State paid U.K. firm not to make movies in Iowa

IOWA CITY - The state has paid $450,000 to London filmmakers in exchange for their decision to cancel plans to shoot a movie in Iowa about a flesh-eating lake monster and other films that could have qualified for millions of dollars in tax credits, newly released public records show.

London-based Midsummer Films and its subsidiaries won approval in 2009 to shoot six films in Iowa with the help of the state's aggressive tax incentives, which were advertised as “half-price filmmaking” and briefly made Iowa a top destination for producers.

But just one month after Midsummer's films were approved, then-Gov. Chet Culver suspended the program amid mounting evidence that fraud and mismanagement were costing taxpayers millions of dollars. Several top state officials resigned and Culver fired Iowa Film Office Manager Tom Wheeler, who was later charged with fraud along with several film industry representatives in the still-evolving scandal.

Midsummer's productions had been approved for tax credits of up to $25.6 million based on estimated budgets totaling more than $51 million, according to records obtained by The Associated Press. The company could have sought to follow through with their plans after the program was reinstated for existing applicants under tighter oversight, but lawyers representing the state pushed them to abandon their Iowa projects and the potential huge liability for state taxpayers.

In other words, a program that was meant to attract films to Iowa ended with tax dollars going to a foreign firm to not shoot movies here.

“It was a much better thing for the state for them to not make the movies and for us to pay this amount of money than for us to make the movies and issue $25 million in credits,” said Deputy Attorney General Jeffrey Thompson, who negotiated the deal for the state. “The reality is, the idea that having people make movies in Iowa under the tax credit program created any kind of real economic benefit was just not true.”

The $450,000 payment reimbursed Midsummer for “liabilities and expenses” it spent preparing for production, according to a settlement dated March 30 and released this month to the AP. Thompson said an audit by the state confirmed Midsummer spent “substantially more than that” on the projects before the program was suspended.

In exchange for the payment, the firm agreed not to make the movies in Iowa or sue the state for breach of contract. Midsummer had signed a contract with the state for one of its six approved films, a feature-length film titled “Legendary, The Shocate,” which was to be shot in Des Moines and at Lake Red Rock.

“Travis Preston is called to investigate if a legendary lake monster is behind the deaths at a remote construction site,” a synopsis of the film reads. “As the death toll rises, Preston discovers the beast is not only real but has a taste for human flesh.”

It is the second large legal settlement Iowa has approved in recent months stemming from the movie program, and others are expected to be finalized soon, Thompson said. In the other case, Iowa paid a $434,000 cash settlement to After Dark Films on top of $316,000 in tax credits after the company argued it received far fewer credits than was initially promised to make two horror movies in the state.

Midsummer executives Matthew Kuipers and Chris Milburn did not return e-mail messages seeking comment, and a phone number listed for the firm rang unanswered.

Media Pro, a film company in England, lists “Legendary: The Shocate,” on its Web site as being in pre-production and starring Brian Austin Green. Media Pro is investing in the film and Midsummer is producing it, a Media Pro representative said, referring additional questions to Midsummer. Media Pro's site lists its budget as about $7 million, or about $5.5 million less than Midsummer estimated to Iowa officials for tax credit purposes.

A state audit released last year blamed Wheeler for the bulk of the problems, saying he aggressively promoted the incentives, urged producers to increase their budgets and miscalculated the tax credits. The report found that more than $25 million in incentives had been awarded improperly, in part because filmmakers had used Iowa-based shell companies and other creative and sometimes fraudulent tactics to increase their windfalls.

Wheeler was charged in January with felonious misconduct in office, first-degree fraudulent practices and conspiracy. He is expected to go to trial Aug. 15. His attorney, Angela Campbell, said her client intends to prove his innocence and avoid a lengthy prison term.

“We're generally denying the allegation that he was intentionally helping people commit fraud,” she said. “Right now our focus is not letting him go to jail for the rest of his life.”

A Minnesota film producer pleaded guilty earlier this year to making false statements to try to obtain Iowa film tax credits, and was sentenced to 10 years in prison. Two others pleaded guilty to theft charges in that case but avoided prison time.

Separately, at least four other defendants are still facing charges. They include Dennis Brouse, a Nebraska horse trainer whose show “Saddle up with Dennis Brouse” airs on public television. Brouse is facing theft and fraud charges for allegedly making false statements to inflate the amount of credits he could receive. His attorney, Guy Cook, said his client relied on the advice of Wheeler and a tax broker who is also facing charges.

Cook said Brouse contends the state owes him $6.9 million in credits for productions that were shot in the state, and is exploring ways to resolve the case short of trial.

“He's frustrated ...because he believes he was a genuine, authentic personality and producer of these videos and films,” Cook said, “and finds himself lumped in with people who were not authentic and genuine.”