The latest on the film incentive cluster

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State officials confirmed a sixth person has lost her job at Iowa’s Department of Economic Development on Tuesday, as a legal battle began over records tied to Iowa’s film scandal.

The governor's office confirmed Melanie Johnson, general counsel for the
department, was terminated Monday along with Amy Johnson and Jeff Rossate of
the agency's business development division.

Johnson had been with IDED since August of 1984; Rossate since 2002; and Amy
Johnson since 2001.


The firings come five months after former film chief Tom Wheeler was fired,
and former IDED chief Mike Tramontina and second-in-charge Vince Lintz
resigned in the wake of allegations of mismanagement of Iowa's film program.

A Register story on Saturday had said the three fired this week — who were all more experienced in dealing with tax credits and legal matters than Wheeler — were aware of some of the program's worst problems, but were still wrestling how to deal with them even as the program collapsed last fall.

Also today, several film companies, including one charged in the state’s probe of the film incentives, began their fight against a five-month-old request by The Des Moines Register for more records related to film incentive applicants, including contracts that projected spending and budgets for different films.

Polk County District Court Judge Artis Reis granted the Register's petition to intervene in the case. The companies are suing IDED, which has said it believes the documents are public.

Scott Brennan, an attorney for the film companies, said there was a difference between public curiosity and public interest in the ongoing probe and that his clients believe they were guaranteed “by contract and by statute” their trade secrets would remain confidential.

Brennan’s firm, Davis-Brown in Des Moines, is representing Iowa Film Production Services, Mississippi Films, Field of Screams, Underground Films, Ticket Out Productions, TriCoast Iowa Productions, GPX Developmet, September Productions, Lucky MP and Recess Film Production and Polynation Pictures.

Polynation Pictures, one of its owners and a partner have been charged with first-degree theft for allegedly inflating expenditures used to obtain credits in the making of the film “The Scientist.”

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Iowa Film Office names interim director
Posted: Tuesday, February 23, 2010 4:08 pm

The Iowa Department of Economic Development announced today a new director for the state film office, which has been the target of a criminal investigation.
Officials said Jessica Montana would serve as the interim director of the Iowa Film Office, which is overseen by the department.
The announcement comes a day after officials confirmed three employees were no longer working at the economic development department in the wake of problems with its film tax credit program.
Montana earned her law degree from Drake University in 2005 and has been employed with the economic development department since 2007, serving on the regulatory assistance team.
Former film office manager Thomas Wheeler was dismissed from his job last year and is facing a criminal charge of non-felonious misconduct in office, a serious misdemeanor. Two filmmakers are facing theft charges for allegedly inflating values on applications for tax credits.
The employees that ended employment with the department Monday were Jeff Rossate, division administrator for business development, Amy Johnson, division coordinator for business development, and the department's general counsel, Melanie Johnson. Amy Johnson also had been interim manager of the Iowa Film Office.
Officials on Tuesday announced Beth Balzer, who has worked for the department 16 years, would oversee efforts of the business development project management team.
"The Iowa Department of Economic Development is focusing on the future," spokeswoman Kay Snyder said in a statement. "Programs and resources are undergoing a comprehensive review focusing on process improvement, ensuring that the department will move forward in an efficient and effective manner."

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Well, it makes you wonder what is there to hide if everything is on the up and up? If you get my tax dollars, shouldn't I know what they went for? Anything my wife receives state money for you can go down to the courthouse and request her itemized bill for that case. So why should this be any different when there are millions of dollars involved? I don't know, if it were me I'd have no problem showing my budget. Course, most of my budgets are under $10k. But hey, if you want to know how much I spent on buffalo burgers at Helen's Corral in Gardnier, Montana I'd be happy to let you know.

Filmmakers argue for confidentiality of reports to state
BY LEE ROOD • FEBRUARY 24, 2010

Another battle over how much transparency is warranted in Iowa's film scandal began Tuesday in Polk County District Court, as filmmakers sought to block attempts by the state and The Des Moines Register to release additional records.

Eleven film companies are suing Iowa's Department of Economic Development, saying they believe certain documents that have not been released since the scandal broke - including expenses and budgets they reported to the state - should be kept confidential.


Scott Brennan, an attorney for the film companies, said Tuesday there is a difference between public curiosity and public interest in the ongoing probe. His clients believe they were guaranteed "by contract and by statute" that certain trade secrets would be kept secret.

