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Hollywood is known as being a risky business, but perhaps no one in the entertainment industry epitomizes the ups and downs quite like Peter Hoffman, a lawyer turned movie producer who used his knowledge of the ins and outs of taxes to full advantage. For doing so, he’s been hounded by federal prosecutors for decades, and now comes a Supreme Court petition that may influence the course of criminal law. In fact, his bid to overturn a conviction for defrauding Louisiana’s movie tax credit system has now picked up support from 14 retired federal judges, nine criminal law professors and the National Association of Criminal Defense Lawyers.
Hoffman once ran a company called Carolco Pictures, which, before filing for bankruptcy, made such films as Total Recall, Terminator 2: Judgment Day and Basic Instinct. Back in the 1990s, Hoffman was put on trial after the feds investigated loans and tax avoidance. He beat the big charges and pled guilty to one misdemeanor charge of sending a false tax return to the IRS.
Hoffman would then go onto run Seven Arts Pictures, which had some modest hits including Rules of Engagement and The Believer, before he ran into another situation that newspapers down in New Orleans would dub the “Hollywood South” scandal.
In 2014, federal prosecutors charged Hoffman with wire fraud for submitting false expense reports on a Louisiana mansion being transformed into a postproduction facility. Hoffman did so to get $1.13 million in movie tax credits issued by Louisiana.
Even though the expenses hadn’t been paid out, Hoffman defended himself by saying he was working with contractors and had real commitments to complete the facility. He also pointed to a brochure that his company had used that included word that HBO’s True Detective had used the mansion’s refurbished facilities. In short, he asserted that his documentation was provided in good faith. Nevertheless, the judge put his intent to a jury.
Hoffman was convicted, but were it not for the Fifth Circuit Court of Appeals, he might have lived with the consequences and even gone about more moviemaking like his recent troublesome adventure on London Fields.
For the crime of submitting fraudulent claims for tax credits and robbing a state that had used the incentive program to attract productions such as The Curious Case of Benjamin Button, Django Unchained, Twelve Years a Slave, The Dallas Buyer’s Club and Dawn of the Planet of the Apes, the trial judge sentenced Hoffman to 60 months of probation. That was an incredible and downright unprecedented departure from federal sentencing guidelines that recommended a range of 168 to 210 months in prison. So, in a rare instance of an appeals court stepping in to vacate a sentence in favor of something harsher, the Fifth Circuit ordered the judge to redo the punishment.
The appellate opinion (read in full here) rejected the proposition that Hoffman was some “Chamber of Commerce hero” and said prison was necessary both as a deterrence to others as well as “Peter’s criminal history…Peter’s lying in court, using his position as a lawyer to facilitate the fraud, and leading a sophisticated conspiracy.”
Facing the prospect of about 15 years in prison, Hoffman, along with his wife Susan and attorney Michael Arata (both also convicted for the same fraud), have now petitioned the Supreme Court for a review, but he’s not challenging what the Fifth Circuit said, but rather the trial court’s decision not to let him off the hook after the jury rendered its verdict.
The petition (read here) makes two arguments for a review that Hoffman’s attorneys at O’Melveny write would “provide much needed clarity and uniformity for criminal defendants, prosecutors, and courts alike.”
First, after alluding to the paucity of legal precedent concerning movie tax credits — especially the permissibility of applying for these credits with non-cash commitments — Hoffman addresses the issue of his intent to defraud with the proposition that he believed his tax credit application to comply with what Louisiana would accept. The trial judge found equal evidentiary support both in favor and against good faith but ruled that a prior Fifth Circuit decision constrained any acquittal. But as the petitioners are pushing the argument on appeal, if upon construing the evidence in the light most favorable to the government, the judge sees that “there is equal evidence of guilt and innocence, that necessarily means that the government has not proven its case beyond a ‘reasonable doubt.’”
The Fifth and Third Circuits may require upholding guilty verdicts along the “rule of equipoise,” meaning when the evidence is evenly balanced, but the petition says that’s not true in the First, Sixth, Seventh, Eighth, Tenth, Eleventh and D.C. Circuits.
A bunch of retired federal judges are attracted to Hoffman’s argument on this issue.
In an amicus brief (see here) submitted Wednesday, they say that while judges shouldn’t take lightly any decision to overturn convictions, in those rare cases where there are post-trial doubts about the sufficiency of evidence, it can’t be the rule to uphold a conviction. “Decades of experience reflect that preserving the safety-valve embodied in the equipoise rule does nothing to usurp power from the jury,” states the brief.
Hoffman and his cohorts make a second argument that essentially stands for the proposition that they should be given latitude due to the “ambiguity” of Louisiana’s tax credit program and their “objectively reasonable interpretation” of application obligations. Anything less “deprive[s] them of fair notice that the statements that they made in connection with that scheme could be considered intentionally false or fraudulent.”
That aspect has law professors opining for the need for the Supreme Court to take up this case.
“The time is ripe to again limit the mail and fraud laws to meaningful shoals,” states their amicus brief (read here). “In the context presented here, where a mail or wire fraud conviction is premised on purportedly false submissions inconsistent with those permitted by a regulatory scheme, a prosecution must be limited to circumstances where any statements or inferences to be gleaned from those submissions are objectively false. These circumstances cannot include statements about an ambiguous scheme, where the accused’s statements are consistent with a reasonable construction of the scheme.”
Given that white-collar fraud often turns on intent over ambiguous regulations, the case could be meaningful should the Supreme Court grant cert.
The U.S. government is due to respond to the petition next month.
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