Lawyers cash in on 38 Studios debacle

Plenty of people are looking into the failure of Curt Schilling's video game company, 38 Studios.

The Rhode Island House of Representatives has an Oversight Committee, but its look into the deal is restricted.

"Once the loan guarantee was authorized by the General Assembly and given to an agency to do, what did that agency do once they had the authority to do so?" said Democratic state Rep. Michael Marcello of Scituate, who chairs the House Oversight Committee.

From the beginning, the 38 Studios deal was a windfall to attorneys. Moving the company to Rhode Island from Massachusetts was accomplished by selling $75 million in bonds, earning millions for bond lawyers.

The company folded once the bond money was spent. The state filed suit to try to recover some of the losses, which are being borne by taxpayers.

But to pursue a lawsuit, a couple of firms have made some significant money.

First, Shechtman Halperin Savage billed $517,000. Then the current state-contracted lawyer, Wistow and Barylik, billed another $87,000 for fees, but since the firm is working on contigency it has not billed for legal work. A third firm - Cohen & Gresser -- has charged the state $102,000.

The legal bill so far totals $707,000.

Cohen & Gresser is an exclusive firm in New York City that handles white-collar defense. The Economic Development Corp. representative said it hired the firm "in response to an inquiry from the (Securities and Exchange Commission)."

The corporation would say nothing more about the inquiry or possible investigation by the SEC.

The U.S. attorney previously reviewed bond documents and found no obvious criminality and is not involved with the SEC probe.

Rhode Island State Police are continuing its own investigation.

Marcello said he believes depositions may take place in the state lawsuit, which would free individuals to testify before the committee.