Film Fiasco Becomes Whodunit, Culver keeps Credits on Ice

The program review of the state's film tax credits program is out. My brief scan through it didn't yield any huge surprises, but it's still troubling reading.

Essentially, it's a program that loved handing out money but didn't like keeping records. Bad news for taxpayers.

Receipts weren't kept. Contracts were changed after approval with no notification to the IDED director or deputy director. Tax credits were used to pay for items, services and labor that weren't allowed under the program's rules, including out-of-state purchases. Credits covered "deferred" payments and millions went for advertising "sponsorships."

Read the report here.

The Attorney General's office is talking criminal investigation in a release this morning:

The Attorney General's Office, Polk County Attorney's Office, State Division of Criminal Investigation and State Auditor are undertaking a criminal investigation related to the Iowa Film Office tax credit program.

We are not permitted by ethical rules to discuss the possible subjects, focus or other details of the investigation. We are permitted to provide information about other aspects of our ongoing review of the Film Office tax credit situation, which was requested by Governor Culver. We are working intensively on this review.

The Attorney General's Office will work to recover any tax credits or funds obtained illegally or not in compliance with the Film Office statute. Approximately $32 million in tax credits have been issued, and we will review them in detail and seek recovery wherever they were obtained in violation of the law.

The preliminary, outside review has been completed by the Clifton Gunderson firm, and we understand the State Auditor will undertake a full examination of the Film Office tax credit program. The Attorney General's Office continues to coordinate and work closely with the Governor, the State Auditor, the Dept. of Revenue, and the Dept. of Economic Development in reviewing the overall matter.

The Governor handled this well by acting quickly and decisively, referring the matter to the other state agencies, taking the personnel actions he took, and freezing the tax credit program.

The Film Office Tax Credit program, which was suspended by the Governor on Sept. 18, remains suspended. Given the problems that we have encountered, and the amount of money at stake, it was imperative that the Governor suspend the program on Sept. 18, and continue to suspend the program.

The Attorney General's Office has found the statute regarding tax credits was not implemented properly in at least several ways: investment tax credits were not calculated according to the statute; expenses were not adequately vetted and verified; projects were not justified in terms of their economic benefit to the State compared to their cost; and the definition of “investment” sometimes was improperly applied.

Gov. Chet Culver is also out with a statement. And it sounds like the credit program will remain in suspended animation:

GOVERNOR CULVER ISSUES STATEMENT ON REVIEW OF IOWA FILM TAX CREDIT

DES MOINES – Governor Chet Culver issued the following statement today after the release of a review by Clifton Gunderson LLP of Iowa's film tax credit program:

“The Clifton Gunderson report is an important preliminary step in reviewing Iowa's film tax credit program, providing clear examples of how it has been both mismanaged and abused over the past several months. This report also underscores why quick action had to be taken, including the departure of staff; appointing Fred Hubbell as interim Director of Economic Development; asking for a complete review by the Attorney General, Auditor, and Department of Revenue; and temporarily suspending the program. To let this program continue without significant changes and appropriate oversight would have been unfair to Iowa taxpayers.

 “Given the serious issues identified in this report, I have directed Public Safety Commissioner Gene Meyer to assist with the criminal investigations. In addition, after reviewing this report, the film tax credit program should not move forward until interim director Hubbell and the Economic Development Board have received clear direction on the appropriate interpretation of the film program statute and the proper controls and oversight that must be followed. Finally, I will work with legislative leaders on any changes that should be made in the law so the program is an effective investment in our state's economic development and is creating real jobs for Iowans.

Coverage is developing in all the familiar places.

The Gazette's story is here.

The Register has coverage at its Politics Insider blog

So does Iowa Politics

UPDATE -- House Minority Leader Kraig Paulsen, R-Hiawatha, takes aim at the Culver administration in a statement this afternoon:

Paulsen Issues Statement on Film Office Report“This is another example of why House Republicans offered proposals last year to provide a more open and transparent state government. Regrettably, these were defeated in the Senate.”

(DES MOINES)-House Republican Leader Kraig Paulsen (R-Hiawatha) issued the following statement in response to the program review of the Iowa Film Office:

“It is outrageous that the executive branch has been administering this program for two years in violation of the laws passed by the Legislature.

“Regular Iowans are not allowed to sidestep the law and state government cannot be allowed to either.