Film Office Flap, Part XIX

“We’re trying to piece the thing together and really doing the best we can to unravel what can be called a complete mess.” — Eric Tabor, 10-27-09.

I’m not sure if this is, indeed, part 19 of the state film office flap, but today Eric Tabor, the Iowa Attorney General’s chief of staff, delivered an update to legislators on the Governnment Oversight Commtitee about the criminal (and civil) investigation.  Tabor spoke to the panel by phone for about 15 minutes, so it was difficult to hear his testimony in the cavernous room.  I’ve gone back and listened to the recording.  Here are the key parts:

“I apologize that we can’t be there in person,” Tabor said to open. “As you well know, the governor suspended the program back on September 18 because of irregularities that were uncovered.  We think the governor’s action was very appropriate..The program remains suspended and, needless to say, our office is working very, very hard on this…several staff members…are working on it very dilligently.”

Tabor mentioned the external audit released a few weeks ago, then mentioned the criminal investigation that’s underway.  “Obviously, because of the criminal investigation I cannot say a whole lot more about that.

“…Clearly, this is a very important, complicated and difficult matter.  Part of that difficulty is the incredibly poor record-keeping that was kept down at the Film Office and we’re trying to piece the thing together and really doing the best we can to unravel what can be called a complete mess. 

“The reality here is that there’s millions of dollars at stake at a time when the state is broke and the legislature and the governor and all of us are trying to figure out how to deal with budget shortfalls.

“Let me talk a little bit about what went wrong, on the civil side, down at the Film Office.  There’s really four ways that we think the law was just ignored and inappropriately applied.  The first was in the areas of documentation.  Of course, the way the program worked is after a movie was completed, the filmmakers would submit their qualified expenditures and get a tax credit.  What we found in most cases was that there was extremely poor documentation of those expenditures, in some cases just a spreadsheet with no documentation to back up that spreadsheet.  That’s problem number one and that needs to be sorted out.

“Problem number two is the law requires that in an expenditure, the payments had to be to an Iowa resident or to an Iowa-based business and we think in numerous cases the requirement for an Iowa-based business was skirted and was not followed at all.

“The third problem was there is both a qualified expenditure tax credit and an investment tax credit and the way the film office was supplying those credits, it ended up oftentimes in a 50 percent credit when we think that in many cases it should have been a whole lot less than 50 percent because they were not applying the investment tax credit provisions correctly.

“Finally, the law — as set up — required D.E.D. to basically look at the economic impact of any film and to say that the economic impact justified the assistance that they were going to be granted under the program and we think that largely was ignored and it’s really hard to see the economic impact of some of these projects.

“…The other complication here and why it’s taking some time to unravel this is we have movies in several different categories and several different progress reports.  The first is there’s been millions of dollars of tax credits already granted and our job, we’re doing research to see if there’s any way those credits can be challenged.

“We also have a number of programs, about 26 projects, that have contracts.  Some of them have completed their movies.  Some of them have not completed their movies.  Some haven’t even started.  What we’ve asked those companies to do is give us more information about their expenditures if they’re finished and about the status of their project if they haven’t.  Once we gather that information we’ll decide how we’re going to handle those particular categories of film makers.

“We also have about 109 films that did not have a contract but had an initial, what was called a registration letter by the department.  Here again, some of those have completed their movies…Some are close to completing their movies and we think quite a few of them may actually have left Iowa.  We’re in the process of gathering information from this group and deciding what, if anything, we should do moving forward with this group of folks.

“…We hope to making some decisions in the next couple of weeks about how we’re goint to proceed here and how we’re going to handle these different categories of projects. Obviously our goal is to do the best we can to represent the state and taxpayers and to make sure the law is followed, but with that, I can’t say much more about the criminal investigation and, frankly, I can’t say too much more about the civil side because there is some potential litigation, but if there are questions I can answer, I’ll be happy to do so.”

Senator Rich Olive, chairman of the committee:  “Do you know how many existing tax credits that we might be challenging, how many dollar value that is, or can you say?”

Tabor: “I believe that’s about $32 million.”

About a minute later, Representative Ralph Watts, another committee member, asks:  “In the $32 million that’s being challenged right now, I’m a little bit confused.  I’m assuming all of that $32 million is under the 26 contracts that were in place or are you including those under registration letters in that $32 million?”

Tabor:  “The credits that we’re looking at challenging would be outside of the numbers I gave you, Representative.”

Watts:  “So it’s outside of the 26 or the 109, either one?”

Tabor:  “That’s right.”

About 90 minutes later Bob Brammer, a spokesman for the attorney general, offered a clarification after speaking with Tabor by phone.  Their clarification? That not all (or perhaps none) of the $32 million in tax credits that have already been awarded will be challenged by the state’s attorneys.

“We are looking at the film tax credits already granted and doing our research, and will make decisions on which,  if any, should be challenged,” Brammer said, via email.