A Baton Rouge moviemaker dodged federal prison time that his two co-defendants recently received and instead was put on probation for three years Thursday and ordered to reimburse the state nearly $162,000 for bilking Louisiana’s tarnished film tax credit program.
George Kostuch, who pleaded guilty in May to wire fraud, faced a sentence of 12 months to 18 months behind bars, but U.S. District Judge Shelly Dick departed downward from that guideline range and cited a favorable presentence investigation report and letters supporting him.
Assistant U.S. Attorney Fred Menner also told the judge that the federal government was not arguing for prison time for the 46-year-old Kostuch.
“This act is not a definition of who you are,” Dick told Kostuch as he stood before her flanked by his attorney, Jim Boren, and the prosecutor. “It is an aberrant act.”
But it was a serious act, added the judge, who determined Kostuch was more than a minimal participant who used sophisticated means to defraud the state of $161,850 — “not an insignificant amount.”
Kostuch admitted six months ago that he wrote checks for nearly $540,000 in false production expenses, which resulted in his company — K2 Pictures — receiving the $161,000-plus in tax credits from the state in 2010 and 2011.
Two fellow filmmakers, Matthew Keith and Daniel Garcia, told authorities they and Kostuch used a complex scheme while working together on three productions — “Xtinction: Predator X,” “Sports Trivia Cash” and “Mysterious Island,” according to the FBI. The two men told federal agents, for example, that Kostuch hired a contractor for $7,000 of work on “Sports Trivia Cash” and then helped produce false invoices and move money through several accounts to give the appearance that the contractor’s work actually cost $89,000.
“He issued and delivered checks,” Dick said of Kostuch in rejecting his contention that Garcia and Keith created the scheme.
Keith, a 38-year-old Prairieville businessman, was sentenced last month to six months in federal prison and ordered to pay $1.2 million in restitution to the state. He admitted using his firm, Dirty District Entertainment LLC, to plot with Garcia to produce inflated spending figures to the state to qualify for tax credits.
Garcia, 38, of Mandeville, was sentenced in September to six months in prison, as well as another six months in a halfway house, and ordered to pay restitution of $900,000 to the state. Garcia, owner of DMG Holdings LLC and Louisiana Film Finishers LLC, acknowledged using canceled checks to create fake records showing he spent $3 million on a moviemaking venture. The records allowed him to obtain $900,000 in film tax credits.
Dick noted that Garcia and Keith caused “significantly higher loss amounts” to the state.
A major condition of Kostuch’s probation requires him to continue his alcohol and substance abuse treatment. Dick warned that she will put Kostuch in jail if he tests positive for drugs or alcohol while on probation.
“I will be watching,” she said.
Boren spoke in court on Kostuch’s behalf and said Kostuch regrets what he did during “a dark period of his life” and has taken steps to make sure it doesn’t happen again.
A dozen people have faced criminal charges tied to the film tax credit program since it kicked off in 2002. Among them was Mark Smith, the program’s former commissioner, who was convicted of taking bribes from a film producer in return for tax credits worth millions of dollars.
To promote moviemaking here, the state awards tax credits to filmmakers equal to 30 percent of their expenditures once those costs top $300,000. The tax credits, once issued, can be sold back to the state for cash or to third parties.