Jury likely to begin deliberating Wheeler film case Wednesday

Prosecutors challenged former Iowa Film Office manager Tom Wheeler's contention Tuesday that he thought vehicle purchases were eligible for state tax credits, pointing to his email communications with filmmakers and his delayed effort to bring the issue to the attention of his superiors as evidence to the contrary.

Thomas H. Miller, a deputy Iowa attorney general, questioned why Wheeler waited 15 months after first encountering the purchase of luxury vehicles by filmmakers under the state's film tax credit program before he told his supervisors that some movie producers had “exploited a loophole” in making claims for taxpayer reimbursements on the purchases.

“Sir, if you felt that this exploitation of a loophole was made in May of 2008, why did you not discuss it with your superiors until July 2009?” Miller asked during his cross examination of Wheeler, the former film office head who is being tried in Polk County District Court on charges of felony misconduct in office, first-degree fraudulent practices, and conspiracy.

“It was not my understanding that anything could be done about it because it was a legislative problem,” said Wheeler, who at one point called the vehicle purchases “a lesser issue” under questioning from Miller. “This was an isolated couple of events that was a very small part of a rapidly expanding program.”

Miller cited emails where Wheeler noted the issue of vehicle purchases was “a narrow line to walk” that may be acceptable to the program but “not so acceptable to the taxpayers,” and an occasion when he seemed relieved that the purchase of a Mercedes by a filmmaker was not mentioned in a news article about the state program.

Wheeler said he approved tax credits for vehicles that were not used solely for on-scene purposes because he believed behind-the-scene activities, such as moving equipment or shuttling stars who had contractual obligations to be transported in luxury vehicles, qualified the vehicles under the tax credit law.

During questioning by his defense attorney, Angela Campbell, Wheeler admitted he made mistakes in overseeing the state's film incentive program, but none were done with criminal intent or to help others commit fraud. He denied that he ever intentionally hid information and he gave numerous explanations why abuses may have gone undetected.

Wheeler said the missteps in administering what had become the nation's most lucrative film incentive largely were rooted in the new law's many ambiguities and a number of evolving interpretations being made by state tax and economic development officials over what expenses and in-kind services were eligible for investors and producers seeking transferrable state tax credits.

He said the “tsunami wave” of contacts that flooded his office once Iowa began providing a 25 percent tax credit for production expenditures made in Iowa and a 25 percent tax credit for investors for projects that spent at least $100,000 in Iowa coincided with other challenges that engulfed the state Department of Economic Development -- such as the state's worst flooding disaster, the national recession and state budget cuts that all stretched DED resources thin.

However, Miller questioned Wheeler about lax oversight in approving false or inflated expense claims and other irregularities in the process of approving questionable claims for millions of dollars in state tax credits.

“I didn't think anybody was submitting false or inflated game,” Wheeler said. “I was not of the mind that that was what was under foot. I thought that everybody was trying to stay on board and on a legal page.”

A state audit released in October 2010 detailed $25.6 million in tax credits allegedly issued improperly to film projects. Nearly $32 million worth of tax credits were granted to 22 film companies, and State Auditor David Vaudt said he was surprised to find that about 80 percent of the claims involved payments for expenditures where there was no proof or inadequate documentation.

The defense rested Wednesday after Wheeler's nearly nine hours of testimony over two days. District Judge Douglas Staskal planned to give instructions to the jury of nine women and three men Wednesday morning, after which attorneys for the prosecution and defense would present closing statements and the case would go to the jury for deliberation.