Zurik: Coach’s show a boon for producers, a bust for taxpayers
NEW ORLEANS (WVUE) - At the height of the New Orleans Saints' success in 2009, a behind-the-scenes play caller from Atlanta racked up $1 million, hitching himself to the Saints bandwagon.
For two seasons, Horizon Entertainment and its owner, Jason Sciavicco, produced "The Sean Payton Show" - and claimed it cost $5,383,886.60.
📷Compare that to Atlanta, where a producer tells us two Falcons shows are produced for $350,000 per year.
Horizon's big budget production led to a big payday. The state gave them credits worth $1,516,889.21. Records show Horizon cashed them in and received a check directly from taxpayers for $1,289,355.88.
Former Horizon employee John Beyer says the numbers just don't add up.
"He just inflated the numbers so that he could get more money from the taxpayers than he spent on the whole thing, is certainly what it looks like," Beyer says.
Horizon claims it spent $75,000 on lighting for season one of The Sean Payton Show, 20 episodes. "For lighting? Man!" Beyer exclaims when we tell him that.
Also in season one, Horizon says it spent $26,000 on dubs. That's a TV term for making a copy - you may dub "The Sean Payton Show" to a DVD, for instance.
But would such a service cost $26,000?
"I don't know, have you ever paid that?" Beyer asks "Neither have I. Nor have I ever billed that."
For two seasons of the Payton show, Horizon billed a total of $176,000 for something called "On-line build/format-playback." Horizon told the state that was the "last step when the show was put together." Horizon has described it as the step "where the footage is brought to high definition form, the post workflow of low resolution edits."
But Beyer says it never happened, was never needed. He calls it a "step in the process that's archaic and we didn't do."
The law allows companies to receive 30 percent in tax credits for all Louisiana expenses. So for that "on-line build," taxpayers gave Horizon $52,800.
"He engaged in what is obvious is a really high-numbers shell game," Beyer says.
Horizon formed shell companies to help them earn credits for "The Sean Payton Show." Horizon owner Jason Sciavicco started TCPS Productions.
Here's how it worked. TCPS would rent equipment and essentially rent employees from Horizon, and all of the spending done by TCPS would be eligible for tax credits. The state calls it a related party expenditure and considers it legal, as long as companies follow the rules.
On March 10, 2011, the state tightened its related party rules. Four days later, a date stamp shows TCPS Productions submitted an audit to the state for "The Sean Payton Show," trying to receive those tax credits. Chris Stelly, head of the state's Film Office, says the new guidelines should have applied to that submission.
The new guidelines had limitations on what related parties can charge for labor. We tracked down a line producer for "The Sean Payton Show." Pay stubs show Horizon paid the producer $1,300 a week. Under the new rules, that's all Horizon could charge for the producer's services.
But records show Horizon actually billed the shell company, TCPS, almost double - $2,500 a week.
"If we would have found that out at that particular point in time, that's certainly not acceptable under the law," Stelly tells us. "It would have to be what you actually paid someone for the service."
📷We talked to more than half a dozen former Horizon employees and found more examples, like another producer who showed us pay stubs. The salary there was $810 a week, $16,200 for 20 weeks of work. But records Horizon gave to the state show the producer earned almost three times the amount, $45,000.
Here's the real advantage to using a related party. In order to get money from the state, Horizon had to find a way to rent its own equipment. If Horizon would have applied for the tax credits directly, they wouldn't have received any credits for the equipment it owned. But by having the shell company rent the equipment from Horizon, they were able to cash in even more on the lucrative credits.
But those new related party guidelines also limited what could be charged for equipment rental. The new guidelines called for a rate below fair market value.
Horizon billed the shell company $1,500 a week for an HVX camera. We went to Wayback Machine, an online site that archives old web pages. In January 2010, you could buy that camera for $4,699. All totaled the shell company rented four cameras for $270,000.
📷That's for one season, 20 weeks of the Payton show. We got quotes online: all four cameras could have been bought for only $89,298.
"I rent the camera for two weeks and I recover my costs to the camera?" asks local CPA Patrick Lynch, who reviewed the Horizon records with FOX 8. "That's pretty lucrative… Who would pay that? If it was that much to rent it, and I could recoup it in two weeks, wouldn't I go buy my own?"
Lynch says the numbers don't make sense and certainly don't follow the state's guidelines that limit costs between related parties. "You're able to recover your costs but you're not going to profit," Lynch tells us.
But there's more. In 2009, Horizon produced "The Sean Payton Show" and "Saintsational," the reality TV show based on the Saintsations. We reviewed credits for both shows as well as documents submitted to the state, and found many of the employees working on both shows at the same time. Credits for "The Sean Payton Show" and for "Saintsational" show camera operator Icaro Godoi, associate producer Mark Welch, and coordinating producer Melissa Dembrun Sciavicco - three of many employees working simultaneously on both shows.
