A Baton Rouge filmmaker on Tuesday became the latest person charged with ripping off Louisiana’s movie tax credit program, the latest blemish for a program that has seen criminal charges lodged against nearly a dozen people since its inception in 2002.
George Kostuch, 43, who owned and ran K2 Pictures, is accused of writing checks for more than $500,000 in false expenses, which led to his company receiving $161,850 in tax credits from the state during a period of several months between 2010 and 2011, U.S. Attorney Walt Green said in a news release.
Kostuch was charged with wire fraud by prosecutors in a bill of information, generally regarded in federal court as an indication that he intends to plead guilty.
Kostuch could face time in prison if convicted, and also be forced to pay back money he received from program.
Kostuch is just the most recent of about a dozen people who investigators believe have illegally tapped Louisiana’s program to incentivize filmmaking in the state.
Taxpayers cover 30 percent of a film production’s cost in the state once the amount spent tops $300,000. While the program is labeled a tax credit, movie producers can return the credits to the state and be issued a check for 85 percent of their worth.
Controversy has dogged the program for years. As the program’s generosity enabled Louisiana to become the nation’s “film capital,” questions have been raised about the tax incentive, particularly about whether all the money paid out to filmmakers fosters homegrown economic development.
The Legislature will likely discuss whether to alter the program when the session starts next month.
Kostuch first appeared in federal court records last year, when he was named in an FBI search warrant application asking for his emails.
The application stated he had been identified by two other filmmakers who pleaded guilty to similar crimes, and who agreed to cooperate with the FBI as the agency’s probe widened.
Those filmmakers, Matthew Keith and Daniel Garcia, said they and Kostuch carried out a complicated scheme while working on three productions: “Xtinction: Predator X,” “Sports Trivia Clash” and “Mysterious Island,” according to the FBI.
They told the FBI that Kostuch played a direct role in the fraud. For example, on the show “Sports Trivia Clash,” Kostuch hired a contractor for $7,000 of work and then helped create false invoices and move money through multiple accounts to give the impression that the contractor’s work actually cost $89,000, according to the FBI.
A similar scheme was attempted for a television show called “Paranormal Plantation.” But that time, the expenses were rejected by the Louisiana Department of Economic Development during the review process, the FBI said. An independent auditor has to certify expenses from a film production company before that company gets reimbursed.
Keith and Garcia both pleaded guilty to wire fraud in 2013, but sentencing hearings have been repeatedly delayed. There is currently no sentencing date for either defendant.
Kostuch says on his website that he produced more than 20 independent films since 2001. He and his attorney could not be reached for comment Tuesday afternoon.
Controversy over earlier, similar schemes reached an apex in 2007, when Mark Smith, the first head of Louisiana’s film credit program, was convicted of taking bribes from New Orleans-based producer Malcolm Petal.
Prosecutors said Smith would OK Petal’s inflated expense reports so that Petal would receive more cash from the state.
Both Smith and Petal served time in prison.
Follow Daniel Bethencourt on Twitter, @_dbethencourt.