38 Studios deal investigated by SEC

38 Studios deal investigated by SEC
Seth Tipps

By Seth Tipps

September 12th 2013 at 8:49AM

Public records show Rhode Island EDC hired law firm to help with federal inquiry

The United States Secuturities and Exchange Commission has launched an investigation into the $75 million dollars in loans offered to 38 Studios as incentive to move to Rhode Island.

The state-guaranteed loans put taxpayers on the hook for over $100 milion dollars when the Kingdoms of Amalur studio founded by Boston Red Sox pitcher Curt Schilling went bankrupt.

The previously unreported SEC investigation was revealed through a request for public records filed by WPRI.com.

The documents obtained show that Rhode Island's Economic Development Corporation – the semi-governmental body that planned and approved the loans – paid attorneys from law firm Cohen & Gresser LLP over $100,000 to assist in their responses to the SEC.

The EDC has declined to answer detailed questions regarding the inquiry, but spokesperson Melissa Czerwein said that the lawyers “were retained based on their expertise in relation to an inquiry from the SEC” and that the organization "doesn’t discuss ongoing matters related to 38 Studios and maintains a level of confidentiality as requested by the SEC.”

This five-month investigation took place last fall and winter, and so appears to be seperate from an investigation by federal police that found 38 Studios hadn't committed any criminal offenses.

Rhode Island and the EDC have filed their own lawsuit against certain 38 Studios executives, former EDC employees, representatives of Wells Fargo, and a group of lawyers who worked for the state as the deal was assembled.

A judge turned down 38 Studio's motion to dismiss in August in a 98 page ruling that also found that the State couldn't sue for the full $75 million, as the developer hadn't actually received that much.