A federal appeals court just ruled that states that hand out TV and film credits — as Tennessee does — can prosecute people who lie or mislead to get those corporate welfare benefits.
Tennessee gave out millions of dollars in incentives to the fictionalized TV drama “Nashville” and more than $300,000 in incentives to the Robin Williams film “Boulevard.”
That movie, filmed in Nashville in 2013, was about a man who starts a relationship with a male prostitute.
According to Bloomberg, the U.S. Court of Appeals for the Fifth Circuit ruled film and TV tax credits are property and thus subject to federal mail and wire fraud laws. That means states can better monitor fraud involving TV and film tax credits.
The case, United States vs. Hoffman, involved film and TV tax credits in Louisiana. The court ruled “the fraudulent issuance of those credits would deplete the state treasury, meaning Louisiana had a property interest in the tax credits and could prosecute for fraud in relation thereto,” according to Bloomberg.
Members of the Beacon Center of Tennessee, a Nashville-based free market think tank, have spoken out against those tax credits for years.
Beacon spokesman Mark Cunningham told The Tennessee Star that anyone who uses tax dollars “in a fraudulent way should be prosecuted to the fullest extent of the law and the money should be returned to taxpayers.”
“While we disagree with corporate welfare in all cases, any person or company who intentionally misuses the tax dollars of hard-working Tennesseans should pay for their crime,” Cunningham said.
The Tennessee Department of Economic and Community Development awards incentives to select TV and film production companies to roll their cameras in the Volunteer State.
ECD spokesman Scott Harrison told The Star Wednesday he had no comment on the court case.
Greg LeRoy, spokesman for the Washington, D.C.-based Good Jobs First, which tracks how states hand out incentives, told Bloomberg that tax credit fraud is “the most common form of economic development incentive fraud.”
In the Louisiana case, defendants Peter and Susan Hoffman and Michael Arata, owners and operators of Seven Arts Pictures Louisiana LLC, allegedly submitted false invoices for construction work and film equipment and circular banking, according to Bloomberg.
Circular banking happens when money gets transferred between accounts to look like movie expenses, the website went on to say.
A jury found the trio guilty. The defendants are currently seeking an appeal.
Court officials said “stealing credits via fraud has the same economic effect on the state as embezzling funds from the treasury.”
As Tennessee Watchdog reported four years ago, the Tennessee Comptroller’s Office released a report critical of the state’s film incentive program. The report said out-of-state production companies took advantage of the state’s generosity with taxpayer money, perhaps as much as $18 million, and redirected that money to California, without spending a lot in Tennessee.
ECD officials said at the time they’d since put in new controls to keep that money in the state.
As reported, ECD officials gave “Boulevard” producers $302,000 in exchange for filming in Nashville. ECD officials publicized what they did as a branding opportunity for the city and state.
But the final product never referenced the city, and the words “Nashville” and “Tennessee” don’t appear until near the end of the closing credits. During those closing credits producers thank ECD and Republican Gov. Bill Haslam for their cooperation in making the film.
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Chris Butler is an investigative journalist at The Tennessee Star. Follow Chris on Facebook. Email tips to [email protected].
