Peter Hoffman Can't Escape Prosecution in Film Tax Credit Fraud Case (Exclusive)
A Louisiana judge rejects the movie producer's argument that unissued tax credits aren't property.
Seven Arts Entertainment CEO Peter Hoffman has failed in a bid to have a Louisiana federal judge throw out the government's fraud case against him.
Hoffman was given $1.13 million to transform an old mansion at the edge of the French Quarter in New Orleans into a film post-production facility. Prosecutors say he and partner Michael Arata filed a "materially false and misleading" film infrastructure tax credit application "when, in truth and in fact, the expenditures had not been made as claimed."
In response, Hoffman challenged the indictment on grounds that it insufficiently stated offenses for wire fraud, mail fraud and conspiracy to commit such fraud.
The movie producer attempted to beat the prosecution in a motion to dismiss by arguing that unissued tax credits in the Louisiana government regulator's hands are not "money or property" for the purpose of mail and wire fraud statutes. For support of this proposition, he cited two prior fraud cases. One dealt with Louisiana video poker licenses, which a court determined wasn't "property," while the other dealt with Texas low-income housing tax credits, which the 5th Circuit Court of Appeals said was only property in an abstract or theoretical way prior to being issued.
The government responded that Louisiana's interest in the film infrastructure tax credits program wasn't merely regulatory, but rather that it implicated its tax revenue. Prosecutors further argued that once the tax credits are certified, they had an immediate cash value as they are transferable and able to be sold on the open market.
"The Court finds that the mail and wire fraud statutes criminalize the defendants' alleged scheme to obtain infrastructure tax credits," writes Judge Martin Feldman in an opinion on Friday. "Those tax credits represent valuable economic entitlements, they are intimately intertwined with the State's tax revenue scheme, and are, therefore, property of the State."
"Valuable entitlements like these," the U.S. Supreme Court is cited as holding, "are 'property' as that term ordinarily is employed."
As a result, Judge Feldman won't dismiss the government's attempt to prosecute Hoffman and Arata for allegedly making deceptive bank transfers and submitting fictitious infrastructure expenditures to swindle Louisiana into issuing its film tax credits.
Hoffman, who is an executive producer on the upcoming $60 million budgeted Neuromancer, is known as an important middleman between Louisiana tax breaks and film companies. The case figures to be closely watched by insiders.