Posts Tagged ‘Film criminal investigation’

Tax Roundup, 11/2/2012: Iowa’s new approach to filmmakers affirmed. And more fertilizer!

Friday, November 2nd, 2012 by Joe Kristan

Promotional image for “The Scientist,” one of the projects of convicted film tax credit recipient Wendy Weiner Runge.

Jailing them instead of bribing them.  Iowa has drastically altered its approach to the film industry in the last few years.  Where it once lured them with lavish film credits, meaning free cars and cash, it now merely provides lodging.  From WHOtv.com:

The Iowa Court of Appeals has affirmed the sentencing of a Minnesota filmmaker who pleaded guilty to fraudulent practices.

Wendy Weiner Runge was sentenced to 10 years in prison after pleading guilty in connection with Iowa’s film tax credit scandal. She was the owner and operator of a film company that applied for tax credits from the Iowa Film Office in 2008.

Ms. Runge said the sentencing judge improperly considered her combative blog posts as evidence of lack of remorse.  The appeals court held otherwise:

Similarly, here, the court properly considered Runge’s statements criticizing the court’s process and disparaging the prosecutors and the judge personally in considering her lack of remorse.

You don’t need to go to law school to figure out that if you plead guilty to something, it’s unwise to publicly rip the judge before sentencing.

Iowa spent over $30 million on the film industry via transferable film credits — another way of saying “subsidies.”  A state auditor report said that 80% of the credits were improperly granted.  It might have been cheaper to just imprison the filmmakers in the first place.

Link: Appeals court opinion.

 

From films to fertilizer.  The Iowa corporate welfare machine now is focused on a less glamorous industry.  On the heels of a huge tax credit grant to build a new fertilizer plant in Eastern Iowa, Iowa announced yesterday an award of up to $70 million of tax credits for a new Sioux City fertilizer plant for a different fertilizer company.

Between the two plants, the state has awarded up to around $180 million in tax credits.  This compares to budgeted net receipts for Iowa’s corporate income tax of under $400 million.

The state claims the project will bring 2,000 construction jobs and 100 full-time jobs at the plant.  If they max out their tax credits, that works out to about $33,300 per job, or $700,000 per “permanent” job.  Heck of a deal.  Meanwhile every other business has to cope with a horrendously complex state tax system with high rates to support these big credit grants.

The politicians love these press conferences when they can brag about bribing new jobs to the state.  Too bad they don’t have to call press conferences every time the state’s dysfunctional tax system costs a job.  But they wouldn’t have time for a press conference every day.

 

TaxProf,  WSJ: Owners Race to Sell Their Businesses by Year-End to Avoid 67% Capital Gains Tax Increase.  If you are going to sell anyway, I understand.  If you don’t already have a buyer, though, it’s probably too late to beat the rush.

 

Brutal Assault on Reason Watch: 

Tax stakes for entrepreneurs next TuesdayMy latest post at IowaBiz.com, the Des Moines Business Record blog for entrepreneurs.

Going Concern, Grover Norquist: No Matter What, Taxes Aren’t Going Up

Howard Gleckman, A Disappointing Presidential Campaign Comes to an End (TaxVox).

Kay Bell,  Making Obama, Romney tax plans add up

Linda Beale,  What natural disasters like Sandy teach us about taxes and government, and why NY City Mayor Bloomberg endorse Obama

Anthony Nitti, The Top Ten Tax Cases of 2012: #9 -The Mortgage Interest Limitation Is More Complicated Than You Realize

Jack Townsend,  Relevant Conduct in Tax Cases

Robert D. Flach starts the weekend early with WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’ – SPECIAL FRIDAY EDITION

News you can use: 10 (er, 11) Uses For Leftover Halloween Candy (TaxGrrrl).  I heartily endorse the first two suggestions.

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Last film credit trial delayed

Friday, April 20th, 2012 by Joe Kristan

hh44.jpgThe trial of film credit broker Chad Witter was delayed this week after prosecutors disclosed new evidence, reports the Des Moines Register:

Rick McConville, one of Witter’s defense attorneys, said prosecutors disclosed Wednesday morning the existence of a computer hard drive they were not aware of previously. The hard drive belongs to a horse broker who did business with a corporation run by Dennis Brouse.

A status conference will be held May 18, at which time the trial is expected to be rescheduled.

Dennis Brouse is a producer who was convicted on charges arising from the disastrous Iowa Film Tax Credit program.  He is scheduled to be sentenced May 2.   