The records indicate Horizon didn't split all of these employees time and pay accordingly.
"The law states, really clear, that only services performed on the state-certified production will qualify," Stelly tells us.
The Louisiana Department of Revenue requires all productions applying for credits to submit a pay schedule to them. The schedule should include the production, name of employee working on the production, and compensation. We tried to get a copy of this schedule. The Department of Revenue said it was protected and couldn't be released under the Public Records law.
So if a person's splitting their time between the two projects, that person has to essentially split their salary, and "allocate their salary… to each project," Stelly insists. "If he's not allocating then certainly they can't double dip into, you know... The same expenditure can't qualify for two different projects."
That goes for camera equipment, too. Remember that Horizon rented four cameras to TCPS for "The Sean Payton Show." In 2009, Horizon rented another six cameras to the shell company producing "Saintsational," TSS Productions. That makes a total of 10 cameras, 30 weeks each, when insiders tell us most of the shooting was done at the same time. And insiders say Horizon didn't even own a total of 10 cameras.
So in 2009, both shows spent a total of $500,000 renting cameras. In tax credits, that put $149,715 into Horizon's pocket.
Between Saintsational and The Sean Payton Show, Horizon and owner Jason Sciavicco received $2,616,866 in Louisiana tax credits. That's your money.
"It's shocking numbers," says Bess Carrick, an independent video producer and director who reviewed some of Horizon's production work on "Saintsational" for us.
To quality for tax credits, a company has to spend at least $300,000 on a production. Horizon claims they spent $5 million producing it "Saintsationals."
"Oh my god," Carrick responds. "I can't believe it. LED, huh?"
Now compare the two shows. Horizon claimed it spent about $5 million on 39 episodes of "The Sean Payton Show." And the company claimed basically the same amount of money was spent on three episodes of "Saintsationals."
"That would be over a million dollars an episode," Carrick says. "That's impossible. "
It may be impossible for this veteran producer to believe, but it's reality for Louisiana taxpayers, who paid that bill.
"If you can abuse that type of Louisiana tax credit that, that's unfortunate because it's a very valuable thing for our industry and our city," Carrick tells us.
John Beyer, we interviewed, says he's a big supporter of the tax incentives and contributed to the Kickstarter campaign to keep it going. He is just raising questions about Horizon's dealings with the incentives.
Louisiana Media Company, the owner of this television station, had a working relationship with Horizon. Louisiana Media severed ties in March of 2011.
Spokesman Greg Bensel issued this statement:
"When we purchased WVUE Fox 8 - we did so with the notion that we would endeavor to make it the best television station in the market - couple that with the burgeoning film industry in New Orleans, it was a natural fit to consider the assets we had with the TV station, the potential programming opportunities and a physical plant that could support film production. Our partnership with Horizon was twofold, we could bring yet another company to New Orleans and let them provide the film production capabilities at Fox 8. After a short time, we decided that the speculative nature of the film industry and creating content was not in our best business interest and decided to end our relationship with Horizon and reallocate our investment in WVUE directly. Those investments, even after we decided to sever our relationship with Horizon, that provide services to the film industry at Fox 8 are still available and are currently being employed by station and Raycom today."
This TV station, WVUE, shared video with Horizon. Horizon was one of a couple of tenants operating out of this building. We worked on several projects together, including the Saints Super Bowl parade. Our TV station also aired the Sean Payton Show.
While the topic of this project was the Saints, the team had no part in the production of the show or in submitting the paperwork to the state, and the Saints say they received no tax credits for the show.
For weeks, we reached out to Horizon Entertainment and owner Jason Sciavicco for a comment. They failed to respond until late Wednesday.
Horizon's attorney, Walter Becker tells us Horizon did nothing improper. Becker says someone in the Film Office told Horizon to follow the old audit guidelines. Becker did not provide us with a name or documented proof of that.
Becker also pointed out the dubs we spoke about in the story included voice overs and transfers. And Becker said Horizon split the tax credits with Louisiana Media Company and the Saints, each receiving a third of the credits.
The Saints and Louisiana Media tell us that is not true. They received no tax credits or money. They say the only thing that was to be split was the profits of the show, and there were none. We asked Horizon to provide us with paperwork, showing Louisiana Media and the Saints were paid money with the tax credit proceeds. They haven't supplied us with any documents showing that.
It's important to reiterate that the documents submitted to the state for the tax credits only have Horizon and Jason Sciavicco's name on them. No other outside entities or names appear in the paperwork.
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