Railing against “unchecked prosecutorial zeal,” a federal judge on Wednesday spared a well-known New Orleans lawyer from a potentially lengthy prison term, sentencing him to four years of probation for his role in an unusual fraud scheme involving state filmmaking tax credits.
U.S. District Judge Martin Feldman, who described the proceedings against Michael Arata as an overreach, said he received more than 130 letters on the attorney’s behalf and cited the poet Melvin B. Tolson in explaining that, in some cases, “mercy must be a component of justice.”
The judge added that Arata’s sentence — which includes a $15,000 fine and 300 hours of community service — “protects the Constitution” and “promotes respect for the law.”
As he has before in the case, Feldman criticized the administration of the Louisiana Motion Picture Incentive Act, a program that was in its infancy when Arata and two business partners set out to renovate a dilapidated mansion into a post-production film studio at the edge of the French Quarter.
Arata was later accused of conspiring with Hollywood producer Peter Hoffman and his wife, Susan, to bilk the state out of more than $1 million in tax credits by misleading auditors and state officials about how much they spent renovating the three-story mansion.
“This case presents a classic example of bewilderment resulting from confusion caused by inconsistent applications of the law as to what might be a criminal hoax,” Feldman said, adding that the state regulations surrounding the film tax program lacked “coherence and leadership.”
Arata faced several years in prison under federal sentencing guidelines in light of his convictions on charges of conspiracy and wire fraud. Feldman’s decision to place him on probation followed an extraordinary development last month in which the same judge, citing insufficient evidence, reversed a jury’s convictions of Arata on nearly a dozen counts.
U.S. Attorney Kenneth Polite’s office is appealing those acquittals, and Arata could face a new sentencing hearing if the 5th U.S. Circuit Court of Appeals disagrees with Feldman.
Prosecutors did not address Feldman at the sentencing hearing — they remained silent until noting their objections at the end — but they had recommended an undisclosed prison term.
Feldman did, however, hear remarks from the Rev. William Maestri of the Archdiocese of New Orleans, who lauded Arata’s contributions and “incredible services” to the Bishop Perry Center. “He has given of himself,” Maestri told the judge. “I’m hoping for salvation.”
“You better ask for mine first,” Feldman quipped.
Arata’s defense attorney, Billy Gibbens, also asked for leniency, saying that even some of the alleged victims in the case had sent letters in support of Arata.
“We have a very good picture of what kind of person Michael was, how he was conducting himself both as a lawyer and in the tax credit field,” Gibbens said. “I couldn’t imagine being in a worse situation than he is right now with young children and facing the prospect of being sentenced to a prison term.”
The case focused on the construction of a state-of-the-art studio at 807 Esplanade Ave. and claims that Arata and the Hoffmans sought to swindle millions of dollars in state tax credits by lying about their expenditures and seeking to confuse several auditors brought on to review the finances.
The business partners started the project — which ultimately was completed — because of a 40 percent tax credit rebate offered by the state at the time for building filmmaking infrastructure. They received some $1.1 million in tax credits in 2009 that Arata later sold at a profit.
Arata, testifying in his own defense last year, sought to minimize his role in the project, saying he eventually parted ways with Peter Hoffman, whom prosecutors portrayed as the mastermind of the scheme.
State officials retracted but honored the tax credits even after the federal indictment was handed up, though they denied two later applications for additional tax credits in the project.
Feldman noted with skepticism Wednesday that state officials had filed a “last minute affidavit” before Arata’s sentencing asserting that the state was, in fact, a victim in the case, “though they’ve never asked for the tax credits to be given back.”
The Hoffmans are scheduled for sentencing March 9.
Follow Jim Mustian on Twitter, @JimMustian.