Rhode Island State Police have released hundreds of pages of emails from their investigation into 38 Studios, providing some clues about their probe of the failed video game company, and the $75 million loan guarantee it received from the state.
The emails, which date from 2012 to 2016, include internal status updates on the case and communications about leads for investigators to pursue.
Some of the earlier emails show state police keeping tabs on media reports about the company, its bankruptcy and the resulting court cases. They also kept an eye on company founder Curt Schilling, a former star pitcher with the Boston Red Sox, sharing transcripts from his radio appearances and social media feeds.
The released emails exclude information provided to a grand jury, which remain sealed. State Police said they redacted portions of the public documents for the same reason. Still, the emails provide some glimpses into the probe.
As early as April 1, 2013, a status update suggests investigators were finding no evidence of criminal wrongdoing by 38 Studios as it sought to secure a subsidy from the state’s economic development agency, then known as the Economic Development Corporation (EDC).
“[T]here is no evidence that 38 Studios made false representations to EDC to obtain the loan,” wrote State Police Lt. Todd Catlow in the update. “38 Studios provided EDC employees information about the tenuous nature of their finances, but some of that information may not have been relayed to the EDC Board of Directors prior to their vote to approve the loan.”
The rest of the update is heavily redacted.
A couple of emails from 2013 show investigators looked into Tazza Cafe, a restaurant owned by the attorney Michael Corso, who helped introduce principals from 38 Studios to state officials. The investigators seemed to focus on contractors who renovated both the restaurant and the offices of 38 Studios.
“Records also support investigative theory that some of the subcontractors may have hidden their cost of renovating Tazza Cafe into expenses charged to 38 Studios and not invoiced Tazza (Mike Corso) for the work,” wrote State Police Detective Kenneth Buonaiuto, a member of the financial crimes unit.
Buonaiuto looked into whether 38 Studios might have been the victim of fraud.
By April 18th of the same year, one email notes this side investigation as the “only investigation that remains active,” although State Police did not officially close their 38 Studios probe for another three years. They ultimately concluded that while contractors may have given Corso “a good deal because he can bring more work to them in the future,” there was no evidence Corse knew they charged 38 Studios for work on his restaurant.
On the more central questions involving the state loan guarantee, Buonaiuto concluded that the approval process was flawed in several ways.
For one thing, the company told state economic development officials it needed $75 million to be successful, but the deal they ultimately crafted resulted in a much smaller amount, about $49.5 million, actually going to the video game developer. The rest was set aside by the EDC.
Economic development officials have said they expected other investors to make up the difference.
Another issue Buonaiuto noted: few state lawmakers understood that the increase in funding they approved for the EDC was intended for just one company. Here are the elected officials Buonaiuto concluded did know the deal was for 38 Studios, but kept the information from their colleagues:
Gordon Fox (former House speaker, now jailed for misuse of campaign funds)
William Murphy (Fox’s predecessor as RI speaker of the House)
Teresa Paiva-Weed (Outgoing state Senate majority leader)
Steven Costantino (former House Finance Committee chairman)
Former Governor Don Carcieri
Keith Stokes (former EDC director, appointed by Gov. Carcieri)
Michael Saul (former EDC top official)
The Rhode Island State Police closed their investigation of 38 Studios last July without criminal charges. They said the state-backed loan that brought the video game company to Rhode Island was less than transparent, but there wasn’t enough evidence for a criminal case.