Link: Tax Update film credit coverage

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Another film credit criminal trial winds down

Tuesday, March 13th, 2012 by Joe Kristan

The trial of Dennis Brouse, known to public TV viewers for his shows about horses, is winding down, according to a story by Lee Rood in the Des Moines Register, which apparently just started printing coverage. Before the trial closes, accountant Chad Witter, who served as a broker for film tax credits, is expected to testify today.
It appears the trial centers around non-cash “expenditures” used to claim millions of dollars in transferable film tax credits, which could be cashed out by selling them at a discount to investors. From the Register’s story:

Brouse

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Iowa filmmaker gets light sentence, but has to repay $4 million

Thursday, December 22nd, 2011 by Joe Kristan

An Iowan who pleaded guilty to a charge arising out of the Iowa film tax credit program received his sentence yesterday, reports The Des Moines Register:

Filmmaker Bruce Elgin, 42, of Washington, Ia., dodged a prison sentence Wednesday morning when he was given a deferred judgment and two years

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Borchers indictment: investigation by other means?

Thursday, December 8th, 2011 by Joe Kristan

The Iowa Attorney General’s Office yesterday moved to dismiss charges it had filed against Donald Borchers arising out of the Iowa Film Tax Credit Program. The Des Moines Register reports:

State prosecutors had accused Donald Borchers, 55, of Beverly Hills, Calif., of defrauding the state of at least $75,000. Charges were filed in October after Borchers declined to provide more information to explain his actions.
Purchases made by Borchers and another filmmaker eventually led to firings in the Iowa

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Filmmaker pleads not guilty; shows budget inflexibility

Wednesday, November 16th, 2011 by Joe Kristan

The producer of the recent “Children of the Corn” remake pleaded not guilty in Polk County District Court to charges of theft and fraudulent practice. The charges arise out of defendant Donald Borcher’s participation in the Iowa Film Tax Credit program, which collapsed two years ago in scandal following revelations that Mr. Borchers and another filmmaker each purchased a luxury vehicle with help from Iowa taxpayers.
Mr. Borchers stoutly asserts his innocence, reports Rod Boshart at EasternIowaGovernment.com:

Donald Borchers, 55, a Beverly Hills producer/director who represented himself at Tuesday

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Probation for film figure Wheeler

Wednesday, October 19th, 2011 by Joe Kristan

The former Director of the Iowa film office was sentenced yesterday to probation on one count of official misconduct yesterday. The Des Moines Register reports:

Polk County District Judge Douglas Staskal granted Wheeler a deferred judgment following a Tuesday morning sentencing hearing. The decision means Wheeler, who faced up to five years in prison after his September conviction for felonious misconduct in office, will have that conviction sealed from public view if he successfully completes two years of probation.

Considering that Mr. Wheeler was charged with 10 felony counts, that’s a pretty good result for the man who seems to have been designated the goat for the disastrous film credit program.
In contrast, there will be no accountability for the Governor who delegated the administration of a huge new state subsidy to a man who’s prior relevant experience was as a film tech at Walgreens. There is no public accounting for Mr. Wheeler’s supervisor, who showed little curiosity about all of the money being given away as long as there were photo ops with starlets to be had. There will be no public apology by the 143 legislators* who eagerly voted for this misconceived and poorly-designed program that sent millions of taxpayer dollars to Hollywood.
One film figure has received a ten year sentence for defrauding the credit program. Two other filmmakers and a film credit broker are scheduled for trial next year. As it has led to no charges, the state has apparently concluded that it was perfectly legal for a filmmaker to drive home with a taxpayer-funded Mercedes. Maybe what was legal under the program is the biggest crime.
*Only three legislators voted “no.”
Other coverage:
The gazette.com
Radio Iowa
Complete Tax Update film credit coverage

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Iowa gets its goat

Tuesday, September 6th, 2011 by Joe Kristan

They threw nine counts at former Iowa Film Office Director Tom Wheeler. One stuck.
A Polk County jury this afternoon cleared Mr. Wheeler of eight charges arising from his role administering the disastrous Iowa Film Tax Credit program, but they convicted him of one count. KCCI reports:

The jury found Wheeler guilty on the first of nine counts — misconduct in office. Wheeler was found not guilty on the remaining eight counts.
The verdict was read at 1:22 p.m. The jury has been deliberating since Thursday.
Misconduct in office is a class D felony that is punishable up to five years in prison. A sentencing date has yet to be set.

