1:45 PM (2 hours ago)
PRESS RELEASE ©
Contact: Gloria Garvin, Co-founder
Fed Up In RI ©
For Immediate Release
FED UP IN RI REQUESTS AN IMMEDIATE POSTPONEMENT OF THE RHODE ISLAND SENATE CONFORMATION HEARING OF RICHARD LICHT PENDING A FULL INVESTIGATION INTO HIS INVOLVEMENT IN 38 STUDIOS, LLC.©
Fed Up in RI is formally requesting that Senate President Paiva-Weed postpone the floor debate and confirmation vote on the judicial nomination of Richard Licht to the Superior Court scheduled for tonight until a full investigation of Richard Lichts’ involvement is completed. We are further requesting that Governor Chafee withdraw his nomination from consideration before the hearing or, in the alternative, ask him to submit his immediate resignation upon confirmation.
On May 21st, 2012, the day Rhode Island EDC was to issue approximately 14.3 million dollars in tax credits to 38 Studios, Grant Garvin, along with Gloria Garvin of Fed Up in RI brought to the attention of Governor Lincoln Chafee the fact that 38 Studios was not a Rhode Island corporation and under Rhode Island General Law was not eligible to even apply for the credits let alone receive them. Needless to say, the tax credits were not issued and 38 Studios closed its doors within days.
See: Garvin email to Governor Chafee, et al
——– Original Message ——–©
DATE: Mon, 21 May 2012 13:06:37 – 0400
Subject: 38 Studios, LLC may not be eligible for Motion Picture Production Tax Credits under RI General Laws
…”Due to the recent events surrounding the potential 38 Studios default, I have been doing some cursory research involving the eligibility of the company to apply for motion picture tax credits. If what I see is indeed correct, under RI law, they may be ineligible for these credits due to the company clearly being a Delaware registered operation, which is not in accordance with the existing tax credit law.”
“A summary of my basic legal research is below. I thought that it may be of interest, in light of the impending outcome of this very public situation that is of great importance to the integrity our State.”
“38 Studios, LLC is a Foreign Limited Liability Company organized under the laws of DELAWARE. All they possess is a “Certificate of Registration to transact business in the State of Rhode Island”. Filing #201067077710 Date: 09/10/2010 10:36 AM”
“Therefore, Under Rhode Island Gen. Law and the State of Rhode Island – Division of Taxation Regulations, 38 Studios, LLC does not meet the requirements to apply for R.I. ‘Motion Picture Production Tax Credits’. Because under R.I.G.L. they were not “formed under the laws of the state of Rhode Island”
*** Please see relevant sections of R.I.G.L. and R.I. Div. of Taxation Regulations below: TITLE 44 “Taxation” CHAPTER 44-31.2 Motion Picture Production Tax Credits SECTION 44-31.2-2
*note: the full contents of this email was also cc’d to all R.I. media.
As Director of the Department of Administration, Richard Licht knew or should have known that 38 Studios, LLC was a limited liability company organized and existing under the laws of Delaware, as stated in their documents on file with the state.
In his capacity and official duties as Director of the Department of Administration, Richard Licht knew or should have known that, only 2 months after 38 Studios relocated to Rhode Island in April of 2011, that on June 24th, 2011, 38 Studio’s auditor, Pricewater house Coopers LLP issued a “going concern” opinion in connection with the Company’s most recent audited financial statements stating that the Company will require additional financing to fund future operations and raising substantial doubt about the Company’s ability to continue as a going concern and had the responsibility to notify the Governor of this finding.
See: RIHOC _Q3_IBMSupp1000131 Document
Richard Licht knew – or should have known that 38 Studios was going to run out of money by the end of 2011, but he continued to meet with them in private along with people from the film tax credit office up until the Spring of 2012 about getting tax credits that he knew, or should have known could not have been legally obtained by 38 Studios because they are NOT a RI Corporation. But it appears he continued to assist them in gaining tax credits despite their ineligibility, and he never warned the Governor, Speaker of the House, or EDC that 38 Studios were having problems.
See: As reported by WPRI; “Former House Speaker Gordon Fox, who attended the April 2012 meeting with Chafee, told WPRI.com two months after it took place that he and the governor had been blindsided by 38 Studios’ request for assistance there and hadn’t even realized the company was in financial trouble.”