The attorney general's office and the Register argue that the records - first requested last fall - are public under state law and should remain so because they are of significant public interest. The two sides met in court for the first time Tuesday.
According to a brief filed Tuesday by Michael Giudicessi, the newspaper's lawyer, "Whether evidenced by the very requests of the Register and other news organizations for access, the suspension of the film tax credit program by the governor's office, the conducting of an independent audit by the department, the vast and increasing amount of taxpayer dollars involved or the ongoing terminations ... it is clear that the public interest is not served by any degree of continuing secrecy."
Also Tuesday, state officials confirmed a sixth person had lost her job as a result of mismanaged tax incentives within IDED.

The governor's office confirmed that Melanie Johnson, general counsel for the department, was terminated Monday along with Amy Johnson and Jeff Rossate of the agency's business development division.

Johnson had been with IDED for more than 25 years, Rossate eight and Amy Johnson nine.

They are experienced managers who were responsible in different ways for overseeing the work of fired film office manager Tom Wheeler. The firings came after the Register reported Saturday that all three were privy last fall to major problems within the incentives program.
Yet only Wheeler - who was hired in 2004 primarily to do marketing - wound up being fired last September, after abuse of the incentives surfaced, and charged criminally earlier this month. Former IDED chief Mike Tramontina and second-in-command Vince Lintz resigned in September.

Saturday's article was based on e-mails to and from Wheeler and Tramontina that were obtained by the Register under Iowa's open records law. The e-mails weren't produced by the state until this month.
The filmmakers' lawsuit over records, which is expected to go to trial as soon as late March, also stems from requests made by the Register in September. Polk County Judge Artis Reis granted the newspaper's request on Tuesday to formally intervene in the case between filmmakers and the state.

Brennan's firm, Davis Brown in Des Moines, is representing Iowa Film Production Services, Mississippi Films, Field of Screams, Underground Films, Ticket Out Productions, TriCoast Iowa Productions, GPX Development, September Productions, Lucky MP, Recess Film Production and Polynation Pictures.
Polynation Pictures owner Wendy Weiner Runge and Matthias Saunders, one of her partners in the film "The Scientist," have been charged with first-degree theft for allegedly inflating expenditures used to obtain credits to help make the film.

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Filmmakers are lobbying to delay a proposed suspension of Iowa's incentives until Jan. 1 of next year.

"This will give us a year to put a much stronger program together, and we will not lose two full seasons of filming," Gruening said.
However, a number of legislators say they want to go ahead and suspend the program beginning in July so it can be re-evaluated and possibly retooled. Legislation that would begin the suspension this summer has been advancing at the Statehouse.

Gov. Chet Culver temporarily suspended the film incentives last September after abuses were publicly disclosed.

Officials from the Iowa attorney general's office and the Department of Revenue said Friday they can't say for sure how much in credits the state will ultimately pay out this year.
Attorneys are still in the process of trying to figure out for themselves which projects will really move forward, said Jeff Thompson, a deputy Iowa attorney general.

Thirty-two filmmakers - with projects approved by fired film chief Tom Wheeler and other economic development officials for about $220 million in tax credits - have not responded to letters from the attorney general asking whether they still intend to film in Iowa.

"From our perspective, we have to treat them as if they are live, until we get an affirmation that they don't intend to move forward," Thompson said.
The state has sent out another letter recently saying it intends to revoke registrations of those projects if filmmakers don't respond.

Of completed films with contracts, seven have been asked to submit expenditures to be audited by the Department of Revenue. One of those seven still has not turned in the form needed for that audit, Thompson said.

Three of those have been reviewed by the Revenue Department and should hear something relatively soon.
Four films that have wrapped up production are ready to submit expenses but still have not received a contract from the state, Thompson said.

"We're talking to all these people," he said. "We're trying to move as quickly as possible."

Several filmmakers or their representatives told The Des Moines Register last week they want to move forward with projects in Iowa in 2010, but they cannot yet say for sure whether they can, for a variety of reasons.
"Some are in a position that they want to proceed, but they want to understand under what rules," said Scott Brennan, a lawyer for several filmmakers.

At issue for several filmmakers is whether the state will honor awards of credits up to 50 percent, as many felt they were promised under Wheeler.

Brennan's firm represents filmmakers including Kip Konwiser and Kevin DeWalt, who both had multimillion-dollar projects that stalled last year because of suspension of the film program.
DeWalt, an award-winning Canadian filmmaker, is still trying to get the amount in tax credits for his crime caper "Clean Out" that he says was guaranteed by Iowa Department of Economic Development officials. DeWalt had deals with actors Timothy Dalton, Harvey Keitel and Elliott Gould to begin filming in Des Moines in October, but the project was stalled after the suspension.

A Polk County judge ordered the state to award DeWalt film tax credits, but his civil case to decide the amount is stalled while negotiations continue.
Konwiser said this week he hopes to move forward filming "Blackbeard," which was gearing up last fall for filming at Southridge Mall in Des Moines.

