A Mandeville moviemaker who cheated Louisiana’s film tax credit program was sentenced Wednesday to six months in federal prison and the same stretch of time in a halfway house.
The sentence handed down in a Baton Rouge federal court Wednesday to Daniel Garcia, 38, is the latest indication of problems with an economic development program that’s raised Louisiana’s profile as a so-called “Hollywood of the South” but has sparked questions about whether it rips off taxpayers.
Garcia also must pay $900,000 to the state of Louisiana as restitution for his scheme to unfairly accrue tax credits, U.S. Attorney for the Middle District of Louisiana Walt Green said in a news release.
Garcia’s attorney, John DiGiulio, said his client doesn’t have the money to pay that amount as of now. But, the lawyer added, “I thought the sentence was fair.”
Garcia, owner of DMG Holdings LLC and Louisiana Film Finishers LLC, pleaded guilty in 2013 to a charge of conspiracy to commit wire fraud after authorities said he used canceled checks to create phony records showing he spent $3 million on a filmmaking venture. That documentation was used to obtain $900,000 in film tax credits between Feb. 10, 2009, and March 31, 2010, authorities said.
The incentive program allows filmmakers to be given tax credits equaling 30 percent — at taxpayers’ expense — of the money they spend on making movies if their payments top $300,000. The state will pay cash for 85 percent of the tax credit’s value, or the credits can be sold to a third party.
Two other men — George M. Kostuch, founder of K2 Pictures, of Baton Rouge, and J. Matthew Keith, of Prairieville — were tied up in Garcia’s plot, agents said. Keith admitted in 2013 to contributing to Garcia’s false paper trail by signing the checks, for which he pleaded guilty to conspiracy to commit wire fraud. Kostuch confessed in May to falsifying invoices in the scheme and pleaded guilty to wire fraud.
The trio worked together on “Xtinction: Predator X,” “Sports Trivia Clash” and “Mysterious Island.” In one instance, Kostuch is accused of hiring a contractor for $7,000 of work and moving funds through multiple accounts to make the product appear to cost $89,000. He was convicted of fraudulently securing nearly $161,000 in tax credits for his company, K2 Pictures.
A dozen people have faced criminal charges tied to the film tax credit program since it began in 2002, including the project’s former commissioner, Mark Smith. He was convicted of taking bribes from a film producer in exchange for millions of dollars of tax credits.
Keith is scheduled to be sentenced Oct. 13, and Kostuch is to appear for sentencing Oct. 29, Green said.
Follow Maya Lau on Twitter, @mayalau.