In yet another blow to the beleaguered program, Baton Rouge movie maker George Kostuch admitted in a federal courtroom Tuesday that he falsified invoices to receive Louisiana’s film tax credits.
The 46-year-old Kostuch pleaded guilty to a single count of wire fraud that accused him of penning checks for nearly $540,000 in false expenses, which led to his company — K2 Pictures — receiving more than $161,000 in tax credits from the state in 2010 and 2011.
Kostuch’s admission of guilt in Baton Rouge federal court came two weeks after a New Orleans federal court jury convicted Hollywood producer Peter Hoffman, his wife, Susan Hoffman, and New Orleans lawyer Michael Arata of defrauding the film tax credit program. The three business partners will be sentenced in August.
U.S. District Judge Shelly Dick did not set a sentencing date for Kostuch. She ordered a presentence investigation and report.
The film tax credit program has come under increasing scrutiny in recent years, both for the ballooning cost and a smattering of criminal cases accusing participants of defrauding the state.
The state House last week passed a cap on the program, limiting the credits to $200 million annually, which is $26 million less than the amount spent last year. Meanwhile, the Senate approved a package of bills designed to beef up administration of the program and prevent fraud.
Kostuch, who is free on his own recognizance, told the judge he underwent drug treatment in 1997 and remained sober for eight years before relapsing and going back to Alcoholics Anonymous in 2010.
“These events all happened at a bad time in George’s life,” Kostuch’s attorney, Jim Boren, said outside Dick’s courtroom. “He knows he did wrong. He regrets it.”
Kostuch’s former business partner, fellow filmmaker Matthew Keith, pleaded guilty in June 2013 to wire fraud conspiracy and is awaiting sentencing. Daniel Garcia, another filmmaker, pleaded guilty to the same charge a month earlier.
It was Keith and Garcia who told federal authorities they and Kostuch executed a complex scheme while working together on three productions: “Xtinction: Predator X,” “Sports Trivia Clash” and “Mysterious Island,” according to the FBI. Keith and Garcia told federal agents that Kostuch hired a contractor for $7,000 of work on “Sports Trivia Clash” and then helped produce false invoices and move money through multiple accounts to make it appear the contractor’s work actually cost $89,000, according to the FBI.
An independent auditor must certify expenses from a film production company before that firm gets reimbursed.
Taxpayers foot 30 percent of a film production’s cost in the state once the amount spent exceeds $300,000.
Louisiana’s film incentive program was set up by the Legislature in 2002. By 2007, its former commissioner, Mark Smith, had pleaded guilty to taking bribes from producer Malcolm Petal in return for millions of dollars in tax credits based on inflated expense reports.
Petal, a former New Orleans lawyer, was sentenced to five years in federal prison. Smith was given a two-year prison term.
Wayne Read was later sentenced to four years in federal prison for selling bogus tax credits to several members of the New Orleans Saints, among others.