Iowa filmmaker Jon Hazell said he lost financing for projects after last September's film freeze, which means he will have to complete them on a much tighter budget if he is able to film later in the year.

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A Polk County judge is expected to decide in the next several days whether the Iowa attorney general's office has a conflict of interests in pursuing criminal charges against fired film chief Tom Wheeler.

Wheeler — charged last month with official misconduct in office over the film office scandal — is to have a preliminary hearing in court on Friday.


On Tuesday, his lawyer, Angela Campbell of Des Moines, told Associate Judge Gregory Brandt that prosecutors in the attorney general's office had a conflict because they previously represented Wheeler and other fired Iowa Department of Economic Development workers who are likely to be material witnesses.

However, Mark Schantz, solicitor general for the attorney general, said no conflict existed because his office's attorneys represented only IDED, not individuals in the office.
"And there is a larger issue here," Schantz told Brandt. A ruling against the attorney general's office, which represents all state agencies, could mean it could not pursue litigation against any state employee, he said.

Brandt appeared to be skeptical of Campbell's argument, questioning whether she had satisfied the legal burden of proof to show a conflict and whether her motion to dismiss attorney general prosecutors was premature.

Campbell contended the attorney general had a stake in prosecuting Wheeler for misconduct — and not others who were fired — because it could help the state in pending civil litigation with filmmakers.
Brandt countered: "But if he (Wheeler) was acting outside his authority, there is no conflict."

Campbell said the state's civil case would be hurt if others within the department were found to have the same lack of knowledge about Iowa's film incentives as Wheeler.

Two top IDED officials — department head Mike Tramontina and second-in-charge Vince Lintz — resigned after abuse and mismanagement of the state-run program were discovered in September.
IDED managers Jeff Rossate and Amy E. Johnson of the business development division and general counsel Melanie Johnson were fired last month after e-mails showed they had some knowledge of film office problems. Rossate and Amy Johnson invoked their Fifth Amendment right against self-incrimination when Campbell tried to ask questions Tuesday.

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A Polk County judge ruled Thursday that the Iowa attorney general's office does not have a conflict in prosecuting fired state film chief Tom Wheeler.

Associate Judge Gregory Brandt said lawyers in the attorney general's office never had an attorney-client relationship with Wheeler; their relationship was with the state agency for which he worked.

Wheeler was fired in September after abuse and widespread mismanagement were discovered in Iowa's tax credit program for filmmaking.


Wheeler's attorney argued in court this week that prosecutors did have a conflict because they were privy to privileged information when Wheeler and other fired employees involved in the film crisis worked at the Iowa Department of Economic Development.

The attorney general also filed formal charges Thursday against Wheeler, which means an initial hearing scheduled for today will be delayed. Wheeler was accused earlier this year in a criminal affidavit of official misconduct in office.

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Film incentives for new film projects will likely take a one-year break or a two-year break, two key state senators said today.

The Iowa Legislature likely won’t kill the film tax credit program altogether, nor will it rewrite the existing law, Sen. Bill Dotzler, D-Waterloo, and Sen. Joe Bolkcom, D-Iowa City, said this morning.

Film projects already awarded tax breaks can continue, Dotzler said. But lawmakers likely will put the brakes on any new breaks until July 2011 or July 2012, he said.

This afternoon, a subcommittee meeting is tentatively scheduled to talk about a bill that would kill the program altogether. Sen. Herman Quirmbach, D-Ames, is the taking the lead on studying that bill, Senate Study Bill 3121.

Late last year, a panel of state officials last month recommended killing the film incentives after they found they could not document a return on investment.

But a majority of senators want to suspend the program, rather than end it or fix it, Bolkcom and Dotzler said this morning.

Most prefer to suspend new tax breaks for at least a year to allow existing films to move forward, give the state time to work out legal issues, and provide lawmakers time to scrutinize what fixes and accountability measures are needed, Dotzler said.

A majority of Iowans believe using state tax breaks to keep film cameras rolling in the state is a good thing, according to The Des Moines Register’s latest Iowa Poll.

The film incentives jump-started a boom in Iowa filmmaking in 2008 and 2009.

A strong majority of Iowans – 61 percent – think the program should continue despite the current criminal probe.

Iowa Gov. Chet Culver suspended the film incentive program last fall in the wake of allegations of abuse and mismanagement.

Tom Wheeler, who was hired in 2004 primarily to do marketing, was fired in September after abuse of the incentives surfaced. Then, the chief of the economic development department, Mike Tramontina, and second-in-command Vince Lintz resigned.

