawyers wrote. “Thereby worsening 38 Studios’ undercapitalization.”
- Unsealed: Read through the documents
- Live Updates: 38 Studios live blog
- Inside the Scandal: Who knew what, and when?
Emails reviewed by Target 12 show there was an internal disagreement about the payment. Shortly after the state reached an agreement with 38 Studios – but before the bond money was issued – Corso penned an October 2010 email to CEO Jennifer MacLean, stating it “should also be clear that my payment is separate and apart from the company’s cash flow issue.”
38 Studios founder Curt Schilling weighed in on the pending $3.75-million payment.
“We gave Mike our word,” Schilling wrote in an email. “And we’ll honor that.”
MacLean agreed Corso deserved to be paid, but wrote: “Payment, however, must wait until Wednesday as we simply don’t have the cash.”
The following week, the bond agreement was finalized and the first payment from the taxpayer-backed loan to 38 Studios was issued.
It remains unclear if Corso was ever given the full $3.75 million. Rick Wester, who worked as the company’s chief financial officer, said in a deposition he couldn’t remember if the payment was made.
But court documents show Corso did receive payments that totaled into the seven-figures.
A May 2011 spreadsheet shows Corso was set to receive a $1,067,912 payment to his company, Orb Development.
In his deposition, Wester was asked if Corso received the money. He stated: “I believe it was at some point; I’m — you know, I can’t really recall. I assume so.”
That payout would have brought Corso’s total payments from 38 Studios to date to $2,032,092, according to the spreadsheet.
Documents show Corso was later paid an additional $310,000 for legal work. His billing sheet shows Corso charged $485 an hour for that work.
Corso’s attorney Michael Lepizzera did not return a call for comment for this report, but in the past he has said that Corso’s dealings with 38 Studios actually had a “negative impact” on his personal finances.
“No one is asking, ‘How much did he lose in this transaction?’” Lepizzera said before the documents were released.
Asked for an example, Lepizzera said Corso had to pay $800,000 to make good on a payment 38 Studios had to make to the state in May 2012.
Last year Target 12 reported that the trustee handling 38 Studios’ bankruptcy case filed a complaint demanding Corso return $232,800 he received from the company shortly before its collapse, arguing he had been overpaid.
Lepizzera declined to comment on the status of that complaint because it is an ongoing case in U.S. Bankruptcy Court in Delaware. Tim White( email@example.com ) is the Target 12 investigative reporter for WPRI 12 and Fox Providence. Follow him on Twitter: @TimWhiteRIEyewitness News has a team of reporters digging through documents to cover 38 Studios: Inside the Scandal. Keep checking the 38 Studios live blog on WPRI.com and catch all the latest reports on Eyewitness News on WPRI 12 and Fox Providence.