38 Studios Insider Gets $650k in New Film Tax Credits

Tuesday, June 19, 2012

Dan McGowan, GoLocal News Editor

The Providence lawyer who pledged more than $14 million in Rhode Island motion picture tax credits that had not actually been issued as collateral in order to obtain an $8.5 million loan for Curt Schilling’s 38 Studios is now playing a behind-the-scenes role in a Michael Corrente movie that is slated to receive $625,000 in state tax credits, GoLocal has learned.

Michael Corso, a top tax credit broker whose loan agreement with BankRI is among several 38 Studios-related matters currently being investigated by state and federal authorities, is one of seven producers for “Backmask,” a horror film currently being shot in Exeter, according to IMDB. Corso’s business partner, Anthony Gudas, is listed as the executive producer and former State Rep. and Congressional Candidate John Loughlin has a small role in the film.

On Monday, the Rhode Island Film and TV Office confirmed the film has received an “Initial Certification Letter” for the tax credits. Corso did not respond to a request for comment.

“They go to the Same Crew of People”

The news that Corso is associated with another entity set to receive tax credits came as no surprise to several critics who say the film tax program only benefits a small number of connected individuals.

“They just go to the same crew of people,” said State Representative Charlene Lima. “Without any transparency, people don't see how it's only the connected people that are the ones getting all the tax credits.”

"Backmask" isn’t the only local film Corso has helped produce in recent years. In fact, he is listed as the executive producer for "Loosies" and "Inkubas," two movies that combined to receive over $300,000 in local tax credits since 2010. Records filed with the Secretary of State’s office show Corso also sold tax credits for those two films and "Infected," which received 640,185 in credits from the state.

Corso’s role in the movie industry stretches far beyond Rhode Island. Since 2010, he has been tagged as a producer for more than 20 films. His business, Sakonnet Capital Partners, has helped broker tax credit deals for the majority of those films, according to IMDB.

For Lima, Corso’s connections to the industry are evidence enough that changes need to be made to the way the state doles out tax credits. She said she believes a list of entities seeking credits should be kept by the Attorney General’s office and that the same groups or individuals should not be allowed to collect the majority of the available credits.

Lima introduced an amendment during this year’s budget debate that she says would have reformed the tax credit system, but it failed to gain enough support from her colleagues. Lima said she also believes companies should be forced to reveal more about their finances and personnel if they are seeking tax credits.

“Right now it’s just a favor factory,” Lima said. “I think a lot of people share the same frustrations I have. We need to change the whole system because right now, it just feeds the well-connected.”

Corso at Center of 38 Studios Deal

A more open process could have also prevented Rhode Islanders from being stuck with the tab to cover the collapse of 38 Studios, according to Lima.

Corso was at the center of the 2010 deal that brought Schilling’s company to the Ocean State. In March of that year, former Economic Development Corporation (EDC) executive director Keith Stokes and House Speaker Gordon (a close friend of Corso’s) met with Schilling and 38 Studios director Tom Zaccagnino about bringing the video game company to Rhode Island.

Two months later, the General Assembly approved legislation that expanded the EDC’s Job Creation Guaranty Program from $50-$125 million. By July of that year, the EDC’s board had signed off on a plan to award 38 Studios a $75 million loan guarantee.

At the time of the deal, Schilling said that he was not moving his company to Rhode Island simply to seek tax credits, but that’s exactly what he did less than a year after moving into 38 Studios’ downtown headquarters.

In January, Corso secured an $8.5 million loan from BankRI by putting up $14.3 million in film tax credits as collateral. Corso and Schilling now claim the state reneged on a deal for the credits after the company failed to make a $1.125 million payment due to the EDC on May 1.

38 Studios filed for bankruptcy earlier this month, several weeks after laying off every single employee. The company owes creditors more than $150 million and has less than $22 million in assets.

Suspend the Tax Credits

For some good government and tax policy groups, reforms to the tax credit system like the ones proposed by Lima need to take place before the state dishes out anymore funds.

Specifically, any project that has connections to Corso should he halted for the time being, according to Ocean State Tea Party in Action president Lisa Blais.

“While the rule is innocent until proven guilty, the fact that this insider's name keeps popping up with tax credits should be create enough question to pause,” she said. “It also underscores that presumably many ‘non-VIPs’ have been turned away for tax credits to start or grow business or generate economic activity in other ways in RI.”

Late last month, Rhode Island Statewide Coalition (RISC) executive director Donna Perry also called for a suspension of the tax credit program.

“In light of all the unanswered questions, it seems only reasonable and fair to the taxpayers that the Governor freezes the film tax credit program and orders a full accounting of how the EDC provides oversight to the loan guarantee program across the board,” Perry said.