In early February, the Iowa attorney general’s office charged Wheeler, the former manager of the Iowa Film Office with misconduct in office.

The AG’s office charged two movie executives with first-degree theft for allegedly inflating costs used to obtain credits.

Then, in late February, three more officials in the economic development department who were responsible in different ways for overseeing the work of fired film office manager. Melanie Johnson was general counsel and a staffer for the department for more than 25 years. Amy Johnson, a nine-year employee, was coordinator of the business development division, the agency’s most experienced tax credit expert and interim manager of the film office. And Jeff Rossate was the agency’s business development division, and Wheeler’s boss, with eight years with the agency.

Staff from the attorney general’s office have advised lawmakers not to change the existing film credit law, because that could add confusion to the legal matters before the state, Dotzler said.

The attorney general expects those legal issues to be resolved in a year, “but two years might be better,” Dotzler said.

The decision will likely be made when lawmakers vote on a big tax credit bill that applies to several programs. There’s no number for that bill yet, Dotzler said.

Eventually, new guidelines could be written, Bolkcom said.

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I feel inspired by this guy! I'm gonna cheat on my taxes this year so I can get a bigger tax refund and buy a big ass HDTV to help more Iowans stay employed!!


An attorney for the state asked a Los Angeles film producer during a court hearing Wednesday over public records why his budget for the movie "Blackbeard" doubled twice — to $20 million — as it geared up for production last year in Des Moines.

Filmmaker Kip Konwiser — whose project was among many that stalled last fall after the suspension of Iowa's film program — insisted he was not trying to inflate his budget to get millions more in tax credits, as other filmmakers are alleged to have done in an ongoing criminal probe.


Rather, the award-winning filmmaker said he was intentionally trying to help former film chief Tom Wheeler build Iowa's movie industry by greatly expanding the amount of in-state work done on his film and, thus, the number of Iowans hired.

"Your implication was that I raised the budget to get more," Konwiser said to Jeffrey Thompson, a deputy attorney general representing the state. "I did it to do more."

Two of the companies Konwiser helps run are among 11 plaintiffs involved in the case. All are asking a Polk County judge to block the Iowa Department of Economic Development from releasing to the media and public certain budget and investor information about their projects.
The economic development department already has said it wants to release the information pertaining to projects awarded tax credits under Iowa's open-records law. State officials already have informed moviemakers the department believes it has an obligation to do so because movie budgets and Iowa's film tax credits are under intense public scrutiny.

Thompson alleged some filmmakers may be seeking to shield the information from public scrutiny only because it may be embarrassing or incriminating.
"This is where millions in public money has been spent, and therefore public interest is very important," Thompson said.

The Des Moines Register has joined the lawsuit seeking to make the information public. However, Judge Ardis Reis has kept some of the budget information in the case under seal from the newspaper and its attorney, Michael Giudicessi.

At the hearing, Giudicessi objected several times to that secrecy. He said the public has a right under law to know what filmmakers did with $32 million in public money. The mismanagement and abuse discovered during a state probe into the program, he said, only show that the government's own checks and balances weren't working.
Reis said she hopes to rule in the next couple of weeks. But she decided Wednesday that a state form containing summary budget information - not specific line items - from projects not involved in the court case should be made public immediately.

Konwiser testified that releasing such information goes against the industry norm, and could be devastating to him and other filmmakers - even to the point of bankruptcy. That's because disclosure would wreck some private contractual agreements that require confidentiality.
Konwiser said he repeatedly was assured by the economic development department and Wheeler that his budget would be kept confidential.

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I think if these three go down you're going to see the state file charges against a bunch of other people. I still think this is the tip of the iceberg.

Prosecutors have filed a dozen new felony charges against three movie-makers with alleged ties to the state’s film tax credit scandal.

State lawyers charged Wendy Weiner Runge, Matthias A. Saunders and Zachary LeBeau with one count of ongoing criminal conduct and 11 counts of first-degree fraudulent practices.

The complaint in Polk County District Court alleges that the three committed unlawful “acts for financial gain on a continuing basis,” between July 2008 and October 2009. The three also allegedly falsified records to collect state money for their projects, according to the complaint.

All three movie-makers are based in Minnesota, according to the complaint.

Three movie companies – Polynation Pictures LLC, Maximus Production Services LLC and The Scientist LLC – also are charged in the complaint. Polynation and Maximus are partly owned by Saunders. LeBeau and Weiner share partial ownership in Polynation and The Scientist.

LeBeau surrendered for arrest today at the Polk County Jail, and was released on $10,000 bond. Weiner and Saunders, who were charged with theft in February, remained free on bond.