Mr. Wheeler seems to be designated as the sacrificial goat for the sins of the entire Iowa political establishment that set up the film fiasco. 143 of the 150 members of the Iowa General Assembly voted to establish the program so poorly written that one agency thought it provided 50% tax credits, while the Attorney General thought it provided a 25% credit. It was signed into law by a Governor who turned administration of the multi-million dollar corporate welfare cash pinata to a single mid-level bureaucrat with no staff and whose prior administrative experience seems to have been as a film processor at Walgreens. It was overseen by a supervisor who didn’t pay attention to the cash bleeding until he found out taxpayers had bought a Mercedes for a filmmaker. Some of the worst abuses were greenlighted by other agencies. The program got only glowing coverage from an embarassingly credulous local news media.
Yet only Tom Wheeler faces prison.
The moral? Don’t be the bottom bureaucrat. They’ll sell you out in a heartbeat.
Related: Iowa’s film credit program: what we know now
Also: Des Moines Register coverage, which indicates that the plea deals with Wendy Runge and her partners at Polynation pictures were key to the one conviction.
UPDATE: More from O. Kay Henderson.

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Teaching a lesson in loyalty to the bureaucracy

Wednesday, August 31st, 2011 by Joe Kristan

Former film office Director was on the stand yesterday in his trial on Felony charges of official misconduct. This exchange reported in The Des Moines Register is an eye-opener:

Wheeler testified that he spent long days at the office in 2008 and 2009, frequently took film calls at his home and even fielded emails during his father

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Iowa’s film credit program: what we know now

Monday, August 29th, 2011 by Joe Kristan

We have completed the first two weeks of the trial of Former Iowa Film Office Director Tom Wheeler on felony misconduct in office charges. While there has been no evidence presented that Mr. Wheeler personally profited from the program, the trial has provided useful information on the way the program was enacted and run. A few things we’ve gotten out of the trial:
- The program as enacted was was poorly defined and outlined, leaving huge responsibility in the hands of the executive branch personnel running it.
- The legislature provided no additional staff and almost no funds to run the program, which had no theoretical or practical cap on the amount of taxpayer money that could be committed.
- The legislation had no provision that would keep the funds from being disbursed in the absence of a system of controls and review of the program.
- This left the program in the hands of a single mid-level state employee, Mr. Wheeler, whose background was in selling Iowa to filmmakers — not in the administration of a multi-million dollar spending program.
- The man who originally hired Mr. Wheeler, before the tax credits were enacted, tesfied that Mr. Wheeler was unfit for the new responsibilities he was given under the program.
- Mr. Wheeler’s supervisor at the Department of Economic Development required no regular oversight of the program until he found out that it was being used to buy luxury cars for film people — well over a year after the program started.
- Other executive branch agencies, including the Department of Revenue, saw bits of the problem as the overmatched Film Office struggled to give away our money, but nobody ever felt compelled to sound the alarm.
- There’s no evidence that any of the 143 legislators who voted for the program ever exercised their oversight responsibilities to see that the funds were being spent responsibly until the program was near collapse.
Whatever the outcome of the trial to Mr. Wheeler, the trial has documented an enormous failure on the part of Iowa’s political leadership, both legislative and executive. Only Mr. Wheeler gets to undergo the nightmare of felony prosecution; the worst that happens to the rest of the bunch is new jobs, and that only for some of them.
What we’ve seen certainly doesn’t make me trust them to spend more of my money in the name of Economic Development, or much of anything else.

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Former Economic Director: the Benz tipped us off to the looting

Thursday, August 25th, 2011 by Joe Kristan

While his underling at the Iowa Film Office was giving away millions of taxpayer dollars to fund pretend expenses, the Iowa Director of Economic Development was oblivious. Then Mike Tramontina heard about the cars. Rod Boshart reports at EasternIowaGovernment.com:

The former head of the state Department of Economic Development said Wednesday he was not aware of brewing problems in the agency

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Iowa Department of Revenue takes the stand in film trial

Wednesday, August 24th, 2011 by Joe Kristan

The Iowa Department of Revenue made its appearance at the trial of former Iowa Film Office Director Tom Wheeler yesterday, in the form of its tax policy guru, Jim McNulty. The testimony shows that there were clues to the ongoing Film Office disaster available in other parts of the state government that weren’t picked up.
From Lee Rood’s Des Moines Register piece:

Jim McNulty exchanged numerous e-mails with Wheeler in 2007 and 2008, giving him advice on a wide range of questions regarding what was acceptable under the new program. McNulty said he based his opinions on what he knew about existing tax law and from consulting others.

For example, McNulty confirmed he sent an email to Wheeler saying that films that were registered with the state by July 2007 were eligible for tax credits, contradicting others in state government who contended after problems erupted that films did not qualify unless they had signed contracts.
He also told Wheeler in emails that services-in-kind, or services provided in which no cash changed hands, were eligible to qualify for tax credits if certain criteria were met. That

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Five cars for Hollywood!

