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New charges in the Iowa film credit fiasco

June 15, 2010

The Iowa Attorney General piled on some new charges in the Iowa film tax credit scandal. Additional charges were filed against Wendy Runge and Matthias Saunders, who had been charged earlier with inflating expenses to obtain unwarranted tax credits. A new filmmaker, Zachary LeBeau, was also charged. Radio Iowa reports:

The new charges allege one count of ongoing criminal conduct and 11 felony counts of first-degree fraudulent practices by the three in connection with some $90-million in production costs for several different movie projects. LeBeau turned himself in to Polk County authorities and was released on bond.

The official complaint provides a helpful window on the operation of of the tax credits. The expenses submitted to the Iowa Film Office included the following invoices for 45-day rental expenses:

one (1) push broom - $225.00
one (1) hand broom C $225.00
six (6) road cones - $1,350.00
one (1) metal rake - $225.00
one (1) pick axe - $225.00 .
two(2) 4' step ladders - $900.00
two (2) 6' step ladders - $900.00
one (1) 8' step ladder - $900.00
one (1) 10' step ladder - $900.00
one (1) 12' step ladder - $1,125.00
one (1) 24' extension ladder - $1,350.00
one (1) sledgehammer - $225.00
two (2) shovels - $450.00

The Attorney General alleges that the expenses were grossly inflated. (If not, the filmmakers badly botched their "lease or buy" computations.) In addition, the complaint says many of the items were listed twice.

The Iowa Film Office duly approved all of the expenses. The complaint adds:

Based on these claims, much of which was falsified and/or inflated, IDED, at the express recommendation and approval of Wheeler, issued tax credits worth $1,850,777.85 or 50% of the claimed "expenditures."

On or about November 25,2008, Matthias Saunders, acting as President/owner of Maximus, assigned Maximus Production Services, LLC's interest in tax credits to The Scientist, LLC.

On or before December 17, through tax credit broker/film investorllowa film consultant Chad Witter, the defendants sold to third parties their rights to the tax credits for "The Scientist."

...

Based upon Wheeler's representation that he had verified the eligibillty for tax credits under the Program, IDEO issued expenditure tax credits for the film project, "The Scientist," totaling $1,850,777.85.

The defendants deny the charges, and their supporters have implied that the charges may reflect religious or racial bias.

The charges are currently scheduled to come to trial this fall, just in time for the campaign season. That seems like a bad thing for the Culver administration. The charges may be intended to show how tough they are on those who would abuse the tax system, but they are just as likely to show how badly the film credit program was run, right before the election.