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FBI Investigates Louisiana Film Incentives Abuse

Whistleblower suit filed by former state employee

By Pamela Cole

June 4, 2007 (Baton Rouge) -- The FBI reported that it is investigating allegations of abuse of Louisiana's state tax credits offered as incentives for film production companies. Louisiana offers the most generous film incentives in America, and has depended heavily on film production to rebuild its economy in the wake of Hurricane Katrina. Since the state enacted the film incentives in 2002, it has become the third most popular U.S. site for film production, after Los Angeles and New York.

Bernie Cyrus, the former director of the Louisiana Music Commission, in May filed a whistleblower suit alleging that his former boss at the Department of Economic Development, Mark Smith, "took bribes from a New Orleans production company in exchange for steering more tax credits toward the company," reported the Louisiana Times-Picayune on May 29.

That production company was the Louisiana Institute of Film Technology (LIFT), which is, according to the Times-Picayune, "the most prominent and active local company to benefit from the movie tax credits program." The allegations center around a $100 million dollar studio that LIFT broke ground for in October 2006, but on which construction was never started. On April 12, the head of LIFT, Malcolm Petal, allegedly threatened to move the studio to another state if tax credits for it and other LIFT projects were not "approved immediately." The state agreed under threat to issue $6 million in tax credits, even though the studio was not yet under construction. Under state incentives, film studio construction is eligible for state tax credits up to 40% of the value of the project.

"The risk of losing that project at that moment would have been devastating," Sherri McConnell, of the office of the Louisiana Department of Economic Development told the Times-Picayune. LIFT claimed the studio would bring 2,253 jobs to the area.

The state now questions whether some of LIFT's projects ever actually qualified for the state's tax credit program.

No charges have been filed against anyone. But this type of government corruption is familiar in this state, where just this week, Congressman William Jefferson (D-New Orleans) was indicted on corruption charges (racketeering, fraud, money laundering and obstruction of justice) stemming from business deals his office brokered in Africa.

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