Per Ted Nesi article; Richard Licht met with Sullivan (RI Tax Office) Corso (The “inventor” and “Prince of tax credits”), Schilling and Zaccagnino in December of 2011. Licht stated that the meeting was; “Purely informational.” (TN) and that “They wanted to understand how it (tax credits) worked. I don’t even remember a lot about the meeting.” (TN)
Why would Corso, an attorney who is purportedly the foremost expert in tax credits ask Licht “how they work”? That makes no sense at all.
As 38 Studios NEVER was eligible for tax credits because they were a Delaware based Corp. and our tax credits can only be granted to RI registered companies. Any competent lawyer should know this – it is simple law. So having future judge Richard Licht, the Head of the Tax Division, Mr. Sullivan, and the so called “Prince of Tax Credits” Michael Corso in the same room, working on obtaining tax credits for 38 Studios is extremely questionable. Are we to believe that these brilliant, knowledgeable individuals didn’t know our state’s own laws about tax credits which was the very thing that they were meeting about?
On December 29th, 2011 the Rhode Island Film and Television Office, through Steven Feinberg, Executive Director, certified (Certification # 2012-0003) that 38 Studios Kingdom of Amalur: Capernicus 2012 was eligible for tax credits from the State in the amount of approximately $11,100,000.00. If 38 Studios was out of money in December 2011, how did it survive until May 2012, without funds. Were these 2011 tax credits issued on Licht’s intervention? And why was the Governor not made aware of the dire situation?
On Dec 29, 2011, Steven Feinberg, the Executive Director of the Film and TV Office granted “Initial Certification” for $11,100,000 in film tax credits (State Certification Number 2012-0003). Just weeks before they had met with Licht and Sullivan because; “they wanted to know how it (tax credits) worked.” Sullivan also stated “it was already clear at the meeting that 38 Studios planned to apply for film and TV tax credits.”(TN)
On December 29th, 2011 the Rhode Island Film and Television Office, through Steven Feinberg, Executive Director, certified (Certification # 2012-0003) that 38 Studios Kingdom of Amalur: Capernicus 2012 was eligible for tax credits from the State in the amount of approximately $11,100,000.00.
On January 19th 2012, 38 Studios, Kingdom of Amalur, made its “Initial Application” for Rhode Island Film and TV Motion Production Tax Credits in the amount of $7,000,000 and an additional application for “Kingdoms of Amalur” without the signature page and no date was also filed on that date or sometime later. These applications together add up to the $12,000,000 which the governor was stopped from giving to them in May, 2012.
On January 26th 2012, the Rhode Island Film and Television Office certified (Certification # 2012-0003) that 38 Studios Kingdom of Amalur: Capernicus 2012 was eligible for additional tax credits from the State in the amount of approximately $5,000,000.00.
Also, on January 26th 2012, the Rhode Island Film and Television Office certified (Certification # 2012-0004) that 38 Studios Kingdom of Amalur: Capernicus Supplemental 2012 was eligible for additional tax credits from the State in the amount of approximately $7,000,000.00.
Braver doc (above) certified that 38 Studios will have money up until Dec 31, 2011 so they are not eligible to receive tax credits because they were out of money on December 31st 2011.
Licht never disclosed to Governor and Speaker and EDC that they were that close to insolvency back in December of 2011? Furthermore Licht stated to WPRI that he didn’t know they were having money problems until he said he met with Corso the following spring (Mar-June 2012) when the company was in financial turmoil. If this is true, he is either grossly inept or a willing participant in collusive negotiations. Fox and Chafee claim to have no idea of the financial problems until April when they met with Schilling about the tax credits.
Richard Licht in his capacity as a public official has failed by his actions in maintaining the appearance of impropriety.
The last point of contention is, that on May 18th of 2012, 38 Studio’s first scheduled payment of $1.125 million was made to the EDC to rectify their default so that the tax credits could be issued. In that same time period, $1.21 million worth of 38 Studio Bonds were sold. To date there is no documentation of who paid the initial $1.125 million to the EDC, nor is there any documentation of who sold the bonds shortly thereafter. Because of Richard Licht’s involvement in the tax credits, there is no way of knowing without a full investigation if he was also involved in this possible insider trading.
Fed Up In RI is formally demanding that the confirmation of Richard Licht in the Senate be postponed until he can satisfactorily answer these questions.
All the documents referenced above can be obtained from the House Committee on Oversight.