Tuesday, August 23rd, 2011 by Joe Kristan

We knew about the Benz and the Range Rover. We didn’t know that Iowa taxpayers had bought four more vehicles for the film industry to take home as part of the Iowa Film Tax Credit program. We know now. From Rod Boshart at the Sioux City Journal:

Overall, six vehicles — the two luxury cars, a pickup truck and horse trailer, and three other vehicles – were cited by prosecutors during the second week of Wheeler’s trial on charges of felony misconduct in office, first-degree fraudulent practices and conspiracy.
However, under cross examination by defense attorney Angela Campbell, Lintz conceded that the vehicle purchases in question were within the scope of the statute that lawmakers approved in 2007 and the subsequent rules that were adopted to implement the program.

Former Film Office director Tom Wheeler is on trial on felony charges in connection with his management of the program, and several other figures in the film industry have pleaded guilty to defrauding the state. As bad as any crimes are, though, the real outrage is what was perfectly legal under the program.
Mr. Wheeler’s defense is spreading the blame for the mismanagement around state government like a rogue honey wagon spreads hog manure. If he makes it look like he had an impossible job, it will be harder for a jury to convict him for misconduct. From Lee Rood at The Des Moines Register:

During the trial Monday, [defense attorney Angela] Campbell lugged three large boxes from behind the defense table and asked Lintz if he was aware they contained receipts for just one movie, South Dakota.

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Witness: we got taxpayer money for saying we’ll spend money someday

Friday, August 19th, 2011 by Joe Kristan

The trial of Iowa Film Director Tom Wheeler yesterday revealed a new and creative way taxpayers got swindled by the Iowa Film Tax Credit program: pretend pay for film employees.
The witness was filmmaker Bruce Elgin, an early booster of the Film Credit program, who is testifying under the terms of a plea bargain. He said that Mr. Wheeler encouraged him to claim tax credits based on “deferred” compensation that would only be paid if the film were sold, and was ultimately never paid. From The Des Moines Register:

For example, one invoice for an actor’s pay that prosecutors showed the jury on Thursday totaled $11,100, of which $8,800 was deferred. Under the incentive program, half of the $11,100 ultimately went to Elgin’s company.
“Iowa Film Production Services made a pretty good profit on a movie that never sold?” prosecutor Thomas H. Miller asked Elgin.
“Yes, sir,” Elgin said.

So Mr. Elgin was able to sell film credits worth $5,550 based on actual wages paid of $2,300 — a 241% tax credit, rather than the touted 50% credit.

Elgin, who submitted invoices worth roughly two and a half times what it cost to make his movies, received $5 in tax credits for every $2 he spent on his films.

Sweet deal, except for the taxpayers. The trial continues today.
Related: Let them Eat Canapes
Complete Tax Update film credit coverage

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Witness: Wheeler knew about the Range Rover

Thursday, August 18th, 2011 by Joe Kristan

The Iowa Film Tax Credit program collapsed upon revelations that taxpayer money was used to buy a Benz and a Range Rover for film people. Yesterday a witness in the felony misconduct trial of former Iowa Film Office director Tom Wheeler said he knew about the vehicles. From the Des Moines Register:

Steve Faust of Urbandale, who worked on several Iowa movies after the lucrative incentive was created, testified that he told Wheeler that director Bruce Isacson planned to ship a luxury Land Rover back to California once the movie “South Dakota” wrapped.
“I went and said, ‘Tom, do I need to talk to you or someone above you?’ ” he said.
Wheeler said he would take care of the problem, and asked that Faust not take it higher or he could get fired, Faust said.

There seems to be no evidence that Mr. Wheeler received any personal benefit from the program. The prosecution will need to convince the jury that the gross misadministration of the program should constitute a felony on Mr. Wheeler’s part. The defense will cast Mr. Wheeler as a scapegoat for an ill-conceived program, and is likely try to deflect responsibility to his supervisors and the Department of Revenue. The fun is just beginning.

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Goat trial begins today

Monday, August 15th, 2011 by Joe Kristan

The centerpiece criminal trial in the Iowa film tax credit fiasco gets underway in Des Moines today. Former Iowa Film Office Director Tom Wheeler faces felony misconduct in office charges for his role in the disastrous program.
For Mr. Wheeler, the trial will be a harrowing experience, but for the rest of us, it promises comedy gold. The prosecution will try to lay the blame for this multi-million dollar disaster at Mr. Wheeler’s feet. The defense will try to spread the blame around state government like a rogue honey wagon. His superiors at the Department of Economic Development will get splattered, certainly, but the manure hose will also be pointed at the Department of Revenue. From the Des Moines Register:

For example, Wheeler said, emails in his trial will show he sought guidance on various expenditures from the state Department of Revenue, including in-kind, deferred or sponsorship transactions in which no cash changed hands. Many industry experts later said such transactions should not have qualified.


Flickr image courtesy carlfbagge under Creative Commons license.
These money-for-nothing deals led to the issuance of millions of dollars of transferable tax credits by the Department.
The State Auditor’s report outlining the disastrous administration of the program shows that Mr. Wheeler has plenty to answer for. But felonies? The trial looks like an effort to blame the fiasco on one inept bureaucrat. Whatever Mr. Wheeler’s failings, he had a supervisor. He was appointed by a Governor, and his program was authorized by an almost unanimous Iowa General Assembly. None of these people face criminal charges, yet they bear the ultimate responsibility for the disaster. If bureaucratic ineptitude is a crime, they should just lock the state office buildings from the outside at night.
Other coverage: AP story
Tax Update film credit coverage:
Sharks circle goat
Iowa Film Follies: Harold Hill meets The Pussycat Dolls
Ten years for filmmaker Runge
Let them eat canapes
Complete Tax Update film credit coverage

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Sharks circle goat

Friday, August 5th, 2011 by Joe Kristan

Things got a little hotter for Tom Wheeler, the former director of the Iowa Film Office, today. O. Kay Henderson reports an announcement that filmmaker Bruce Elgin has pleaded guilty to a reduced misdemeanor charge and will cooperate with prosecutors — presumably against Mr. Wheeler. Mr. Elgin had faced felony charges.
Mr. Wheeler faces charges of felony misconduct in office arising out of his administration of the Iowa Film Tax Credit program, which collapsed in scandal in 2009. Subsequent investigations have revealed systematic abuse and chaotic administration of the program, including funding of luxury cars for filmmakers.
While Mr. Wheeler seems to have been cast for the role of scapegoat in this production, the legislature that passed the ill-conceived program with only three dissenting votes faces no charges; nor does the former Governor who signed the program into law and appointed Mr. Wheeler to run it.
Mr. Wheeler’s trial is scheduled to begin later this month.
Related:
Iowa Film Follies: Harold Hill meets The Pussycat Dolls
Let them eat canapes
Complete Tax Update film credit coverage.

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Another Iowa Film Tax Credit indictment!

Wednesday, June 29th, 2011 by Joe Kristan

20110629-2.jpgJust in time for the summer film season! Lee Rood reports:

The Iowa attorney general’s office charged Harel Goldstein with first-degree fraud, conspiracy and forgery, alleging he made false statements to try to obtain Iowa tax credits he was not entitled to, according to court documents.
Goldstein sought the credits for a horror film made in Iowa called “Underground.” State officials denied him credits after an audit revealed his alleged false claims.

The story says that Mr. Goldstein was sentenced last year to four years in federal prison on other fraud charges. These are the kinds of entrepreneurs you can expect to attract by throwing taxpayer money around.
Tom Wheeler, former Director of the Film Office and designated official scapegoat, is scheduled to go on trail on felony misconduct charges August 15.

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Where will Harold Hill go?

Friday, June 3rd, 2011 by Joe Kristan

Tax Policy Blog says “More States Abandoning Film Tax Incentives.” The post talks up a Tax Foundation report:

The report details recent suspensions or eliminations in Arizona, Arkansas, Idaho, Iowa, Kansas, Maine, New Jersey, and Washington. Additionally, programs are facing additional restrictions or scrutiny in Alaska, Connecticut, Georgia, Hawaii, Michigan, Missouri, New Mexico, Rhode Island, and Wisconsin.

While Iowa may be falling behind in the idiots battle to fund Hollywood with your tax money, it’s running away with the national lead in film credit indictments and plea deals.

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Film credit goat trial delayed until August

Tuesday, April 26th, 2011 by Joe Kristan

The Quad City Times reports that the trial of the former head of the Iowa Film Office, Tom Wheeler, has been delayed until August 15.
Mr. Wheeler was in charge of the film office when it was granting tens of millions of dollars in transferable film tax credits for fraudulent and imaginary expenses. The program has since been mostly shut down, and the current Governor has no plans to revive the tax credits.
While Mr. Wheeler has plenty to answer for, the criminal charges seem more like a search for a scapegoat than a quest for justice. If incompetence and mismanagement in state government is a crime, they might as well start locking the state buildings from the outside — starting with the Capitol building, where they voted the film credits into law with only three “no” votes out of 150 legislators.
Related:
Harold Hill Gulls the House
Complete Tax Update film credit coverage

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